Pharmacoeconomics

What Is It?
Pharmacoeconomics refers to the scientific discipline that compares the value of
one medicine to another.
Construct evidence
Collect evidence
Manipulate evidence

It is a sub-discipline of health economics.

A pharmacoeconomic study evaluates the cost (expressed in monetary terms)
and effects expressed in terms of either
Monetary value (dollars)
Efficacy (clinical); or
Enhanced quality of life (humanistic) of a medicine.
Economics is a social science not accounting; about economic efficiency.
It assists in society prioritise expenditure on goals society values most highly, in
a way that achieves most benefits for dollars spent.
It recognises that resources are scarce, but goals limitless.
Based on making an evidence-based informed decision, therefore based
on evidence-based medicine
Health economics is the discipline of economics applied to the topic of health
care.
Health care resources available for medical procedures, including medicines are
limited.
Economic evaluations help alleviate the burden of scarce resources by improving
the allocative efficiency of health care financing.
Allocative efficiency refers to obtaining maximum gain in health outcomes for
dollars spent on health services.
Economic evaluations relate the costs of alternative interventions to the health
benefits they provide.
Health economists stress the importance of value unlike accountants who are
just interested in money (profit and loss).
Fundamentally our health needs are always greater than the money available to
meet these needs
When society decides to purchase a health service or intervention, it forgoes the
opportunity to purchase a different service with the same funds.
Health Economics helps society-made decisions that maximise the health
benefits we obtain from purchasing services or interventions. The aim is to
ensure we do not reject something that would have been more useful.
It is not about reducing expenditure on health, but rather maximising health
benefits gained from the money spent.

Economic evaluations may be applied to any intervention intended to improve

health:
Diagnostic procedures breast cancer screening (found to be cost
effective in comparison to treatment), prostate serum analysis
measurement (still has limitations due to questionable diagnostic
reliability)
Preventative health exercise and CV risk
Surgical procedures keyhole vs. conventional hernia repair; keyhole
surgery improves QoL, decreases hospital admission and lower chance of
infection.
Pharmacy based medication management programs asthma
management
Health Economics when applied to medicines is termed Pharmacoeconomics.
Pharmacoeconomics identifies, measures and compares the costs, risks and
benefits of medicines to estimate which alternative produces the best health
outcome for the resources invested.
A PE analysis therefore must describe the incremental gain in health benefit
derived from using a new medicine, and its costs, and decide whether these
benefits are worthwhile, compared to existing treatment.
FUNDAMENTALS OF PHARMACOECONOMICS
PE extends existing medical decision making beyond comparative efficacy and
safety, to include comparative cost effectiveness.
PE is fundemental to Australia meeting the objectives of our National Medicines
WHAT IS IT?
Policy:
To meet medication and related services needs, so that both optimal
Pharmacoeconomics
is fundamental
to Australia
the objectives of our
health outcomes and
economic objectives
aremeeting
achieved
National
medicines
Policy
Gives a lot of value for the amount of money that has been spent on health
in Australia

To meet medication and

e rl ated service needs, so that both optimal health
outcomes and economic objectives are achieve
Quality, Safety
& Efficacy

Timely & Cost

Effective Access
PBS - reimbursement

NATIONAL
MEDICINES
POLICY

TGA - registration

Responsible &
Viable Industry

Quality Use of
Medicines

DSIIR

NPS

NOT TO BE USED WITHOUT THE AUTHORS PERMISSION

PBS is primarily responsible for timely and cost effective access.

PE contributes to evidence based medicine (EBM).

As such, PE is designed to improve the quality of decision-making about
medicines.
PE aims to maximise the health outcomes achieved for the dollars spent on
medicines.
PE makes use of the best available evidence relevant to the question being
asked
Is it worthwhile purchasing this new medicine?
FUNDAMENTALS
OF PHARMACOECONOMICS
Why Do We Need It?
COST OF DEVELOPMENT HIGH AND RISING
COST OF MEDICINES DEVELOPMENT

1000

1000
880

900
800

800
700
600
COST (US$ MILLION)

500
500
400

$US Mill

400
300

250

270

300

200

200
125
100

55
7.5

10

1950

1960

0
1970

1980

1989

1991

1993

1995

1998

2000

2003

2005

2009

YEAR

You have until the end of patency to pay for the investment of a new medicine
(usually about 15 years).
Governments
are happy
to subsidise new medicines so long as they provide
FUNDAMENTALS
OF PHARMACOECONOMICS
economic benefit to the Government.
NOT TO BE USED WITHOUT THE AUTHORS PERMISSION

LIFE EXPECTANCY CONTINUES TO RISE

LIFE EXPECTANCY AT BIRTH

82

81

AVERAGE AGE

80

Australia
Canada
79

Sweden
UK
USA

78

77

76
2002

2003

2004

2005

2006

2007

2008

YEAR

SOURCE OECD Health data April 2011

This decade has sown large increases in life expectancy.

