What is Pharmacoeconomics?

1
What is Pharmacoeconomics?

• Joseph A. Paladino, PharmD, FCCP
• Clinical Professor
• State University of New York at Buffalo
• School of Pharmacy and Pharmaceutical Sciences
• Director, Clinical Outcomes and Pharmacoeconomics
• CPL Associates LLC
• Amherst NY
• paladino_at_cplassociates.com

2
Cost-Containment Pharmacy

• Generic substitution
• Therapeutic substitution
• Restrictive formulary
• Restricted usage (appropriate use guidelines)
• Antibiotic order sheets
• Prior authorization
• Automatic stop-orders
• Selective reporting of susceptibilities
• Dose minimization

3
Whats So Bad About Cost-Containment?

• Doesnt work
• Does not measure clinical benefits
• Does not allow for a valuation of technology,
  personnel, or services
• Doesnt work

4
What Can Cost-Containment Accomplish?

• Reduce medication expenditures

5
What Can Cost-Containment Accomplish?

• Reduce medication expenditures
• Under Capitation or DRG reimbursement,
• every single medication dispensed erodes
  institutional profit.
• So, the best you can do is

6
What Can Cost-Containment Accomplish?

• Reduce medication expenditures
• Under Capitation or DRG reimbursement,
• every single medication dispensed erodes
  institutional profit.
• So, the best you can do is
• Become less of a loser

7
Do Formulary Restrictions Reduce Drug Costs?

• Problem Using too much ceftriaxone
• Solution Restrict ceftriaxone
• Result Decreased use of ceftriaxone
• SUCCESS!!!
• But

8
Do Formulary Restrictions Reduce Drug Costs?

• Problem Using too much ceftriaxone
• Solution Restrict ceftriaxone
• Result Decreased use of ceftriaxone
• SUCCESS!!!
• Can you expect the use of another antibiotic to
  increase?

9
Benchmarking to Analyze Antibiotic Control
StrategiesRifenburg et al. AJHP
1996532054-2062

• 88 hospitals in US and Canada
• Serial 1993 1994 data
• Formulary restrictions of advanced generation
  ?-lactams
• Accompanied by increased expenditures on other
  antibiotics
• Overall, 300/OB/yr increase
• Cost-shifting

10
EFFECT OF MEDICAID 3-DRUG PRESCRIPTION
LIMITSoumerai et al. NEJM 19913251072-1077

• 5 months baseline, 11 months cap,
• 10 months after cap rescinded
• Core Rx/pt NJ (no cap) NH (cap)
• Baseline 2.3 2.8
• CAP 2.3 1.9 (35)
• Nursing Home Admissions
• Pre-Cap 2.1 2.3
• CAP ( period) 6.6 10.6 (p0.006)
• Post-Cap ret. to baseline

11
Intended and Unintended Consequences of HMO
Cost-Containment Strategies Results from the
Managed Care Outcomes Project Horn SD et al.
Am J Man Care 19962253-64

• Six HMOs 3 with strict formulary control
• Five diseases OM, arthritis, epigastric ulcers,
  HTN, asthma
• 1 year 12,997 patients
• ? Co-pay ? Prescriptions, ? Hospitalizations
• ? Formulary
• Restriction ? healthcare utilization
• (Rx, office visits, ER, hospitalizations)

12
Does Controlling Purchase PricesReduce Drug
Expenditures?

• Price controls have been associated with a
• 17 reduction in costs
• 10 reduction in costs
• 4 increase in costs
• 5 reduction in costs

13
Does Controlling Purchase PricesReduce Drug
Expenditures?PharmacoEconomics 199814471

• Germany 1989 (1981- 1992)
• Cost increase before control 5.9 after control
  9.0
• The Netherlands price clusters in 1991
• Drug expenditures continue to rise
• Canada drug prices restrained, but
• Drug expenditures continue to rise 3.8
• US Medicaid (MAC)
• Added restrictive formularies, prior
  authorization, rebates, generic incentives
• Reference pricing does not address the demand for
  drugs or the demand for quality care

14
What Can We Do That Works?
15
Antibiotics as Percentage of Total Healthcare
Costs
16
Antibiotic Percentage of Total Healthcare Costs

• CAP Dresser et al. Chest 20011191439-1448
• HAP Paladino Fell. Ann Pharmacother
  199428384-389
• IA Friedrich et al. Am J Hosp Pharm
  199249590-594
• DF McKinnon et al. Clin Infect Dis
  19972457-63
• Burn Nicolau et al. J Burn Care Rehabil
  199415244-250

17
Outcomes-Based Economic AnalysesMust Consider

• All resources consumed
• Personnel Professional
• Personnel Service
• Hospitalization
• ER, ambulance
• Office/clinic visit
• Radiology
• Pathology
• Medications
• etc.

• All possible outcomes
• Success
• Failure
• Adverse events
• Indeterminate
• Resistance

18
Practical Uses of Pharmacoeconomics

1. Show value of your position (i.e. YOU!)
2. Demonstrate economic viability of a service
3. Evaluate outcomes of a medication for
   formularies, guidelines, pathways, etc.

