Pharmacoeconomic: Analysis of The Cost of Drug Therapy To Health Care Systems and Society

ISSN No : 2321 8630, V 1, I 1, 2014
Journal Club for Pharmaceutical Sciences (JCPS)

Manuscript No: JCPS/REV/2014/23, Received On: 05/09/2014 , Accepted On : 22/09/2014, Published On: 09/11/2014
REVIEW ARTICLE
Pharmacoeconomics : Analysis of The Cost of Drug Therapy To Health
Care Systems and Society
Sharma PH *1, Kalasare SN 2, Kamble RA 3, Powar PV 4, Ambikar RB 5
1
Department of Pharmaceutics, Padmashree Dr. D.Y. Patil College of Pharmacy,

Akurdi, Pune- 411044.India
ABSTRACT
Pharmacoeconomics is a subdivision of health economics and result from that discipline
coming of age through consolidation to diversification. Health economics, as a branch of
economics is itself relatively young. Economics, indeed, there are a still health economist
who regards the growth of Pharmacoeconomics as an unnecessary over specialization. As a
discipline which is still is the process of growth any definition would become outdated by the
time this book is published. Earliest definitions of Pharmacoeconomics are very narrowly
focused on the analysis of the cost of drug therapy to health care systems and society. This
perception of Pharmacoeconomics research is solely concerned with cost and does not
consider the outcome from the use of pharmaceutical products. Pharmacoeconomics research
is about: Assessing the implications of projected outcomes and costs of pharmaceutical
products for the decision whether to continue or stop development of a drug and for global
pricing strategy. This expanded definition has got the advantage of incorporating
Pharmacoeconomics research into the process of drug development from inception (pre phase
one) up to phase four when post-marketing surveillance is taking place.
KEYWORDS
Health economics, Cost, Adverse Drug Reaction (ADR), Drug therapy, Pharmacoeconomics,
Cost minimization analysis
discipline that evaluates the clinical,
INTRODUCTION
Pharmacoeconomics
discipline
of
Pharmacoeconomics
refer
as
health
is
sub-
economic and
humanistic aspects of
economics.
pharmaceutical products, services, and
scientific
programmes, as well as other health care

interventions.1
Different
branches
of
Address for Correspondence:
Pharmacoeconomics shown in Fig. 1. The
Dr.(Mrs.) Padmini. H. Sharma,

Associate Professor,
Pad. Dr D Y Patil College Of Pharmacy,
D. Y. Patil Education Complex, Sec No.
29, Akurdi, Pune 411 044
Email : pharmabrain20@yahoo.co.in
role of pharmacoeconomics plays various

roles
at
specific
phases
of
drug
development; during the initial phases it

helps to recognize commercially exploited,
while at the later stages it performs
All Rights Reserved by Journals Club & Co.
142
Pharmacoeconomics : Analysis of The Cost of Drug Therapy to Health Care Systems and Society
function of informing choice of the drugs
Omission= failing to prescribe a drug
which
have
been
Pharmacoeconomics
applied
is
an
developed.
for a patients underlying disease
instrument
state
for strategic and operational
decisions about
Goals of Pharmacoeconomics2
Fig. 1. Disciplines of Pharmacoeconomics
1.
Broad
methodologies
to
offer
information to generate the greatest benefit

pharmaceutical
expenditure.
enlargement
The
and
aim
of
Pharmacoeconomics is to make sure

mainly proficient use of limited resources,
and recuperate the gap among R&D and
marketing
departments
of
the
pharmaceutical companies.
in terms of patient outcomes.

2. Device for evidence base decision
making
Adverse drug reaction (ADR) 3
Unintended reactions to a drug that is
usually not anticipated or avoidable
adverse drug event (ADE)
Fig. 2. Study of the role of

