The practical impact of pharmacoeconomics on institutional managers

The value of pharmacoeconomics has been advocated by governments and academic establishments worldwide. However, the importance of pharmacoeconomic information to healthcare decision makers will depend upon the viewpoint from which the analysis is conducted. Institutional decision makers are likely to be concerned more with direct than with total costs, and to be influenced more by arguments that apply to the economic effects on the institution than by a societal perspective. Formularies have been employed for a considerable length of time, but their effectiveness has been assessed in terms of cost savings rather than overall value in healthcare outcomes. Many governments and institutions now advocate the importance of contracting for health gain by emphasising the importance of effectiveness of therapeutic interventions. By subjecting treatments to clinical audit, maximum effectiveness can be sought while minimising toxicity and improving compliance with medication through risk management strategies. Pharmacoeconomic evaluations will have maximum impact when there is wide flexibility in the management of resource allocation by virement between different budgets. The consideration of all costs and benefits as parts of a single healthcare budget would satisfy the majority of these needs and maximise the use of healthcare resources.     

The pursuit of transparency and quality improvement in cost-effectiveness analysis - a case study in disease-modifying drugs for the treatment of multiple sclerosis

Cost-effectiveness analysis (CEA) can be a powerful analytic tool for assessing the value of health care interventions when used in conjunction with efficacy, safety, and other supporting data in an evidence-based decision making environment. CEA is commonly defined in terms of the comparison of costs, expressed in monetary units, with outcomes that may be expressed in a variety of ways. One of the most common forms of CEA compares costs in monetary units with outcomes quantified in nonmonetary units (e.g., cancer avoided, death avoided, or successfully treated patient). Cost-utility analysis (CUA) is a form of CEA that compares costs in monetary units with outcomes quantified as a multidimensional measure of effectiveness (e.g., utilities that are used to estimate quality-adjusted life-years [QALYs]). Cost benefit analysis (CBA), another form of CEA that is used less frequently, compares costs and benefits (i.e., outcomes) both of which are quantified in monetary units. Overall, there has been an increasing trend in the use of CEA (CEA, CUA, and CBA) to inform decision making. This trend can be implicitly measured by the frequency of published CEAs over time.     

QALYs: are they helpful to decision makers?

The QALY is the product of life expectancy (estimated in years) and its quality over that time (estimated in utilities or QOL units). It theoretically enables direct comparison of the costs of obtaining different health outcomes through cost utility analysis (CUA). In this review, we argue that, at present, the problems related to the use of utilities preclude the use of cost per QALY as a major determinant of policy decisions on the acquisition and use of health technologies. Those who use CUA can be divided into (i) those who inform the process of decision making through CUA and (ii) those who make the decisions. The former have no direct budgetary responsibility for the decisions that are taken, while the decision makers must pay for those decisions from their budgets. Use of CUA rests on the assumption that all QALYs are of equivalent value in the eyes of society. However, the value accorded to them varies with circumstances. The utilities or QOL indices required to compute QALYs can be measured in different ways, which give different answers, and have been shown to be unreliable. Thus, the QALY is not sufficiently accurate or reliable to be used by decision makers as a basis for comparison of the costs of different technologies. Until the theoretical and practical problems of determining health preferences are resolved and the methods of their measurement are standardised, it is necessary to estimate the cost effectiveness of health interventions by relating their cost to their primary health outcomes.     

Societal discounting of health effects in cost-effectiveness analyses: the influence of life expectancy