Australia > Canada > Sweden > UK > US

NOT TO BE USED WITHOUT THE AUTHORS PERMISSION

FUNDAMENTALS OF PHARMACOECONOMICS

75% of HEALTH EXPENDITURE OCCURS IN 65+ AGE GROUP

HEALTH EXPENDITURE PER CAPITA

30000

25000

DOLLARS

20000

1987
15000

1999
2004

10000

5000

0
0-18

19-44

45-54

55-64

65-74

75-84

85+

FUNDAMENTALS OF PHARMACOECONOMICS
AGE GROUP

SOURCE US Office of the Actuary, National Health Statistics Group

HEALTH EXPENDITURE CONTINUES TO RISE

NOT TO BE USED WITHOUT THE AUTHORS PERMISSION

TOTAL EXPENDITURE ON HEALTH (% GDP)

17

16

15

14

13

% GDP

Australia
Canada
Sweden

12

UK
USA
11

10

7
2002

2003

2004

2005

2006

2007

2008

YEAR

Us has the worst life expectancy, yet spends the highest proportion of GGP on
health at 16%. Australia is at ~8% with better outcomes. This shows the value in
FUNDAMENTALS
OF PHARMACOECONOMICS
Australian health interventions.
SOURCE OECD Health data April 2011

NOT TO BE USED WITHOUT THE AUTHORS PERMISSION

MOST WESTERN GOVERNMENTS CONTRIBUTE THE MAJORITY OF HEALTH

CARE FUNDING
GOVERNMENT HEALTH EXPENDITURE (% OF TOTAL)
88

83

78

PERCENTAGE

73

Australia

68

Canada
Sweden
UK

63

USA

58

53

48

43
2002

2003

2004

2005

2006

2007

2008

YEAR

In the US, most of health care is paid by the individual, in comparison to Australia
where the 70% of health care is funded by the government.
SOURCE OECD Health data April 2011

NOT TO BE USED WITHOUT THE AUTHORS PERMISSION

FUNDAMENTALS OF PHARMACOECONOMICS
MOST WESTERN COUNTRIES HAVE SIGNIFICANT OR RISING DEBT
NATIONAL DEBT (% GDP)
75

65

55

PERCENTAGE

45

Australia

35

Canada
Sweden
UK
25

USA

15

1995

2000

2005

2010

2011

-5

FUNDAMENTALS OF PHARMACOECONOMICS
-15

YEAR

SOURCE OECD Economic data 2011

AGEING
IS A MAJOR FACTOR IN INCREASING MEDICINES USE
NOT TO BE USED WITHOUT THE AUTHORS PERMISSION

PRESCRIPTION MEDICINES USE

100

90

80

70

60

% using

50

average number prescriptions annually

40

30

20

10

0
18-34

35-49

50-64

65-79

80+

AGE GROUP

SOURCE Centre on an Ageing Society Georgetown University

Shows that as you get older, you start requiring more medicines. At the 80-yearold age group, 100% are using at least 1 prescribed medicine. With an aging
population, were going to have more and more people needing to use medicines.
Increase in life expectancy is thought to be driven by development of effective
medicines.
NOT TO BE USED WITHOUT THE AUTHORS PERMISSION

FUNDAMENTALS OF PHARMACOECONOMICS
VALUE AN INCREASING IMPORTANT DETERMINANT

The reason for discontinuing a medicine is shifting away from efficacy towards
economic reasons, i.e. you might have a safety or efficacy gain in a new drug, but
there is no financial worth to develop it (not cost-effective).
NOT TO BE USED WITHOUT THE AUTHORS PERMISSION

