Pharmacoeconomics

What are the 6 steps of performing a CBA?

(1) determine the primary intervention (2) identify alternative(s) to the intervention (3) determine the perspective of the study (payer or societal) (4) identify costs & benefits (5) assign monetary values to health benefits (6) calculate results of CBA

List 4 ways to conduct willingness-to-pay

-open ended questions -closed ended questions -bidding game -payment card

A person with cancer is expected to live 12 years. He is willing to trade away 8 years of living with cancer to live 4 years in good health. What would be the calculated utility score for living with the cancer according to the patient's time trade off responses?

0.33

•Time •Quality of life

2 things contribute to determining QALY

•Minh is testing a new drug to treat rheumatoid arthritis •He is comparing it to methotrexate which is a commonly used drug for RA •He has created a decision analysis tree. •There is an 80% chance of improvement with his drug; 60% success rate with methotrexate •Of those that improve, there is a 65% chance that improvement lasts for >6 months with Minh's drug and 90% chance it lasts for >6 months with methotrexate •What is the probability for a patient to have improvement that lasts <6 months with Minh's drug

28%

*Missed work*- for those employed *Missed housekeeping*- days missed from maintaining housekeeping responsibilities *Restricted activity days*- % of time for which missed work or housekeeping was limited *Caregiver time*- Time spent as caregiver for an ill family member (such as a parent to an ill child or ill spouse)

4 types of missed time for human capital

Which one of the following is a primary outcome (ie, NOT a surrogate outcome)

5-year *survival rate* for patients with colon cancer treated with bevacizumab

A group of researchers is evaluating the pharmacoeconomics of a new drug to treat hypertension. 300 people were randomized to either standard of care or use of Vascusav Using time trade off, a utility of 0.65 was determined for hypertension Over the 10 years of the study, patients getting Vascusav lived a median of 8 years while those on standard of care lived 5 years What is the QALY of using Vascusav? (ie, convert years of life lived to QALY)

5.2 years

Step 1: determine the primary intervention being considered (ie, service, drug, etc) Step 2: identify alternative(s) to the intervention (ie, the control) Step 3: determine the perspective of the study (usually use the societal perspective in CBA) Step 4: identify ALL costs and benefits of interventions (all those shown on the earlier slide) Step 5: assign a monetary value to health benefits (more on this coming up) Step 6: calculate results of costs and benefit analysis (examples coming up

6 steps to conduct a CBA

1)Identify the situation and the potential new intervention (aka, the test intervention) 2)Specify the standard intervention (aka, the control) 3)Draw the decision analysis structure 4)Specify possible costs, outcomes, and probabilities 5)Perform calculations 6)Conduct a sensitivity analysis

6 steps to performing decision analysis

-the cost paid by an institution to acquire a medication from a wholesaler as part of their inventory -this is often a negotiated cost based on contracts with the wholesaler or manufacturer -often kept as proprietary information

Acquisition cost

•Willingness to pay •Human capital

Assign monetary values to benefit

-prices paid by wholesalers that *include discounts* from the manufacturer -more precise estimate of what pharmacies pay

Average Manufacturer's Price (AMP)

"list price" of drugs before discounts and prices in negotiating contracts -available in Red Book

Average Wholesale Price (AWP)

= (mean cost per patient)*/*QALY

Average cost per QALY

Which of the following BEST describes opportunity cost? A.The total cost of using the "best" option B.The cost of the "best" option over the "next best option" C.The net cost of using an inferior product D.The savings achieved by using a product to prevent illness

B

When using the standard gamble method to determine the utility of a health state, what must participants decide?

Between getting an intervention that might make them healthy or cause their death vs just living with the disease

resembles an auction in which an initial bid is subsequently ↑or ↓ based on the person's response to get to the maximum value (ex. Question: would you pay $500 to avoid COVID? No, how about $400? Yes, well how about $450...)

