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What is Pharmacoeconomics?

What is Pharmacoeconomics?. Joseph A. Paladino, PharmD, FCCP Clinical Professor State University of New York at Buffalo School of Pharmacy and Pharmaceutical Sciences Director, Clinical Outcomes and Pharmacoeconomics CPL Associates LLC Amherst NY paladino@cplassociates.com.

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What is Pharmacoeconomics?

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  1. What is Pharmacoeconomics? Joseph A. Paladino, PharmD, FCCP Clinical Professor State University of New York at Buffalo School of Pharmacy and Pharmaceutical Sciences Director, Clinical Outcomes and Pharmacoeconomics CPL Associates LLC Amherst NY paladino@cplassociates.com

  2. Cost-Containment: Pharmacy • Generic substitution • Therapeutic substitution • Restrictive formulary • Restricted usage (appropriate use guidelines) • Antibiotic order sheets • Prior authorization • Automatic stop-orders • Selective reporting of susceptibilities • Dose minimization

  3. What’s So Bad About Cost-Containment? • Doesn’t work • Does not measure clinical benefits • Does not allow for a valuation of technology, personnel, or services • Doesn’t work

  4. What Can Cost-Containment Accomplish? • Reduce medication expenditures

  5. What Can Cost-Containment Accomplish? • Reduce medication expenditures • Under Capitation or DRG reimbursement, every single medication dispensed erodes institutional “profit”. • So, the best you can do is –

  6. What Can Cost-Containment Accomplish? • Reduce medication expenditures • Under Capitation or DRG reimbursement, every single medication dispensed erodes institutional “profit”. • So, the best you can do is – Become less of a loser

  7. Do Formulary Restrictions Reduce Drug Costs? • Problem: Using “too much” ceftriaxone • Solution: Restrict ceftriaxone • Result: Decreased use of ceftriaxone SUCCESS!!! But…

  8. Do Formulary Restrictions Reduce Drug Costs? • Problem: Using “too much” ceftriaxone • Solution: Restrict ceftriaxone • Result: Decreased use of ceftriaxone SUCCESS!!! Can you expect the use of another antibiotic to increase?

  9. Benchmarking to Analyze Antibiotic Control StrategiesRifenburg et al. AJHP 1996;53:2054-2062 88 hospitals in US and Canada Serial 1993 & 1994 data • Formulary restrictions of advanced generation -lactams • Accompanied by increased expenditures on other antibiotics • Overall, $300/OB/yr increase Cost-shifting

  10. EFFECT OF MEDICAID 3-DRUG PRESCRIPTION LIMITSoumerai et al. NEJM 1991;325:1072-1077 5 months baseline, 11 months cap, 10 months after cap rescinded Core Rx/ptNJ (no cap) NH (cap) Baseline 2.3 2.8 CAP 2.3 1.9 (35%) Nursing Home Admissions Pre-Cap % 2.1 2.3 CAP (% period) 6.6 10.6 (p=0.006) Post-Cap ret. to baseline

  11. Intended and Unintended Consequences of HMO Cost-Containment Strategies: Results from the Managed Care Outcomes ProjectHorn SD et al. Am J Man Care 1996;2:253-64 Six HMOs: 3 with strict formulary control Five diseases: OM, arthritis, epigastric ulcers, HTN, asthma 1 year: 12,997 patients  Co-pay:  Prescriptions,  Hospitalizations  Formulary Restriction:  healthcare utilization (Rx, office visits, ER, hospitalizations)

  12. Does Controlling Purchase PricesReduce Drug Expenditures? Price controls have been associated with a: • 17% reduction in costs • 10% reduction in costs • 4% increase in costs • 5% reduction in costs

  13. Does Controlling Purchase PricesReduce Drug Expenditures?PharmacoEconomics 1998;14:471 • Germany 1989 (1981- 1992) • Cost increase before control: 5.9% after control: 9.0% • The Netherlands: price clusters in 1991 • Drug expenditures continue to rise • Canada: drug prices restrained, but • Drug expenditures continue to rise: 3.8% • US Medicaid (MAC) : • Added restrictive formularies, prior authorization, rebates, generic incentives Reference pricing does not address the demand for drugs or the demand for quality care

  14. What Can We Do That Works?

  15. Antibiotic cost Total Healthcare Costs (%) Total cost Antibiotics as Percentage of Total Healthcare Costs

  16. Antibiotic Percentage of Total Healthcare Costs CAP Dresser et al. Chest 2001;119:1439-1448 HAP Paladino & Fell. Ann Pharmacother 1994;28:384-389 IA Friedrich et al. Am J Hosp Pharm 1992;49:590-594 DF McKinnon et al. Clin Infect Dis 1997;24:57-63 Burn Nicolau et al. J Burn Care Rehabil 1994;15:244-250

  17. All possible outcomes Success Failure Adverse events Indeterminate Resistance All resources consumed Personnel: Professional Personnel: Service Hospitalization ER, ambulance Office/clinic visit Radiology Pathology Medications etc. Outcomes-Based Economic AnalysesMust Consider:

  18. Practical Uses of Pharmacoeconomics • Show value of your position (i.e. YOU!) • Demonstrate economic viability of a service • Evaluate outcomes of a medication for formularies, guidelines, pathways, etc.

