September 30, 2023

Pharmacoeconomics Basic terminologies

Pharmacoeconomics Basic terminologies

Basic terminologies involved: 

1. Efficiency: 

In order to justify marginal costs (e.g. health gain), a measure of obtained from limited resources. clinical what can be effectiveness may introduce an important distortion into the analysis that is crucial to obtaining economic efficiency, 

2. Opportunity cost: 

This is defined as the benefit foregone when choosing one therapeutic alternative over another. Costs are measured by the economist using economic methods to evaluate the actual cost of using resources in one way in relation to another.

3. Incremental analysis: 

This decision-making technique is used in business to determine the true cost difference between alternatives. It’s a fact that treatment exists in most therapeutic fields, even if this treatment is limited to providing the best supportive care. Economic evaluations assess the costs and benefits of a new intervention over and above what is currently provided.

What are the methods of pharmaco-economic evaluation?

There are four methods of pharmaco-economic evaluation. They are as follows:
The ultimate objective of all four methods is to compare the cost and outcome of The nature of outcome measurement is the all-important factor determining both the level of complexity and sophistication as well as the reliability and validity of a comparison of alternative regimens. ideally by generating a single index or cost-outcome ratio.
Cost-minimization analysis (CMA)
Cost-effectiveness analysis (CEA)
Cost-benefit analysis (CBA)
Cost-utility analysis (CUA)

  1. Cost-minimization analysis (CMA):

 It identifies the least expensive alternative therapy within the proposed drug’s capability and toxicity ranges. It involves measuring only costs, usually health services, 

e.g. 1) prescribing a generic preparation instead of a brand leader.

       2) Day case surgery may be performed with a higher proportion of local or regional anaesthesia than in-patient surgery, and this may lead to differences in transient side effects.

2. Cost-effectiveness analysis (CEA): 

The major outcome of interest is single and common to all alternatives but different programmes have different success rates in achieving this common outcome.

It compares the difference in costs between alternative interventions and refers to the whole of economic evaluation but specifically a particular type of evaluation in which the health benefit can be defined and measured in natural units. The cost of an intervention compared to another (or the status quo) is estimated based on the unit of a health outcome; e.g. years of life saved, ulcers healed, etc.

It, therefore, compares therapies with qualitatively similar outcomes in a particular therapeutic area.

For example, if the outcome of interest is a prolongation of life we may have programmes A and B which have different costs and prolong life to a different degree.

For instance, in severe reflux oesophagitis, we could consider the costs per patient relieved of symptoms using a proton pump inhibitor compared to those using H2 blockers. CEA is the most commonly 

Applied form of economic analysis in the literature, and especially in drug therapy.

It does not allow comparisons to be made between two totally different areas of medicine with different outcomes. The incremental cost-effectiveness ratio (ICER).

                                                                       (Cost of drug A-cost of drug B)

Incremental Cost-Effectiveness Ratio =     ————————————————-

                                                                 (benefits of drug A-benefits of drug B)

                            the difference in costs (A-B) 

             ICER=    ———————————–

                          the difference in benefits (A-B)

3. Cost-utility analysis (CUA): 

It is similar to cost-effectiveness but an outcome is a unit of utility, e.g. Quality-Adjusted Life Years (QALY). e g QALY of coronary artery bypass grafting versus cost per QALY for Erythropoietin in renal disease.

In CUA a different measure of value derived directly from Economics is used to measure an outcome called utility.

The basic idea behind CUA is that one purpose of medical intervention is to improve the quality of life of patients and that changes in quality of life should be measured alongside measures of increase in life expectancy.

Therefore, the comparative efficacy of the alternative treatments is captured and measured through their contribution to the quality of life of the patients undergoing such treatments.

This is an important idea that deserves a more detailed explanation and will be covered later on. However, despite the obvious theoretical advantages of UA, there are major practical difficulties in establishing the exact utility attached to different health states.

 3) Cost-benefit analysis (CBA):

The aim here is the same as before i.e. to construct cost/outcomes ratios (average and incremental) to compare alternative regimens. 

However, cost-effectiveness analysis cannot be applied because the alternatives achieve fundamentally different outcomes.

In this case, the benefit is measured as the associated economic benefit of intervention here both results and the cost have monetary values; e.g. monetary value of returning a worker to employment earlier.

We express in monetary terms the positive and negative consequences of the medical intervention and aggregate them to construct comparable cost-benefit ratios. 

Healthcare professionals often feel instinctively uncomfortable about putting a financial value on human suffering. However, the function of money is quite simple to allow society to compare the value of totally different commodities.

The most controversial aspect of CBA is to put a value on items that are perceived to be inherently invaluable by healthcare professionals, for example, the loss of eyesight, impairment of hearing, renal failure or even loss of human life.

However, this practice is well established in the insurance industry.

Indeed, this is neither new nor exclusive to the insurance industry. 

CBA are not that common in Pharmacoeconomics and where performed the investigators usually have calculated the costs and benefits which easily (and non-controversially) can be expressed in money terms.

Alternatively, there are techniques for quantifying the strengths of individual preferences for alternatives. These include willingness to pay and the standard gamble technique, in which hypothetical examples are used to ask individuals how much they would be willing to pay to secure improvements in treatment.

Among all the approaches available, this is the most comprehensive and, yet, the most difficult to apply.

Notes Chapter 6 Pharmacoeconomics

6.1  Introduction

6.2 Basic terminologies

6.3 importance of pharmacoeconomics

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