BACKGROUND: Increasing life expectancy and decreasing marginal valuation of additional QALYs over time may serve as a basis for discounting future health effects from a societal perspective. Therefore, we tested the hypothesis that societal time preference for health is related to perceived future life expectancy. METHODS: A sample of 223 people from the general population prioritised healthcare programmes with differential timing of health benefits and costs from a societal perspective. Furthermore, we asked respondents to estimate future life expectancy. RESULTS: The relationship between future life expectancy and time preference for health is ambiguous. We observed that people who expected a higher future life expectancy elicited higher discount rates for health effects than those with lower life expectancy growth expectations for all four time periods (5, 10, 20 and 40 years into the future), but the differences were never significant. On average, providing explicit information on growth in life expectancy did significantly alter discount rates in the expected direction but, on an individual level, the results were rather inconsistent. We observed a significantly stronger time preference (i.e. higher discount rates) for health effects than for costs. As commonly observed, discount rates for health and money decreased with time delay following a hyperbolic function. CONCLUSION: Our data indicate that it is troublesome to elicit societal discount rates empirically, especially rates that are in line with the theoretical arguments on societal discounting. The influence of life expectancy remains ambiguous, but there seems to be at least some positive relationship between growth in life expectancy and discount rates that deserves additional attention.     

On individual preferences and aggregation in economic evaluation in healthcare

For practical reasons, in order to carry out economic evaluations of collective decisions, total costs will generally be compared with total benefits; hence, individuals' willingness to pay (WTP) or quality-adjusted life-years (QALYs) have to be estimated at an aggregate level. So far, aggregation has usually been done by taking the individuals' mean WTP or the unweighted number of QALYs. Since the aggregation process is closely related to the way that income, health and/or utility of different individuals are compared and weighted, it also has significant equity implications. Thus. the explicit (or, more often, implicit) assumptions behind the aggregation process will largely affect how health and welfare are distributed is society. The aggregation problem in economic evaluation is certainly not trivial, but is seldom addressed in current practice. This paper shows the underlying assumptions of aggregate cost-benefit analysis (CBA) and cost-effectiveness analysis/cost-utility analysis (CEA/CUA), and it emphasises the particularly strong assumptions which have to be made when QALYs are interpreted as utilities in the welfare economics sense. Naturally, the appropriate method to choose depends on what is to be maximised: welfare or health. If decisions of resource allocation are to be based on economic welfare theory, then CBA should be preferred. However, if QALYs are interpreted as measures of health, rather than as utilities, then CEA/CUA would be appropriate.     

Discounting in cost-effectiveness analysis of healthcare programmes

Discounting is a technique commonly used in cost-effectiveness analysis to 'make fair' comparisons of programmes whose costs and outcomes occur at different times. It is not a correction for inflation. While there is general agreement among health economists regarding the need to discount, there is less consensus on the procedure for discounting costs or benefits. We describe the method of constant-rate discounting, which uses the same rate to discount costs and benefits, and examine its impact on the cost effectiveness of selected health interventions. This methodology has significant limitations, however. Constant-rate discounting may not accurately represent the values of a society. Furthermore, discounting does not reflect the longitudinal time preferences of individuals (or groups). The philosophical rationale for constant-rate discounting is the concept of longitudinal equity, i.e. that society should make allocation decisions in such a way that present and future cohorts are treated equally, regardless of when they come into existence. In general, discounting affects the cost effectiveness of preventive interventions more than acute interventions, and it affects programmes with immediate cost more that those with ongoing cost. The reader of such analyses should be aware of these effects, and should use caution in comparing the cost effectiveness of interventions with vastly different timing of cost and benefit.     

Cystic fibrosis: cost of illness and considerations for the economic evaluation of potential therapies

