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Cost issues in sequential therapy
Journal of I@ction (1998) 37, Supplement 1, 45-50
Cost Issues in Sequential Therapy J. Cooke Department of Pharmacy, South Manchester University Hospitals NHS Trust, Withington Hospital, Nell Lane, Manchester M20 2LR, U.K. Pharmacoeconomics is starting to be employed in strategic therapeutic decision making. Costs associated with antimicrobials included: (i) acquisition costs; (ii) preparation, administration and consumables costs; (iii) monitoring costs; (iv) costs of unwanted drug effects; (v) costs of resistance and therapeutic failures and (vi) costs of duration of stay. Most hospitals have a Drug and Therapeutics Committee but acquisition costs are still the most important economic criterion for acceptance for use, even though medicines only consume between 3 and 5% of total revenue costs, of which antibiotics account for around 15 %. In any sequential programme acquisition costs and consumables are immediately realizable. Staff time and monitoring tests are less realizable but require changes in the way budgets are handled. Microbial resistance and risk management are difficult to quantify but are increasingly becoming important in strategic decision-making. The educational needs of health care decision makers in economic need addressing and mechanisms need to be put in place to enable the putative savings reported in the pharmacoeconomic literature to be realized.
Introduction Pharmacoeconomics is the description and analysis of the costs and consequences of drug therapy to health care systems and society. The value of pharmacoeconomics has been advocated by governments and academics all over the world, as a way of reconciling unlimited demands for medicines with a limited ability to fund their supply. 1 All aspects of the use of medicines may be allocated costs, both direct, such as acquisition and administration costs, and indirect, such as the cost of a given patient's time off work because of illness, in terms of lost output and social security payments. The consequences of drug therapy include benefits for both individual patients and society at large, which m a y be quantified in terms of health outcome and quality of life, in addition to purely economic impacts. Pharmacoeconomics provides a guide for decision makers on resource allocation but is not the sole basis on which decisions should be made. Pharmacoeconomics can assist in the planning process and help to assign priorities where, for example, medicines with a worse outcome may be available at a lower cost and medicines with better outcome and higher costs can be compared. Costs and consequences of therapeutic decision making can be described in a number of ways.
Types of costs Costs can be direct to the health care system, i.e. acquisition costs of medicines, consumables associated with 0163-4453/98/$20045 + 06 $12,00/0
drug administration, staff time in preparation and administration of medicines, laboratory charges for monitoring for effectiveness and adverse drug reactions. Indirect costs include lost productivity from a disease which can manifest itself as a cost to the economy or taxation system, as well as economic costs to the patient and the patient's family. The concept of Opportunity Cost is at the centre of economics and identifies the value of opportunities which have been lost by utilizing resources in a particular service or health technology. This can be valued as the benefits which have been forsaken by investing the resources in the best alternative fashion. Opportunity Cost recognizes that there are limited resources available for utilizing every treatment and therefore the rationing of health care is implicit in such a system. Average costs are the simplest way of valuing the consumption of health care resources. Quite simply, they represent the total costs (i.e. all the costs incurred in the delivery of a service) of a health care system divided by the units of production. For example, a large teaching trust hospital might treat 75 000 patients a year (finished consultant episodes, FeE) and have a total annual revenue cost of £ 1 5 0 million. The average cost per FeE is therefore £2000. Fixed costs are those which are independent of the number of units of production and include heating, lighting and fixed staffing costs. Variable costs, on the other hand, are dependent on the numbers of units of production. The costs of the consumption of antibiotics is a good example of variable costs. © 1998 The British Infection Society
46
J. Cooke
The invariable increases in the medicines budget in a particular institution which is treating more patients or those with a more complex pathology have often been erroneously interpreted by financial managers as a failure to m a n a g e this budget effectively. In order to better describe the costs associated with a health care intervention, economists employ the expression Marginal Costs to describe the costs of producing an extra unit of a particular service. The term Incremental Cost is employed to define the difference between the marginal costs of alternative interventions. In an attempt to analyse all the costs associated with therapy, Gladen and colleagues have developed a hierarchical method of classifying costs associated with antibiotic administration, in order to arrive at a comprehensive estimate of global costs associated with each dosing regimen. 