Pharmacoeconomics What Is It? Pharmacoeconomics refers to the scientific discipline that compares the value of one medicine to another.

Construct evidence Collect evidence Manipulate evidence It is a sub-discipline of health economics. A pharmacoeconomic study evaluates the cost (expressed in monetary terms) and effects expressed in terms of either Monetary value (dollars) Efficacy (clinical); or Enhanced quality of life (humanistic) of a medicine. Economics is a social science not accounting; about economic efficiency. It assists in society prioritise expenditure on goals society values most highly, in a way that achieves most benefits for dollars spent. It recognises that resources are scarce, but goals limitless. Based on making an evidence-based informed decision, therefore based on evidence-based medicine Health economics is the discipline of economics applied to the topic of health care. Health care resources available for medical procedures, including medicines are limited. Economic evaluations help alleviate the burden of scarce resources by improving the allocative efficiency of health care financing. Allocative efficiency refers to obtaining maximum gain in health outcomes for dollars spent on health services. Economic evaluations relate the costs of alternative interventions to the health benefits they provide. Health economists stress the importance of value unlike accountants who are just interested in money (profit and loss). Fundamentally our health needs are always greater than the money available to meet these needs When society decides to purchase a health service or intervention, it forgoes the opportunity to purchase a different service with the same funds. Health Economics helps society-made decisions that maximise the health benefits we obtain from purchasing services or interventions. The aim is to ensure we do not reject something that would have been more useful. It is not about reducing expenditure on health, but rather maximising health benefits gained from the money spent.

Economic evaluations may be applied to any intervention intended to improve health: Diagnostic procedures breast cancer screening (found to be cost effective in comparison to treatment), prostate serum analysis measurement (still has limitations due to questionable diagnostic reliability) Preventative health exercise and CV risk Surgical procedures keyhole vs. conventional hernia repair; keyhole surgery improves QoL, decreases hospital admission and lower chance of infection. Pharmacy based medication management programs asthma management Health Economics when applied to medicines is termed Pharmacoeconomics. Pharmacoeconomics identifies, measures and compares the costs, risks and benefits of medicines to estimate which alternative produces the best health outcome for the resources invested. A PE analysis therefore must describe the incremental gain in health benefit derived from using a new medicine, and its costs, and decide whether these benefits are worthwhile, compared to existing treatment. FUNDAMENTALS OF PHARMACOECONOMICS PE extends existing medical decision making beyond comparative efficacy and safety, to include comparative cost effectiveness. PE is fundemental to Australia meeting the objectives of our National Medicines WHAT Policy: IS IT? To meet medication and related services needs, so that both optimal Pharmacoeconomics is fundamental to Australia meeting the objectives of our health outcomes and economic objectives are achieved Nationala lot of value for the amount of money that has been spent on health Gives medicines Policy in Australia

To meet medication e rl ated service and needs, so that both optimal health outcomes and economic objectives are achieve
Quality, Safety & Efficacy TGA - registration

Timely & Cost Effective Access PBS - reimbursement

NATIONAL MEDICINES POLICY

Responsible & Viable Industry DSIIR

Quality Use of Medicines NPS

NOT TO BE USED WITHOUT THE AUTHORS PERMISSION

PBS is primarily responsible for timely and cost effective access.

PE contributes to evidence based medicine (EBM). As such, PE is designed to improve the quality of decision-making about medicines. PE aims to maximise the health outcomes achieved for the dollars spent on medicines. PE makes use of the best available evidence relevant to the question being asked Is it worthwhile purchasing this new medicine?
FUNDAMENTALS It? PHARMACOECONOMICS Why Do We Need OF
COST OF DEVELOPMENT HIGH AND RISING
COST OF MEDICINES DEVELOPMENT

1000 900 800 700 600 COST (US$ MILLION) 500 500 400 400 300 200 125 100 7.5 0 1950 1960 1970 1980 1989 1991 1993
YEAR

1000 880 800

$US Mill

250 200

270

300

55 10 1995 1998 2000 2003 2005 2009

You have until the end of patency to pay for the investment of a new medicine (usually about 15 years). Governments are happyPHARMACOECONOMICS so long as they provide FUNDAMENTALS OF to subsidise new medicines economic benefit to the Government.
NOT TO BE USED WITHOUT THE AUTHORS PERMISSION

