Download Pharmacy and Therapeutics Committee

Drug and Therapeutics
Committee
Session 6. Evaluating the Cost of
Pharmaceuticals
Introduction
 Adding medicines to the formulary involves
careful consideration of—
 Efficacy
 Safety
 Quality
 Cost
 Cost factors are becoming more important
 Science of pharmacoeconomics is emerging
Objectives
 Define and understand the different types of cost
analysis methods relevant to choosing medicines for
the formulary
 Understand how to read and assess journal articles
concerning an economic study
 Apply session materials to conduct a basic cost
analysis for a medicine being requested for the
formulary
Outline
 Introduction
 Key Definitions
 Cost-Evaluation Methods
 Cost-Minimization Analysis
 Cost-Effectiveness Analysis
 Evaluating Pharmacoeconomic Studies
 Activities
 Summary
Key Definitions (1)
 Pharmacoeconomics—the description and
analysis of the cost of pharmaceutical therapy to
health care systems
 Cost—the total resources consumed in
producing a good or service
 Price—the amount of money required to
purchase an item
Key Definitions (2)
 Medicine effectiveness—the effects of a medicine
when used in real-life situations
 Medicine efficacy—the effects of a medicine under
clinical trial conditions
Direct Costs of a Medicine
 Acquisition cost
 Transportation cost
 Supply management cost (i.e., storage facility cost)
 Cost of supplies and equipment to administer medicines,
such as syringes and needles
 Personnel costs to prepare and administer such as
physicians, pharmacists, and nurses
 Other direct costs (e.g., ADRs, hospital room charges,
laboratory fees)
 Nonmedical cost (e.g., patient travel expenses)
Indirect Costs of a Medicine
 Indirect costs—examples
 Cost of illness to the patient
 Lost time from work
 Time required to care for somebody
 Intangible costs
 Costs associated with pain and suffering usually
incorporated into utilities assigned to health states
which reflect quality of life
Cost-Minimization Analysis
 Of two medicines with equal effectiveness,
which is the least expensive?
 Most used cost-evaluation method
 Most accurate method when comparing cost
between two therapeutically equivalent
medicines
Cost-Minimization Analysis: Process
 Obtain acquisition price for each medicine and calculate
the price for the course of treatment to be compared—
dose per day, number of days of treatment.
 Calculate pharmacy, nursing, and physician costs
associated with the use of each medicine.
 Calculate equipment cost associated with each medicine.
 Calculate laboratory cost associated with each medicine.
 Calculate cost of any other significant factor.
 Calculate and compare total medicine costs for each
medicine.
Cost-Minimization Analysis: Example 1
Category





Acquisition price
Pharmacist salary
Nursing salary
Supplies
Laboratory services
 Total
*USD refers to U.S. dollar
Medicine A
Medicine B
USD* 8.00
2.50
2.50
9.00
4.00
USD15.00
1.50
2.00
2.25
1.00
USD 26.00
USD 21.75
Cost-Minimization Analysis: Example 2
Cost Categories
Ampicillin
(500 mg)
Ceftriaxone
(1 g)
USD1.00
USD 8.00
Gentamicin
(80 mg)
Acquisition price
for one vial
Doses per day
Price per day
4
1
USD 2.00
3
USD 4.00
USD 8.00
USD 6.00
USD 3.00
USD 0.75
USD 2.25
Nursing salary at
USD 0.75 per injection
Equipment:
IV set at USD 1.00/set
—
USD 1.00
— _
Syringe/needle 0.50/set
USD 2.00
—
USD1.50
Laboratory tests
USD 2.00
USD 2.00
USD 4.00
Total medicine costs/day
USD 11.0
USD 11.75
USD 13.75
3,000 treatment-days/year
3,000 days
3,000 days
3,000 days
Total medicine costs
USD 33,000
USD 35,250
USD 41,250
Cost-Effectiveness Analysis (CEA)
 Of two medicines, A and B, with different
effectiveness, what is the cost per patient
cured for medicine A versus medicine B?
