2013 [UNIT PH 3340] 1

Pharmacoeconomics and

Management in Pharmacy III

[John Vella B.Pharm.(Hons.) M.Sc.(Pharmacoeconomics)]

2013 [UNIT PH 3340] 2

News review

J. Vella [PH 3340]

Elective surgery Lists

3

J. Vella [PH 3340]

Performance audit (i)

• Elective surgery is that which can be delayed by 24hrs at a

minimum

• A source of common patient complaint

• Are these justified?

4

J. Vella [PH 3340]

Performance audit (ii)

• Increased waiting times, why?

5

an ageing population

new technologies

MDH offers more services

J. Vella [PH 3340]

Performance audit (iii)

• The issue of liability in a European context

• High level of patient satisfaction

• Increase of 35% from 28,223 in 2006 to 38,165 in 2012

• 75% of patients waited up to 3 months

• Less than 20% waited more than 1 year

6

J. Vella [PH 3340]

Performance audit (iv)

• An increase in day surgery

• Implement audit trails and IT to track interventions

• Fully implement the Centralised Waiting List system

7

J. Vella [PH 3340]

Performance audit (v)

• Ease the bed shortage issue by tackling LTC patients at

MDH

• Establish and implement maximum waiting times

• Recruit more competent adminstrators and care providers

8

J. Vella [PH 3340]

Budget 2014 (i)

9

J. Vella [PH 3340]

Budget 2014 (ii)

• Health expenditure increased from € 354 million to € 383

million

• 8% annualised

• No details yet on where the funds are going

10

J. Vella [PH 3340]

Budget 2014 (iii)

11

J. Vella [PH 3340]

Budget 2014 (iv)

• 48.7% of the funds are earmarked for wages

• A slight decrease from the 50% of the previous year

• An indication of inefficient utilisation of human resources

12

J. Vella [PH 3340]

Budget 2014 (v)

13

J. Vella [PH 3340]

Budget 2014 (vi)

• An increase in item 5400 of € 10 million

• Substantial funds at hand

• More items on Schedule V and novel treatments

14

J. Vella [PH 3340]

Budget 2014 (vii)

• An increase of 14.7%!

• This augurs well for patients

• What we need is good management of the money in hand

with the appropriate amount of oversight, transparency and

accountability

15

J. Vella [PH 3340]

The NAO report for 2011(i)

• An annual audit of government operations is the remit of the

individuals trusted with its collation and publication

• Of great relevance is the section relating to the Ministry of

Health especially to those of us with a vested interest in the

health sector and the formulation of health policy and its

actuation

16

J. Vella [PH 3340]

The NAO report for 2011(ii)

• This latest version of the NAO report out last week highlights

deficiencies across the board within the public service

• Amongst these are certain grave and fundamental

shortcomings within the healthcare sector

• It is of great concern that no fuss was made over the

following points

17

J. Vella [PH 3340]

Point One - attendance

• The lack of control on employee attendance and the brazen

refusal of doctors' and dentists' unions to accept such a

basic tenet of employment

• One consultant physician claimed € 80,000 in allowances in

one year

• Payroll officials claimed € 30,000 in overtime

18

J. Vella [PH 3340]

Point Two - tendering

• The fact that tendering procedures for medicines and

surgical materials and also non-surgical equipment are

routinely circumvented by direct orders, and the limits and

approvals required for the latter are disregarded at will

• No oversight or accountability in this regard

19

J. Vella [PH 3340]

Point Three – storage & distribution

• The storage of medicines and surgical materials is not centralized

and one of the depots does not provide satisfactory storage

conditions under the regulations laid out by the MA

• This suggests that sub-standard medicinal and supplies are being

passed onto the local treatment chain.

• No IT system to facilitate stock distribution and uniformity across the

whole service

20

J. Vella [PH 3340]

Point Four – stock levels!?

• The discrepancy in stocks held was said to be less than Eur

2,000 on a total figure of over Eur 18 million.

• This range of accuracy is not credible to the trained

observer, as it implies no human error in stock transfers and

no inventory pilferage

• For some reason this did not seem odd to the auditors

21

J. Vella [PH 3340]

Why use PE studies?