LIFE EXPECTANCY CONTINUES TO RISE

LIFE EXPECTANCY AT BIRTH

82

81

80

AVERAGE AGE

Australia Canada 79 Sweden UK USA

78

77

76 2002 2003 2004 2005 YEAR 2006 2007 2008

This decade has sown large increases in life expectancy. Australia > Canada > Sweden > UK > US

SOURCE OECD Health data April 2011

NOT TO BE USED WITHOUT THE AUTHORS PERMISSION

FUNDAMENTALS OF PHARMACOECONOMICS

75% of HEALTH EXPENDITURE OCCURS IN 65+ AGE GROUP

HEALTH EXPENDITURE PER CAPITA

30000

25000

20000

DOLLARS

1987 15000 1999 2004

10000

5000

0 0-18 19-44 45-54 55-64 AGE GROUP 65-74 75-84 85+

FUNDAMENTALS OF PHARMACOECONOMICS
SOURCE US Office of the Actuary, National Health Statistics Group

HEALTH EXPENDITURE CONTINUES TO RISE

NOT TO BE USED WITHOUT THE AUTHORS PERMISSION

TOTAL EXPENDITURE ON HEALTH (% GDP)

17

16

15

14

13 Australia

% GDP

Canada 12 Sweden UK USA 11

10

7 2002 2003 2004 2005 YEAR 2006 2007 2008

Us has the worst life expectancy, yet spends the highest proportion of GGP on health at 16%. Australia is at ~8% with better outcomes. This shows the value in FUNDAMENTALS interventions. Australian health OF PHARMACOECONOMICS
SOURCE OECD Health data April 2011
NOT TO BE USED WITHOUT THE AUTHORS PERMISSION

MOST WESTERN GOVERNMENTS CONTRIBUTE THE MAJORITY OF HEALTH CARE FUNDING

GOVERNMENT HEALTH EXPENDITURE (% OF TOTAL)
88

83

78

73

PERCENTAGE

68

Australia Canada Sweden UK USA

63

58

53

48

43 2002 2003 2004 2005 YEAR 2006 2007 2008

In the US, most of health care is paid by the individual, in comparison to Australia where the 70% of health care is funded by the government.
SOURCE OECD Health data April 2011
NOT TO BE USED WITHOUT THE AUTHORS PERMISSION

FUNDAMENTALS OF PHARMACOECONOMICS
MOST WESTERN COUNTRIES HAVE SIGNIFICANT OR RISING DEBT
NATIONAL DEBT (% GDP)
75

65

55

45

PERCENTAGE

35

Australia Canada Sweden UK

25

USA

15

1995 -5

2000

2005

2010

2011

FUNDAMENTALS OF PHARMACOECONOMICS
-15 YEAR

SOURCE OECD Economic data 2011 AGEING IS A MAJOR FACTOR IN INCREASING MEDICINES USE
NOT TO BE USED WITHOUT THE AUTHORS PERMISSION

PRESCRIPTION MEDICINES USE

100

90

80

70

60

50

% using average number prescriptions annually

40

30

20

10

0 18-34 35-49 50-64 AGE GROUP 65-79 80+

SOURCE Centre on an Ageing Society Georgetown University

Shows that as you get older, you start requiring more medicines. At the 80-yearold age group, 100% are using at least 1 prescribed medicine. With an aging population, were going to have more and more people needing to use medicines. Increase in life expectancy is thought to be driven by development of effective medicines.
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FUNDAMENTALS OF PHARMACOECONOMICS
VALUE AN INCREASING IMPORTANT DETERMINANT

