Basic of Pharmacoeconomics

Basic of
Pharmcoeconomic
Ulvi Nur Rista
Outline
Definition
Type of Pharmacoeconomic studies
The Differences of the studies
How to measure the cost

Definition
 The analysis that identifies, measures, and compares the costs and
consequences/outcomes of pharmaceutical products and services.
Basic Pharmacoeconomic Equation
Cost Clinical
Pharmacoeconomic study
analysis study
Why is pharmacoeconomics important?
Health costs are rising, the pharmacoeconomic studies help to

 Develop a drug formulary
 Develop drug use guidelines for insurance
 Improved patient outcomes that decrease the need for other costly services
Type of Pharmacoeconomic (PE) Studies
Cost Minimization Analysis
Cost Effectiveness Analysis
Cost Benefit Analysis
Cost Utility Analysis

The Differences of the studies
Cost Minimization Analysis (CMA)
Cost Minimization Analysis (CMA)
 The simplest study

 The outcomes are assumed to be equivalent, thus only the costs of
intervention are compared
 This study is conducted by comparing the products with the same drug entity
or comparing the same drug in the different setting
Lansoprazole Total Costs

“X” Rp…
The outcomes are
The costs are
equivalence
compared
(be assumed)
Lansoprazole Total Costs

“Y” Rp…
Cost Effectiveness Analysis (CEA)
 CEA is the most common type of PE study, compare costs and outcomes
 The outcomes easier quantify, because these outcomes are routinely
collected in the clinical practice (blood pressure mmHg, cholesterol level,
symptoms free days, years of life saved)
The
 Type of outcomes of each group must be same Disadvantage:
Subjectivity
Judgement
Cost Benefit Analysis (CBA)
Cost Benefit Analysis (CBA)
 CBA compares costs and benefits in monetary units

 The advantage is many different outcomes can be
compared as long as the outcome measures are valued in
monetary units
 The disadvantage is defining outcomes in monetary units
is not an easy task and there is no standar method for
that.
Comparison CEA and CBA
How to conduct a CBA?
Determine the
Identify the
type of Determine the
costs and
program/ alternatives
benefits
intervention
The alternatives
are to ”do
nothing”,
similar/different
program
How to calculate the costs &
benefits? Which one of the
interventions that considered to
be cost beneficial?
• Net Benefit (Net Cost)

Cost benefit if: Net Benefit > 0 OR
Net cost < 0
• Benefit to Cost (Cost to Benefit) Ratio
Benefit-to-Cost > 1 OR
Cost-to-Benefit < 1
• Internal Rate of Return
Using calculator
How to Measure Indirect & Intangible
Benefits?
 Benefits = Cost Savings = Cost Avoidance
 Indirect Benefits are increases in productivity or
earnings because of a program/intervention
 Intangible benefits measured by patient
preferences in monetary units
Benefits? (2)
 Human Capital Method
1. Wage Rate Calculation
o A Yearly wage rate  for a program/intervention that would reduce long
term disability or death
o A Daily wage rate  for a program/intervention that would reduce short
term disability
2. Missed Time Because of Illness
Example: Average Income Rp. 5.000.000,-/year and 240 days worked per year.
Daily wage rate = Rp. 20.850,-
Group Missed Days of The Value of Indirect benefit/
Work per years Productivity Loss Cost Saving
(Rp)
A (Before 20 days Rp. 417.000,- Rp 271.050,-
treatment)
B (After treatment) 7 days Rp. 145.950,-
Benefits? (2)
 Willingness to pay, determine how much people are willing to pay to reduce
the chance of an adverse health outcome.
1. Bidding vehicle
o Open ended question
Ex: What is the maximum amount that you would be willing to pay for a 1-
hour consultation with a pharmacist? ________________________________
o Close ended question
Ex: Would you be willing to pay $60 for a 1-hour consultation with a
pharmacist? ___Yes____No
Cost Utility Analysis (CUA)
Cost Utility Analysis (CUA)
 A subset of CEA because the outcomes are assessed using a special type of
clinical outcome measure
 The most common outcome unit = QALY (Quality-Adjusted Life Year)
 The advantage is that different types of outcome and disease with multiple
outcomes or different treatment can be compared, using one common
outcome unit.
How to conduct a CUA?
1.Sum the
1.Develop a 1.Choose a 1.Choose product of utility
description of method for subjects who will scores by the
each disease determining determine length of life for
state utilities utilities each option to
obtain QALYs.
Step 1. Develop a description of each disease
state
 Describe the usual health effects expected from the disease