• “The main reason for studying pharmacoeconomics is to be

able to estimate and understand the full impact of a new

therapy” 1

• Thus PE can be construed as a driver of change and an aid

to progress within the field of health and pharmaceutical care

• 1 Mauskopf, J,2009

22

J. Vella [PH 3340]

The complexity of PE

23

J. Vella [PH 3340]

A parallel to Malta?

24

J. Vella [PH 3340]

Discussion

• Once again, brand prescribing is the problem

• Italy operates a system of reimbursement and co-payment,

with different localities and councils subsidising medicines to

varying levels

• It is undeniable that further generic consumption would

reduce total healthcare costs

25

J. Vella [PH 3340]

A nation of excess?!1

• The United States spends $1000 per capita on

pharmaceuticals, 3x as much as the UK

• The US also has 5x more CT scans than Germany and 5x

more coronary bypass ops than France

• 60m operations are performed each year, one for each 6

Americans?

1 http://www.healthoutcomescommunicator.com/?p=843

26

J. Vella [PH 3340]

Why?

• Two main reasons can be inferred:

• (i) moral hazard: the healthcare system in the United States

is pay per service, so physicians are rewarded for providing

more services

• (ii) patient demands: patients are better, or worse, informed

and demand unnecessary and futile tests and procedures

27

J. Vella [PH 3340]

Significant FDA ruling

28

J. Vella [PH 3340]

Against current trends

• The FDA ignored public pressure not to revoke the breast

cancer indication

• Lobbyists, especially cancer victim and survivor groups were

ion favour of its retention

• Clinical data exhibited no benefit for Avastin in breast

cancer, and retaining would have meant futile expenditure to

the system29

J. Vella [PH 3340]

Reason must prevail

• A case of logic over emotion, individuals with very little hope of

survival will grasp at any opportunity

• However, the situation must be considered in the context of society

as a whole, and the fact that better outcomes can be achieved for the

same output

• The clout of the oncology producing company must not be

underestimated

30

J. Vella [PH 3340]

Oncology is an important area (i)

31

J. Vella [PH 3340]

Oncology is an important area (ii)

• 2006 sales for pharmaceutical products were $ 36 billion

• 70% of these were products developed in the last 10 years

• 20% of NMEs launched

• 30% of new drug candidates are oncology compounds

• New cases of cancer to grow from 10m in 2000 to 15m in 2015

32

J. Vella [PH 3340]

Flu pandemic could cost $800 billion(i)

33

J. Vella [PH 3340]

Flu pandemic could cost $800 billion(ii)

34

J. Vella [PH 3340]

Flu pandemic could cost $800 billion(iii)

35

J. Vella [PH 3340]

Paranoia or reality?!

• Not due to direct death or sickness

• Most expense to global GDP would actually be caused by

the preventative measures and the accompanying hype and

disruption of normal productive procedures

• Underlies the need for objective reporting and professional

caution and integrity (swine flu scare a few years back)

36

J. Vella [PH 3340]

Playing God?

37

J. Vella [PH 3340]

Public indignation

• NICE is one of the leaders in HTA worldwide

• It is independent of the British health system and is

entrusted to give impartial advice and evaluations

• The article discusses the fact that certain patients suffering

from renal cell carcinoma would not be eligible for state-

funded treatment as they would not be cost-effective

38

J. Vella [PH 3340]

An intractable situation

• A no-win situation, as the maths does not justify a large

expenditure on so few patients, with an uncertain and

curtailed survival prognosis

• On the other hand, human nature does not allow the

abandonment of fellow individuals to their fate on purely

economic grounds, hence the dilemma

39

J. Vella [PH 3340] 40

J. Vella [PH 3340]

Diabetes (i)

• 347 million people worldwide effected with 3.4million deaths

in 2004

• More than 80% of diabetes deaths occur in low- and middle-

income countries

• WHO projects that diabetes will be the 7th leading cause of

death in 2030

41

J. Vella [PH 3340]

Diabetes (ii)

• Diabetes exerts a financial toll on the sufferer and family members

• The most affected are low income countries

• A vicious cycle of spiraling poverty will ensue if the right diagnosis,

treatment and health prevention campaigns are not undertaken

42

J. Vella [PH 3340]

Diabetes (iii)

• Factor in the fact that the working population is already

shrinking

• State systems will not keep up with increased demand

• Malta is at a high risk due to massive obesity rates

43

J. Vella [PH 3340]

Budget 2013 (ii) (Extracted from the Lifestyle Survey 2007, NSO Malta)

