Health Economics in Pharmacy Practice

1. Health Economics in Pharmacy Practice 陳立佳 Dr. Li-Chia Chen Drug Usage and Pharmacy Practice Research Group, School of Pharmacy and Pharmaceutical Sciences, The University of Manchester 高雄醫學大學 教師發展中心教師成長系列活動17/12/2005

2. Outline • What is An Health Economic Evaluation? • Why Do We Need Health Economic Evaluations? • Basic Concepts of Health Economics • Components and Analytic Framework of Economic Evaluations • Economic Evaluations in Pharmacy Practice • Economic Evaluation Curricula in School of Pharmacy

3. What is An Health Economic Evaluation?

4. Car A B Cost £6,995 £11,300 Engine 2 L, 16 V 2 L, 16 V MPG 32.8 32.1 BHP 136 137 MPH 129 125 Make Ford Hyundai Model Mondeo Coupe Year 1998 2001 Mile age 30,000 8,000 Safety equipment Full Full How Do We Make Decision in Real Life? Which car? Look at overall attribute of characteristics of cars, not only costs. An Economic evaluation is doing the same thing!

5. What Is Economics? • What do you think 'economics' is? • What do you think 'health economics'is? • What do you think 'pharmacoeconomics' is? • What is aRESOURCE? • What is aBENEFIT? • What do you think ‘efficiency’ is? • Is it appropriate to use economics in health care?

6. Concepts in Health Economics • Economics is a science which studies human behaviour as a relationship between ends and scarce means which have alternative uses (Robbins, 1932) • Health economics is the application of economic principles to the production and consumption of health in the population • Health care economics examines the economics of health care provision • Pharmacoeconomicsapplies economics to the provision of pharmaceutical services

7. Economic efficiency, cost-benefit analysis(Jules Dupuit) 1952 Economic evaluation in health care programme(Burton Weisbrod, the human-capital approach) 1960 cost-effectiveness analysis was developed(Klarman et al.) 1968 QALYs, cost-utility analysis were developed 1970s Willingness-to-pay assessment(Ciriacy-Wantrup) 1947 Cost-utility analysis 1973 Pharmacoeconomics Late 1970s First economic evaluation in pharmacy 1978, 1979 History of Economic Evaluation In Health Care

8. Health Economic Evaluation • An economic evaluation is a study that • SO, the main components are costs and benefits. compares the costs and benefits of two or more alternative interventions INPUTS Process of health care OUTPUTS Resources consumed Outcomes (health gain) Costs Direct (fixed, semi-fixed, variable) Indirect Intangible Effects: natural units Utilities: quality of life Benefits: monetary

9. Why Do We Need Health Economic Evaluations?

10. Increasing Cost of Health Care

11. Taiwan’s Health Expenditures Total Health Expenditures as % of GDP (1983-2002) NHI Total Health Expenditures Out-of-pocket Health Insurance Government Sector

12. International Comparison 資料來源 : 1. OECD Health Data,2000~2002 2. 行政院衛生署編印之中華民國89年衛生統計動向 3. International Health Policy之Chart VIII-5 from Multinational Comparisons of Health System Data,2000

13. International Comparison US Dollar 資料來源 : 1. OECD Health Data,2000~2001 2. 行政院衛生署編印之中華民國89年衛生統計動向,主計處91年8月13日國情統計通報專題分析 3. International Health Policy之Chart VIII-9 from Multinational Comparisons of Health System Data,2000

14. International Comparison No. of visit 資料來源 : 1. OECD Health Data,2000~2001 2. 行政院衛生署編印之中華民國89年衛生統計動向,主計處91年8月13日國情統計通報專題分析 3. International Health Policy之Chart VIII-9 from Multinational Comparisons of Health System Data,2000

15. International Comparison US Dollar Source: 1. OECD Health Data, 2000~2001 2. 行政院衛生署編印之中華民國89年衛生統計動向,主計處91年8月13日國情統計通報專題分析 3. International Health Policy之Chart VIII-9 from Multinational Comparisons of Health System Data,2000

16. Why Is the Cost of Health Care Rising? • Changing demographic trends • Advances in medical technology • labour intensive nature of the health service and rising salaries • Society's increasing expectations • Defensive medicine • Impact of living habits on disease epidemiology

17. 2000 1500 1000 500 0 birth childhood working age elderly very elderly Cost To The NHS Per Year of Life (£)

18. Total UK Health Expenditure 1997-2002 (in £m and as a percentage of Gross Domestic Product) Total healthcare expenditure, UK, 1973-2000 (http://www.statistics.gov.uk/healthaccounts/experimental.asp)

19. Increase Cost of Pharmaceutical Care to NHS UK Amount spent on drugs in different therapeutic groups (1998) 1991 to1997

20. Basic Concepts of Health Economics

21. Concepts In Health Economics • Underlying Concepts: • Scarcity and choice • What is a resource? • What is a benefit? • Resources in health care are scarce • Are any resources not scarce? • If resources were not scarce, choices would not have to be made. • Choices about allocation of resources have to be made, and are being made. How???

