CHAPTER 1: Introduction to Advanced Pharmacoeconomics and Review of Basic Pharmacoeconomics
After reading this chapter, you should be able to:
- Describe the basics of measuring & estimating health care costs and outcomes
- Discuss the difference in information provided between pharmacoeconomic methods: Cost-minimization analysis, cost-effectiveness analysis, cost-utility analysis, and cost-benefit analysis
- Discuss the basis of acquiring pharmacoeconomic data
- Prepare for a greater understanding of pharmacoeconomic method through seeing them applied in decision-making and real-life practice.
In the CCPE Basic Pharmacoeconomics course, we illustrated the fundamentals of pharmacoeconomics and provided an overview of the methods to measure and estimate health care costs and outcomes to produce different pharmacoeconomic analyses. We also briefly reviewed practical applications of pharmacoeconomics in Chapter 7 of that course.
In this Advanced Pharmacoeconomics course, we will delve deeper into important practical pharmacoeconomic studies, namely, the cost-effectiveness and cost-utility analyses, which guide clinical and political decision-making. We will show how rational decisions can be made with the help of pharmacoeconomic data, and discuss their use specifically in the drug approval process in Canada, as well as their use in developing health policy and clinical guidelines. In this chapter, we will briefly review build on the foundational concepts taught in Basic Pharmacoeconomics; please refer back to Basic Pharmacoeconomics for any unfamiliar concepts.
Measuring and Estimating Health Care Costs and Outcomes
In Chapters 3 and 4 of Basic Pharmacoeconomics, we introduced the many methods to which health care costs and outcomes can be measured, respectively. Costs could be divided into direct and indirect costs, and are usually measured in dollars. Direct costs are the estimated expenditures used to provide a treatment or service in order to prevent, detect, and/or to treat a disease. They can be medical or non-medical in nature; examples would include medications (medical) and transportation to and from a hospital (non-medical). Indirect costs involve the forfeiture of money or monetary value from lost productivity, and have no direct relation to the provision of treatment. An example would be the inability to work while suffering from a depressive illness; the lost wages do not contribute to the treatment, but still costs the patient a defined monetary value.
There are also intangible costs, which are difficult to measure in dollar value but should be considered in the decision making process. Examples include the “cost” of suffering, pain, or fatigue secondary to an illness or its treatment. Opportunity costs are the value(s) forgone in choosing one option over another; simply put, the dollars used for one treatment for an illness cannot be used for another treatment – choosing one had cost the opportunity to choose the other. An example we went through in the Basic Pharmacoeconomics course was the decision between vaccinating all children or all the elderly in a given country. We can see that if we chose to vaccinate all children, then the elderly would lose the opportunity to be vaccinated, and vice versa. These opportunity costs are present in every decision we make; a pharmacoeconomic decision maker must be able to identify and appropriately measure all the potential costs and the likelihood of them occurring to produce a sound decision.
Likewise, outcomes can be measured in different ways. Health care outcomes are the consequences, both positive and negative, that result from a health care intervention. All humanistic, economic, and clinical outcomes should be considered. We categorize outcomes like we do with costs – direct benefits, indirect benefits, and intangible benefits. Direct benefits are the outcomes gained from a medical treatment, such as reductions in blood pressure. Indirect benefits are the savings from avoiding indirect costs, such as a patient being able to return to work earlier, thereby preventing lost productivity. Intangible benefits are the benefits derived from avoiding suffering, such as reduced pain or suffering.
Health care outcomes are different from health care costs in that they cannot always be simply measured in dollars. A blood pressure reduction or the eradication of an infection cannot be measured in dollars. The units often used for health care outcomes are natural units, quality adjusted life-years (QALYs), and monetary value. Natural units are the simplest for clinicians to understand; it is simply the clinical result – a reduction in blood pressure, a reduction in symptoms, or an absolute or relative risk reduction. Natural units are useful in comparing two interventions with the same outcome. QALYs measure the quantity and quality of life of a patient, and thus can be used across different disease states for comparison. For example, if a set budget was allowed to fund one extra drug, but there were many drugs for different conditions to choose from, one way would be to determine which drug yields the most QALYs. Those unfamiliar with pharmacoeconomics are health economics may have difficulty grasping the concept of a QALY for interpretation. QALYs are based on a utility value determined by a patient on a scale of 0 to 1.0 indicating their quality of life, multiplied by the years of life remaining. There are many ways to determine the utility value, or quality of life of a patient; these are described in detail in Chapter 4 of the Beginner Pharmacoeconomics module. Monetary value is simplest for anyone without any economic background to understand; clinical outcomes are converted to a dollar amount and used for easy interpretation. While this unit of outcome is easiest to compare with costs, the conversion of an outcome to a dollar value is often difficult and inaccurate.
Pharmacoeconomic methods are used to compare different alternatives against each other based on measured or estimated health care costs and outcomes, in different units.
- A Cost-Minimization Analysis (CMA) looks only at health care costs and is focussed on finding the lowest cost option without regard to outcomes.
- A Cost-Benefit Analysis (CBA) compares both health care costs and health care outcomes in dollars.
- A Cost-Effectiveness Analysis (CEA) compares health care costs in dollars, and health care outcomes in natural units.
- A Cost-Utility Analysis (CUA) compares health care costs in dollars, and health care outcomes in QALYs.
The latter three are most often used in pharmacoeconomics as they compare outcomes against cost, which is often the question when new drugs are brought to the market. As mentioned, a CBA is likely the easiest to understand, but may be less meaningful when used for decision-making, as the health outcomes are converted to a dollar value, which is often difficult to do. A CUA is likely the most difficult to understand, but usually the most meaningful when making a health care decision as multiple outcomes can be considered when generalized into a quality or quantity of life measure; it also considers the patients’ perspective of quality of life rather than focussing on a pure clinical outcome. A CEA is often useful in comparing drugs that have a common or similar outcome; for example, a new drug entering the market for reducing blood pressure will likely undergo a CEA with existing anti-hypertensive medications already on the market. The usage of one study does not exclude the usage of other studies; often multiple studies of different types are considered before a decision is made. A more in-depth discussion of pharmacoeconomic methods can be found in Chapter 5 of Basic Pharmacoeconomics.
Acquiring Pharmacoeconomic Data
The data used in measuring or estimating health care costs and outcomes can come from a variety of sources. Costs can be obtained by measuring expenditures of a particular hospital, department, or province; it can also be obtained through various types of literature. Outcomes can be measured in the form of a new clinical trial, or taken from one or more trials conducted and discussed in medical literature.
Medical literature follows a framework called the hierarchy of evidence that rates the relative strength of the different types of research method used. The evidence strength is defined as the reliability of the evidence with regards to its study design, the presence of bias, and the quality and consistency of data.
In general, the best evidence comes from systematic reviews or meta-analyses, which are ideally synthesized from multiple randomized controlled trials (RCT). The weakest evidence comes from in vitro research used to infer outcomes in human patients. A review of the hierarchy of evidence can be found in Chapter 6 of Basic Pharmacoeconomics.
In this course, you will learn that outcomes from medical literature will be applied to decision-making modules and used to calculate probabilities of their occurrence to aid in rational decision-making. This will be explained further in Chapters 3 and 4.
CHAPTER 1 Summary
This chapter serves to briefly recapitulate key concepts taught in Basic Pharmacoeconomics. A full understanding of these concepts is necessary before proceeding as new concepts build on the existing ones.