The reason for discontinuing a medicine is shifting away from efficacy towards economic reasons, i.e. you might have a safety or efficacy gain in a new drug, but there is no financial worth to develop it (not cost-effective).
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How Do We Do It? - Using Evidence to Define Value Questions we Need to Know About Medicines First hurdle Focus on Quality Mid 1800s first development of drugs that actually worked. Based around heavy metals used to treat syphilis and gonorrhoea not governed by quality so people could die from heavy metal poisoning US and British Pharmacopoeias codify quality Second Hurdle Plus Safety 1902 US Biologics Control Act includes safety as a required standard 1938 US Food, Drug and Cosmetic Act strengthens premarket testing Third Hurdle Plus Efficacy 1945 FDA Penicillin amendment requires testing and certification of safety and efficacy of all penicillin products 1960s consolidation of premarketing evaluation of quality, safety and efficacy Fourth Hurdle and Value for Money 1992 Pharmaceutical Benefits Advisory Committee (PBAC) requires new medicines to demonstrate appropriate cost and effectiveness NICE, US reforms

Why do we need to Estimate Value? It helps us to objectively address these types of questions: What medicines should be included on the hospital formulary? What is the best medicine for this particular disease? What is the cost per Quality Adjusted Life Years (QALYs) for any given for any medicine? What is the best medicine for a pharmaceutical company to develop? Is a pharmacy based intervention designed to enhance adherence worthwhile? What is the Best Available Evidence? From a scientific viewpoint, evidence generated from a well-designed clinical trial: Maximises the probability of getting the observed difference due only to the new medicine Minimises the probability of getting the observed difference by chance Randomised, controlled trial is the gold standard (INTERNAL VALIDITY) o Greatest likelihood of getting the same result over and over again From an economic viewpoint, evidence that reflects practice and measure outcomes valued or understood by society (EXTERNAL VALIDITY). How well your result translate into a practical environment The problem it is extremely difficult to achieve both equally. compare medicines. RCT minimises the likely impact of biases or chance on results (uncertainty), by tightly specifying the trial environment. Most medicine RCT focus on safety and efficacy. ITS Economics is more interested in health outcomes, more so than efficacy ALWAYS A BALANCING ACT! measures Most medicine RCT over minimise and certaintyup safety signals Chance and bias is monitor patients to pick of results maximised by carefully designing & controlling the trial the benefits and costs of medicine when high signal, Economics is more interested in environment (INTERNAL VALIDITY) low noise patients, rather than clinical trial populations. treating
ALWAYS A to practice is maximised if we keep the trial environment as close as ITS Relevance BALANCING ACT possible to real life minimise andVALIDITY) lower signal, higher noise Chance and bias is (EXTERNAL certainty of results maximised by carefully designing and controlling the trial environment (INTERNAL Certainty of benefit is maximised if we conduct clinical trials which measure VALIDITY) high signal, low noise health outcomes rather than surrogate conduct clinical trials which Relevance to practice is maximised if we measures of efficacy measure health outcomes rather than surrogate measures of efficacy However it may take may years, and several thousand to detect ato detect a However, it may take years, and several thousand subjects subjects significant difference in health outcomes such as as mortality of MI significant difference in health outcomes such mortality of MI. Big, long term studies are costly and patent terms are at most 20 years Big, long term studies are costly and patent terms are at most 20 years INTERNAL VALIDITY CERTAINTY EXTERNAL VALIDITY TIME and COST

A well-designed prospective randomised controlled trial remains the FUNDAMENTALS OF PHARMACOECONOMICSbest tool to

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EFFICACY VERSUS EFFECTIVENESS

Increasing effectiveness over time

5HT uptake inhibitors, D2 antipsychotics

EFFICACY
Decreasing effectiveness over time
TZD, minoxidil, class 1 antiarrythmics

This demonstrates efficacy against effectiveness. Efficacy, no matter when you measure it, is going to remain the same. Effectiveness can increase or decrease over time.