22. Opportunity Cost • a holiday • a car • a house • a lifetime supply of pizza • 10 hip replacements • a heart transplant • a smoking cessation programme • Is the benefit that would be derived from using a resource in its best alternative use.

23. = SupplyDemand Providerssupply Purchasersdemand < In reality: SupplyDemand Supply And Demand • Health care services which meet the 'needs' of their local population of residents. Efficiency (效率) • How do we allocate scarce resources so that benefit is maximised? • Allocative:using resources, across the whole economy, so that benefit is maximised (or the opportunity cost is minimised).配置效率 • Technical:means producing a given output for the least cost, or maximising output for a given cost. 技術效率

24. Efficiency Versus Ethics • Raison d’être of the NHS: • To every citizen without exception, without remuneration limit and without economic barrier at any point to delay it. • 臺灣全民健保制度：促進全體國民健康、風險分擔 • 提供民眾適當醫療服務、有效利用醫療資源、減少國民就醫財務障礙，和促進國民健康 • 擴大受益人口、平衡保險財務、增加就醫可近性 • 提高醫療品質、節制醫療費用成長，以及照顧弱勢團體 Is it ethical to: • Use scarce resources on treatments when there is no evidence of their benefit? • Use scarce resources on treatments if there is an equally effective, less costly alternative? • Follow processes of care and treatment that waste resources?

25. Components and Analytic Framework of Economic Evaluations

26. IdentifyingCost and Benefit • True economic cost takes into account all the costs of the process • Societal perspective INPUTS Process of health care OUTPUTS Resources consumed Outcomes (health gain) Costs Direct (fixed, semi-fixed, variable) Indirect Intangible Effects: natural units Utilities: quality of life Benefits: monetary

27. Fixed Costs Semi-fixed Costs Variable Costs Staff Drugs, blood products, disposable equipment Capital Costs Overhead Costs For setting up the service For running the services Type of Costs COST Direct Costs Indirect Costs Intangible Costs Production loss of society Anxiety, pain or suffering Direct Medical Costs Direct non-medical Costs Incurred from: a patient’s treatment Patient and family out-of-packet expenses Other part of public sector Incurred from: whether patients are treated or not e.g. counselling rooms equipment e.g. lighting, heating, cleaning

28. Outcome Measure • Benefits, outcomes and consequences refer to the effect on the patient, not the effect on people providing the service. • Cost is not anoutcome measure. • The principal outcome categories used in economic evaluation are: • Effectiveness (Natural Units) 效益 • General outcome measures, Clinical indicators • intermediate outcome measures • Quality of life (QoL) 生活品質 • Disease specific measures, Generic measures • Utility 效用 • Expressing benefits as monetary values • Contingent valuation (CV) 假設市場價值 • Willingness to pay (WTP) 願付價值

29. Utility • Definition: value attached by an individual for a specific level of health status or a specific health outcome. • Different individuals may attach different values to the same health state. • e.g. value of a broken arm to a cricketer vs. to a footballer? • Utility can be used: • to assess groups of patients who may have different illnesses • to compare outcomes in different patient groups

30. Measure Utility • Method • Complex and still under development • Methods for attaching a numerical value to the value a person has for a particular health state • Standard gamble (標準賭博法), time trade-off (時間交換法), rating scale • Most commonly used • Quality Adjusted Life Year (QALY)品質調整年 Quality Adjusted Life Year Quality of life Quantity of life morbidity mortality

31. 0.2 0.3 0.4 0.6 0.7 0.8 0.9 0.1 0.5 Visual Analogue Scale Scenario 1 • How do you feel today??  0 1 worst health state (death) best health state