Cystic fibrosis (CF) is the most common life-shortening inherited disease of the Caucasian race, with a prevalence of around 1 in 2500 live births. Advances in the treatment and management of respiratory and pancreatic disorders have dramatically increased the life expectancy of patients with CF. This article presents an overview of cost-of-illness studies of CF, identifies deficits in the available health economic analyses of CF and discusses which specific factors are essential for the economic evaluation of potential therapies, based on a critical review of the health economic literature on two main therapeutic strategies. Cost-of-illness studies of CF have predominantly been restricted to direct costs. According to the literature, direct costs amount to between 6200- 16300 US dollars (1996 values) per patient per year. As most studies likely underestimated the actual costs (e.g. by disregarding provision of certain healthcare services), real healthcare costs tend to be at the upper end of the cost range. Healthcare costs depend on the patient's age (for adults, costs are approximately twice as high as for children), the grade of severity (the cost relationship of severe to mild CF is between 4.5 and 7.1) and other factors. Lifetime direct costs of CF are estimated at 200 000-300000 US dollars (at 1996 values and a discount rate of 5%). Home intravenous (IV) antibacterial therapy and recombinant human DNase (rhDNase; dornase alfa) treatment are the two main therapeutic strategies most often evaluated in health economic studies of CF. While home IV antibacterial therapy (compared with inpatient IV antibacterial therapy) is assumed to be cost saving, rhDNase treatment is a very cost-intensive therapy intended to efficiently achieve health improvements. Health economic analyses of future CF therapeutic technologies should present explicit data regarding healthcare services provision, resource consumption and unit costs. Indirect costs and patient costs should be considered more often than they have to date, particularly when they are significantly influenced by novel CF technologies. The perspective of health economic studies should be stated explicitly and always include the societal perspective. More economic studies should be based on a controlled, and preferably randomised, design. The observation period must be long enough to identify long-term effects of interventions. A greater number of effectiveness studies should be performed to determine costs and outcomes of therapies applied under everyday life conditions for patients with CF. Finally, international comparison studies should identify the influence of different healthcare systems on the costs and outcomes of interventions.     

Sharing the costs of structural interventions: What can models tell us?

BackgroundThe global HIV response needs to both integrate with the broader health system and tackle the structural drivers of HIV. Cross-sectoral financing arrangements in which different sectors agree to co-finance structural interventions – have been put forward as promising frameworks to address these concerns. However, co-financing arrangements remain rare for HIV, and there is no consensus on how to distribute costs.MethodsWe use case studies to investigate how structural interventions can be incorporated within three quantitative decision-making frameworks. First, we consider cost-benefit analyses (CBA) using an opioid substitution therapy (OST) program in Armenia; second, we construct a theoretical example to illustrate the lessons game theory can shed on the co-financing arrangements implied by CBA; and third we consider allocative efficiency analyses using needle-syringe programs (NSPs) in Belarus.ResultsA cross-sectoral cost-benefit analysis of OST in Armenia demonstrates that the share of that should be funded by the HIV sector depends on the willingness to pay (WTP) to avert an HIV-related DALY, the long-term cost-benefit ratio, and the HIV risk reduction from OST. For reasonable parameter values, the HIV sector's share ranges between 0–48%. However, the Shapley value––a game-theoretic solution to cost attribution that ensures each sector gains as much or more as they would from acting independently––implies that the HIV sector's share may be higher. In Belarus, we find that the HIV sector should be willing to co-finance structural interventions that would increase the maximal attainable coverage of NSPs, with the contribution again depending on the WTP to avert an HIV-related DALY.ConclusionMany interventions known to have cross-sectoral benefits have historically been funded from HIV budgets, but this may change in the future. The question of how to distribute the costs of structural interventions is critical, and frameworks that decision-makers use to inform resource allocations will need to take this into account.     

Attitudes and policies about continuing education among Wisconsin hospital pharmacy directors

Pharmacy directors in Wisconsin hospitals were surveyed to determine their attitudes toward continuing professional education and to assess the status of policies and procedures regarding continuing education (CE) and funding for CE activities. A two-page questionnaire was sent to all pharmacy directors in the state. A total of 151 questionnaires were delivered and 103 (68.2%) usable responses were returned. Written policies and procedures regarding CE were available in 47.6% of pharmacy departments. Most directors (84.5%) had formal mechanisms for documenting staff participation in CE activities but few (19.6%) reported having criteria for determining who would attend CE programs. Only 64% of directors used a formal system of budgeting for CE activities, although 88% provide financial support for CE activities outside the institution. The types of CE activities considered to be most desirable were programs sponsored by pharmacy organizations, programs sponsored by schools of pharmacy, and journal reading. Many directors (72.8%) believed that CE is necessary if pharmacists are to remain competent, but few (5.9%) believed that their budgets were adequate to meet the costs of all CE activities in which their pharmacists might be interested, and few expected their budgets to increase. Based on this survey, Wisconsin pharmacy directors in both small and large hospitals believe that CE is important and that the pharmacy department should support it.     

