Pharmacoeconomics & Health Outcomes

Pharmacoeconomics & Health Outcomes

Costs and Perspectives

Leon E. Cosler, R.Ph., Ph.D. Associate Professor of Pharmacoeconomics Albany College of Pharmacy

Road Map

1. ECHO Model for evaluations 2. Costs – Categorizations 3. Perspective 4. Applications

ECHO Conceptual Model Humanistic Mediators

Disease

Clinical Endpoints

Clinical Outcomes

(Pt biomedical status)

(medical events from Dx or Tx)

Treatment Modifiers (alter outcomes of Tx alternatives)

External Controls

Humanistic Outcomes

Treatment Alternatives

Economic Costs (cost: all types)

Economic Outcomes

(cost of care against outcomes)

COSTS: A measure of “value”

COSTS: A measure of “value”

•

Costs ARE: • The magnitude of resources consumed • Categorized into several types • Time sensitive • Dependent on one’s point of view

•

Costs are NOT: • The same as ‘price’ • The same as what’s ‘charged’ for a service • Not always a flow of cash

What does this car cost?

COSTS: categories Direct A transfer of money occurs

Fixed

vs

Unpaid resources committed

vs

Not affected by output

Average

Σ Σ

Indirect

Variable Varies with output

vs

Marginal

(costs)

Cost 1 – Cost 2

(units)

Units 1 – Units 2

Average vs Marginal Example

Average vs Marginal Example

COSTS: Opportunity Costs: - the value of the next best alternative = “price” only in a purely competitive market • caution with services like inpatient care

- Some services have no “price”… • Volunteer time - How to measure that ‘opportunity cost’ ?

COSTS of a medical illness 1. “Medical Resources” “Direct Medical Costs”: • costs paid directly for the medical products • hospitalization(s), MD visits, Rxs

2. “Non-Medical Resources” “Personal non-medical costs” - transportation, child care

“System non-medical costs” - Special education programs

COSTS of a medical illness

3. Indirect Costs: - costs of “morbidity” & “mortality” - lost wages or productivity - premature death 4. Intangible Costs: - cost of non-financial “humanistic” outcomes - cost associated with pain & suffering - associated with measuring quality of life

Direct vs Indirect Costs of Illnesses Billions 0

50

100

150

200

250

300

350

Heart Diseases

Cancer

Cerebrovascular Diseases

Pneumonia / Flu

Injuries

Diabetes

Kidney Disease

Chronic Liver Disease

Direct Costs

Indirect Costs

Dept. of Health and Human Services; National Institutes of Health. Disease – Specific Estimates of Direct and Indirect Costs of Illness and NIH Support; Fiscal Year 2000 Update [online]. Available from: URL: http://ospp.od.nih.gov/ecostudies/COIreportweb.htm

400

Direct vs Indirect Costs of Illnesses Billions 0%

20%

40%

60%

80%

100%

Heart Diseases

Cancer

Cerebrovascular Diseases

Pneumonia / Flu

Injuries

Diabetes

Kidney Disease

Chronic Liver Disease

Direct Costs

Indirect Costs

Dept. of Health and Human Services; National Institutes of Health. Disease – Specific Estimates of Direct and Indirect Costs of Illness and NIH Support; Fiscal Year 2000 Update [online]. Available from: URL: http://ospp.od.nih.gov/ecostudies/COIreportweb.htm

COSTS of Treatment

1.

(direct) Resources needed to acquire / apply Tx

Costs as a result of treatment 1.

Costs of adverse events

2.

Costs (Savings) of avoiding / preventing disease or sequelae

3.

Costs of “new information” for treatment

4.

Costs of extending life (*)

An Example: 45+ y/o wm presents to MD Dx Bronchitis • 1 MD Office Visit • 3 Rxs written: - Zithromax 250 mg Z-PAK (g) - Entex - LA (generic) - Vicodin Syrup 120 ml • Missed 2 days of work • No other sequelae

($8 copay) ($20 copay) ($14.36) ($2.18)

• What did this encounter ‘cost’ ???

Perspective: who’s point of view? Costs will differ depending on who pays… Government HMO’s Patient Perspective Hospital Insurer Society

Health Professional

From the Patient's Perspective Direct Medical Costs Office Visit: Rxs:

Total: Direct non-medical

$ 8.00 Co-pay $ 20.00 Co-pay $ 2.18 Co-pay $ 14.36 Co-pay $ 44.54 $ 20.00 Taxi ? / Babysitter ?

Indirect Costs

???

2 days wages

Opportunity Costs

???

Reschedule meetings or vacation?

From the Insurer's Perspective Direct Medical Costs Office Visit: Rxs:

Total:

$ 50.00 $ 60.00 $ 6.50 $ 12.50 $ 129.00

Direct non-medical

???

Indirect Costs

n/a

bill bill bill bill

to CDPHP to CDPHP to CDPHP to CDPHP

Administration ?

$56.50 + $3.50 $2.00 + $4.50 $8.00 + $4.50

(“cost” + dispensing fees…)

• • • •

AWP = Average Wholesale Price AAC = Actual acquisition cost EAC = Estimated “ “ ASP = Average Sales Price

•

Typical re-imbursement formula:

- lower of: (AWP - x%) or ASP + 6% - plus a dispensing fee • higher for generics to encourage use

From Society’s Perspective... Direct Medical Costs Office Visit: Rxs:

Total: Direct non-medical Indirect Costs

Opportunity Costs

$ $ $ $ $

58.00 80.00 8.68 26.86 173.54

Everything Everything Everything Everything

???

Everything

$ 528.00 Cost of missed work

???

$$$ Value of lost opportunities

Compare Direct Medical Costs: Perspective:

Patient

Insurer

Society

Direct Medical Costs for this Episode:

$ 44.54

$ 129.00

$ 173.54

Perspectives

-

Determined by the research question(s)

-

Indirect Costs often the largest category includes patient morbidity and mortality most government perspectives use this one

Must be stated or obvious in any manuscript Society: “overall” costs of medical care

Framework for Determining Costs

1.

Specifying the inputs • •

2. 3.

All relevant costs (not just the easy ones) Perspective!

Counting the units for each input Assigning dollar values appropriately • • • •

Often not easy Devote appropriate time to each category = “Price” sometimes Marginal costs better than average costs

Framework for Determining Costs

1.

Adjust for timing •

3.

(e.g. discounting)

Adjusting for uncertainty •

Sensitivity analyses

Cost estimation applications

•

Personnel time • Work sampling • Time-motion studies (stopwatch time studies) • Does not always require “new” labor

•

Drug Products • Rxs will have multiple prices • AWPs as a standard (but inflated) • ASP a better choice, not always available

Applications

•

Physician Services • Market prices • Insurers ‘allowable’ charges

•

Hospital Charges • True costs never equal charges • Cost-shifting between Depts. • Options: - Average “per diem” costs (bad idea) - Separate routine costs from Pt. specific costs De scriptiv e Statistics - DRGs (sometimes a good N Mean choice) totchge 5086 8301.19 totcost 5067 3452.14 - DRG 97 (asthma): Valid N (listwise) 5067

Next week: Discounting

•

Bring calculators and / or PC’s

•

Discounting will also use MS Excel software as a demo

That’s all for today… !