19
Pharmacist Participation on Physician
RoundsAdverse Drug Events in the ICU Leape LL
et al. JAMA 1999282267-270

• Clinical pharmacists ? preventable ADEs 66
• Save 270,000 annually

20
Economic Evaluations of Clinical Pharmacy
Services 1988-1995 Schumock et al.
Pharmacotherapy 1996161188-1208

• Reviewed 104 publications
• 7 well-conducted trials
• CBA 16.71

21
Economic Evaluations of Clinical Pharmacy
Services 1996 - 2000 Schumock et al.
Pharmacotherapy 200323113-132

• Evaluated 59 publications Hospitals 52
• Community Practice 41
• HMOs 3
• Increased rigor in study design
• CBA in 16 trials 4.71

22
 Value of Clinical Pharmacy Services

• Drug-related morbidity and mortality.
• Johnson JA, Bootman JL. Arch Intern Med
  19951551949-1956.
• Reduction in HF events by a clinical pharmacist
  with a HF management team.
• Gattis et al. Arch Intern Med 19991591939-1945.
  
•  
• RCT to assess the cost impact of
  pharmacist-initiated interventions.
• McMullin et al. Arch Intern Med
  19991592306-2309.
•  
• Clinical pharmacy services and hospital mortality
  rates.
• Bond et al. Pharmacotherapy. 199919556-564.
•  
• Clinical pharmacy services, pharmacy staffing,
  and the total cost of care in US hospitals.
• Bond et al. Pharmacotherapy. 200020609-621.

23
Practical Uses of Pharmacoeconomics

• Evaluate outcomes of a medication for
  formularies, guidelines, pathways, etc.

24
Benefits of Advanced Antibiotics in AECB
Destache et al. J Antimicrob Chemother.
199943A107-113

• 224 exacerbations in 60 outpatients
• 1st line agents Amoxicillin, Erythro, TCN,
  TMP/SMX
• 2nd line agents Cephalosporins
• 3rd line agents Amox/clav, Azithromycin,
  Ciprofloxacin
• Failures more 1st line than 3rd line (19 vs
  7, plt0.05)
• Hospitalizations more 1st line than 3rd line
  (18 vs 5.3, plt0.02)

25
Immunosuppressive Drug Costs Renal
TransplantationCanafax et al. Pharmacotherapy
199010205-210.

• Mean values
• ALG-AZA-P CSA-AZA-P
• Treatment period 3/83-10/84 9/84-12/86
• Number of Patients 30 30
• 1 year survival 93 100
• Drug Costs () 2,017 6,004
• ALG-AZA-P antilymphoblast globulin -
  azathioprine - prednisone
• CSA-AZA-P cyclosporin - azathioprine -
  prednisone

26
Immunosuppressive Drug Costs Renal
TransplantationCanafax et al. Pharmacotherapy
199010205-210.

• Mean values
• ALG-AZA-P CSA-AZA-P
• Drug Costs () 2,017 6,004
• Hospitalization () 18,146 13,459
• LOS (days) 12 8 7 4
• Rehospitalization () 6,364 1,508
• LOS (days) 7 6 5 4
•  
• ALG-AZA-P antilymphoblast globulin -
  azathioprine - prednisone
• CSA-AZA-P cyclosporin - azathioprine -
  prednisone

27
Azithromycin IV/PO versus Cefuroxime
Erythromycin IV/PO 266 Hospitalized Patients
with CAP
Paladino et al. Chest. 2002122 1271-1279

• Cost Cure Cost-Effectiveness Ratio
• Azithromycin 4104 78 5265expected success
• Cefuroxime
• Erythromycin 4578 75 6145 expected
  success
• P value 0.059 NS 0.05

28
6332 5 days
S (0.5)
IV (0.02)
F (0.5)
8865 7 days
IV/PO (0.98)
5106 4 days
S (0.99)
Gati n 98
F (0.01)
2533 2 days
IV (0.03)
F (1.0)
CAP
15,823 14 days
Ceft alone n 70
5827 4 days
S (0.96)
F (0.04)
IV/PO (0.97)
19,355 11 days
Ceft n 105
5598 4 days
S (0.89)
Ceft Ery n 35
F (0.11)
IV/PO (1.0)
8590 8 days
28
29
Pharmacoeconomics 101

• Sick patients cost more than healthy ones.

30
Effects of Cost and Compensation on Adoption of a
Cost-Effective Drug Kolassa et al.
Pharmacoeconomics 199813223-230

• 1 of 3 versions of a questionnaire sent to 1,300
  pharmacy directors in the US
• 353 (27) usable responses
• Pharmacy budget will increase by either
• 250, 1,750, or 3,250 per case
• Differing salary compensation conditions
• Each case will save the hospital 2,500 (14)

31
Cost vs. Economics ResultsKolassa et al.
Pharmacoeconomics 199813223-230

• EACH SCENARIO WAS COST-EFFECTIVE!
• More will restrict use at 3,250 than at lower
  costs (plt0.001)
• More will restrict use, regardless of cost, if
  their personal salary is contingent on drug
  budget control (p0.001)
• Department-based budgeting is a disincentive to
  cost-effective decisions

32
Reality
33
Endpoints in Studies of Infections Traditional
and NewNiederman M. 2001

• Clinical cure, failure
• Time to clinical response
• Time to return to work
• Time until next infection (AECB)
• Bacteriologic eradication, superinfection,
  reinfection
• Prevention of resistance
• Economic money spent on drugs, hospitalization
• Money saved by being well, Cost of lost
  productivity

34
Although Drug Prices Are Important

• Overall costs are dependent on overall outcome
  (economics)
• Sick patients cost more than healthy ones
• It is cost-effective to quickly cure the patient
• The most expensive medication is one that does
  not work.