Cost-benefit and cost-effectiveness analysis of drug therapy

A model for cost-benefit analysis and cost-effectiveness analysis (CBA-CEA) of pharmaceutical intervention is presented, and CBA-CEA research methods reported in the literature are reviewed. The cost versus benefit and the cost effectiveness of drug therapy can be analyzed in societal as well as private terms. Since CBA measures costs and outcomes in monetary terms, it can be used to compare net benefits of all types of interventions. CEA, however, can be used only in comparing alternative interventions that can produce a similar health outcome. Research activities needed for identification of treatment protocols, alternative therapies and their respective outcomes, and resource use are described. Quantification of benefits and costs is discussed and inherent strengths and weaknesses of CBA-CEA are summarized. For the wide variety of research activities involved in CBA-CEA, the expertise of economists, physicians, clinical pharmacists and pharmacologists, epidemiologists, sociologists, and psychologists is needed. Inherent in CBA-CEA for drug therapy are judgments, either by analysts or by policy decision makers, about how to value life, pain, anxiety, and happiness and how to distribute health-care resources. When results of CBA-CEA are presented and interpreted with care, this analysis can be an important tool for policy decision makers.     

Discounting of health benefits in the pharmacoeconomic analysis of drug therapies: an issue for debate?

In most economic evaluations, future monetary costs and benefits and future health benefits are discounted at the same rate. The purpose of this article is to question such current practice. The primary reason behind discounting costs and benefits is to allow for individuals' preferences over the timing of such events, i.e. to represent social time preference. We argue that the social time preference rate for health benefits is unlikely to be the same as that for monetary costs and benefits. The results of a sensitivity analysis of pharmacoeconomic analyses of drug treatments for hypertension illustrate how the choice of discount rate can affect the conclusions. As no definite conclusions can be drawn regarding the magnitude of the discount rate for health benefits, we recommend that analysts conduct sensitivity analyses employing differential discount rates for health benefits as well as monetary costs and benefits.     

Cost-effectiveness league tables: valuable guidance for decision makers?

This paper asks the question 'are cost-effectiveness league tables a good way to provide information to decision makers about the value of new healthcare interventions?' League tables that rank alternative healthcare interventions based on their incremental cost-effectiveness ratios (ICERs) are seen by economists as a valuable tool to inform decision makers about the allocation of scarce healthcare resources. However, league tables frequently compare ICERs from studies that have computed these ratios using different methods and assumptions including choice of comparator, choice of discount rate, time horizon, and population subgroup. The methodological differences among studies may influence the ranking of the studies and therefore decisions made using the league table. In addition, league tables generally do not include measures of the uncertainty of the cost-effectiveness estimates. In this paper, a reference case approach is proposed for the computation of the incremental cost-effectiveness ratio and an expanded set of measures is proposed for inclusion in the league table. In addition, a central repository for reference case expanded league tables is suggested so that decision makers can use them more effectively and more consistently.     

Healthcare rationing in Spain: framework, descriptive analysis and consequences

This paper describes the main healthcare rationing policies implemented in Spain over the last 2 decades, and analyses the consequences of these policies on the healthcare system, patients, healthcare practitioners, the pharmaceutical industry and policymakers. The primary explicit healthcare rationing policies utilised in Spain include a catalogue that defines the healthcare rights of citizens. However, the existing system may lead to inequity between regions, and is not structured to direct resources towards the most cost-effective options. Health technology assessment requires further work before it can be utilised widely for the development of rationing strategies. Selective reimbursement of drugs and drug co-payments provide only short-term results and appear to have little long-term impact on expenditure. Implicit rationing instruments, especially waiting lists, have had a significant effect on healthcare quality and the welfare of citizens, and have contributed to keeping the Spanish healthcare budget under control. Newer regulations should integrate some form of economic evaluation within the policy-making processes associated with healthcare. Further research is needed to identify those efficient and equitable rationing instruments that are most likely to improve health interventions for an aging society that is increasingly demanding of health services.     