Bidding game

To rate the value of an intervention in WTP method, requires an individual to place a value using -answers are then pooled together to a mean or median value

Bids -bids are obtained through various types of questioning

Which one of the following BEST describes a 'chance' node?

Bifurcation point on a decision analysis tree at which different events could occur, each with their own probability

Loss of productivity from illness or death is which one of the following types of costs? A. Direct medical costs B. Direct nonmedical costs C. Indirect medical costs D. Intangible costs

C

is equal to the present value of benefits compared to the present value of costs -ignores other factors such as inflation or external costs -Goal: rate of return such that costs = benefits

CBA: Internal Rate of Return (IRR)

people asked whether they would or would not pay a specific amount for the intervention (ex. Would you pay $500 to avoid getting COVID19; YES or NO)

Closed-ended questions (aka dichotomous choice OR take-it-or-leave-it)

In which situation would QALYs be useful?

Comparing the impact of infliximab in improving mobility in patients with arthritis with use of gabapentin to reduce pain in patients with diabetic neuropathy

•Choice (aka decision) node *green square* - a choice is made, like either drug A or drug B •Chance node *purple circle*- indicates that there is a probability of events to occur such as the probability of a cure or probability of an adverse event •Terminal (aka final outcome) node *red triangle*- indicates the final outcome that could occur for each option and event and is the end of the branching

Connections (aka nodes) at certain points indicate 1 of 3 things:

•Evaluates degree to which a test measures "constructs" components of an abstract item (ie, something difficult to measure) •Assess instruments that measure abstract ideas/subjective factors - difficult to measure Ex. Happiness, pain, intelligence

Construct Validity

•Confirms whether the HRQoL instrument provides an adequate representation of the factors of interest •The information being assessed is consistent with the disease state or condition •Sometimes referred to as "face" validity based on whether it seems like it assesses the right things based on just a quick inspection

Content Validity

evaluates just the *costs* ex: how much more does drug X cost than drug Y

Cost analysis (or a partial economic analysis)

= difference between the cost of the two treatments */* difference between the QALYs of the two treatments

Cost per QALY

•*Compares both costs AND benefits* of an intervention in monetary units (ie, dollars) •Often used to help assess societal benefit of policies or projects (ie, the intervention) while balancing proper use of available resources (ie, the costs) Note: not all benefit categories need to be included in a CBA, but need at least 1

Cost-Benefit Analysis (CBA)

used to compare costs of an intervention and *health related outcomes*

Cost-Effectiveness Analysis (CEA)

A study in which the costs and outcomes are measured (this type of analysis is better than just a cost-minimization analysis)

Cost-Effectiveness Study

compares costs between 2 or more products or services *assumes that outcomes are equal for each option* (often outcomes are only assumed equal) tries to find the intervention with the least cost

Cost-Minimization Analysis (CMA)

•Net benefit •Benefit-to-cost ratio

Cost-benefit analysis

•Cost consequence analysis (CCA) •Cost effectiveness ratio (CER) •Incremental cost-effectiveness ratio (ICER) •Cost effectiveness grid •Cost effectiveness plain

Cost-effectiveness analysis

Ratio of *resources used per unit of benefit* is calculated for each intervention

Cost-effectiveness ratio (CER)

Type of cost-effective analysis in which the outcome used is quality adjusted life years (QALY) Less common outcomes include: •Disability adjusted life years (DALY) •Health year equivalents (HYE) •also takes into account *the utility of an intervention which is a way to measure patient preferences*

Cost-utility analysis (CUA) utility is sometimes referred to as preference weight or preference value

•Shows that the scores for a HRQoL instrument are related to criteria of a certain outcome •Sometimes called "predictive" validity due to the scores obtained might predict a certain outcome

Criterion validity

Follow-up evaluations are made throughout the time period, each follow-up time period is called a

Cycle

Discounting future costs and savings is used for which one of the following purposes? A.Get the best price possible for current purchases B.Eliminate the impact of inflation C.Calculate the net benefit of a superior product or service D.Determine future values in dollars based on inflation