How Do We Do It? - Using Evidence to Define Value

Questions we Need to Know About Medicines
First hurdle Focus on Quality
Mid 1800s first development of drugs that actually worked. Based
around heavy metals used to treat syphilis and gonorrhoea not
governed by quality so people could die from heavy metal poisoning
US and British Pharmacopoeias codify quality
Second Hurdle Plus Safety
1902 US Biologics Control Act includes safety as a required standard
1938 US Food, Drug and Cosmetic Act strengthens premarket testing
Third Hurdle Plus Efficacy
1945 FDA Penicillin amendment requires testing and certification of
safety and efficacy of all penicillin products
1960s consolidation of premarketing evaluation of quality, safety and
efficacy
Fourth Hurdle and Value for Money
1992 Pharmaceutical Benefits Advisory Committee (PBAC) requires new
medicines to demonstrate appropriate cost and effectiveness
NICE, US reforms

Why do we need to Estimate Value?

It helps us to objectively address these types of questions:
What medicines should be included on the hospital formulary?
What is the best medicine for this particular disease?
What is the cost per Quality Adjusted Life Years (QALYs) for any given for
any medicine?
What is the best medicine for a pharmaceutical company to develop?
Is a pharmacy based intervention designed to enhance adherence
worthwhile?
What is the Best Available Evidence?
From a scientific viewpoint, evidence generated from a well-designed clinical
trial:
Maximises the probability of getting the observed difference due only to
the new medicine
Minimises the probability of getting the observed difference by chance
Randomised, controlled trial is the gold standard (INTERNAL
VALIDITY)
o Greatest likelihood of getting the same result over and over again
From an economic viewpoint, evidence that reflects practice and measure
outcomes valued or understood by society (EXTERNAL VALIDITY).
How well your result translate into a practical environment
The problem it is extremely difficult to achieve both equally.
A well-designed prospective
randomised
controlled trial remains the best tool to
FUNDAMENTALS
OF
PHARMACOECONOMICS

compare medicines.
RCT minimises the likely impact of biases or chance on results
(uncertainty), by tightly specifying the trial environment.
Most medicine RCT focus on safety and efficacy.
ITS ALWAYS
A BALANCING
ACT! in health outcomes, more so than efficacy
Economics
is more interested
measures
Most
medicine
RCT
over
monitor patients
to pick up
signals
Chance
and
bias
is minimise
and certainty
of safety
results
maximised by carefully
designing
&
controlling
the
trial
environment
(INTERNAL
VALIDITY)
Economics is more interested in the benefits and costs of medicine
when high signal,
lowtreating
noise patients, rather than clinical trial populations.
Relevance
to practice ACT
is maximised if we keep the trial environment as close as
ITS
ALWAYS A BALANCING
possible
to
real
life
(EXTERNAL
lowermaximised
signal, higher
Chance and bias is minimise andVALIDITY)
certainty of
results
by noise
carefully designing and controlling the trial environment (INTERNAL
Certainty
of benefit
is maximised
VALIDITY)
high signal,
low noise if we conduct clinical trials which measure
health
outcomes
rather
than
surrogate
measures
of efficacy
Relevance to practice is maximised
if we conduct
clinical
trials which
measure health outcomes rather than surrogate measures of efficacy
However
it may
and several
thousand
subjects
However,
it maytake
takemay
years,years,
and several
thousand
subjects to
detect ato detect a
significant
difference
outcomes
such
mortality
of MI
significant
differencein
in health
health outcomes
such
as as
mortality
of MI.
Big, long term studies are costly and patent terms are at most 20 years
Big, long term studies are costly and patent terms are at most 20 years
INTERNAL VALIDITY
CERTAINTY

EXTERNAL VALIDITY
TIME and COST

NOT TO BE USED WITHOUT THE AUTHORS PERMIS

EFFICACY VERSUS EFFECTIVENESS

Increasing effectiveness
over time
5HT uptake inhibitors, D2
antipsychotics

EFFICACY
Decreasing effectiveness
over time
TZD, minoxidil, class 1
antiarrythmics

TIME TO OUTCOME

This
demonstrates
efficacy against
effectiveness.
Efficacy, no
matter when
you measure it,
is going to
remain the
same.
Effectiveness
can increase or
decrease over
time.