32. 0.2 0.3 0.4 0.6 0.7 0.8 0.9 0.1 0.5 0 1 Visual Analogue Scale Scenario 2 • How do you think you would feel with pneumonia? • Difference between Scenario 1 & 2 is: • the utility lost by pneumonia, or • the utility gained by the cure 

33. 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 UTILITY 5 10 years QALYs • QALY (品質調整年 ) • =health status valuationssurvival periods • = quality of life  quantity of life • One QALY is one year at perfect health, or two years at ‘half’ perfect health. A = 5 x 0.8 = 4 QALYs B = 10 x 0.5 = 5 QALYs Treatment A Treatment B

34. Example of WTP 願付法 • You have a headache. • You can have Medicine A or Medicine B. • Both are equally effective for alleviating headache. Medicine A makes 1 in 10 people feel sick. Medicine B makes 3 in 10 people feel sick. • How much would you be ‘willing to pay’ to have Medicine A? • That is, what value, in pounds, do you attach to the reduced risk of feeling sick?

35. [cost] = [benefit] [Cost A - Cost B] 成本效益比率 = [Effectiveness A - Effectiveness B] Incremental Analysis 邊際分析 • Incremental cost (cost) = CostA - CostB • Incremental benefit (benefit) = BenefitA - BenefitB • Incremental cost/benefit (outcome) ratio • Incremental cost/effectiveness ratio (ICER)

36. 成本節約分析 成本效益分析 成本效用分析 成本獲利分析 Framework of Analysis None (same outcome) Cost , cost per caseCost comparison Natural units Cost per unit of benefit ICERs QALY or utility Cost per QALY ICURs (incremental cost /QALY gained) Net benefit (benefit - cost) Willingness to pay

37. Decision Analytic Model 決策樹分析模式 P1 patient responds C1 Cefuroxime 1-P1 doesn’t respond C2 Patients admitted to hospital with pneumonia P2 patient responds C3 Co-amoxiclav 1-P2 doesn’t respond C4 decision node; chance node; end node. Cost cefuroxime=(C1×P1)+C2×(1-P1) Cost Co-amoxiclav=(C3×P2)+C4×(1-P2)

38.   Cost-effectiveness Plane CostN - CostO  Costs ICER = = EffectivenessN - EffectivenessO  Effectiveness  Costs 2 slope = =decision maker’s WTP NW NE 1 2 > 1 New treatment more effective but more costly New treatment less effective but more costly  Effectiveness New treatment less costly but less effective New treatment less costly but more effective SW SE

39. Economic Evaluations in Pharmacy Practice

40. Applying Economic Evaluation to Health and Pharmaceutical Care • Informing decision-making • What services, when and at what level of provision? • How and where? • Who should get the services? • Achieving efficiency in health care • Efficiency: 'maximum' total benefit from finite resources available • This may be achieved by moving resources from one programme to another. Alternatively, it may be best to make best use of the resources you already have. • Applications to Pharmacy • efficiency of individual drug therapies • economic implications of a pharmacy service • efficient pharmaceutical services

41. Economics’ Relevance to Pharmacy • Economic pressures on drug use Economic evaluation of drugs -mandatory in Australia for reimbursement -used for marketing -used to decide which drugs to have on a formulary Drive for deregulation of drugs Prescription tax increases • Economic pressures on pharmaceutical service provision in all sectors • Economic arguments needed to justify existence/extension

42. Cost Effectiveness of Pharmacy(Valuing the invaluable?) Why is it important that research is done? • Pharmacy is an expensive service for a health service to provide • If it cannot prove that it is effective and cost effective, less likely that scare funds will be directed towards it. • Belief that it has an impact on quality of health care, but little to substantiate this belief. • Empirical research needed to provide evidence of its impact on patients. • Until effectiveness of pharmacy is addressed, will always need to justify its existence through cost savings

43. Cost Effectiveness of Pharmacy • Goals • Highlight areas of practices where pharmacy is most and least ‘cost effective’ • Inform a policy decision about where to concentrate scare resources • Decision-makers more likely to allocate their resources where they can ‘see what they’re getting for their money’ • Evidence Cost Effectiveness Cost of individual pharmacy services Costs averted by interventions largely limited to impact on performance indicators Impact on patient outcome has not been fully addressed It is not sufficient to only assess the impact of the pharmacist on drug costs. Need to measure using health related quality of life measures.

