Pharmacoeconomics

1. Pharmacoeconomics Presentation Developed for theAcademy of Managed Care Pharmacy Updated: February 2016

2. Objectives Define the term pharmacoeconomics Differentiate between the types of pharmacoeconomic evaluation methods Discuss various considerations essential to evaluating a pharmacoeconomic design Provide examples of how pharmacoeconomics is applied in practice and various roles for the pharmacist

3. Definition of Pharmacoeconomics The process of identifying, measuring, and comparing the costs, risks, and benefits of programs, services, or therapies To determine which alternative produces the best health outcome for the resource invested Most impactful when making decisions about a population rather than individual “Costs vs. Consequences of Alternatives”

4. Types of Economic Evaluation Cost of illness evaluation (COI) Cost minimization analysis (CMA) Cost benefit analysis (CBA) Cost effectiveness analysis (CEA) Cost utility analysis (CUA)

5. Cost of Illness Evaluation Also termed cost consequence model Description: Estimates the cost of a disease within a defined population Application: Provides a baseline for evaluating the impact of prevention/treatment options Measurement Units: Monetary ($) Example: Cost of peptic ulcer disease

6. Cost Minimization Analysis Description: Identifies intervention cost differences between similar alternatives Application: Identify least costly alternative when outcomes/consequences are identical Measurement Units: Monetary for intervention costs (no outcomes measured) Example: Comparing costs of Drug A and Drug B, which have evidence of equal efficacy for a given condition and safety (incidence of ADRs)

7. Cost Benefit Analysis Description: Identifies net cost impact of an intervention Measurement Units: Monetary for both intervention costs and outcomes Calculated: Benefit($)/Cost ($) Application: Compare programs or agents with different objectives or 1 program against a return on investment benchmark Example: Clinical pharmacy service vs. other institutional service

8. Cost Effectiveness Analysis Description: Compares costs of two or more alternatives versus outcomes measured in natural units Measurement Unit: Monetary for cost, outcome in physical measures i.e., event avoided Incremental cost to achieve a one unit increase in outcome ICER = ∆Cost/∆Effect = (CTx1 – CTx2)/(ETx1 – ETx2) Application: Compare treatment alternatives for a given condition that differ in outcomes and costs Example: Osteoporosis Drug A vs Drug B on fracture risk reduction ($/fracture avoided)

9. Cost Utility Analysis Description: Subset of cost effectiveness analysis -outcomes are measured in utility units Utilities represent patient preferences and quality of life/functional status associated with disease and/or treatment QALY: Quality adjusted life year – factor of life expectancy and utility e.g., 4 years at 25% QOL = 1 year at 100% QOL ICER = (CTx1 – CTx2)/(QALYTx1 – QALYTx2) Application: Same as CEA, useful when treatment extends life and/or effects quality of life Example: Compare cancer chemotherapy regimens

10. Cost Effectiveness Plane

11. Cost Effectiveness Plane Reject Accept

12. Recap of Pharmacoeconomic Analyses

13. Considerations for Designing or Evaluating Pharmacoeconomic Studies Costs Direct medical – e.g., medication and administration Direct non-medical – e.g., transportation for treatment Indirect – e.g., lost wages due to illness Intangible – e.g., pain, suffering Perspective Patient, Provider, Payer, Society Perspective dictates what costs are considered

14. Considerations for Designing or Evaluating Pharmacoeconomic Studies Discounting - value of money changes over time A dollar is worth more today than in the future Sensitivity Analysis Challenges results and tests assumptions by altering variables Accuracy and transparency Clearly documented study design, assumptions, inputs Face Validity Do the assumptions/input and alternatives reflect reality

15. Economic Modeling • Analytic models used to predict economic consequences of coverage, treatment, and access decisions • budget impact, cost effectiveness, cost minimization • E.g., evaluate the impact of adding drug A to the formulary • Constructed by health plans, pharmaceutical manufacturers, academic groups, and consultants

16. Economic Modeling • Good practice guidelines for model development should utilized in constructing models • Promote transparency, minimize bias • Guidelines also exist to facilitate the evaluation of pharmacoeconomic studies

17. Applications in Practice & Roles of the Pharmacist Assist in the design and implementation of research studies Evaluate pharmacoeconomic literature Apply results to clinical decision making Individual patient care Formulary/utilization management Disease management Resource allocation

18. Helpful Resources Navarro RP, ed. Managed Care Pharmacy Practice. 2nd edition. Jones and Bartlett Publishers: Sudbury, MA; 2009. Rice TH, Unruh L. The Economics of Health Reconsidered 3rd ed. Chicago, IL. Health Administration Press, 2009. www.ispor.org http://www.ispor.org/workpaper/Modeling-Good-Research-Practices-Overview.asp. Assessed Sept. 16, 2013. Husereau D, Drummond M, Petrou S, et al. Consolidated Health Economic Evaluation Reporting Standards (CHEERS)—Explanation and Elaboration: A Report of the ISPOR Health Economic Evaluation Publication Guidelines Good Reporting Practices Task Force. Value in Health. 2013; 16:231-250.

19. Conclusion Pharmacoeconomic evaluations consider cost compared to consequences of treatment alternatives Results are used to support population-level decisions regarding medication coverage and use Best-Practice principles should be used in designing pharmacoeconomic studies to optimize transparency and reduce bias

20. Thank you to AMCP member Carrie McAdam-Marx for updating this presentation for 2016.