  19. Pharmacist Participation on Physician Rounds:Adverse Drug Events in the ICULeape LL et al. JAMA 1999;282:267-270 Clinical pharmacists  preventable ADEs 66% Save $270,000 annually

  20. Economic Evaluations of Clinical Pharmacy Services 1988-1995Schumock et al. Pharmacotherapy 1996;16:1188-1208 Reviewed 104 publications 7 well-conducted trials CBA 16.7:1

  21. Economic Evaluations of Clinical Pharmacy Services 1996 - 2000 Schumock et al. Pharmacotherapy 2003;23:113-132 Evaluated 59 publications: Hospitals 52% Community Practice 41% HMOs 3% Increased rigor in study design CBA in 16 trials: 4.7:1

  22.  Value of Clinical Pharmacy Services Drug-related morbidity and mortality. Johnson JA, Bootman JL. Arch Intern Med 1995;155:1949-1956. Reduction in HF events by a clinical pharmacist with a HF management team. Gattis et al. Arch Intern Med 1999;159:1939-1945. RCT to assess the cost impact of pharmacist-initiated interventions. McMullin et al. Arch Intern Med 1999;159:2306-2309. Clinical pharmacy services and hospital mortality rates. Bond et al. Pharmacotherapy. 1999;19:556-564. Clinical pharmacy services, pharmacy staffing, and the total cost of care in US hospitals. Bond et al. Pharmacotherapy. 2000;20:609-621.

  23. Practical Uses of Pharmacoeconomics Evaluate outcomes of a medication for formularies, guidelines, pathways, etc.

  24. Benefits of Advanced Antibiotics in AECB Destache et al. J Antimicrob Chemother. 1999;43A:107-113 224 exacerbations in 60 outpatients 1st line agents: Amoxicillin, Erythro, TCN, TMP/SMX 2nd line agents: Cephalosporins 3rd line agents: Amox/clav, Azithromycin, Ciprofloxacin Failures: more 1st line than 3rd line (19% vs 7%, p<0.05) Hospitalizations: more 1st line than 3rd line (18% vs 5.3%, p<0.02)

  25. Immunosuppressive Drug Costs: Renal TransplantationCanafax et al. Pharmacotherapy 1990;10:205-210. Mean values ALG-AZA-P CSA-AZA-P Treatment period 3/83-10/84 9/84-12/86 Number of Patients 30 30 1 year survival 93% 100% Drug Costs ($) $2,017 $6,004 ALG-AZA-P: antilymphoblast globulin - azathioprine - prednisone CSA-AZA-P: cyclosporin - azathioprine - prednisone

  26. Immunosuppressive Drug Costs: Renal TransplantationCanafax et al. Pharmacotherapy 1990;10:205-210. Mean values ALG-AZA-P CSA-AZA-P Drug Costs ($) $2,017 $6,004 Hospitalization ($) $18,146 $13,459 LOS (days) 12 + 8 7 + 4 Rehospitalization ($) $6,364 $1,508 LOS (days) 7 + 6 5 + 4 ALG-AZA-P: antilymphoblast globulin - azathioprine - prednisone CSA-AZA-P: cyclosporin - azathioprine - prednisone

  27. Azithromycin IV/PO versus Cefuroxime ± Erythromycin IV/PO266 Hospitalized Patients with CAP Paladino et al. Chest. 2002;122: 1271-1279 CostCureCost-Effectiveness Ratio Azithromycin $4104 78% $5265:expected success Cefuroxime ± Erythromycin$457875%$6145: expected success P value 0.059 NS 0.05

  28. $6332 5 days S (0.5) IV (0.02) F (0.5) $8865 7 days IV/PO (0.98) $5106 4 days S (0.99) Gati n = 98 F (0.01) $2533 2 days IV (0.03) F (1.0) CAP $15,823 14 days Ceft alone n = 70 $5827 4 days S (0.96) F (0.04) IV/PO (0.97) $19,355 11 days Ceft n = 105 $5598 4 days S (0.89) Ceft + Ery n = 35 F (0.11) IV/PO (1.0) $8590 8 days 28

  29. Pharmacoeconomics 101 Sick patients cost more than healthy ones….

  30. Effects of Cost and Compensation on Adoption of a Cost-Effective Drug Kolassa et al.Pharmacoeconomics 1998;13:223-230 • 1 of 3 versions of a questionnaire sent to 1,300 pharmacy directors in the US • 353 (27%) usable responses • Pharmacy budget will increase by either $250, $1,750, or $3,250 per case • Differing salary compensation conditions • Each case will save the hospital $2,500 (14%)

  31. Cost vs. Economics: ResultsKolassa et al.Pharmacoeconomics 1998;13:223-230 EACH SCENARIO WAS COST-EFFECTIVE! • More will restrict use at $3,250 than at lower costs (p<0.001) • More will restrict use, regardless of cost, if their personal salary is contingent on drug budget control (p=0.001) • Department-based budgeting is a disincentive to cost-effective decisions

  32. Reality$$$$

  33. Endpoints in Studies of Infections: Traditional andNewNiederman M. 2001 • Clinical: cure, failure • Time to clinical response • Time to return to work • Time until next infection (AECB) • Bacteriologic: eradication, superinfection, reinfection • Prevention of resistance • Economic: money spent on drugs, hospitalization • Money saved by being well, Cost of lost productivity

  34. Although Drug Prices Are Important: • Overall costs are dependent on overall outcome (economics) • Sick patients cost more than healthy ones • It is cost-effective to quickly cure the patient The most expensive medication is one that does not work.

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