Pharmacoeconomics and Economics
Burdon of drug related problems
An incident or situation connecting a
patients drug treatment that truly, or
potentially, interferes with the success of a
most favorable result
Commission= prescribing a drug with
Fig. 3. Drug related problems
a known fatal drug drug interaction
143
1. To
develop
methods
for
Health economics 1,4
pharmaceutical interventions:
Health
The
extensive,
system-based
economics
is
division
of
research
economics concerned with issues linked to
methodologies used to create significance
dearth in the distribution of health and
for pharmaceutical intervention.Fig. 4.
health care sectors.
shows the methods for pharmaceutical

intervention.
Fig. 4. Methods for Pharmaceutical

Interventions
2. Applications of pharmacoeconomics
method:
Fig. 6. Factors of health Economics
The applications of pharmacoeconomics

methodologies in various sectors like
R&D, Drug approval & sales revenue
shown in Fig. 4.
Fig. 5. R&D, Drug approval & sales revenue
Fig. 7. The scope of health economics by

Alan Williams
144
Health of a country or the residence of that
country is greatly reliant on the geographic
location ,legal and economic stabilities of
the nation. The government body attentive
on the industry enhances the research and
development along with reinforcement to
infrastructure required.
Economics evaluation 2,5
There are four types of economics
evaluation, shown in Fig. 8. The ultimate
aim of methods is to compare the cost and
outcome of substitute regimens, ideally by
generating cost-outcome ratio.
Fig. 9. Components of economic analysis

Methods of economic evaluation
Economic evaluation is framework which
draws up a balance sheet between costs
and benefits to assist decision making.
Common types of study
The four types of economics evaluation
given in Table.No.1.
Fig. 8. Types of Economic Evaluation

Table 1. Methods of Economics Evaluation
145
out. Although the two options must
COST-MINIMIZATION ANALYSIS
achieve the major outcome of interest
equally,
they
may
still
have
other
outcomes which differ. For example, day

case surgery may be performed with a
higher proportion of local or regional
anesthesia than in-patient surgery, and this
may lead to differences in transient side
effects. A cost minimization analysis
Fig. 10. Cost-Minimization Analysis
would measure the costs arising from these

differences in anesthesia, while assuming
Cost
minimization contains an clear
that the outcome of surgery is identical.
assumption that the two alternatives attain

the main outcome equally and it may
include additional information to test the
assumption of all other things being
equal. This involves measuring costs,
COST-EFFECTIVENESS ANALYSIS
Compares the total relevant cost of therapy
to the effectiveness when the outcomes for
the alternatives are NOT equal
usually only to the health services, and is

applicable only where the outcomes are
identical and need not be considered
separately. An example is prescribing a
generic preparation instead of the brand
preparation .The major outcome of interest
is the same and is achieved similarly by
the alternative regimens, thus allowing the
evaluators of the program to concentrate
Fig. 11. Cost-Effective Analysis

Example:
on the cost side of the equation and choose

the substitute that has the least costs. An
example is minor surgery for adults who
can be done either as in or out patient
without any significant difference in the
clinical outcome. The tool for successful
cost minimization is that the comparators
must have been shown equivalent clinical
effectiveness before the analysis is carried
Example: Increment CE ratio
146
1. = cost drug A-cost drug B
fundamentally different outcomes. For
example, one prolongs life and improves
2. Outcomes drug A-outcomes drug B
quality of life (e.g. coronary artery bypass

3. =$220,000-$20,000
grafting) whereas the other only improves
4. 79 Lives-78Lives
quality of life (e.g. hip joint replacement).

To compare different outcomes (some
5. =$200,000/Life saved
positive some negative like adverse effect,

toxicity or adverse drug reaction) we need
a common denominator which is stable,
plausible, consistent and incorporates most
(if not all) possible outcomes. In CostBenefit
Analysis
the
common
denominator for conversion is money.

Healthcare
professionals
often
feel
instinctively uncomfortable about putting a

COST-BENEFIT ANALYSIS 7
financial value on human suffering.
Evaluates the value of all resources
The most controversial aspect of Cost-
consumed in implanting a program or
Benefit Analysis is to put value on items
intervention against the value of the
like loss of eye sight, impairments of
outcome in terms of dollars.
hearing, renal failure or even loss of