NOT TO BE USED WITHOUT THE AUTHORS PERMISSION

Best Available Evidence

Clinical Trials Provide:
Benefits in ideal setting
Strictly controlled environment
Costs driven by protocol
Measures efficacy and safety
Outcomes usually short term changes in signs or symptoms e.g. BP,
plasma cholesterol
PE Requires:
Benefits in routine setting
Standard practice
Costs associated with standard management
Measures effectiveness
FUNDAMENTALS
OF PHARMACOECONOMICS
Outcomes usually longer term changes in health status, e.g. less CV events,
decreased mortality
UNDERSTANDING UNCERTAINTY

UNCERTAINTY

Uncertainty
increases in
three main
ways,
determined by
the type of
clinical trial
that we are
looking at.
Uncertainty
increases
doubt in
funding a drug.

DATA
Meta-analysis
Effectiveness trial
Health Outcome

RCT

Observational

Regulatory trial

Opinion

Retrospective analysis Case Series

Intermediate surrogate

Efficacy surrogate

How do we get the Balance Right? Two Ways

1. Modify clinical trials
Make environment more realistic
o Fewer inclusion restrictions
o Less intensive monitoring
Measure more relevant outcomes
o Changes in disease rather than signs or symptoms
Move from specialist to GP setting
Minimise unnecessary costs
o Testing
o Clinic visits
2. Base economic evaluation on regulatory clinical trials, and use other data
sources such as expert opinion, epidemiology studies, cost of illness
studies to:
Extrapolate RCT results to a longer time horizon
Transform RCT efficacy results to intended final outcomes of
treatment
Translate RCT protocol driven costs to usual practical costs
This is achieved by modelling. An economic model can be used to:
Estimate the impact of side effects/withdrawals on long term
effectiveness
Estimate costs of treatment based on standard practice rather than
protocol generated costs
Link immediate surrogates to health outcomes (BP to CV risk to
decreased mortality)

The Nuts and Bolts of how Economic Evaluation is Done

Economic Evaluation
What
is measured? OF PHARMACOECONOMICS
FUNDAMENTALS
Intended outcome of therapy
Resource consumption to achieve outcome
Cost of therapy and resources
i Hospitalisations
Impact on health care costs
Drug
Therapy

iii Procedures

i Survival

Impact on health status

Target
group

ii Other drugs

ii QOL
i Hospitalisations
Alternative
therapy

ii Other drugs
Impact on health care costs

iii Procedures

Health status can be measured according to survival, QoL, change in blood

pressure, change in cholesterol.
NOT TO BE USED WITHOUT THE AUTHORS PERMISSION

Steps in Undertaking an Economic Evaluation

Assign probabilities for the intended outcome using each medicine based on:
Clinical trial results
Literature
Expert opinion
Calculate costs associated with each treatment:
Other medicines
Tests
Hospital services, doctor visits
Calculate incremental cost and outcome ratio for new treatment

FUNDAMENTALS
OF PHARMACOECONOMICS
Probability of getting
the outcome you want and the cost of achieving the
outcome according to the probability

ECONOMIC VALUE

SAVINGS

COMPARATOR
PRICE

DIFFERENTIAL

CLINICAL
BENEFITS

HOSPITALISATIONS

VALUE

SURVIVAL/QOL
BENEFITS

BP

TREATMENT FAILURES
MONITORING

CV MORTALITY

CV RISK

CV MORBIDITY

MICROALBUMIN

QALYS

VALUE IN USE
COMPLIANCE
PRODUCTIVITY
PREDICTABILITY

DOCTOR VISITS
900

600

7000

200

300
5000

Comparator
price based
on equal
safety &
efficacy

Cost savings
due to
avoidance SAE

Cost
savings due
to reduced
CV risk

Cost
savings
due to
avoided
dialysis

Cost saving
due to fewer
dr visits, path
tests

Economic value per year

= price of new drug

NOT TO BE USED WITHOUT THE AUTHORS PERMISSION

This is a graphical way of showing how you build up economic value.

Economic value is the likely price you can get with your new drug. The price of a
new drug is built on an equation, with the price of a comparator that would have
previously been given. Differential value can be savings (e.g. less
hospitalisations), clinical benefits (e.g. control BP better), survival/QoL Benefits
and value in use (e.g. improving compliance by making it a 1 daily dose).
In this bottom example, the comparator price is $5000/year. This means we pay
$5000/year for the comparator that was used in this study. The new drug gives
you:
$300/year cost savings due to lower incidence of side effects
$900/year on savings regarding CV risk because it has a much stronger
impact on lowering blood pressure
$200/year cost savings due to avoidance of dialysis (decreases
microalbuminurea, which would lead to kidney disease and the need for
dialysis)

$600/year due to decreased doctor visits and less liver testing with new
drug

Therefore, this shows we can deliver $2000/year more value to society by

using a new drug. Therefore we believe our price can be $7000 rather
than $5000.
o PBS looks at need of a new drug, i.e. if there are thousands of
antihypertensive on the market, then there is no point in the
government subsidising it.