2 This method segregates individual costs into five comprehensive "orders": (i) First-order costs (drug acquisition price factors) List price Transportation charges Contracts Direct versus distributor procurement Incentives, rebates, quantity discounts, special deals package and size considerations (ii) Second-order costs Preparation and administration costs Labour costs P h a r m a c y preparation and materials (CIVAS) Administration supplies (e.g. IV sets) Inventory carrying costs Clinical p h a r m a c y services and other secondary pharmacy functions Monitoring and oversight (P & T committees) (iii) Third-order costs Monitoring costs to guarantee efficacy and minimize toxicity Laboratory tests, X-rays and scans Mandated consultations (iv) Fourth-order costs Drug-related complications Adverse drug reactions and drug interactions (v) Fifth-order costs (arising from suboptimal efficacy) Delay in reaching therapeutic drug levels Unexpected resistance Emerging resistance Superinfection Slow therapeutic response Institutional costs of resistance in nosocomial strains Legal costs
In addition, hospital charges, including those for "hotel services" such as heating and lighting overheads, meals and accommodation, which m a y constitute a major cost, should be considered. These are frequently included in an average cost per patient day. First-order costs, drug acquisition costs, are those which are most frequently scrutinized by health care managers and drug and therapeutics committees. A recent survey of chief pharmacists in the U.K. showed that 86.7% of their hospitals had a formulary of some description and only 12.8% had no Drugs and Therapeutics Committee. Only 17.3% of respondents admitted to having received any formalized training in health economics, despite being in post for a m e a n of 7.1 years, and only 19.4% were aware of the existence of any national guidelines for the economic evaluation of medicines. When asked which economic aspects were considered in formulary listing, 90% volunteered the acquisition cost of the medicine to be the most important. 3 Second-order costs are associated with the use of resources associated with the preparation and administration of medicines and include the time taken by the various types of staff as well as the various equipment and consumables used in the process. 4 ~ Third-order costs include costs of various tests and investigations associated with the use of particular antimicrobials such as monitoring for levels of aminoglycosides or glycopeptides. ~ Fourth-order costs include those associated with adverse drug reactions to prescribed therapy. For example, it has been calculated that each case of nephrotoxicity associated with aminoglycoside therapy costs U.S. $2500. 7 Furthermore, costs of U.S. $1.5 million were awarded against a hospital for not monitoring the levels of aminoglycosides w h e n this resulted in a young w o m a n suffering permanent vestibular damage. 8 These types of costs are now being incorporated into risk m a n a g e m e n t strategies. Fifth-order costs include those associated with drug resistance, which can lead to an institution having to use more expensive and wider spectrum agents which are invariably more toxic. In a study of 50 consecutive cases of Clostridiurn difficile infection a prospective comparison was made with control patients who were admitted to the same geriatric wards within 72 h of the cases. Cases with C. difficile infection stayed in hospital significantly longer (mean 21.3 days) than the controls. The total additional costs associated with C. difficile infection amounted to more t h a n £ 4 0 0 0 per case; 94% of these costs were associated with increased duration of stay?
Cost Issues in Sequential Therapy Types of health economic evaluations There are a n u m b e r of different types of health economic evaluations.
Cost benefit analysis. In cost benefit analysis (CBA) consequences are measured in terms of the total cost associated with a p r o g r a m m e where both costs and consequences are measured in monetary terms. Whilst this type of analysis is preferred by economists, its employment in healthcare is problematical as it is frequently difficult to ascribe pecuniary values to clinical outcomes such as pain relief, avoidance of stroke or improvements in quality of life. However, methods are available to address these issues. CBA can be usefully employed at a macro level for strategic decisions on health care programmes. For example, a countrywide immunization program can be fully costed in terms of resource utilization consumed in running the programme. This can then be valued against the reduced mortality and morbidity which occur as a result of the programme.
Cost effectiveness analysis (CEA). Cost effectiveness analysis can be described as an examination of the costs of two or more programmes which have the same clinical outcome as measured in physical units, e.g. lives saved or reduced morbidity. Treatments with dissimilar outcomes can also be analysed by this technique. Where two or more interventions have been shown to be or are assumed to be similar, then if all other factors are equal (e.g. convenience, side effects, availability, etc.), selection can be made on the basis of cost. This type of analysis is called cost minimization analysis (CMA). CMA is frequently employed in formulary decision making where often the available evidence for a new product appears to be no better t h a n for existing products. This is invariably w h a t happens in practice, as normally clinical trials on new medicines are statistically powered for equivalence as a requirement for licensing submission.