The increasingly complex fourth hurdle for pharmaceuticals

There are three known criteria that underlie drug reimbursement decisions: therapeutic value, cost effectiveness and burden of disease. However, evidence from recent reimbursement decisions in several jurisdictions points to residual unexplained variables, one of which may be budget impact. An economic rationale for carrying out budget impact analyses is opportunity cost, measured by the economic benefits foregone by using resources in one way rather than another. Under certain assumptions, cost-effectiveness analysis accounts for opportunity cost while conveying to the decision maker the price of maximising health gains, subject to a budget constraint. However, the underlying assumptions are implausible, particularly in the context of pharmaceutical care. Although drugs that are cost effective may lead to unambiguous health gains among patient groups for whom the drugs are indicated, the opportunity costs could conceivably lead to a reduction in aggregate health gains, or failure to meet different kinds of equity considerations. The pertinent policy question is where to find the resources to fund new innovations, such as cost-effective pharmaceuticals, or drugs targeting severe diseases. It may be a matter of redeployment of resources across healthcare sectors, cancelling the funding of (older) pharmaceuticals that are less cost effective, or delisting drugs that are cost effective but target less burdensome conditions.     

Current issues in German healthcare

Germany has developed a model of social health insurance for financing healthcare. The basic characteristics of this model are compulsory membership, income-dependent contributions paid by employers and employees, a comprehensive package of healthcare entitlements, stringent government regulation and implementation by not-for-profit health insurers--the sickness funds--which operate under public law. Since the mid-1970s, when health care cost containment gradually evolved as a new issue in German healthcare policy-making, a long series of reform programmes have been initiated. Two recent development can be noted: the introduction of market competition in health insurance and the introduction of fixed budgets. Market competition in health insurance is now an explicit policy tool in Germany. This article analyses the German healthcare system, the history of healthcare reforms and the current healthcare acts. Special emphasis is given to the German drug market and its regulation. The paper describes the present cost-containment policy for pharmaceutical products, especially the global budget concept which was introduced for medicines and patients' copayments.     

The role of topical moxifloxacin, a new antibacterial in Europe, in the treatment of bacterial conjunctivitis