TIME TO OUTCOME

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Best Available Evidence Clinical Trials Provide: Benefits in ideal setting Strictly controlled environment Costs driven by protocol Measures efficacy and safety Outcomes usually short term changes in signs or symptoms e.g. BP, plasma cholesterol PE Requires: Benefits in routine setting Standard practice Costs associated with standard management Measures effectiveness FUNDAMENTALS OF PHARMACOECONOMICS Outcomes usually longer term changes in health status, e.g. less CV events, decreased mortality
UNDERSTANDING UNCERTAINTY

DATA Meta-analysis Effectiveness trial Health Outcome RCT Observational Opinion

Uncertainty increases in three main ways, determined by the type of clinical trial that we are looking at. Uncertainty increases doubt in funding a drug.
Retrospective analysis Case Series Efficacy surrogate

UNCERTAINTY

Regulatory trial

Intermediate surrogate

How do we get the Balance Right? Two Ways 1. Modify clinical trials Make environment more realistic o Fewer inclusion restrictions o Less intensive monitoring Measure more relevant outcomes o Changes in disease rather than signs or symptoms Move from specialist to GP setting Minimise unnecessary costs o Testing o Clinic visits 2. Base economic evaluation on regulatory clinical trials, and use other data sources such as expert opinion, epidemiology studies, cost of illness studies to: Extrapolate RCT results to a longer time horizon Transform RCT efficacy results to intended final outcomes of treatment Translate RCT protocol driven costs to usual practical costs This is achieved by modelling. An economic model can be used to: Estimate the impact of side effects/withdrawals on long term effectiveness Estimate costs of treatment based on standard practice rather than protocol generated costs Link immediate surrogates to health outcomes (BP to CV risk to decreased mortality)

The Nuts and Bolts of how Economic Evaluation is Done Economic Evaluation What is measured? OF PHARMACOECONOMICS FUNDAMENTALS Intended outcome of therapy Resource consumption to achieve outcome Cost of therapy and resources
i Hospitalisations Impact on health care costs Drug Therapy Impact on health status ii Other drugs iii Procedures

Target group

i Survival ii QOL i Hospitalisations

Alternative therapy

ii Other drugs Impact on health care costs iii Procedures

Health status can be measured according to survival, QoL, change in blood pressure, change in cholesterol.
NOT TO BE USED WITHOUT THE AUTHORS PERMISSION

Steps in Undertaking an Economic Evaluation Assign probabilities for the intended outcome using each medicine based on: Clinical trial results Literature Expert opinion Calculate costs associated with each treatment: Other medicines Tests Hospital services, doctor visits

FUNDAMENTALSgetting the outcome you want and the cost of achieving the Probability of OF PHARMACOECONOMICS
outcome according to the probability
=
COMPARATOR PRICE

Calculate incremental cost and outcome ratio for new treatment

ECONOMIC VALUE

DIFFERENTIAL VALUE

SAVINGS
HOSPITALISATIONS TREATMENT FAILURES MONITORING DOCTOR VISITS

CLINICAL BENEFITS
BP CV RISK MICROALBUMIN

SURVIVAL/QOL BENEFITS
CV MORTALITY CV MORBIDITY QALYS

VALUE IN USE
COMPLIANCE PRODUCTIVITY PREDICTABILITY

900 300 5000 200

600

7000

Comparator price based on equal safety & efficacy

Cost savings due to avoidance SAE

Cost savings due to reduced CV risk

Cost savings due to avoided dialysis

Cost saving due to fewer dr visits, path tests

Economic value per year = price of new drug

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This is a graphical way of showing how you build up economic value. Economic value is the likely price you can get with your new drug. The price of a new drug is built on an equation, with the price of a comparator that would have previously been given. Differential value can be savings (e.g. less hospitalisations), clinical benefits (e.g. control BP better), survival/QoL Benefits and value in use (e.g. improving compliance by making it a 1 daily dose). In this bottom example, the comparator price is $5000/year. This means we pay $5000/year for the comparator that was used in this study. The new drug gives you: $300/year cost savings due to lower incidence of side effects $900/year on savings regarding CV risk because it has a much stronger impact on lowering blood pressure $200/year cost savings due to avoidance of dialysis (decreases microalbuminurea, which would lead to kidney disease and the need for dialysis)

$600/year due to decreased doctor visits and less liver testing with new drug Therefore, this shows we can deliver $2000/year more value to society by using a new drug. Therefore we believe our price can be $7000 rather than $5000. o PBS looks at need of a new drug, i.e. if there are thousands of antihypertensive on the market, then there is no point in the government subsidising it.