Health Economic Methods

Four key methods to compare costs, risks and benefits.
Each method measures costs in monetary terms; the differences lie in how the
risks and benefits are measured and valued.

Cost minimisation equal risks (ADE) and benefits

o E.g. develop a new statin with same effect at lowering cholesterol
as others and the same ADR profile
Cost effectiveness outcome measured similarly (BP)
o Two medicines that achieve the same outcome (e.g. lowering of
blood pressure). One is more effective at lowering blood pressure
compared to the other, therefore more cost effective for the
government in the long run.
Cost utility synthesis multiple outcomes into single measure (QALY)
o Medicines that have either different outcomes or you are trying to
synthesise novel outcomes into a single measure. This is when you
get the QALYs.
o E.g. you get two drugs (say, cancer drugs) that increase survival
time but one has much lower side effects therefore improving QoL.
Cost benefit outcomes measured in monetary terms
o Not often done with medicines; usually with other interventions,
i.e. surgical intervention vs. drugs for complications

Cost-Minimisation
Used when no significantly significant difference in outcome between two
medicines can be qualified
In theory, efficacy and safety profile must be the same
Best underpinned by equivalence trial
Price of new medicine same as comparator
Cost Effectiveness
Used when both medicines affect the same physiological or disease pathway
(same outcome measures are used)
Cost effectiveness of a medicine cannot be compared across diseases or
conditions a medicine which lowers cholesterol cannot be compared to one
that reduces BP (but can if we are measuring CV risk)
If the new medicine produces an incremental gain in benefits, a price premium
may be justified

Cost Utility
Used to integrate effectiveness and patient satisfaction or preference
Usually a better way of establishing value because of assessing patient
needs and QoL (government will pay for this if they think it is important
CUA not only measures the change in disease or condition, but also the patients
perception or preference for this change
Better economic tool because youre including preference
Quality of life is a common method which measures the outcome of a medicine
on the patients physical, social and physiological functioning and well being
Other Considerations

Perpective of the analysis

o Whose costs and outcomes are relevant to the evaluation?
o The perspective may be from a society, patient, insurer, regulator
aor reimbursement position
o The perspective is important because an analysis from one view
may not reach the same conclusions as one from an alternative
view
o From a hospitals perspective, reduced medicine cost, nurse
administration time and length of admission are important
o From societys perspective, savings to the health care system as a
whole and imporved QoL and adherencce of the patient are more
important
Modelling
o The basis of pharmacoeconomics is usually clinical trials
conducted to support the safety and efficacy of medicine
o The aim of modelling is to make the trial results more relevant to
practice
o Modelling is designed to overcome the limitations of the trial data
base:
Increasing the eternal validity of the trial
Extending the costs and consequences beyond the scope of
a RCT
Linking surrogate outcomes to health outcome measures
Replacing protocol driven resurce use and costs with real
life information
Impact of side effects on continuation and health outcomes
Simple models are developed using decision analysis
Decision analysis utilises costs, outcomes of treatment and
probability of obtainingg a given outcome to compare the
cost-effectiveness of two or more medicines
Estimates of costs, outcomes and probabilities can be taken
from clinical trials, epidemiological sources or even expert
opinion
Estimates become increasingly uncertain as we move
further away from RCT to observational data and expert
opinion
The impact of uncertainty in estimating a cost or outcome
on the analysis is tested using sensitivity analysis varying
the estimate across a range
A 6 month RCT showed the following:

On average, 90% (CI 84-95%) patients treated with

Gluceze achieve HbA1c of 7% compared to 80% (CI
73-83%) using metformin
o CI indicates good efficacy in the study; shows
that results wil be constant most of the time
If target HbAic not reached insulin was added
10% patients had an ADE on Gluceze and required
specific treatment. Only 2% required specific ADE
treatment on metformin
Gluceze costs $20 per month, metformin $10 per
month
FUNDAMENTALS OF PHARMACOECONOMICS
Does Gluceze treatment represent value for money?
MODELLING
GLUCEZE