44

J. Vella [PH 3340]

Long-term approach to budgeting works

45

J. Vella [PH 3340]

A holistic approach

• The initial extra cost of setting up the video-conferencing and

data transfer equipment involves an initial bulk capital

investment

• In the long run savings and better health outcomes were

observed

• Less transfers to main hospitals and a lower cost of

treatment, combined with better survival rates and patient

QOL

46

J. Vella [PH 3340]

Discussion points (i)

• Still ignoring the warning signs of future epidemics regarding

obesity and dementia

• 50c per citizen per annum is just not enough, in fact

expenditure has decreased from 2011!

• Expenditure on pharmaceutical materials is increased from €

64 to € 68 million

47

J. Vella [PH 3340]

Cost vs effect?

• Expenditure on healthcare has been rising constantly over

the past decade

• We have no tangible evidence that we are getting a

consequent increase in healthcare outcomes

48

J. Vella [PH 3340]

The RPI again!

49

J. Vella [PH 3340]

EU comparisons

50

J. Vella [PH 3340]

Interesting quote

51

J. Vella [PH 3340]

Points to discuss

• The methodology utilised would be worth evaluating

• Are we using a weighted index?

• What sample size?

• What choice of sampling?

• Are medicines stratified according to class and generic or

originator status?

52

J. Vella [PH 3340]

White paper (i)

53

J. Vella [PH 3340]

White paper (ii)

• Just published

• A step forward in the consultative process

• As long as the viewpoints of all sides are taken on board and

given due consideration

54

J. Vella [PH 3340]

White paper (iii)

• Three cornerstones:

(i) patient treatment management and medicine

management

(ii) the modernisation of the entitlement process

(iii) supply chain re-structruring to eliminate OOS syndrome

55

J. Vella [PH 3340]

White paper (iv) – Medicine managment

• A patient-oriented approach

• The problem of polypharmacy and related adverse reactions

• Medicine wastage and returns policy

• Reduction of prescription frequency for chronic

conditions(not longer than 6 months)

• Set up of a Medicines Information Centre

56

J. Vella [PH 3340]

White paper (v) – Overhaul of process

paradigm

• A new ICT system

• E- prescribing and integrated care records

• A single patient health record, accessible through Myhealth

Card and/or PIN

• Electronic tagging of medicines

• Cross-tabulation of patient data with allergy and adverse

reaction databases

57

J. Vella [PH 3340]

White paper (vi) – Medicines procurement

• Four options:

(i) convert POYC to SBU

(ii) extend further to include the end-user

(iii) sub-contract procurement and distribution

(iv) utilise existing pharmacy distributors

58

J. Vella [PH 3340]

White paper (vii)

• It is commendable that this document has been issued

• All stakeholders involved must take an active role

• The future of our healthcare system is at stake

59

2013 [UNIT PH 3340] 60

Basic considerations in PE

J. Vella [PH 3340]

Decision tree

61

J. Vella [PH 3340] 62

Pharmacoeconomics

Input costs Output costsHealthcare

J. Vella [PH 3340]

In & out

• The simplest consideration in PE is that a certain amount of

resource is expended to carry out or produce a healthcare

intervention

• The resulting intervention has a result or outcome

• The quantification of this outcome in various manners is the

crux of PE

63

J. Vella [PH 3340]

Misdirected focus

• Both input costs and output effects are studied

• The greatest focus in recent times has been on the input

costs

• We are totally ignoring the more important output or

outcome, or the ultimate aim of the intervention, the health

of the patient

64

J. Vella [PH 3340]

HTA’s and study aims

• Most Health Technology Assessments are geared towards

the containment of inputs

• Recently various experts in the field have pointed out that

the two most vital and convergent subjects, outcomes and

patient well-being, are more often than not, ignored in

treatment evaluation studies

65

J. Vella [PH 3340]

The end-point of value

• This rationale leads us to the logical end-point that we can

better evaluate healthcare interventions by grading them on

the value they provide to the patient

• Extending this argument, we can move towards systems that

reward better health outcomes and patient QOL, rather than

simply prioritising the short-term view of cost-containment

66

2013 [UNIT PH 3340] 67

Cost considerations in PE

J. Vella [PH 3340]

The cost of an intervention

68

Intervention

Direct Cost Indirect Costs

Wider cost

implications to

society eg. lost

production.