Health Economic Methods Four key methods to compare costs, risks and benefits. Each method measures costs in monetary terms; the differences lie in how the risks and benefits are measured and valued. Cost minimisation equal risks (ADE) and benefits o E.g. develop a new statin with same effect at lowering cholesterol as others and the same ADR profile Cost effectiveness outcome measured similarly (BP) o Two medicines that achieve the same outcome (e.g. lowering of blood pressure). One is more effective at lowering blood pressure compared to the other, therefore more cost effective for the government in the long run. Cost utility synthesis multiple outcomes into single measure (QALY) o Medicines that have either different outcomes or you are trying to synthesise novel outcomes into a single measure. This is when you get the QALYs. o E.g. you get two drugs (say, cancer drugs) that increase survival time but one has much lower side effects therefore improving QoL. Cost benefit outcomes measured in monetary terms o Not often done with medicines; usually with other interventions, i.e. surgical intervention vs. drugs for complications

Cost-Minimisation Used when no significantly significant difference in outcome between two medicines can be qualified In theory, efficacy and safety profile must be the same Best underpinned by equivalence trial Price of new medicine same as comparator Cost Effectiveness Used when both medicines affect the same physiological or disease pathway (same outcome measures are used) Cost effectiveness of a medicine cannot be compared across diseases or conditions a medicine which lowers cholesterol cannot be compared to one that reduces BP (but can if we are measuring CV risk) If the new medicine produces an incremental gain in benefits, a price premium may be justified

Cost Utility Used to integrate effectiveness and patient satisfaction or preference Usually a better way of establishing value because of assessing patient needs and QoL (government will pay for this if they think it is important CUA not only measures the change in disease or condition, but also the patients perception or preference for this change Better economic tool because youre including preference Quality of life is a common method which measures the outcome of a medicine on the patients physical, social and physiological functioning and well being Other Considerations Perpective of the analysis o Whose costs and outcomes are relevant to the evaluation? o The perspective may be from a society, patient, insurer, regulator aor reimbursement position o The perspective is important because an analysis from one view may not reach the same conclusions as one from an alternative view o From a hospitals perspective, reduced medicine cost, nurse administration time and length of admission are important o From societys perspective, savings to the health care system as a whole and imporved QoL and adherencce of the patient are more important Modelling o The basis of pharmacoeconomics is usually clinical trials conducted to support the safety and efficacy of medicine o The aim of modelling is to make the trial results more relevant to practice o Modelling is designed to overcome the limitations of the trial data base: Increasing the eternal validity of the trial Extending the costs and consequences beyond the scope of a RCT Linking surrogate outcomes to health outcome measures Replacing protocol driven resurce use and costs with real life information Impact of side effects on continuation and health outcomes Simple models are developed using decision analysis Decision analysis utilises costs, outcomes of treatment and probability of obtainingg a given outcome to compare the cost-effectiveness of two or more medicines Estimates of costs, outcomes and probabilities can be taken from clinical trials, epidemiological sources or even expert opinion Estimates become increasingly uncertain as we move further away from RCT to observational data and expert opinion The impact of uncertainty in estimating a cost or outcome on the analysis is tested using sensitivity analysis varying the estimate across a range A 6 month RCT showed the following:

On average, 90% (CI 84-95%) patients treated with Gluceze achieve HbA1c of 7% compared to 80% (CI 73-83%) using metformin o CI indicates good efficacy in the study; shows that results wil be constant most of the time If target HbAic not reached insulin was added 10% patients had an ADE on Gluceze and required specific treatment. Only 2% required specific ADE treatment on metformin Gluceze costs $20 per month, metformin $10 per month FUNDAMENTALS OF PHARMACOECONOMICS Does Gluceze treatment represent value for money?
MODELLING GLUCEZE
Probability of Success 90

