Pharmacoeconomics

Assoc. Prof. Natia kvizhinadze

Tbilisi State Medical University
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- Accreditation Expert for Pharmacy Programs at the Ministry of

Education and Science of Georgia

- Independent Expert of the Drug Agency of the Ministry

of Health of Georgia on Pharmaceutical issues

Since 2015 - ISPOR (International Society for Pharmacoeconomics and Outcomes

Research) President of Georgia Chapter

Since 2018 – Pharmacoeconomics, as the study discipline was involved at the

Pharmacy Curriculum at the Bachelor and Master Programs

In 2020 – First International Conference for Georgian Pharmacy Students

In 2021 – Second Conference for Foreign Pharmacy Students
Prof. Natia Kvizhinadze MD., PharmD

Email: n.kvizhinadze@tsmu.edu
natia0807@gmail.com

Phone: 597158082
(Cell/whatsup/viber)
Subject :

Introduction .
Why we need it .
Goals .
Costs and types .
What is perspectives of it .
Types of pharmacoeconomic studies .
Applications
Conclusion.
 WHAT IS THE IMPORTANCE OF
PHARMACOECONOMICS?

Pharmacoeconomics is vitally important to drug manufacturers in terms of

communicating to external decision-makers (payers, prescribers, patients)
the value of their products, achieving regulatory and reimbursement
approval and contributing to commercial success. Since development of
new drugs is long, costly and risky, and decisions must be made how to
allocate considerable research and development (R&D) resources,
pharmacoeconomics also has an essential role informing internal decision-
making (within a company) during drug development.
 The use of pharmacoeconomics in early development phases is
likely to enhance the efficiency of R&D resource use and also
provide a solid foundation for communicating product value to
external decision-makers further downstream, increasing the
likelihood of regulatory (reimbursement) approval and
commercial success.
Pharmacoeconomic analyses outlines five techniques (clinical trial simulation
[CTS], option pricing [OP], investment appraisal [IA], threshold analysis [TA]
and value of information [VOI] analysis) that can provide useful input into the
design of clinical development programmes, portfolio management and
optimal pricing .

CTS can estimate efficacy and tolerability profiles before clinical data are
available. OP can show the value of different clinical programme designs,
sequencing of studies and stop decisions. IA can compare expected net
present value (NPV) of different product profiles or study designs. TA can be
used to understand development drug profile requirements given partial
data.
VOI can assist risk management by quantifying uncertainty and assessing
the economic viability of gathering further information on the
development drug. No amount of pharmacoeconomic data can make a
bad drug good; what it can do is enhance the drug developers
understanding of the characteristics of that drug.

Decision-making, in light of this information, is likely to be better than that

without it, whether it leads to faster termination of uneconomic projects or
the allocation of more appropriate resources to attractive
 THE RELATIONSHIP BETWEEN
PHARMACOECONOMICS AND
ECONOMICS

• It helps in forming an economic

relationship which combines the drug
research, its production and distribution,
storage, pricing, and further use by the
people. Some of the concepts involved
in pharmacoeconomic analysis include
cost minimization, cost effectiveness,
cost benefit, and cost utility analysis.
The fact that 'pharmacoeconomics' evaluates the costs and effects of
pharmaceutical drugs does not make it a sub-discipline of health
economics.

It is merely a coined term by pharmacists and/or other health scientists

who do not understand that 'pharmacoeconomics' can't be a sub-
discipline of health economics since health economics is in fact not a
distinct field but a sub-discipline of economics. If we are to use that
logic, then one could further come up with sub disciplines of
'pharmacoeconomics' which would then become cyclical, inaccurate,
laughable and misleading.
 Introduction

Pharmacoeconomic research is used to identify,

measure, and compare the costs, risks, and benefits
of programs, services, or therapies and determine
which alternative produces the best health outcome
for the resources invested.
 Introduction

Pharmacoeconomics is used to determine the

best value for a health care intervention. In an
article on the Agency for Healthcare Research
and Quality website, Russell describes the
international use of cost-effectiveness analysis
and cost-benefit analysis to allocate rare health
care resources.1 Different countries make
choices regarding public spending on the basis
of a combination of their society’s cultural
values, scientific evidence of outcomes, and
availability of funds. Organizations and agencies
around the world set standards for these
decisions.
 Why we need it ?

