Pharmacoeconomics Presentation Developed for the Academy of Managed

Pharmacoeconomics Presentation Developed for the Academy of Managed Care Pharmacy Updated: February 2016

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

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”

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)

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

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)

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

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 = (CTx 1 – CTx 2)/(ETx 1 – ETx 2) • 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)

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 = (CTx 1 – CTx 2)/(QALYTx 1 – QALYTx 2) • Application: Same as CEA, useful when treatment extends life and/or effects quality of life • Example: Compare cancer chemotherapy regimens

Cost Effectiveness Plane 10

Cost Effectiveness Plane R ej t c e t p ce c A 11

Recap of Pharmacoeconomic Analyses Model Type Units Outcomes Cost Minimization Costs in $ Assumed to be equal 2+ similar alternatives Cost Benefit Costs and benefits in $ Can differ by type of 2+ outcome interventions/programs or 1 vs. benchmark Costs in $, benefits Effectiveness/Utility in non $ units Presumed to differ, but must be same type of outcome Comparison 2+ alternatives

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

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

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

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

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

Helpful Resources • Navarro RP, ed. Managed Care Pharmacy Practice. 2 nd edition. Jones and Bartlett Publishers: Sudbury, MA; 2009. • Rice TH, Unruh L. The Economics of Health Reconsidered 3 rd 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.

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

Thank you to AMCP member Carrie Mc. Adam-Marx for updating this presentation for 2016.