Cost utility analysis (CUA). An alternative measurement for the consequences of a health care intervention is the concept of utility. Utility provides a method for estimating patient preference for a particular intervention in terms of the patient's state of well being. Utility is described by an index which ranges between 0 (representing death) and I (perfect health). The product of utility and life years gained provides the term quality adjusted life year (QALY). The calculation of QALYs provides a method which enables decision makers to compare different health interventions and assign priorities for decisions on resource allocation. However, the use of QALY league
47 UK NHS Drug Spend 1980-1995
3500 3000 2500 ,~ 2000 1500 1000 5OO 0
g~
~ ~g
~ g ~ g g g
~ g g~
Figure 1. U.K. expenditure on medicines. FHS: Family Health Service; HCHS: Hospital and Community Health Service. ( , ) GP expenditure; (D) hospital expenditure.
tables has provided an area of contentious debate amongst stakeholders of health care.
Costs of Health Care Around half of the total UK expenditure on health is associated with hospital care, and a typical acute general hospital's revenue costs might be distributed as follows: Salaries & wages Medical & dental Nursing Prof & tech Other Total Staff
% 6 48 10 17 81
Non staffing Medicines Medical & surgical Provisions Other (rates, heating, etc.) Total Non-Staff
% 3 6 2 8 19
In the United Kingdom medicines account for about 10% of health care expenditure. Most of this cost is incurred in the primary care setting, where around 7% is spent on antimicrobials (virtually all oral). In the average hospital between 3 and 5% of total costs are attributable to medicines and antimicrobials account for up to 25% (mean 15%) of these costs. Parenteral formulations are generally more expensive than oral, therefore they account for a disproportionately high part of the total cost. Thus the first-order (drug acquisition) costs are only associated with a very small part of the total expenditure on healthcare and yet these bear a considerable focus of
48
J. Cooke
effort for economies. Whilst a reduction in the unnecessary use of medicines is viewed as being desirable, this does not necessarily increase the efficiency of the organization. Rather, efficiency should be measured in terms of treating patients better or treating more patients from the same budget. More t h a n four-fifths of a hospital's expenditure goes on staffing costs, and therefore it might be expected that anything which reduces this element might be considered to be a desirable goal. The ability to transfer these basic economic principles into practice has been a considerable challenge to the protagonists of pharmacoeconomics. A n u m b e r of studies have demonstrated the effectiveness, in clinical terms, of switch therapy. 1°-27 The use of clinical pharmacists intervening to promote switch therapy from intravenous to oral ranitidine was estimated to be able to save around U.S. $23 000 a year in a teaching hospital. 28 In an open controlled trial, patients admitted for lower respiratory tract infection were randomized to treatment with either oral co-amoxiclav, intravenous followed by oral co-amoxiclav, or intravenous followed by oral cephalosporins. There were no significant differences between the groups in clinical outcome or mortality; however, patients randomized to oral co-amoxiclav had a significantly shorter hospital stay than the two groups given intravenous antibiotic (median 6 vs. 7 and 9 days, respectively). The oral antibiotics were cheaper, easier to administer, and if used routinely in the 800 or so patients admitted annually would lead to savings of around £ 1 7 6 000 a year. 1° However, a counterargument might be raised that the patient should never have been admitted to an acute hospital in the first place. In another study the routine practice of having a 24hour observation period following switching from intravenous to oral antibiotic therapy was questioned. 29 A campaign to promote the use of oral versus intravenous antibiotics in a 1000-bed Canadian teaching hospital employed eye-catching reminders attached to patient's charts. Substantial cost savings were achieved for metronidazole and clindamycin, and the programme has been expanded to cover fiuconazole, cefuroxime and ciprofloxacin as well. 3° A review of the selection of antibiotic treatment for serious, hospital-associated infections concluded that for selected patients, use of oral rather t h a n intravenous antibiotics could lead to significant cost savings in terms of drugs and administration, and to benefits for the patient without adverse clinical consequences. 31 An evaluation of the economic benefit associated with the early conversion of therapy from IV ceftriaxone to the comparable oral third-generation cephalosporin, cefpodoxime proxetil showed that in the cefpodoxime study group, the average time receiving intravenous and