METFORMIN
80

FUNDAMENTALS OF PHARMACOECONOMICS
$120 $60 10 2

Cost per 6 months treatment

Probability of ADE

Outcome
Cost of treating ADE $100 $120

Cost

Continue

0.9

Alternative treatment cost

$70

Success

GLUCEZE
ADE
0.1

$70

0.9 FUNDAMENTALS OF PHARMACOECONOMICS

Continued success Success with ADE Failure TOTAL Metformin Continued success Success with ADE Failure TOTAL

$120 $120 $100 $70

NOT TO BE USED WITHOUT THE AUTHORS PERMISSION

GLUCEZE
Success
0.9

Failure Outcome
Continue
0.9

Cost

Probability 0.1 Cost X P Insulin

GLUCEZE

0.1
ADE
0.1

Continued success Success with ADE

$120 $120 + $100 $70

0.9 X 0.9 = 0.81

$97.20

GLUCEZE

Failure
0.1

Insulin

0.1

0.9 X $19.80 Continue0.1 =0.98 0.09 0.1 $7.00 $124 0.02

Success
TOTAL
0.98

Failure

Metformin
Metformin

Continue Success
0.8

0.8 Metformin
Continued success $60 $60 + $120 $70

ADE
0.8 X 0.98 = 0.784

$60

ADE

0.02

$47.04 $2.88 $14.00 $63.92

Failure Success
Failure
0.2

Insulin

with ADE Failure TOTAL

Insulin X .0.02 0.8

= 0.016 0.2

$60 + $120 $70

0. 2

0. 2

0.2

Incremental cost effectiveness ratio = Cost/ outcome $124 - $63.92/0.9 0.8 = $601 per extra success

Incremental cost effectiveness ratio = Cost/ outcome $124 - $63.92/0.9 0.8 = $601 per extra success

NOT TO BE USED WITHOUT THE AUTHORS PERMISSION

Spending $601/year to get one extra patient with good diabetes control, therefore cost effective for government

FUNDAMENTALS OF PHARMACOECONOMICS

LIMITATIONS OF MODELLING - UNCERTAINTY

SMOKING BP REDUCTION IN CVD WEIGHT HDL-C BSL

Contributors of CV risk For any given health outcome, there are often multiple efficacy surrogates which contribute to the risk of poor outcomes.

It is the interplay of each efficacy variable which LDL-C ACTIVITY determines individual health FUNDAMENTALS OF PHARMACOECONOMICS For any given health outcome, there are often multiple efficacy surrogates outcomes.
which contribute to the risk of poor outcomes.

LINKING INTERMEDIATE FACTORS TO HEALTH OUTCOMES IN CEA It is the interplay of each efficacy variable which determines individual health MEDICINE CLASS EFFICACY SURROGATE INTERMEDIATE HEALTH OUTCOME outcomes
SURROGATE
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LIPID MODIFIER

LDL- C HDL- C

CV RISK

REDUCTION IN CVD/MORTALITY

ANTIHYPERTENSIVE

BP

CV RISK

REDUCTION IN CVD/MORTALITY

HYPOGLYCAEMIC

FPG HbA1c

CV RISK

REDUCTION IN CVD/MORTALITY

ONCOLOGY AGENT

TUMOUR SIZE

PROGRESSION FREE PERIOD

QALYS

Increasing certainty of benefit

So say we have a new lipid lowering drug, in trials we measure LDL and HDL levels, and so on for the others. The intermediate surrogate that links all these together is the CV risk and the ultimate outcome is a decrease in CVD and FUNDAMENTALS OF PHARMACOECONOMICS mortality. Just measuring the intermediate otcomes gives no real idea whether, I isolation, efficacy surrogates alone fix health outcomes.
THE ROSIGLITAZONE EXAMPLE - Measuring efficacy and assuming health outcomes
Rosiglitazone effective as both a monotherapy and in combination with SU and metformin in lowering fasting PG and HbA1c in long term In comparison to metformin, it increased LDL-C by 7%, weight by 8% and a small but significant decrease in BP (4/2mmHg). It was assumed that rosiglitazone would reduce CVD risk in diabetic patients, based on glycaemic impact. Seven years after first marketing, a meta-analysis ny Nissen and Wolski demonstrated that patients taking rosiglitazone have a 43% increased risk of MI, and 64% increased risk of CV death