human life; which are perceived to be
inherently
invaluable
by
healthcare
professionals.
In Cost-Benefit Analysis, investigators
usually calculated the costs and benefits;
there are techniques for quantifying the
strengths of individual preferences for
alternatives. However the assets of this
Fig. 12. Cost-Benefit Analysis
analysis allow comparisons between very
The aim is to construct cost/outcomes
different areas, and not just medical, e.g.
ratios to compare alternatives regimens.
cost benefits of expanding university
Cost-effectiveness
education.
analysis
cannot
be
applied because the alternatives achieve
Example:
147
such tables have usually been derived at
different ways and are not comparable.
Use of published probability of an
outcome event and its associated cost to
project the average expected cost per
patient for the alternatives being compared
COST-UTILITY ANALYSIS 8
Relatively fast??
Evaluates the value of an involvement or a
Inexpensive
program against the value of the outcome
Can use external or internal
in terms of quality-adjusted life years
Tables. 2. Calculation of QALYs
(QALYs).
With Treatment X
Without
Estimated
Treatment X
estimated
survival=10years
survival=5 years
Estimated quality of
estimated quality
(Relativelife
to perfect
of to
lifeperfect
(relative
health)=0.7
health) =0.5
Fig. 13. Cost-Utility Analysis
QALY gain from treatment X= 7-
This is similar to cost effectiveness in that
2.5=4.5QALYs
the costs are measured in money and there
If the cost of treatment X is 18,000 then
is a
the cost per QALY is 4,000 per QALY
defined outcome (unit of utility e.g. a
QALY). Cost-Utility Analysis can look at
more area of medicines, like cost per
Decision Analysis Models
QALY of coronary artery bypass grafting
Use of published probability of an
versus cost per QALY for erythropoietin in
outcome event and its associated cost to
renal disease.
project the average expected cost per

patient for the alternatives being compared
Tables No 2. of QALYs gives comparisons

between ranges of therapies. The values in
Relatively fast??
148
Inexpensive
Some information then used
for
promotional claims to persuade customers
Can use external or internal
to make decisions(also regulated)

DRUG DEVELOPMENT PROCESS
Phase IV :
(Shown in Fig. 14.)
During
this
looking
for
1. Test
5,000-10,000
identify
compounds,
candidates
for
to
further
investigators
additional
are
information,
including the drug or treatment's risks,

benefits, and optimal use. This trial may
development
2. Send
phase,
approximately
250
for
pre
occur after the drug or treatment has been

approved for use by the FDA. Trials may
clinical testing
be conducted to determine better dosing
3. Enter approximately 5 into:
guidelines, new formulations, effects on

different populations or new indications.
Studies or trials conducted after a medicine
is marketed to provide additional details
about the medicine's efficacy or safety
profile. Different formulations, dosages,
durations
of
interactions,
treatment,
and
other
medicine
medicine
comparisons may be evaluated. New age

groups, races, and other types of patients
can be studied. Detection and definition of
Fig. 14. Clinical Trials
previously
1. Approval of the new drug: license
10+
years
after
identification
unknown
or
inadequately
quantified adverse reactions and related

for
development
risk factors are an important aspect of

many Phase IV studies. If a marketed
Cost incurred per NCE=$600 million
medicine is to be evaluated for another
2. Pricing & reimbursement discussions
(i.e., new) indication, then those clinical
OBSERVATIONS:
trials are considered Phase II clinical trials.
Process is long, costly and risky
Highly regulated industry:
Gather
drug
profile
information
The term post marketing surveillance is

for
frequently used to describe those clinical
regulatory authorities to make decisions
studies in Phase IV (i.e., the period
(license, price, reimburse)
following marketing) that are primarily

observational
or
non-experimental
in
149
nature, to distinguish them from well
pharmacy with economics. In today
controlled Phase IV clinical trials or
competitive
world
one
maintains
marketing studies.
pharmaceutical product identity, integrity

and dignity, by providing their product
with good quality, quantity and maintain
cost effective. Pharmacoeconomics refers
to the scientific discipline that compares
the value of one pharmaceutical drug or
drug therapy to another. Which evaluates
the cost (expressed in monetary terms) and
effects (expressed in terms of monetary
value, efficacy or enhanced quality of life)
of a pharmaceutical product. Different
Fig. 15. Drug development process
participants of Pharmacoeconomics shown

SCOPE
OF
in Fig. 17.
PHARMACOECONOMICS-
Fig. 17. Pharmacoeconomics provides

weapons to health care
Fig. 16. Scope of Pharmacoeconomics
Conclusion and summary
Pharmacoeconomics
is
The premises upon which both health

Economics and Pharmacoeconomics are
based are virtually indistinguishable to
an
upcoming
those of conventional Economics. The
stream in Health care Pharmacy industry
fundamental problem in economics is to
which acts as a bridge which connects
discover a socially suitable solution to
150
peoples limitless demands and societys 4. Singer, C., Underwood, E.A. (1962). A
restricted ability to react to these demands
history of medicine. Oxford University
with production of goods and services.