oral antibiotics was 9.1 days at a total cost of $3040.26 for the 20 patients. In the control group, the average time receiving intravenous and oral antibiotics was 11.9 days at a total cost of $3961.26. A saving of $46.05 per patient was achieved. Patients receiving sequential therapy averaged 1 less day of hospitalization. 32 An evaluation of a standard form for recommending changes from injection to oral dosage forms supported by p h a r m a c y technicians demonstrated that the technicians produced savings which roughly equalled the staff costs. Furthermore, nurses gained time for providing services other t h a n drug administration) 3 A parenteral-to-oral (IV-po) sequential program was undertaken in a Canadian teaching and tertiary care referral hospital with 1100 beds, where a random sample of 78 patients receiving cefuroxime was compared with a random sample of 50 patients receiving IV-po cefuroxime. The clinical effectiveness of the two regimens was similar. Mean costs of drug therapy per day was less for the sequential group (U.S. $15.78 t h a n the IV group (U.S. $25.47, P
Are cost savings real? There is considerable debate about the true value of the various costs included in economic evaluations. Often a perceived saving within one budget results in greater expenditure for the health service as a whole. Moreover,
Cost Issues in Sequential Therapy
49
Table I. Estimate of the effect on the healthcare budget of savings on specified items in the U.K. Item
Effects of savings
Notes
Drug costs Consumables Lab costs Staff costs
+ + + +
Resistance Risk m a n a g e m e n t Treatment setting
+ + + +
Budgets can be held centrally or locally Both budgets should be held localiy Often there are fixed overheads associated with the delivery of the service Only w h e n wards can be closed or w h e n overtime or bank staff time can be reduced Data is present but the application remains theoretical Not yet sophisticated e n o u g h to consider in real terms Providing sufficient support is available in the n e w setting
+ + + + + + +
+ = s a v i n g s are marginal and dependent on organizational changes; + + = s a v i n g s are dependent on service costings; + + + = s a v i n g s are realizable on a hospital perspective; + + + + = s a v i n g s are real and significant.
resources saved m a y be used to treat more patients, increasing total expenditure. In the U.K. drug costs receive a lot of attention, despite consideration of their minor impact on total healthcare expenditure (Table I).
Conclusion There are a number of situations where economic savings can be obtained by the judicious switching from intravenous to oral antimicrobial therapy. Recent surveys have indicated that health care decision makers still regard acquisition costs as the the most important factor for drug selection. Awareness of the principles of economic evaluation needs to be raised if health economics is to be effectively incorporated into strategic and operational planning. It does not matter how well a health economic evaluation is carried out if the mechanisms are not in place to use the results.
Acknowledgement The author would like to sincerely t h a n k Miss Sue Austen, Drug Information P h a r m a c y Manager, South Manchester University Hospitals NHS Trust for assistance with the literature searches.
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8
9
10
11
12
13
14
15
16
17
References 1 Townsend RJ. Post-marketing drug research and development. Drug Intell Clin Pharm 1987; 21: 1 3 4 - 1 3 6 . 2 Gladen H. Evaluating the cost-effectiveness of treatment with thirdgeneration cephalosporins. Diagn Microbiol Infect Dis 1992; 15: 99-105. 3 Cooke J, Walley T, D r u m m o n d M. Use of health economics for formulary decision making: evidence from the United Kingdom. International Pharmaceutical Abstracts 1996; 33: 2339. 4 Plumridge RJ. Cost comparison of intravenous antibiotic administration. Med J Austral 1990; 153: 5 1 6 - 5 1 8 . 5 Cousins DH, Lee M, Stanaway M, Neary C. Implementation and evaluation of a centralised IV additive service for antibiotic injections. Pharmaceut ] 1989; 242 (Suppl.): HS14-16. 6 Cochrane DMG, Cooke J. Incremental costs of intravenous antibiotic