Pharmacoeconomics is vitally important to drug

manufacturers in terms of communicating to
external decision-makers (payers, prescribers,
patients) the value of their products, achieving
regulatory and reimbursement approval and
contributing to commercial success.

Pharmacoeconomics analysis is important for

inclusion in formularies or coverage by the drug
insurance companies. It assesses therapeutic
advantages and disadvantages of the drug and
cost-effectiveness of the drug relative to accepted
therapy.
 Why we need it ?
These topics are becoming increasingly important in the current economic climate. Recent legislation has
greatly increased the potential for more research in these areas. The American Recovery and Reinvestment
Act of 2009 began this process by allocating $1.1 billion dollars to Comparative Effectiveness Research
(CER).2 This act also created the Federal Coordinating Council for Comparative Effectiveness Research. The
goal of this was to coordinate between a number of federal agencies to foster comparative effectiveness
research, reduce redundancy and share resources, when possible.

The priorities that were named by PCORI (Patient-Centered

Outcomes Research Institute) in 2018 include:

 Assessment of options for prevention, diagnosis and treatment

 Improving health care systems

 Dissemination and communications research

 Addressing disparities

 Accelerating patient-centered outcomes research and methodology

 Why we need it ?
The first priority directly addresses comparative
effectiveness between treatment options.

The second priority deals more with the delivery of

health-care than the actual interventions.

The third priority means to ensure that all parties

(including providers, patients and caregivers) are
informed of the results. The fourth priority means to
include all groups equitably in research, including those
groups traditionally not researched (i.e., specific ethnic
groups, age groups, etc.). Finally, the fifth priority
means to ensure that research addresses those
questions that patients find most important and is
carried out in a way that is important to the patient.
 What is the Goals of
Pharmacoeconomics

The goal of Pharmacoeconomics is to determine

whether the expense incurred by the use of a
treatment strategy (only drugs, reactive
pharmacogenetic tests, intensity / frequency of
monitoring, combination of medications and
intervention, etc... ) is justified in comparison with
the cost of existing medication and other means.
 What is the Goals of Pharmacoeconomics

Potential savings could result from better quality

of life, extended life expectancy, a decrease in
the number of follow up, emergency room visits,
length of stay or number of hospitalizations,
ancillary or intangible costs (family, caregiver),
and the number of days of work lost by patients
taking the alternative drugs or innovative
medication. Also to improve the allocation of
resources for pharmaceutical products and
services .
 WHAT IS THE COSTS AND TYPES OF
PHARMACOECONOMICS

The four types of pharmacoeconomic methods are :

cost-minimization analysis.
cost-benefit analysis.
cost-effectiveness analysis.
cost-utility analysis.
WHAT IS THE COSTS AND TYPES OF
PHARMACOECONOMICS
 WHAT IS THE COSTS AND TYPES OF
PHARMACOECONOMICS

cost-minimization analysis :

Comparison of multiple drugs of

equal efficacy and equal tolerability
to identify the least expensive
therapy
 WHAT IS THE COSTS AND TYPES OF
PHARMACOECONOMICS

cost-benefit analysis:

Determines whether an investment or policy

decision is sound (justification feasibility) and
provides a basis for evaluating policies by
comparing the total expected cost of each option
against the total expected bene fits to see
whether the bene fits outweigh the costs, and by
how much; vaccination programs are a classic
example.
 WHAT IS THE COSTS AND TYPES OF
PHARMACOECONOMICS

cost-effectiveness analysis :

Comparison that balances a single unit

of cost against a single unit of risks or
benefits to the quality of life extended to
the patient.
 WHAT IS THE COSTS AND TYPES OF
PHARMACOECONOMICS

cost-utility analysis :