Non-health

services resource

use. Eg. patient

transportation,

informal care

Health services

resource use.

Eg. Inpatient,

outpatient, tests,

drugs

Costs to family

and friends.

J. Vella [PH 3340] 69

Cost breakdown

Cost category Costs

Direct costs(medical & non-

medical)

Cost of medication,

hospitalisation costs

Indirect costs Morbidity, mortality

Intangible costs Pain ,Suffering ,Grief

Opportunity cost Loss of opportunity,

revenue forgone

J. Vella [PH 3340]

Direct medical costs

70

J. Vella [PH 3340]

Direct Non-Medical Costs

71

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Indirect costs

72

J. Vella [PH 3340]

Intangible costs

73

J. Vella [PH 3340]

Opportunity cost (i)

• Defined in economics as the cost of the next-best choice

available for the utilisation of the ‘scarce’ resource at hand

• This is the hidden cost of an economic decision, when

alternatives in a treatment palette are mutually exclusive

• E.g. in a hypothetical scenario a public health service must

decide whether to vaccinate for MMR or Chickenpox

74

J. Vella [PH 3340]

Opportunity cost (ii)

• If the MMR vaccine is chosen, then the cost for the year in

question will be the monetary value of the MMR vaccines

PLUS the fact that children in that vaccination cycle will be at

the risk of contracting Varicella

• This will bring with it all the connected costs to society.

These costs are less than those potentially posed by a lack

of MMR vaccination

75

J. Vella [PH 3340]

More costing!

• Other definitions of costs incurred include:

76

fixed & variable

average & marginal

capital & operating

top down & bottom up

J. Vella [PH 3340]

Fixed and variable costs (i)

• Fixed costs – in the short term do not vary e.g. Labour

costs, utilities and rent

• Variable costs – fluctuate on a constant basis e.g. Raw

materials, part-time employees, sales commissions and

bonus payments

77

J. Vella [PH 3340]

Fixed and variable costs (ii)

78

J. Vella [PH 3340]

Average cost vs marginal cost

• The average cost of an intervention is often quoted

alongside the marginal cost

• Whilst the average cost is easy enough to calculate and

understand, marginal cost is a different concept

• Marginal cost is defined as the cost necessary to achieve

one more positive outcome

79

J. Vella [PH 3340]

A marginal cost of $ 47 million!

80

J. Vella [PH 3340]

All is not what it seems!

• This distinction is imperative as the previous example shows

• The average cost alone would not have revealed that the

sixth test is totally useless, whereas this is immediately

borne out by the astronomical marginal cost

• It is thus possible to dramatically increase healthcare costs

whilst achieving increasingly diminishing returns

81

J. Vella [PH 3340]

Capital and operating costs (i)

• Capital costs are those defined as funds utilised in the

purchase of a tangible asset e.g. a new MRI machine for a

hospital, or a new clinic couch for a pharmacy

• Capital costs are not included in expenses as utility costs

are, but are depreciated over time

• They are deducted from annual profits at a fixed rate over a

fixed time period

82

J. Vella [PH 3340]

Capital and operating costs (ii)

• E.g. a machine costing € 100,000 is depreciated over 5

years at a rate of 20%

• This means that € 20,000 are added to expenses and

deducted from profits yearly

• Operating costs such as wages, utility bills, insurance and

inventory write-offs are immediately subtracted from gross

profits83

J. Vella [PH 3340]

Top down, bottoms up! (i)

• Top down costing means that a global cost is first identified

and then deconstructed into its component cost sectors

• This could be applied to the example of an preliminary

evaluation of the total health expenditure for a country and

then a detailed division of expense by continually subdividing

into segments

84

J. Vella [PH 3340]

Top down, bottoms up! (ii)

• Bottom up costing is the aggregation of all the micro-costs

of the components of a larger framework to complete the

whole structure in a step-wise manner

• Could be applied to the collection of individual patient costs

and ALOS and bed cost plus other myriad factors to

compute a complete country-wide figure

85

J. Vella [PH 3340]

Data sources

• government (tender prices)

• previous research

• provider accounts(N/A in Malta)

published sources

• (eg patient out-of-pocket expenses – travel, time, OTC, child care)