 It should include the amount of pain, any restriction of activities, the time it may
take for treatment, any mental changes, possible changes in health perceptions
Description of Hospital Based Kidney Disease
You often feel tired and sluggish. A piece of tubing has been inserted into your arm
or leg, which may restrict your movement. There is no severe pain but rather chronic
discomfort. You must go to the hospital twice a week for 6 hours per visit. You must
follow a strict diet (low salt, little meat, no alcohol). Many people be- come
depressed because of the nuisances and restrictions, and some feel they are being
kept alive by a machine.
Step 2. Choose a method for determining
utilities
Rating Scale (RS)
Step 3. Choose subjects who will determine
utilities
Patient's
Patient Family or
Care Giver
General Health Care

Society Professionals
Step 4. Sum the product of utility scores by
the length of life for each option to obtain
QALYs
Cost Categorization
Measure and Estimate the Cost
 Determine the perspective of a study based on types of

cost measured
 The most common perspective used in PE studies:
Institution or provider (hospital or clinic) or the payer
(insurance or patient)
 Timing adjustment for the cost
1. Bringing past costs to present  Standardization of Cost
2. Bringing future cost to present  Discounting
Standardization of Cost
 Adjustment of cost needed, if we had taken the retrospective data over a

numb of years ago.
 Example:
The cost for patient who received treatment in 2015 is different with the
cost for patient who received in 2019  should be standardized.
 How to standardize the cost?
1. Units multiplied by current cost
2. Medical consumer price index inflation rates
Method 1. Units multiplied by current cost
Case:
A pharmacoeconomic study to be conducted in 2018, the objective is to estimate
the difference in the costs of Mild Infection treatment. retrospective data were
collected from a past medical record (2010). Calculate the total standardized
cost for the current year.
Medical Units of each Cost per unit in Total Cost in

Resource Resource 2018 (Rp) 2018 (Rp)
Doctor Visit 3 visits Rp. 200.000,- Rp. 600.000,-
Laboratory 2 laboratory Rp. 500.000,- Rp. 1.000.000,-
service for services
culture organism
Antibiotic 28 capsules Rp. 9000,- Rp. 252.000,-
Treatment
Method 2. Medical consumer price index
inflation rates
 Inflation rate = the percentage of how much the price of the item has
increased over a time periode
 Example:
Medical cost were collected from these years
2017 2018 2019
MCPI Inflation MCPI Inflation

Rate Rate
Cost Adjusted = Cost from the year the data were collected x (1+ MCPI Inflation rate
for that year)
Case 2
 A pharmacoeconomic study to be conducted in 2019, the objective is to

estimate the difference in the costs of chemotherapy regimens. retrospective
data were collected from a past medical record 2017.
calculate the total standardized cost given that the MCPI for the year 2018 is
4.4% and for 2019 is 4.5%.
Medical Cost Estimate Year of cost Cost adjusted to

Resource (Rp) estimate 2019
Chemotherapy Rp. 1.500.000,- 2017 Rp. 1.636.470,-
Drug
Cost adjusted from 2017= Rp. 1.500.000,- x (1+0,044) x (1 + 0,045) = Rp. 1.636.470,-
Discounting
 Money in the future is valued at a lower rate than money received

today.
 Discount rate: Interest rate you need to gain on a given amount of
money today to end up with a given amount of money on the future.
 Present Value (PV): How much the actual amount to have in order to
have the future amount.
 Present Value (PV) = Future Value / (1+ discount rate)n
dimana n = number of years
Case 3
 The expenses of cancer treatment for the next 3 years are as the following in
the table. Calculate the Total present value of the expenses if you knew that
expenses occur at the beginning of each year given that the discount rate is
5%.
Year Costs are Estimated Cost Calculation Present Value
Incured w/o discounting
Year 1 Rp. 2.500.000,- 2.500.000/1 Rp. 2.500.000,-
Year 2 Rp. 3.000.000,- 3.000.000/(1,05) Rp. 2.857.142,-
Year 3 Rp. 3.500.000,- 3.500.000/(1,05)2 Rp. 3.174.603,-

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Basic of

Type of Pharmacoeconomic studies

The Differences of the studies

How to measure the cost

Basic Pharmacoeconomic Equation

Health costs are rising, the pharmacoeconomic studies help to

Cost Minimization Analysis

Cost Effectiveness Analysis

Cost Benefit Analysis

Cost Utility Analysis

 The simplest study

Lansoprazole Total Costs

Lansoprazole Total Costs

 CBA compares costs and benefits in monetary units

• Net Benefit (Net Cost)

 Describe the usual health effects expected from the disease

Description of Hospital Based Kidney Disease

General Health Care

 Determine the perspective of a study based on types of

 Adjustment of cost needed, if we had taken the retrospective data over a

Medical Units of each Cost per unit in Total Cost in

2017 2018 2019

MCPI Inflation MCPI Inflation

 A pharmacoeconomic study to be conducted in 2019, the objective is to

Medical Cost Estimate Year of cost Cost adjusted to

 Money in the future is valued at a lower rate than money received

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