 Used to compare two or more medicines which are
not therapeutically equivalent
 Effectiveness of therapy according to predetermined
therapeutic measure, for example—
 Patients cured
 Deaths averted; years of life saved
 Decreased blood pressure or glycosylated
hemoglobin
CEA: Steps
 Define objectives—which medicine regimen is
preferred to achieve the desired clinical outcome
(e.g., cure)?
 List the different options (medicines and other
treatments) to achieve the desired clinical outcome.
 Identify and measure for each option: (1) cost and
(2) clinical outcome.
 Calculate the incremental cost-effectiveness ratio.
 Perform sensitivity analyses. Adjust cost of
variables and re-analyze to confirm or refute results.
Incremental Cost-Effectiveness Ratio
(Net costs treatment A – Net costs treatment B)
÷
(Net effects treatment A – Net effects
treatment B)
= Additional cost per additional benefit
Example of CEA: Medicine Costs
Medicine cost
Lab cost
Adverse event
Physician
Total
Medicine cost
Lab cost
Adverse event
Physician
Total
Cost/unit
No. of
units
(USD)*
Medicine A
40
12
20
1
50
2
25
2
25
20
50
25
Medicine B
12
2
3
3
No. of
patients
Total cost
(USD)
100
100
100
100
48,000
2,000
10,000
5,000
65,000
100
100
100
100
30,000
4,000
15,000
7,500
56,500
*USD equals U.S. dollar
Example of CEA: Benefits
Effectiveness
Medicine A
25/100 patients
Medicine B
19/100 patients
Clinical outcome: number of patients with ≥ 1%
decrease in glycosylated hemoglobin over one
year
Drug B
Cost of drug = $44.50
Cost of drug $56.00
Effectiveness of drug =
Average decrease in
A1C = 1.5
Effectiveness of drug =
Average decrease in
A1C = 0.8
Cost-effective ratio
$29.33/1 unit of A1C
Cost-effective ratio
$70.00/1 unit of A1C
Example of CEA: Incremental CostEffectiveness
Comparison between medicines A and B for 100
patients for 1 year
Medicine A
Medicine B
Net costs USD*
65,000
56,500
Effectiveness
No. patients with ≥ 1%
decrease in glycosylated
hemoglobin
25
19
Incremental Cost Effectiveness Ratio =
(65,000-56,500)/(25-19) = USD1,416.67 per extra patient
with ≥ 1% decrease in glycosylated hemoglobin.
CEA of Two Thrombolytics in Acute
Myocardial Infarction (MI) in Australia (1)
Cost of treatment and mortality rates
 Usual care (UC) of MI: 3.5 million Australia dollars
(AUD)/1,000 cases, 120 die
 UC+ Streptokinase (SK): AUD 3.7 million /1,000
cases, 90 die
 UC + tissue plasminogen activator (tPA): AUD 5.5
million /1,000 cases, 80 die
Source: Australian Prescriber, 1996, 19(2): 52–54.
CEA of Two Thrombolytics in Acute MI in
Australia (2)
Comparison of the Treatments
1. Difference between UC + SK and UC of MI:
Cost of treatment
= AUD 3.7 – 3.5 million/1,000 cases
= AUD 0.2 million/1,000 cases
= AUD 200/case
Number of deaths prevented
= 120 – 90
= 30 deaths/1,000 cases treated
Incremental cost effectiveness of SK compared with UC
= AUD 0.2 million/30 lives
= AUD 6,700/life saved
CEA of Two Thrombolytics in Acute
MI in Australia (3)
2. Difference between UC + tPA and UC of MI:
Cost of treatment
= AUD 5.5– 3.5 million/1,000 cases
= AUD 2.0 million/1,000 cases
= AUD 2,000/case
Number of deaths prevented
= 120 – 80
= 40 deaths/1,000 cases treated
Incremental cost effectiveness of
tPA vs. UC
= AUD 2.0 million/40 lives
= AUD 50,000/life saved
CEA of Two Thrombolytics in Acute
MI in Australia (4)
3. Difference between tPA and SK treatments for MI:
Cost of treatment
= AUD 2.0 - 0.2 million/1000 cases
= AUD 1.8 million/1000 cases
= AUD 1,800/case
No. of deaths prevented
= 90 - 80 = 10 deaths/1,000 cases treated
Extra cost effectiveness of tPA over SK
= AUD 1.8 million/10 lives
= AUD 180,000/life saved
CEA of Two Thrombolytics in Acute
MI in Australia (5)
If one has a budget of only AUD 500,000—
For SK
= 500,000 ÷ 200
= 2,500 cases
Number of lives that can be saved
= (30 ÷ 1,000) × 2,500
= 75 lives
For tPA
= 500,000 ÷ 2,000
= 250 cases
Number of lives that can be saved
= (40 ÷ 1,000) × 250
= 10 lives
Which regimen should the DTC choose?