• questionnaires

• diaries

direct valuation

86

J. Vella [PH 3340]

Adjustments

• Choice between these is often dependent

on data availability and time constraints

• Inflation parameters adjust for the variation

of the worth of money over time, and

Purchasing Power Parities adjust for cross-

border fluctuations in the value of money

J. Vella [PH 3340]

Costs and time

• Past costs must be inflated to present day prices to enable a

level comparison

• Future costs must be discounted to account for the fact that

the funds designated for a particular healthcare intervention

could have been invested elsewhere

• This is a factor often disregarded when considering the local

scenario

88

J. Vella [PH 3340]

Rate of inflation (Malta)

89

Ra

te o

f In

fla

tio

n2002

2003

2004

2005

2006

2007

2008

2009

2002 2003 2004 2005 2006 2007 2008 2009

ROI 2.19% 1.30% 2.79% 3.01% 2.77% 1.25% 4.26% 2.08%

J. Vella [PH 3340]

An example of costs and inflation

90

• E.g. if visiting a GP cost Lm 2.50 (€ 5.82) in 2002, to

compare it to today’s (2010) prices we must inflate it by the

rise in the ‘cost of living’

• Using the data in the previous slide the increase was of

18.79% and therefore:

• € 5.82 * 1.1879 = € 6.91

J. Vella [PH 3340]

Inflation (cont.)

• The same applies to all costs

• All costs in a study must be brought to the same point in

time, otherwise comparison is not possible

• Future costs are discounted by a factor called the ‘discount

rate’

• In certain cases this rate differs from the projected rate of

inflation for the general economy

91

J. Vella [PH 3340]

Adjusting for international currencies

• Purchasing Power Parities (PPPs) and exchange rates are two methods that are used to convert different currencies into a common denominator

• PPPs are more appropriate than exchange rates as these eliminate the difference in price levels between countries

• PPPs are calculated from a common basket of goods

2013 [UNIT PH 3340] 93

Types of PE studies

J. Vella [PH 3340]

Stages in economic evaluation

Deciding upon study question

• Viewpoint taken.

• Alternatives appraised.

Assessment of costs and benefits

• Identification of relevant C&B.

• Measurement of C&B.

• Valuation of C (&B).

Adjustment for timing.

Making a decision.

Adjustment for uncertainty.

J. Vella [PH 3340]

Classification of pharmacoeconomic studies

Does it examine two or more alternatives?

No Yes

Does it examine cost and health effects?

Does it examine cost and health effects?

Cost only

Effects only

both Cost only

Effects only

both

Cost description (cost of illness)

Health description

CostOutcomedescription

Cost analysis

Efficacy and/or effectiveness analysis (QOL studies)

Cost minimization analysisCost benefit analysisCost effectiveness analysisCost consequences analysisCost utility analysis

J. Vella [PH 3340]

Main types of PE approaches

• Four main studies are utilised in HTAs or Health Treatment

Assessments

• CMA – Cost Minimisation Analysis

• CEA – Cost Effectiveness Analysis

• CUA – Cost Utility Analysis

• CBA – Cost Benefit Analysis

96

J. Vella [PH 3340]

Types of PE studies

Type of Study Description

Cost Minimisation Analysis – CMA Compares costs in monetary terms of

treatments with identical outcomes

Cost Effectiveness Analysis – CEA Compares costs in monetary terms with

outcomes in natural units

Cost Utility Analysis – CUA Compares costs in monetary terms &

outcomes in terms of years of life

Cost Benefit Analysis - CBA Compares costs and outcomes in

monetary terms

97

J. Vella [PH 3340]

CMA – Cost Minimisation Analysis(i)

98

Costs Treatment Outcomes

J. Vella [PH 3340]

CMA – Cost Minimisation Analysis(ii)

• The simplest of the four types

• The focus is on measuring the left-hand side of the

pharmacoeconomic equation -costs

• The right hand side of the equation—outcomes

• Is assumed to be the same (or is found to be the same)

99

J. Vella [PH 3340]

CMA – Cost Minimisation Analysis(iii)

• A case of when identical outcomes are assumed

• E.g. two generic drugs versions with equivalent therapeutic

effect

• The only differential is the cost

• Definition is less clear when comparing drugs from different

classes, e.g. ACE inhibitors and Beta blockers

100

J. Vella [PH 3340]

CMA – Cost Minimisation Analysis(iv)

• The scope of CMA studies is limited due to the fact that

outcomes must be equal

• Equivalence is not a straightforward comparison in a medical

scenario

• A newer drug might cost more per dose, but have the

desired effect over a shorter period, thus globally incurring

less expenditure

101

J. Vella [PH 3340]

CMA – Cost Minimisation Analysis(v)

• Or a surgical intervention that could be could be carried out

on an in-patient or out-patient basis.