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19
20
21
administration in UK teaching hospitals. Pharmaceut J 1993; 251 (Pharmacy Practice Research Suppl.): R18. Eisenberg JM, Koffer H, Glick HA et al. W h a t is the cost of nephrotoxicity associated with aminoglycosides? Intern Med 1987; 107: 900-909. Brushwood DB. Government liable for failure to monitor a patient's serum gentamicin concentration in an Army hospital. Am J Hosp Pharm 1992; 49: 1 7 4 8 - 1 7 5 0 . Wilcox MH, Cunnfffe JG, Trundle C, Redpath C. Financial burden of hospital-acquired Clostridium difficile infection. J Hosp Infect 1996; 34: 23-30. Chan R, Hemeryck L, O'Regan M e t al. Oral versus intravenous antibiotics for c o m m u n i t y acquired lower respiratory tract infection in a general hospital: open randomised controlled trial. Brit Med J 1995; 310: 1 3 6 0 - 1 3 6 2 . Paladino JA, Sperry HE, Backes JM et al. Clinical and economic evaluation of oral ciprofloxacin after an abbreviated course of intravenous antibiotics. Am J Med 1991; 91: 4 6 2 - 4 7 0 . Chayakul P, I@isanapan S, Kalnauwakul S. Sequential intravenous/ oral ciprofloxacin in the treatment of severe multiresistant gramnegative infections. J Med Assoe Thail 1993', 76: 35-40. C u n h a BA. Community-acquired pneumonia. Cost-effective antimicrobial therapy (see comments). Postgrad Med 1996; 99: 1 0 9 110, 113-114, 117-119. Davis C. Sequential intravenous/oral ciprofloxacin as an empiric antimicrobial therapy: results of a Canadian multieenter study. Clin Therapeut 1994; 16: 5 0 5 - 5 2 1 . Feist H. SequentiaI therapy with i.v. and oral ofioxacin in lower respiratory tract infections: a comparative study. Infection 1991; 19: $ 3 8 0 - 3 8 3 , Gaut PL, Carron WC, Ching WT, Meyer RD. Intravenous/oral dprofioxacin therapy versus intravenous ceftazidime therapy for selected bacterial infections. Am J Med 1989; 87: 169S-175S. Gelfand MS, Simmons BP, Craft RB, Grogan J, Amarshi N. A sequential study of intravenous and oral lleroxacin in the treatment of complicated urinary tract infection. Am J Med 1993; 94: 1 2 6 S 130S. Gentry LO, Koshdel A. Intravenous/oral ciprofioxacin versus intravenous ceftazidhne in the treatment of serious gram-negative infections of the skin and skin structure. Am J Med 1989; 87: 132S-135S. Heppt W, Lutz H. Clinical experiences with ofloxacin sequential therapy in chronic ear infections. Europ Arch Otorhinolaryngol 1993; 250 (Suppl.): $ 1 9 - 2 1 . K h a n FA, Basir R. Sequential intravenous-oral administration of ciprofloxacin vs ceftazidime in serious bacterial respiratory tract infections. Chest 1989; 96: 5 2 8 - 5 3 7 . Lau RC, Doyle JJ, Freedman MH, King SM, Richardson SE. Early discharge of pediatric febrile neutropenic cancer patients by substitution of oral for intravenous antibiotics. Ped Hematol Onco11994; 11: 4 1 7 - 4 2 1 .
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22 Peacock JEJ, Pegram PS, Weber SF, Leone PA. Prospective, randomized comparison of sequential intravenous followed by oral ciprofloxacin with intravenous ceffazidime in the treatment of serious infections. Am J Med 1989; 87: 1858-1908. 23 Ramirez JA, Srinath L, Ahkee S, Huang A, Raft MJ. Early switch from intravenous to oral cephalosporins in the treatment of hospitalized patients with community-acquired pneumonia. Arch Intern Med 1995; 155: 1273-1276. 24 Santora J et al. Pharmacist intervention program focused on IV. Ranitidine therapy. Am J Hosp Pharm 1990; 47: 1346-1349. 25 Solomkin JS, Reinhart HH, Dellinger EP et al. Results of a randomized trial comparing sequential intravenous/oral treatment with ciprofloxacin plus metronidazole to imipenem/cilastatin for intra-abdominal infections. The Intra-abdominal Infection Study Group. Ann Surg 1996; 223: 303-315. 26 Trenholme GM, Schmitt BA, Spear J, Gvazdinskas LC. Randomized study of intravenous/oral ciprofloxacin versus ceftazidime in the treatment of hospital and nursing home patients with lowerrespiratory tract infections. Am J Med 1989; 87: 116S-118S. 27 Yoshioka K, Youngs DJ, Keighley MR. A randomised prospective controlled study of ciprofloxacin with metronidazole versus amoxicillin/clavulanic acid with metronidazole in the treatment of intraabdominal infection. Infection 1991; 19: 25-29.