D

A way to graphically represent the process of making a decision in a "tree" to facilitate

Decision analysis

•Classifies diagnoses and procedures based on similar resources used •An average reimbursement rate is given for each group

Diagnosis-related group (DRG)

•There are two HRQoL surveys, each with 20 questions, scales from 1-5 for each question, and total scores from 20 to 100 •Survey 1 has a minimally importance difference of 5 •Survey 2 has a minimally importance difference of 8 •Diego took survey 1 last year and scored a 66; this year his score was 59 •Bhavika took survey 2 last year and scored a 60; this year his score was 67 •What is our interpretation of these results?

Diego has a change in his health status but Bhavika does not

Average cost/day for specific reason of hospitalization

Disease-specific per diem

areas of health included in the assessment of HRQoL

Domains (physical, psychological, and social)

A pharmacoeconomic study is evaluating drug A (test intervention; aka the "alternative") and drug B (the control; aka the "standard") to treat hypertension. A value for INB was calculated to be -$150. What does this mean?

Drug A is not more cost effective than drug B

Decision analysis is only useful in pharmacoeconomic decisions

False

Which of the following is/are included in the calculation of incremental cost effectiveness ratio (ICER)? A.Cost of drug A B.Cost of drug B C.Outcome percent when using drug A D.Outcome percent when using drug B E.A and B F.A and C G.B and D H.All the above

H

Four Types Include: •*Physical functioning*- includes ability or disability to complete activities of daily living •*Psychological functioning*- level of mental distress affecting anxiety, depression, mood, etc •*Social and role functioning*- ability to develop and maintain social relationships •*General health perceptions*- overall perceptions about current and future health

Health status domains

Part of QoL that measures impact of illness and treatment on perceived quality of life

Health-related quality of life (HRQoL)

List two methods used to determine monetary values for indirect benefits or intangible benefits

Human Capital & Willingness-to-Pay

•Estimates wages and productivity lost due to illness, disability, or death •Requires knowledge of income and job benefits for a specific occupation by gender and age *= multiply the wage rate X missed work time*

Human Capital Method

(Cost to use drug X - Cost to use drug Y)*/*(Outcomes of pts treated with drug X - Outcomes of pts treated with drug Y)

ICER calculation

=(λ x Δeffects)- Δ costs

INB

the alternative intervention is deemed NOT to cost effective when compared to the standard

INB < 0

intervention is deemed cost effective compared to standard

INB > 0

•Developed due to difficulties in interpreting ICERs •Uses an estimate of the value of the health outcome in the incremental analysis •The value of the health outcome is determined by the maximum acceptable willingness to pay (lambda; λ) for the outcome

Icremental Net Benefit (INB) (Also called 'net benefit framework' or 'net monetary benefit')

Tanya answered a HRQoL questionnaire about smoking. She thinks that some questions asked for the same information but in different ways. Why would authors of the questionnaire have multiple questions that asked for similar information?

Increase internal consistency

common calculation to assess one option against another = (diff. in costs between two options) */* (difference in outcomes)

Incremental cost effectiveness ratio (ICER)

= (Δ costs/[Δ survival days) x 365 days/year]

Incremental cost per life year saved

(Cost to use drug X - Cost to use drug Y)*/*(QALY of treatment X-QALY of treatment y)

Incremental cost utility ratio (ICUR)

-Ratio of difference in costs divided by difference in outcomes of two different interventions -Allows for determination that one drug is better (ie, dominant) than another because it costs less and is more effective

Incremental cost-effectiveness ratio (ICER)

If the conclusion with the re-calculations *stays the same* compared to the original costs then the results are

Insensitive (Robust) GOOD thing; it means our model is a good predictor even if costs change

level of similarity for responses from different questions on the same questionnaire that ask for the same information

Internal consistency

determines the agreement in responses between two individuals administering the questionnaire to the same patient

Interrater reliability

they must have to have a strong association with the primary outcome

Limitation of surrogate outcomes

Creates a possible sequence of events based on probability of various events to occur based on occurrence of previous events •Can be applied to gambling, population growth of animal species, people moving through airports •*In health care, enables evaluation of health states and interventions over long periods of time*

Markov Modeling

What is the purpose of a health related quality of life questionnaire?