METFORMIN

Probability of Success

90

80

Cost per 6 months treatment

$120

$60

Probability of ADE

10

Cost of treating ADE

$100

$120

FUNDAMENTALS OF PHARMACOECONOMICS

Outcome

Alternative treatment cost

Continue

GLUCEZE

Success

$70

$70

0.1

ADE

0.9
FUNDAMENTALS OF PHARMACOECONOMICS

NOT TO BE USED WITHOUT THE AUTHORS PERMISSION

Failure
Outcome

GLUCEZE

Continue

0.9

ADE

0.1

0.1

0.9

GLUCEZE

Insulin

0.1

Metformin

Probability 0.1
Cost X P
Insulin

Continued
success

$120

Success
with ADE

$120 +
$100

Failure

$70

Success

0.1

Metformin

Cost

0.9 X 0.9 =
0.81

0.98

$97.20

0.9 X 0.1 =
$19.80
Continue
0.98
0.09
0.1

TOTAL
Continue

$124
0.02

ADE

0.8
Metformin

$7.00

Success
0.8

ADE

Continued
success

0.02

Failure
Success
Failure

Insulin

0.2

Continued
success

$120

Success
with ADE

$120
$100

Failure

$70

GLUCEZE

Success

Failure

Cost

0.9

0. 2

0.2

$60

0.8 X 0.98
= 0.784

Insulin0.8 X .0.02

with ADE

$60 +
$120

= 0.016

Failure

$70

0.2

TOTAL

$47.04
$2.88

0. 2

$14.00
$63.92

TOTAL
Metformin
Continued
success

$60

Success
with ADE

$60 +
$120

Failure

$70

TOTAL

Incremental cost effectiveness ratio = Cost/ outcome

$124 - $63.92/0.9 0.8 = $601 per extra success

Incremental cost effectiveness ratio = Cost/ outcome

NOT TO BE USED WITHOUT THE AUTHORS PERMISSION

$124 - $63.92/0.9 0.8 = $601 per extra success

Spending $601/year to get one extra patient with good diabetes control,
therefore cost effective for government

FUNDAMENTALS OF PHARMACOECONOMICS

Contributors of CV risk

LIMITATIONS OF MODELLING - UNCERTAINTY

For any given health

outcome, there are often
multiple efficacy
surrogates which
contribute to the risk of
poor outcomes.

SMOKING
BP

BSL
REDUCTION IN CVD
HDL-C

WEIGHT

It is the interplay of each

efficacy variable which
LDL-C
ACTIVITY
determines individual
health outcomes.
FUNDAMENTALS
OFoften
PHARMACOECONOMICS
For any given health
outcome, there are
multiple efficacy surrogates
which contribute to the risk of poor outcomes.

LINKING INTERMEDIATE FACTORS TO HEALTH OUTCOMES IN CEA

It is the interplay of each efficacy variable which determines individual health
MEDICINE CLASS
EFFICACY SURROGATE
INTERMEDIATE
HEALTH OUTCOME
outcomes
SURROGATE

NOT TO BE USED WITHOUT THE AUTHORS PERMISSION

LIPID MODIFIER

LDL- C
HDL- C

CV RISK

REDUCTION IN
CVD/MORTALITY

ANTIHYPERTENSIVE

BP

CV RISK

REDUCTION IN
CVD/MORTALITY

HYPOGLYCAEMIC

FPG
HbA1c

CV RISK

REDUCTION IN
CVD/MORTALITY

ONCOLOGY AGENT

TUMOUR SIZE

PROGRESSION FREE
PERIOD

QALYS

Increasing certainty of benefit

So say we have a new lipid lowering drug, in trials we measure LDL and HDL
levels, and so on for the others. The intermediate surrogate that links all these
together is the CV risk and the ultimate outcome is a decrease in CVD and
FUNDAMENTALS
OFthe
PHARMACOECONOMICS
mortality.
Just measuring
intermediate otcomes gives no real idea whether, I
isolation, efficacy surrogates alone fix health outcomes.

NOT TO BE USED WITHOUT THE AUTHORS PERMISSION

THE ROSIGLITAZONE EXAMPLE - Measuring efficacy and assuming health outcomes

Rosiglitazone effective as both a monotherapy and in combination with SU and metformin in

lowering fasting PG and HbA1c in long term

In comparison to metformin, it increased LDL-C by 7%, weight by 8% and a small but

significant decrease in BP (4/2mmHg).