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Sensitivity analysis o In any model, the issue of uncertainty in the data must be addressed o Generally, the uncertainty associated with outcome variable increases as the quality of evidence use to estimate the outcome decreases o For example, if you ask n economists a question you get n+1 answers o However, even RCT have outcome uncertainty which is MENTALS OF PHARMACOECONOMICS the point estimate represented by confidence intervals around o The standard approach to managing FUNDAMENTALS OF PHARMACOECONOMICS uncertainty is to perform a sensitivity analysis o Using an RCT the base case would use the point estimate from the ITY ANALYSIS SENSITIVITY ANALYSIS trial, with the upper and lower 90% CI values used I the sensitivity analysis
Base case Cost X Cost X P Base case P = $124

hypoglycaemic example New oral hypoglycaemic example

Outcome GLUCEZE Lower CI
Outcome

Cost

Cost

Probability

Probability

Cost X P

Cost X P

= $124

GLUCEZE Lower CI Continued success with ADE $120 $120 + $100 0.84 X 0.9 = 0.756 = 0.084 $90.72

Incremental cost effectiveness ratio base = $601 lower = $1412 upper base = = $421

Incremental cost effectiveness ratio $601 lower = $1412 upper = $421

Continued $120 success Success Success with ADE Failure

0.84 X 0.9 $90.72 0.84 $18.48 = 0.756 X 0.1 0.840.16 X 0.1 = 0.084 0.16 $18.48 $11.20 $11.20
$120.40

$120 +$70 Failure $100

TOTAL

$70

In this case, the incremental cost effectiveness of drug A is sensitive to the proportion of patients In this case, the reaching HbA1c target incremental

TOTAL
GLUCEZE Upper CI

GLUCEZE Upper CI Continued success Success with ADE $120 $120 + $100 $70 0.95 X 0.9 = 0.855 0.95 X 0.1 = 0.095

$120.40
$102.60 $20.90

cost effectiveness of drug A is sensitive to the proportion of patients reaching HbA1c target

ContinuedFailure $120 success Success with ADE Failure TOTAL

TOTAL

0.950.05 X 0.9 = 0.855 0.95 X 0.1 = 0.095 0.05

$102.60 $3.50 $20.90 $3.50

$127

$120 + $100 $70

In the base case, it is going to cost us an extra $600/6 months of treatment to get an additional patient in control. Ranges of control can vary between $400 and $1500.

NOT TO BE USED WITHOUT THE AUTHORS PERMISSION

Discounting $127 o When the costs and benefits of a medicine extend over time (generally over several years), the future costs and benefits should be discounted to reflect todays value NOT TO BE USED WITHOUT THE AUTHORS PERMISSION o The assumption is that people prefer to receive money (and benefits) today rather than at a later time For example, if you lent $1000 you would expect $1000 + CPI in 2 years time to retain the same value o There is no standard discount rate applied to pharmacoeconomic evaluations, but current interst rates are often used.

FUNDAMENTALS OF PHARMACOECONOMICS

DESIGNING A HEALTH ECONOMIC STUDY

DESIGN FEATURE CONSIDERATION TYPE 2 DIABETES EXAMPLE

Likely place in therapy (Indication)

Evidence based management guidelines

Diet, exercise then metformin as foundation therapy

Patient Population

Population most likely to benefit

Patients failed diet, exercise and metformin rather than newly diagnosed

Comparator

Treatment to be replaced in practice or gold standard

Sulfonylurea or TZD or gliptan rather than placebo

Outcome

Health outcome rather than surrogate

CV risk rather than HbA1c

Costing

Practice rather than protocol driven

Efficacy and safety testing according to best practice guidelines

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