Measure the impact of disease or treatment on a patient's life

•Pt records reviewed to determine specific services used, assigning costs to those services (meds, labs, procedures, etc) •Requires good record keeping and documentation •Computerization improves accuracy and ease

Micro-coding

•Alaina conducts a study using a HRQoL questionnaire assessing the impact of using two drugs (Sleeprite and Snoozall) on 200 patients' sleep patterns •The questionnaire has 10 questions and patients answer each question using a 5 point scale with 5 meaning "strongly agree" down to 1 meaning "strongly disagree" •The higher the overall score the better the sleep •The results (see table) show that Sleeprite was statistically significantly better (p<0.05) at improving sleep scores compared to Snoozall. How should we interpret these results?

Need more information about the questionnaire to make a conclusion

occurs when the test intervention is more effective and less expensive than the control intervention (Numerator is negative and denominator is positive)

Negative ICER ratio

*asks people how much they would be willing-to-pay for the intervention to avoid getting sick or treat some ill condition*

Open-ended questions

the person selects one value from a list of possible amounts *aka multiple choice* (ex. how much would you pay to avoid the flu: A) $50 B) $75 C) $100 D) $200

Payment card

an average cost per day for all hospitalizations regardless of reason for hospitalizations

Per diem hospital costs

indicates the test intervention is more expensive and more effective and the *ICER can be used to calculate the magnitude of the additional cost for each benefit gained (+/+=+ or -/-=+)*

Positive ICER ratio

Hybrid instruments used to assess health, combines elements of utility and HRQoL methods -EuroQual 5D (EQ-5D) -Short-Form 6D (SF-6D) -Health Utilities Index 3 (HUI3)

Preference-based classification systems

•include assessment of *terminal points* of treatment (eg, cure of disease, eradication of infection, life years saved and more) •These *types of outcomes are preferred*, but not always possible to collect due to limitations of time or financial resources •These types of outcomes are also usually patient oriented

Primary (aka final) outcomes

*Utility for each year of life saved (0 to 1) X Years of life saved by intervention =*

QALY

•A way to measure the burden of living with a disease •Considers both quality and quantity of life lived •Ranges on a *scale from 0.0-1.0 per each year lived* •0.0 = death •1.0 = perfect health

QALY

measures how an intervention affects the quality of life gained by an intervention

QALYs

Broad term that describes overall perception of pt's life •Includes health-related quality as well as non-health-related factors (how the economy, politics, weather affect pt)

Quality of life (QoL)

•Uses a linear scale from 0-100 •Score is then divided by 100 to get a rating between 0-1

Rating scale method of determining utilities

Assesses ability of a HRQoL instrument to detect changes in health status

Responsiveness

If the conclusion with the re-calculations changes within any of the different costs used, then the results are (*changing costs changes our conclusion*)

Sensitive

•Requires each participant to make a decision between two alternative health states (ie, outcomes) from different interventions •The probability of *achieving normal health in choice 1 is assigned a number, p (and the probability of death would be 1-p)* •The value of p is then varied (up or down between 0-1) until the participant is unable to decide between intervention choices 1 and 2

Standard Gamble method to determine utility

1. Understand each disease state or condition 2. Choose a method to determine utility scores 3. Select participants who will determine utility scores 4. Use the utility scores and length of life gained for each intervention to obtain the QALY

Steps to calculate QALY

•Often used in place of primary outcomes •Typically easier to measure •Lots of choices •Related to disease or condition Examples: lab value or disease marker

Surrogate (aka intermediate) outcomes

assesses the similarity of health status scores over time when no changes have occurred

Test-retest reliability

Incremental cost utility ratio (ICUR) Average cost per QALY

Tests for cost-utility analysis that use QALYs

Which one of these statements BEST describes "benefit" obtained with an intervention?