CEA of Two Thrombolytics in Acute
MI in Australia (6)
The study concluded that although tPA had slightly
better efficacy and saved marginally more lives,
when cost was taken into account, more patients
could be treated and more lives saved using SK.
Other Controversial Cost Analyses
Cost-Utility Analysis—a type of costeffectiveness analysis in which the desired
clinical outcome or benefit is measured in
utilities, for example, in quality-adjusted life
years (QALYs) and disability-adjusted life years
(DALYs)
Cost-Benefit Analysis—a comparison of the
costs and benefits of an intervention by
translating the health benefits into a monetary
value, so that both the costs and benefits are
measured in the same monetary unit
Sensitivity Testing
Used to measure how different assumptions made in a
particular cost analysis will affect the conclusions
Method—Change the assumptions concerning the cost of
different variables, and repeat the cost-analysis study to see
if the results supporting the original conclusion change.
Examples of variables used in a cost analysis studies that can
be varied in a sensitivity analysis: cost of physician visits,
price of medicines, cost estimate of ADRs, number of ADRs
experienced, laboratory tests required
Discounting
 Used in cost evaluations to account for a future cost of
a benefit from the medicine (or intervention)
 Method to account for effects of the medicine (or
intervention) over prolonged periods of time (because
of the effects of inflation)
 The discount rate must be tied to the economics of the
country where the medicine or intervention would be
provided—5% in the United States; treasury rate in the
United Kingdom
 The discount rate is not known for sure in any
pharmacoeconomic study and any arbitrary rate used
will have a dramatic effect on the results of the
economic study
Evaluating Pharmacoeconomic Studies (1)
Important new area but difficult to evaluate
 Study may not be relevant to the reader’s country
 No “gold standard” for pharmacoeconomic studies
 Quality of studies varies widely
 Bias of many studies to support sponsor
 Negative outcome research seldom gets into the
literature
Evaluating Pharmacoeconomic
Studies (2)
Key questions to ask in reading an article
 Is patient selection in the study similar to those in your
community?
 Is the study applicable to your setting?
 Are costs of medicines fully described?
 Are costs of benefits or assumptions of effectiveness fully
disclosed?
 Has a sensitivity analysis be done?
 Who is the sponsor?
Evaluating Pharmacoeconomic Studies (3)
Key questions to ask (continued)
 Are all the costs associated with medicine treatment,
including good and bad outcomes described (not just prices)?
 Costs associated with nonpharmaceutical treatments
(equipment) and negative outcomes (side-effects) may be
missing
 Has discounting been used to reflect the costs of any future
benefits or consequences in present day values?
 Different discounting rates for medicine costs and future
benefits may be used to emphasize a medicine’s costeffectiveness ratio
Activities
 Activity 1—Cost Minimization Analysis of
NSAIDs
 Activity 2—Cost-Effectiveness Analysis of
Two Antimalarial Treatments
Summary
 Cost analysis of medicines is becoming much
more important.
 Comprehensive analysis of medicines is
necessary to fully assess the real cost of
medicines and the benefits from medicine use.
 Pharmacoeconomic studies are very difficult to
assess. Appropriate analyses should—
 Rely on data from clinical trials or reasonable
extrapolations of these trials
 Use basic verifiable costing—cost minimization and
cost effectiveness whenever possible