• In this case direct and indirect costs relevant to the

intervention must be considered.

• Direct costs would include paying for the surgical team and

the medical disposables and pharmaceuticals utilised during

the operation

102

J. Vella [PH 3340]

CMA – Cost Minimisation Analysis(vi)

• Indirect costs would include transporting the patient to

hospital, and paying for the nurse and carers while the

patient is resident at the institution in question.

• This method has limited use because it can only compare

alternatives with the same outcomes

103

J. Vella [PH 3340]

CEA – Cost Effectiveness Analysis (i)

• Is the most common type of pharmacoeconomic analysis

found in the pharmacy literature

• Measures costs in money terms and outcomes in natural

health units

• E.g. the number of lives saved or a reduction in blood

pressure

104

J. Vella [PH 3340]

CEA – Cost Effectiveness Analysis (i)

• One could compare the effectiveness of dietary regimens as

opposed to OHA treatment in the initial stages of Type II

Diabetes (NIDDM)

• Different treatments are utilised, but their outcomes are

measured in the same standardized units, mmol/lt of glucose

or maybe an HbA1c reading

105

J. Vella [PH 3340]

CEA – Cost Effectiveness Analysis (ii)

• The same rationale could be applied to two anti-hypertensive

agents from different classes, such as an ACE inhibitor, and

a Ca channel blocker

• Two very different modes of action, but economic end-point

is measured in mm of Hg

106

J. Vella [PH 3340]

CEA – Cost Effectiveness Analysis (iii)

• A disadvantage to CEA is that the alternatives used in the

comparison must have outcomes that are measured in the

same clinical units

• An anti-hypertensive(with outcomes in mmhg) cannot be

compared to an asthma product(with outcomes in FEV)

107

J. Vella [PH 3340]

CEA – Cost Effectiveness Analysis (iv)

• Intermediate Outcomes versus Primary Outcomes

• Primary or final outcomes are preferred, e.g. the eradication

of a disease or life years saved

• Intermediate outcomes are used as proxies or surrogate

end-points

108

J. Vella [PH 3340]

CEA – Cost Effectiveness Analysis (v)

• The limitation of using intermediate outcomes is reduced as

the strength of the association between the intermediate and

primary outcome measures increases

• Use data from RCTs(Randomised Controlled Trials)

cautiously

• RCTs are conducted under a strict adherence to protocol

• This may not reflect real-life conditions

109

J. Vella [PH 3340]

CUA – Cost Utility Analysis (i)

• CUA is an improvement on a CEA in which the unit of

comparison is the number of extra life years gained

• In CUA studies each year of life gained is given a value of

quality ranging from 1.0 to 0

• In the view of some researchers, CUA is an extension or

subset of CEA

110

J. Vella [PH 3340]

CUA – Cost Utility Analysis (ii)

• These years of life are known as QALYs or Quality Adjusted

Life Years

• The quality of life for a particular life state is scored using a

set of utility weights which are tested on population samples

• e.g. of a HRQOL (Health Related Quality Of Life) scale used

is the EQ-5D (European Quality of Life- Five Dimensions)

111

J. Vella [PH 3340]

CUA – Cost Utility Analysis (iii)

• The five dimensions in the EQ-5D are:

112

Number of states Dimension

5 Mobility

5 Self-care

5 Usual activities

5 Pain/discomfort

5 Anxiety/depression

J. Vella [PH 3340]

CUA – Cost Utility Analysis (iv)

• The EQ-5d can have 245 possible combinations used to

describe various life states

• The highest value possible is 1.0 or perfect health

• A figure lower than 0 is possible as some states are deemed

to worse than death

113

J. Vella [PH 3340]

CUA–The composition of the QALY - V

Quality Quantity QALY

114

J. Vella [PH 3340]

CUA – Cost Utility Analysis (vi)