The dollar amount people place on either achieving a positive or avoiding a negative health outcome

-Net benefit (aka net cost) calculations -Benefit-to-cost and cost-to-benefit ratios -Internal rate of returns

Three formats to present CBA

•Measures the quality of life a patient could be experiencing with a certain disease •It's a hypothetical discussion in which the time tradeoff comes from the participant being willing to trade years of living with the condition in order to be healthy (ie, living shorter but healthier) *•↑ x (ie, trade less years) if a patient is willing to live a longer lifetime with the disease •↓ x (ie, trade more years) if the patient is not willing to live a longer lifetime with the disease*

Time Tradeoff (TTO) method to determine utility

Which of the following terms describes the movement from one health state to another in a Markov model?

Transition

Higher values of incremental net benefit are better than lower values

True

In a Markov model, the total percent of patients in any particular cycle is always equal to 100% regardless of the type of initial or terminal outcome

True

The higher the benefit:cost ratio the better the intervention

True

The incremental cost effectiveness ratio (ICER) calculates the cost for one additional unit of benefit achieved by comparing the differences between costs and outcomes of two interventions

True

the value of a health state from 0-1

Utility

Which one of the following BEST explains a way to use QALYs in a Markov Model?

Utility values of health states can be used to show the changes in quality of life over time

•Evaluates whether answers obtained from a questionnaire truly represents what they are supposed to be measuring •Reflects whether actual differences in patients are measured as differences in responses on the testing tools

Validity

-estimates of costs to wholesaler from the manufacturer -does *not* include negotiated discounts

Wholesale Acquisition Cost (WAC)

•Useful to value both indirect and intangible components of a disease/condition •Determines a value of how much people are willing to pay to reduce the chance of an adverse health outcome •Considers both patient preferences and quality of life between health outcomes

Willingness-to-pay method

A terminal state (ex. death)

absorbing state

•Allows comparison of different types of health outcomes (ie, health states) from different diseases with one common unit...the QALY •QALYs convert all outcomes over to quality of life over a full year •Does not require estimation of monetary value of benefit (like with incremental net benefit)

advantages of CUA

Why should we do sensitivity analysis when we already have an answer from running a CBA?

allows us to determine whether varying amounts of costs or benefits results in different conclusions

Most commonly used CBA format

benefit-to-cost (the bigger the number, the better the intervention)

What type of data is compared and what assumption is made by researchers in a CMA?

compares the total costs of two interventions, assumes the outcomes are equal for each option

Which one of the following situations would cost-minimization analysis be useful?

comparing the costs of using two drugs that have equal outcomes

-assigning monetary values to medical outcomes is difficult -no standard way to determine these monetary values for outcomes

cons of CBA

involves asking a person to rate the value (ie how much it means to them) of an intervention in a detailed *hypothetical* scenario

contingent valuation (used in WTP method)

is the amount *needed* for the provider of a service or product to provide that service or product (eg. drug acquisition costs, salaries, materials etc)

cost

-values costs and benefits in monetary terms -helps determine if benefits outweigh costs of product or service -enables comparison of different interventions with unrelated outcomes (b/c everything is in terms of dollars)

cost-benefit analysis

Which level of cost-effective analysis is *very basic* where no ratio is calculated?

cost-consequence analysis (CCA)

assesses cost and measures outcomes in easily quantified units (ie. lab measurements or symptom-free days)

cost-effectiveness analysis

compares costs of two interventions when outcomes are the same

cost-minimization analysis

considers life outcome gained based on its quality (ie. spectrum of quality between perfect health [1.0] and death [0.0])

cost-utility analysis

what is the purpose of sensitivity analysis

determine if analytical results stay the same when using different input values of the same resource