It was assumed that rosiglitazone would reduce CVD risk in diabetic patients, based on
glycaemic impact.

Seven years after first marketing, a meta-analysis ny Nissen and Wolski demonstrated that
patients taking rosiglitazone have a 43% increased risk of MI, and 64% increased risk of CV
death

Sensitivity analysis
o In any model, the issue of uncertainty in the data must be
addressed
o Generally, the uncertainty associated with outcome variable
increases as the quality of evidence use to estimate the outcome
decreases
o For example, if you ask n economists a question you get n+1
answers
o However, even RCT have outcome uncertainty which is
MENTALS OF PHARMACOECONOMICS
represented by confidence intervals around the point estimate
The standard approach to managing uncertainty is to perform a
FUNDAMENTALS OFo PHARMACOECONOMICS
sensitivity analysis
o Using an RCT the base case would use the point estimate from the
ITY ANALYSIS
SENSITIVITY ANALYSIS trial, with the upper and lower 90% CI values used I the sensitivity
analysis

hypoglycaemic
example
New
oral hypoglycaemic
example
Outcome
GLUCEZE
Lower CI

Outcome

Cost

TOTAL
GLUCEZE
Upper CI

Cost X P

BaseBase
case Cost
P = $124
caseX Cost
XP

= $124

Incremental cost effectiveness ratio

Continued
success

$120
$120 +
$100

$120 +$70
Failure
$100
TOTAL

$70

0.84 X 0.9
= 0.756

$90.72

0.84 X 0.9
$90.72
0.84 X 0.1
$18.48
= 0.756
= 0.084

0.840.16
X 0.1
= 0.084

$18.48
$11.20

0.16

$11.20

GLUCEZE
Upper CI

$120.40

$120.40

Continued
success

$120

0.95 X 0.9
= 0.855

$102.60

Success
with ADE

$120 +
$100

0.95 X 0.1
= 0.095

$20.90

ContinuedFailure
$120
success
Success
with ADE

Probability

Cost X P

Incremental cost effectiveness ratio

with ADE

Failure

Probability

GLUCEZE
Lower CI

Continued
$120
success Success
Success
with ADE

Cost

0.950.05
X 0.9
= 0.855

$102.60
$3.50

$120 +
$100

0.95 X 0.1
= 0.095

$20.90

$70

0.05

$3.50

TOTAL

$70

$127

base = $601
lower = $1412
=
upper base
= $421

$601
lower = $1412
upper = $421

In this case, the incremental cost

effectiveness of drug A is sensitive
to the proportion of patients
In this
case,
the incremental
reaching
HbA1c
target

cost
effectiveness of drug A is sensitive
to the proportion of patients
reaching HbA1c target

In the base case, it is going to cost

us an extra $600/6 months of
treatment to get an additional
patient in control. Ranges of
control can vary between $400
and $1500.

NOT TO BE USED WITHOUT THE AUTHORS PERMISSION

Failure
TOTAL

Discounting
$127
o When the costs and benefits of a medicine extend over time
(generally over several years), the future costs and benefits should
be discounted to reflect todays value NOT TO BE USED WITHOUT THE AUTHORS PERMISSION
o The assumption is that people prefer to receive money (and
benefits) today rather than at a later time
For example, if you lent $1000 you would expect $1000 +
CPI in 2 years time to retain the same value
o There is no standard discount rate applied to pharmacoeconomic
evaluations, but current interst rates are often used.

FUNDAMENTALS OF PHARMACOECONOMICS

DESIGNING A HEALTH ECONOMIC STUDY

DESIGN FEATURE

CONSIDERATION

TYPE 2 DIABETES EXAMPLE

Likely place in therapy

(Indication)

Evidence based management guidelines

Diet, exercise then metformin as foundation

therapy

Patient Population

Population most likely to benefit

Patients failed diet, exercise and metformin rather

than newly diagnosed

Comparator

Treatment to be replaced in practice or gold

standard

Sulfonylurea
or TZD or gliptan rather than placebo

Outcome

Health outcome rather than surrogate

CV risk rather than HbA1c

Costing

Practice rather than protocol driven

Efficacy and safety testing according to best

practice guidelines

NOT TO BE USED WITHOUT THE AUTHORS PERMISSION