Ratio between the cost of a health-related

intervention and the benefit it produces in
tens of number of ears lived in full health.
 WHAT IS THE COSTS AND TYPES OF
PHARMACOECONOMICS

Pharmacoeconomics is a branch of
health economics that usually focuses
on balancing the costs and benefits of
an intervention towards the use of
limited resources, aiming at
maximizing value to patients,
healthcare payers and society through
data driven decision making
 WHAT IS THE COSTS AND TYPES OF
PHARMACOECONOMICS

Costs :

Cost involves all the resources that

are used to produce and deliver a
particular drug therapy.
 WHAT IS THE COSTS AND TYPES OF
PHARMACOECONOMICS

Types of Costs :

Direct costs ( Medical vs

Nonmedical )
 Indirect costs .
Intangible costs .
Opportunity costs.
 WHAT IS THE COSTS AND TYPES OF
PHARMACOECONOMICS

Direct costs ( Medical vs Nonmedical ) :

In health economics , the term direct cost refers to all

costs due to resource use that are completely attributable
to the use of a health care intervention or illness. Direct
costs can be split into direct medical costs and direct non-
medical costs. Direct medical costs include the cost of
a defined intervention and all follow-up costs for other
medication and health care interventions in ambulatory,
inpatient, and nursing care. All specialist and GP care,
including emergency care, as well as rehabilitation and
physiotherapy, is considered. Direct non-medical costs
include e. g. transportation costs and additional paid
caregiver time.
 WHAT IS THE COSTS AND TYPES OF
PHARMACOECONOMICS

 Indirect costs :

The term indirect costs has come to be defined

as the expenses incurred from the cessation or
reduction of work productivity as a result of the
morbidity and mortality associated with a given
disease. Indirect costs typically consist of work
loss, worker replacement, and reduced
productivity from illness and disease. These
losses are typically valued from either societal,
individual, or employer perspectives .
 WHAT IS THE COSTS AND TYPES OF
PHARMACOECONOMICS

 Intangible costs :

Intangible costs include the costs of pain,

suffering, anxiety, or fatigue that occur because of
an illness or the treatment of an illness. It is
difficult to measure or assign values to intangible
costs. Treatment of an illness may include all four
types of costs.
 WHAT IS THE COSTS AND TYPES OF
PHARMACOECONOMICS

 Opportunity costs :

It refers to the economic benefit which is

relinquished while choosing one therapeutic
alternative over the other. Incremental cost – It
refers to the extra cost required to buy an
additional unit of benefit for one therapeutic
alternative compared to the other.
What is perspectives of
Pharmacoeconomics ?

Perspective in Pharmacoeconomics
refers to the economic vantage point
of a pharmacoeconomic analysis,
such as a cost-effectiveness analysis
or cost-utility analysis. This affects
the types of costs (resource
expenditures) and benefits that are
relevant to the analysis.
What is perspectives of
Pharmacoeconomics ?
 What is perspectives of
Pharmacoeconomics ?

Five general perspectives are often cited in

pharmacoeconomics, including institutional, third
party, patient , governmental and societal . The
author must state the perspective and then ensure
that costs and valuations remain consistent with it
throughout the study, explaining briefly the
applicable nomenclature. This should allow
prospective reader to get a better understanding,
and a firmer grasp of the subject matter.
 What is perspectives of
Pharmacoeconomics ?
We have 4 types :

Patient perspective.
provider perspective.
Payer perspective.
Societal perspective.
 What is perspectives of
Pharmacoeconomics ?

Patient perspective:

is the patient's experience of PH and its

impact on him/her and caregivers, including
symptomatic, intellectual, psychosocial,
spiritual and goal-oriented dimensions of
the disease and its treatment.
 What is perspectives of
Pharmacoeconomics ?

provider perspective :

is appropriate, for example, when assessing

the costs and benefits of establishing and
operating a mobile voluntary counseling and
testing (VCT) clinic. From the clinic's
perspective, direct medical costs would be
included, but productivity losses associated
with a patient's going to the mobile clinic for
VCT would not be included.
 What is perspectives of
Pharmacoeconomics ?