This article discusses current practice in the treatment of conjunctivitis and how the use of topical moxifloxacin can increase therapeutic effectiveness, reduce treatment failures and, consequently, be cost effective and reduce the societal burden of the disorder. Current practice and effectiveness data were derived from the literature. Data on healthcare utilization as a result of treatment failure were collected by survey and the cost of treatment was defined using national costings. A decision-analytic model to assess cost effectiveness was developed and the impact on the healthcare budget was calculated to define the health economic impact. Bacterial conjunctivitis represents a significant health problem and accounts for an estimated 1-1.5% of primary-care consultations. The disorder is highly contagious and causes a substantial healthcare and societal burden. Bacterial conjunctivitis is generally self-limiting, resolving within 1-2 weeks. However, the use of antibacterials significantly improves clinical and microbiological remission, shortens symptom duration, and enables more effective use of healthcare resources, compared with placebo. From a health economic perspective this benefits the healthcare system and society, since fewer healthcare resources are needed and the adult affected, or the parent/caregiver of the child affected, can return to full work capacity sooner, reducing loss of productivity. Treatment strategies vary significantly between countries. Most patients are first seen in primary care, where 'wait-and-see', lubrification and antiseptic or antibacterial treatment is provided. In Europe, when antibacterials are prescribed most general practitioners (GPs) prescribe a broad-spectrum topical antibacterial. The most commonly used drugs are chloramphenicol and fusidic acid, with fluoroquinolones rarely reported as first-line treatment by GPs. At the specialist (ophthalmologist) level, or for second-line treatment at the GP level, topical antibacterials are frequently used. However, in most countries, topical fluoroquinolones, particularly those recently approved by the European Medicines Agency, such as topical levofloxacin and topical moxifloxacin, are rarely used and instead are reserved for use as a last resort. In other parts of the world topical lomefloxacin, gatifloxacin and/or besifloxacin are also available. The strategy of using novel topical fluoroquinolones as a last resort reflects a belief that the use of topical fluoroquinolones may enhance the development of resistance, jeopardizing future availability of antibacterial treatment for ocular infections. In fact, most cases of bacterial resistance arise as a result of systemic treatment. Thus, this concern should not be extrapolated to topical use of fluoroquinolones, which results in antibacterial concentrations at the ocular surface that can significantly exceed mutant prevention concentrations. In addition, with products such as topical moxifloxacin, a dual-step mutation is required for resistance to emerge. Moxifloxacin restricts the selection of resistant mutants, meaning that emergence of resistance is unlikely. The strategy of not using the most effective fluoroquinolones such as topical moxifloxacin may lead to more patients with no improvement or worsening of symptoms, requiring re-intervention, additional examination and new treatment; these outcomes are defined as 'treatment failures'. Treatment failures cause an extra societal burden and increased costs due to the extra healthcare resources required (additional GP/specialist visits, laboratory tests, additional treatment, etc.). Compared with non-fluoroquinolones, topical moxifloxacin has a higher potency and faster in vitro 'speed-to-kill'. It has also been shown that, within the fluoroquinolone class, topical moxifloxacin and besifloxacin achieve the highest mean concentrations in conjunctival tissue, have the longest residence times and display favourable area under the concentration-time curve from time zero to 24 hours (AUC(24))/minimum inhibitory concentration ratio required to inhibit the growth of 90% of organisms (MIC(90)) and thus favourable pharmacokinetic/pharmacodynamic characteristics. This can result in reduced time-to-cure and a lower number of treatment failures, leading to better disease management and a healthcare-economic benefit arising from the associated reduction in utilization of healthcare resources. The high potency and mean concentration in conjunctival tissue combined with the long residence time of topical moxifloxacin enables a dosing strategy of three times daily for 5 days. Topical moxifloxacin is also the first ophthalmic antibacterial in Europe provided as a multidose, self-preserved, topical solution, thus avoiding the risk of benzalkonium chloride preservative-related allergic reactions and swelling. In addition, topical moxifloxacin has a near neutral pH (6.8) and is well tolerated by patients. Given the characteristics of the novel topical fluoroquinolones, a change in the healthcare treatment strategy for acute infectious conjunctivitis is to be recommended. Topical application of fluoroquinolones, such as moxifloxacin multidose self-preserved solution, should be considered earlier in the treatment path for conjunctivitis. Notwithstanding the premium price attached to this novel topical antibacterial, use of topical moxifloxacin for bacterial conjunctivitis can be cost effective and even generate total healthcare budget savings by reducing both the costs of managing treatment failures and the use of clinicians' time to manage such failures.     

Using discrete choice experiments within a cost-benefit analysis framework: some considerations

A great advantage of the stated preference discrete choice experiment (SPDCE) approach to economic evaluation methodology is its immense flexibility within applied cost-benefit analyses (CBAs). However, while the use of SPDCEs in healthcare has increased markedly in recent years there has been a distinct lack of equivalent CBAs in healthcare using such SPDCE-derived valuations. This article outlines specific issues and some practical suggestions for consideration relevant to the development of CBAs using SPDCE-derived benefits.The article shows that SPDCE-derived CBA can adopt recent developments in cost-effectiveness methodology including the cost-effectiveness plane, appropriate consideration of uncertainty, the net-benefit framework and probabilistic sensitivity analysis methods, while maintaining the theoretical advantage of the SPDCE approach. The concept of a cost-benefit plane is no different in principle to the cost-effectiveness plane and can be a useful tool for reporting and presenting the results of CBAs.However, there are many challenging issues to address for the advancement of CBA methodology using SPCDEs within healthcare. Particular areas for development include the importance of accounting for uncertainty in SPDCE-derived willingness-to-pay values, the methodology of SPDCEs in clinical trial settings and economic models, measurement issues pertinent to using SPDCEs specifically in healthcare, and the importance of issues such as consideration of the dynamic nature of healthcare and the resulting impact this has on the validity of attribute definitions and context.