λ is the benefit value of achieving a specific outcome.Where do we get values for λ?

determined through methods such as willingness to pay

-medically related inputs to provide a service or treatment -costs incurred by the provider and charged to the payer/patient

direct medical costs

costs incurred by patients and their families in order to receive the service/product from the provider ex: cost to travel to and from physician's office child care services during time spent away food and lodging expenses for extended periods of treatment

direct nonmedical costs

1 */* (1 + r) ^ t r = discount rate per year t = time in years difference from present

discount factor

*adjusts future dollar amounts* to present amounts -if you don't alter future projections in this way, you would be making errors in the value of costs/savings

discounting

evaluates just the *outcomes* ex: patients getting drug X lived longer than those given drug Y

economic analysis

Which is better, a benefit:cost ratio that is

greater than 1

Listed on the left half, could occur with each intervention to treat the disease/condition

health states and outcomes

is the minimum rate of benefit expected from an intervention

hurdle rate

the difference in costs between options being compared = cost of product A *-* cost of product B

incremental (aka marginal) costs

include the savings from not having to pay indirect costs

indirect benefits (hopefully the indirect benefit > indirect costs)

results from loss of productivity due to illness or death

indirect costs

costs of pain, suffering, anxiety, or fatigue due to a disease state or associated with the treatment for the disease state (more difficult to assign a monetary value compared to other types of costs)

intangible costs

What is the hurdle rate for a rate of return?

its minimal amount of benefit to get a positive internal rate of return its the point @ which costs = benefits

enables a predictive transition of patients to different health states based on probability

markov modeling

the extra cost of the "best" option over the "next best option"

opportunity cost

-costs spent by provider based on time spent providing the service -costs include salary and benefits for the service provider based on time spent -very commonly used to measure chain pharmacies metrics

personnel costs

describes the viewpoint to determine whose costs are being considered in a pharmacoeconomic study -*determines which costs are included in the analysis* (will affect the interpretation of results)

perspective

considers options available on both sides of the equation -answers the question whether the extra cost of a drug is worth the additional duration of health benefit -connects the cost, the product or service, and the outcome

pharmacoeconomic analysis

-description and analysis of costs of drug therapy (measures costs and consequences (ie outcomes) of medications and services -useful in helping to the added value of one intervention over another

pharmacoeconomics

*costs* (resources to provide a service or product) -> *product or service* -> *outcomes* (i.e. cure, prolonged survival, BP control etc)

pharmacoeconomics equation

is the amount *charged* to a payer (patient, health care insurance company, or the government) that pays for a treatment or service

price

is the difference between the price and cost

profit margin *price = cost + profit margin*

-allows for comparison of many different outcomes as long as they are valued in monetary units -determines whether the benefit of an intervention outweighs the cost -enables identification of the intervention with the greatest benefit

pros of CBA

-easy to use -multiple sources available for wages -days lost to illness are easily measured

pros to human capital method

-allows determination of a dollar amount on intangible benefits -incorporates patient preference and choice similar to the free-market system

pros to willingness to pay method

price *minus* negotiated discounts must be *greater than* cost - or the provider loses $$

reimbursed amount (aka allowable charge)

adjusts *past dollar amounts* to present amounts retrospective analysis over a time period of greater than 1 year *2 methods* -apply costs from one point in time -adjust all costs from each year using medical inflation rates

standardizing

ideally you want a rate of return that is greater than

the hurdle rate

The higher the INB,

the more favorable the intervention

Probabilities are listed for each possible movement, the movement from one health state to another health state or outcome is referred to as

transition (represented by arrows)

*x/t* (ex. 15 years left after trading t-x years/25 years they would otherwise live with the disease=0.6)

utility score

Which of the following can be used to determine a monetary for indirect or intangible benefits of an intervention

willingness to pay

average amount a group of people would be willing-to-pay for a condition to be cured

willingness-to-pay technique