Payer perspective and Societal perspective:

The most common perspective besides the

societal perspective is the payer's perspective. It
refers to all expenses of the public payer, e. g.
a sickness fund, government health service, or
private health insurance company, for reimbursed
health care due to a defined health care
intervention or disease. From a payer's
perspective, only the health care described in the
catalog of reimbursed items is relevant and to
a large extent the reimbursement rates directly
reflect the costs.
 Components of
pharmacoeconomics
 Types of
pharmacoeconomic
studies ?
Types of pharmacoeconomic
studies
Types of pharmacoeconomic
studies ?
One of the primary applications of Pharmacoeconomics in clinical practice
today is to aid clinical and policy decision making.

Through the appropriate application of Pharmacoeconomics, practitioners

and administrators can make better, more informed decisions regarding the
products and services they provide.

WHAT ARE THE APPLICATIONS OF

PHARMACOECONOMICS
Applied Pharmacoeconomics is defined as putting pharmacoeconomic
principles, methods, and theories into practice to quantify the value of
pharmacy products and pharmaceutical care services used in real-
world environments.

Today’s practitioners increasingly are required to justify the value of

the products and services they provide.

Applied Pharmacoeconomics can provide the means or tools for this

valuation. One of the primary applications of Pharmacoeconomics in
clinical practice today is to aid clinical and policy decision making.

Through the appropriate application of Pharmacoeconomics,

practitioners and administrators can make better, more informed
decisions regarding the products and services they provide.
 Application

PharmacoEconomics is the benchmark journal for peer-reviewed,

authoritative articles on the practical application of health economics and
outcomes research to optimize healthcare resource allocation. An essential
resource for clinicians, those involved in health technology assessment
and other professionals involved with healthcare resource allocation,
budgeting and prescribing decisions.
PharmacoEconomics is dedicated to the clear communication of
complex pharmacoeconomic issues related to all healthcare
interventions (drugs, diagnostics, devices, personalized medicine
and surgical interventions.
 What is pharmacoeconomics in pharmacology?

Pharmacoeconomics has been defined as the

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
service.
 What is Pharmacoeconomic Research

Pharmacoeconomic research is used to identify, measure, and compare

the costs, risks, and benefits of programs, services, or therapies and
determine which alternative produces the best health outcome for the
resources invested.

Each pharmacoeconomic method measures costs in monetary terms; the

differences lie in the valuation of outcomes. In cost-minimization analysis,
the outcomes are considered to be equal and therefore are not measured.
 A well-designed pharmacoeconomic analysis involves 10 steps:

(1) defining the problem,

(2) determining the study's perspective,
(3) determining the alternatives and outcomes,
(4) selecting the appropriate pharmacoeconomic method,
(5) placing monetary values on the outcomes,
(6) identifying study resources,
(7) establishing the probabilities of the outcomes,
(8) applying decision analysis,
(9) discounting costs or performing a sensitivity or incremental cost analysis, and
(10) presenting the results, along with any limitations of the study. By adhering to the
analytic steps described, the pharmacist undertaking a pharmacoeconomic
evaluation has the greatest likelihood of obtaining valid and useful results.
 Pharmacoeconomic methods
are used to assist physicians,
hospitals, insurers, patients and
healthcare professionals in
making proper decisions what
CONCLUSION drug therapies should be
chosen.
 Conclusion

many pharmacy and therapeutics committees continue

to be challenged with managing costs of
pharmacotherapy. Pharmacoeconomics models can be
useful tools for evaluating the costs of pharmaceuticals
The ability to objectively measure and compare costs
may also produce better decisions about the choice of
pharmaceuticals for a formulary. Decision analysis is
one of the many tools finding increased utilization in the
field of medicine and pharmacoeconomics specifically.
As the science of pharmacoeconomics becomes more
standardized rigorous comparison among several
papers on the same topic will be possible and necessary
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