Press, 2, 50.
REFERENCES
5. Tom,
1. Berger, M.L., Bingefors, K., Hedblom, E.,

Pashos, C.L., Torrance, G., Dix, Smith, M.
Healthcare cost, quality and outcomes:
Chapter
Pharmacoeconomics
and
9.
Economic
Evaluation of Drug Therapies.

6. Robinson,
R.
(1993).
Economic
Evaluation and Health Care, Br Med J.
ISPOR Book of Terms.

2. Mooney, G. (1992). Economics, medicine
and healthcare. London: harvester Wheat
307, 670673.
7. Williams, D. N., Bosh, D., Boots, J.,
Schneider, J. (1993). Safety, efficacy and
sheaf.
3. Lundkvist,
Walley.
J., Jnsson,
Pharmacoeconomics
of
B.
adverse
(2004).
cost saving in an outpatient intravenous
drug
antibiotic program. Clin Therapeutics. 15,
reactions. Fundam Clin Pharmacol. 18(3),
169-179.
8. Rubinstein, E. (1993). Cost implication of
275-80.
home care on serious infection.Hosp

Formul. 28(1), 46-50.
HOW TO CITE THIS ARTICLE

Sharma, P.H., Kalasare, S.N., Kamble, R.A., Powar, P.V., Ambikar, R.B. (2014).
Pharmacoeconomics : Analysis of The Cost of Drug Therapy To Health Care Systems and
Society. Journal Club for Pharmaceutical Sciences (JCPS), 1(I), 142-151.
151

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ISSN No : 2321 8630, V 1, I 1, 2014

Journal Club for Pharmaceutical Sciences (JCPS)

Department of Pharmaceutics, Padmashree Dr. D.Y. Patil College of Pharmacy,

pharmaceutical products, services, and

programmes, as well as other health care

Address for Correspondence:

Pharmacoeconomics shown in Fig. 1. The

Dr.(Mrs.) Padmini. H. Sharma,

role of pharmacoeconomics plays various

development; during the initial phases it

All Rights Reserved by Journals Club & Co.

for a patients underlying disease

for strategic and operational

information to generate the greatest benefit

Pharmacoeconomics is to make sure

in terms of patient outcomes.

Fig. 2. Study of the role of

Commission= prescribing a drug with

Fig. 3. Drug related problems

a known fatal drug drug interaction

All Rights Reserved by Journals Club & Co.

economics concerned with issues linked to

methodologies used to create significance

dearth in the distribution of health and

for pharmaceutical intervention.Fig. 4.

health care sectors.

shows the methods for pharmaceutical

Fig. 4. Methods for Pharmaceutical

Fig. 6. Factors of health Economics

The applications of pharmacoeconomics

Fig. 5. R&D, Drug approval & sales revenue

All Rights Reserved by Journals Club & Co.

Fig. 7. The scope of health economics by

Fig. 9. Components of economic analysis

Fig. 8. Types of Economic Evaluation

All Rights Reserved by Journals Club & Co.

outcomes which differ. For example, day

would measure the costs arising from these

minimization contains an clear

that the outcome of surgery is identical.

assumption that the two alternatives attain

usually only to the health services, and is

Fig. 11. Cost-Effective Analysis

on the cost side of the equation and choose

All Rights Reserved by Journals Club & Co.

Example: Increment CE ratio

2. Outcomes drug A-outcomes drug B

quality of life (e.g. coronary artery bypass

grafting) whereas the other only improves

quality of life (e.g. hip joint replacement).

positive some negative like adverse effect,

denominator for conversion is money.

instinctively uncomfortable about putting a

financial value on human suffering.

Evaluates the value of all resources

The most controversial aspect of Cost-

consumed in implanting a program or

Benefit Analysis is to put value on items

intervention against the value of the

like loss of eye sight, impairments of

outcome in terms of dollars.

hearing, renal failure or even loss of

analysis allow comparisons between very