Lecture 15 Assoc. Prof. Sencer Ecer HEALTH ECONOMICS Technical Change Lecture 15 Assoc. Prof. Sencer Ecer HEALTH ECONOMICS

Pharmaceuticals and Regulation Starts from thousands of molecules, huge fixed cost, very low marginal costs Pioneer drugs, branded drugs Generics Branded generics FDA Drug Testing – Four Phases Pharmaceutical Inspection Co-operation Scheme (PCI-S), Good manufacturing practice (GMP) Hatch-Waxman Act (Ecer and Higgins, 2004) Patents Settlement Agreements Co-marketing, off-label

Pharmacoeconomics Description and analysis of the costs of drug therapy to health care systems and society. It identifies, measures, and compares the costs and consequences of pharmaceutical products and services. (Rascati, (2009), Bootman et al. (2005)) At the intersection of Pharmacy-related clinical or humanistic outcomes research and health care economics Costs and outcomes Should this new medication be added to the formulary (for reimbursement)? How do different medications impact a patient’s health-related quality of life?

Pharmacoeconomic Analysis In all types of pharmacoeconomic analysis, costs are measured by monetary terms. Outcome measures differ. There are four major types of pharmacoeconomic analyses

1) Cost minimization analysis (CMA) Health outcomes should be identical Generic (lower cost) v Generic (higher cost) The outcomes are either truly or assumed to be identical Advantage: Easily implemented Disadvantage: Type of interventions that can be evaluated via CMA is limited If a new antibiotic has a higher rate of healing inner ear infections but at a higher cost than a currently marketed antibiotic, then CMA would be inappropriate

2) Cost Effectiveness Analysis (CEA) Health benefits measured in natural units (e.g years of life saved, ulcers healed, mmHg, cholesterol levels, symptom-free days (SFDs)) Advantage: Outcomes are easier to quantify than the other two techniques –CUA and CBA), routinely collected in clinical studies e.g. In severe reflux oesophagitis use a proton pump inhibitor or H2 blockers. (Walley, 2011) e.g. Evaluation chemotherapy agents

2) CEA – continued Disadvantage: Different types of outcomes cannot be compared: (Anticoagulation clinic v diabetes clinic because clinical outcomes would be prothrombin time v blood glucose measures) Even if primary clinical outcomes are the same, if there other differences (e.g. side effects, impact on other diseases), hard to use CEA First v second generation antihistamines (drowsy v non-drowsy) Disadvantage: CEA may estimate the extra costs associated with each additional unit of outcome (cure, year of life, SFDs) but it is a judgment call to assess these non-monetary benefits vis a vis monetary costs

3) Cost Utility Analysis (CUA) Health benefits measured in terms of quality or utility (not natural units as in CEA) Utility weights between zero and one: 1=Perfect Health, 0=Death Patient or society preferences for specific health states When morbidity and mortality are both important outcomes of a treatment, CUA should be used to incorporate both into one unit of measure e.g. a quality adjusted life year QALY. e.g. cost per QALY of coronary artery bypass grafting versus cost per QALY for erythropoietin in renal disease (Walley, 2011). Disadvantage: No consensus on how to measure these utility weights

4) Cost benefit analysis (CBA) Typical economic cost benefit analysis, always measured in monetary terms Advantage: We can determine whether benefits exceed costs Advantage: Multiple programs with similar or unrelated outcomes can be compared Disadvantage: Hard to put a monetary value on health outcomes