44. Four basic requirements for an economic evaluation of pharmacy: Identify (or define) pharmacy and its alternative(s) Characterise and quantify the effectiveness of pharmacy and its alternative(s) Characterise and quantify the economic impact (resource use and associated cost) of pharmacy and its alternatives; Identify the perspective of the evaluation (this well determine which costs are included). Literature review, including systematic review of the medical (clinical), economic, operational research, social science and health service research literature. Other source are local reports, local audit and unpublished research. At this stage, the usefulness of non-local data needs to be assessed. What Type of Research Is Required? 1. Systematic review

45. What Type of Research Is Required? 2. Combine data from published sources to answer the research questions (economic modeling) 3. Undertake primary research • What is the variation in the perception and actually of pharmacy? • What is the impact of pharmacy on patient outcomes? • What is the relationship of pharmacy to performance indicators, and of these performance indicators to patient outcomes? • What is the incremental cost difference resulting from pharmacy? 4. Decide which areas have higher priorities for research

46. Economic Evaluation Curricula in School of Pharmacy

47. Pharmacy School Curricula • 1976 • course material in pharmacoeconomics was introduced into undergraduate & graduate pharmacy school curricula(McGhan WF, 1978, Am J Hosp Pharm) • 2002 • Survey of European Pharmaceutical Student Association (EPSA) : pharmacoeconomics taught in 22 European countries • 64% not aware of the term, 56% regarded the level was poor • 2005 • E-mail survey of colleagues & schools of pharmacy outside US (43 countries) • 47 colleges and schools, 9 professional level, 16 graduate and 22 both • Similar to the trend in the US in the 1990s

48. Curricula In Taiwan • 2004 • At this time, only one school of pharmacy has pharmacoeconomic courses taught at the graduate level. This program is new, established just 2 years ago. • Five professors in the public health arena have training in health economics and are interested in exploring the field. • The health care system in Taiwan is facing the need of economic evaluation on medical device, procedures, and drug treatments. • The planning of organization structure, the academic research groups, the research manpower training, the Association, and the pharmaceutical industry are all aware and became more accepting. (Doherty J et al. What is next for pharmacoeconomics and outcomes research in Asia? Value in Health, 2004;7(2): 118-132)

49. Recommendations To Pharmacists For Advanced Learning • What is health economics and its main contents? • Macro- or micro-economics? Social welfare? • What is your profession? • A pharmacist uses economic methodology? • Degree course? MSc, diploma or PhD? • Where are you going to learn? • A ground understanding about health care system and policy is crucial. • How are you going to find information? • Health economic centres in the UK, Oxford and York • Health economic courses in the UK: Careers Service Unit

50. Recommended Reading • Evidence-Based Medicine- What is …? series http://www.evidence-based-medicine.co.uk/What_is_series.html (What is health economic?) • Cost-effectiveness Matters. The NHS economic evaluation Database (NHS EED). http://www.york.ac.uk/inst/crd/pdf/em61.pdf • National Prescribing Centre. An introduction to health economics (part 1). MeReC Briefing Bulletin 2000;(13): 1-8. http://www.npc.co.uk/MeReC_Briefings/2000/briefing_no_13.pdf • National Prescribing Centre. An introduction to health economics (part 2)- applying health economics. MeReC Briefing Bulletin 2000;(14): 1-8. http://www.npc.co.uk/MeReC_Briefings/2000/briefing_no_14.pdf • Fleurence R. Pharmacoeconomics (1): An introduction to health economics. The Pharmaceutical Journal, 2003(271): 679-681. http://www.pjonline.com/pdf/cpd/pj_20031115_pharmacoeconomics1.pdf • Fleurence R. Pharmacoeconomics (2): Economic evaluations. The Pharmaceutical Journal, 2003(271): 716-718. http://www.pjonline.com/pdf/cpd/pj_20031122_pharmacoeconomics2.pdf • Elliott R, Payne K. Essentials of economic evaluation in healthcare. London: Pharmaceutical Press, 2005. • Robinson R. Costs and cost-minimisation analysis. British Medical Journal 1993; 307(6906): 726-728. • Robinson R. Cost-effectiveness analysis. British Medical Journal 1993; 307(6907): 793-795. • Robinson R. Cost-utility analysis. British Medical Journal 1993; 307(6908): 859-862. • Robinson R. Cost-benefit analysis. British Medical Journal 1993; 307(6909): 924-926. • Robinson R. The policy context. British Medical Journal 1993; 307(6910): 994-996. • 臺灣生活品質與成本效性研究團隊http://home.mc.ntu.edu.tw/~cfyu/index.html