• The main disadvantage of CUA is that there is no consensus

on how to measure these utility weights

• The main disadvantage is that they are measured ‘ante’ to

states they describe

• The people evaluating the debilitating effects of disease

have not experienced the sickness themselves

115

J. Vella [PH 3340]

CUA – Cost Utility Analysis (vii)

“A case in point was brought to light by one of the members of the Citizens’ Council, which is used as a

consulting body by NICE in the UK. A wheel-chair bound member was classified as having a negative

quality of life, when she actually was leading a perfectly functional and productive existence! The

population sampled had simply given high negative value to loss of mobility, whereas an individual who is

in the state attaches so much less importance to it, and much more to, incontinence, for example. This

illustrates that it is extremely difficult to arbitrarily assign life states to the effects of disease, and to the

beneficial results of treatments to improve these states, as both are the products of a multitude of dynamic

factors.”

116

J. Vella [PH 3340]

CBA – Cost Benefit Analysis (i)

• CBA compares both costs and benefits in monetary units

• An advantage of this type of analysis is that many different

outcomes can be compared as long as the outcomes

measures are valued in monetary units

117

J. Vella [PH 3340]

CBA – Cost Benefit Analysis (ii)

118

J. Vella [PH 3340]

CBA – Cost Benefit Analysis (iii)

119

• CEAs commonly use cost-effectiveness ratios

• Based on the costs of treatment divided by benefits of the

treatment

• Lower ratios indicate lower costs and are therefore the

preferred options

J. Vella [PH 3340]

CBA – Cost Benefit Analysis (iv)

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• CBAs use benefit-to-cost ratios

• based on monetary benefits divided by

monetary costs

• Ratios higher than 1 indicate that the option

is cost beneficial

• higher ratios indicate higher benefits for

each euro spent and therefore are preferred

over lower ratios

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CBA – Cost Benefit Analysis (v)

121

J. Vella [PH 3340]

Other types of studies

• COI- Cost Of Illness

• researchers attempt to determine the total economic burden

(including prevention, treatment, losses caused by morbidity

and mortality, and so on) of a particular disease on society

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J. Vella [PH 3340]

Cost of illness (ii)

• The costs included in this method are usually summarized

into two categories:

• 1) direct costs, or the costs associated with providing

treatment or prevention (e.g., medical services) and

• 2) indirect costs, or the costs attributable to loss of

productivity of patients with that disease or condition

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Cost of illness (ii)

124

2013 [UNIT PH 3340] 125

Points to consider in a PE

study

J. Vella [PH 3340]

Key attributes of cost analyses (i)

• Any evaluation of resource use must

distinguish between three properties:

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identification

measurement

valuation

J. Vella [PH 3340]

Key attributes of cost analyses (ii)

• perspective is important

• range of costs justified by perspectiveidentification

• need to distinguish between fixed, variable and total cost, and average, marginal costs and incremental cost

• may need to adjust for differential timing (discounting)measurement

• method of valuation needs justification (incl. market prices)

• price does not necessarily equate with cost

• precision – ‘top down’ versus ‘bottom up’

• may need to adjust for inflation or currencies

valuation

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Key attributes of cost analyses (iii)

• (i) Comparator: this must be a specific intervention; either

the standard of care or no intervention. Inferior HTAs use

out-dated or inappropriate treatments to achieve the right

statistical impact

• (ii) Perspective: this must be clearly established; it can be

societal, patient, payer, prescriber or hospital focused

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Key attributes of cost analyses (iv)

• (iii) Cost apportionment: contributing costs should be

segmented accordingly into direct (medical and non-

medical), indirect and intangible

• (iv) Time horizon: the passage of time must be appreciated

in HTA evaluations; studies must encompass a long enough

timeframe to allow for realistic results

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Key attributes of cost analyses (v)

• (v) Discounting: past costs must be inflated to current

prices, and future costs discounted to their NPV

• (vi) Average/marginal costs: distinction must be made

between average cost and the marginal cost, or results will

not be relevant; marginal cost is important as some

treatments may be useless above a certain number of

interventions

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J. Vella [PH 3340]

Key attributes of cost analyses (vi)

• (vii) Sensitivity: variables in a study have to be changed

over a range of values to see if a particular property or

finding holds in several scenarios

131