28 Baciewicz AM. Conversion ofintravenous ranitidine to oraltherapy. Drug lntell Clin Pharm 1991; 25: 251-252. 29 Caceres VM, Stange KC, Kikano GE, Zyzanski SJ. The clinical utility of a day of hospital observation after switching from intravenous to oral antibiotic therapy in the treatment of pyelonephritis (see comments). J Faro Praet 1994; 39: 37-39. 30 Frighetto L, Nickoloff D, Martinusen SM, Mamdani FS, Jewesson PJ. Lntravenous-to-oral stepdown program: four years of experience in a large teaching hospital. Ann Pharmaeother 1992; 26: 1447-1451. 31 Guay DRP. Sequential antimicrobial therapy. A realistic approach to cost containment? Pharmacoeconomics 1993; 3: 341-344. 32 Hendrickson JR, North DS. Pharmacoeconomic benefit of antibiotic step-down therapy: converting patients from intravenous ceftriaxone to oral cefpodoxime proxetil. Ann Pharmacother 1995:29, 33 Krstenansky PM, Lau J. Technician assistance in switching patients from injectable to oral therapy. Am J Hosp Pharm 1994; 51: 384-386. 34 Malfair SC, Frighetto L, Nickoloff DM, Martinusen SM, Jewesson PJ. Evaluation of the use of cefuroxime and cefuroxime axetil in an intravenous-oral stepdown program. Ann Pharmaeother 1996; 30: 337-342. 35 Cooke J, Cairns CJ, Tillotson GS et al. Comparative clinical, microbiologic and economic audit of the use of oral ciprofloxacin and parenteral antimicrobials. Ann Pharmacother 1993; 27: 785-789,
Cost Issues in Sequential Therapy J. Cooke Department of Pharmacy, South Manchester University Hospitals NHS Trust, Withington Hospital, Nell Lane, Manchester M20 2LR, U.K. Pharmacoeconomics is starting to be employed in strategic therapeutic decision making. Costs associated with antimicrobials included: (i) acquisition costs; (ii) preparation, administration and consumables costs; (iii) monitoring costs; (iv) costs of unwanted drug effects; (v) costs of resistance and therapeutic failures and (vi) costs of duration of stay. Most hospitals have a Drug and Therapeutics Committee but acquisition costs are still the most important economic criterion for acceptance for use, even though medicines only consume between 3 and 5% of total revenue costs, of which antibiotics account for around 15 %. In any sequential programme acquisition costs and consumables are immediately realizable. Staff time and monitoring tests are less realizable but require changes in the way budgets are handled. Microbial resistance and risk management are difficult to quantify but are increasingly becoming important in strategic decision-making. The educational needs of health care decision makers in economic need addressing and mechanisms need to be put in place to enable the putative savings reported in the pharmacoeconomic literature to be realized.
Introduction Pharmacoeconomics is the description and analysis of the costs and consequences of drug therapy to health care systems and society. The value of pharmacoeconomics has been advocated by governments and academics all over the world, as a way of reconciling unlimited demands for medicines with a limited ability to fund their supply. 1 All aspects of the use of medicines may be allocated costs, both direct, such as acquisition and administration costs, and indirect, such as the cost of a given patient's time off work because of illness, in terms of lost output and social security payments. The consequences of drug therapy include benefits for both individual patients and society at large, which m a y be quantified in terms of health outcome and quality of life, in addition to purely economic impacts. Pharmacoeconomics provides a guide for decision makers on resource allocation but is not the sole basis on which decisions should be made. Pharmacoeconomics can assist in the planning process and help to assign priorities where, for example, medicines with a worse outcome may be available at a lower cost and medicines with better outcome and higher costs can be compared. Costs and consequences of therapeutic decision making can be described in a number of ways.
Types of costs Costs can be direct to the health care system, i.e. acquisition costs of medicines, consumables associated with 0163-4453/98/$20045 + 06 $12,00/0
drug administration, staff time in preparation and administration of medicines, laboratory charges for monitoring for effectiveness and adverse drug reactions. Indirect costs include lost productivity from a disease which can manifest itself as a cost to the economy or taxation system, as well as economic costs to the patient and the patient's family. The concept of Opportunity Cost is at the centre of economics and identifies the value of opportunities which have been lost by utilizing resources in a particular service or health technology. This can be valued as the benefits which have been forsaken by investing the resources in the best alternative fashion. Opportunity Cost recognizes that there are limited resources available for utilizing every treatment and therefore the rationing of health care is implicit in such a system. Average costs are the simplest way of valuing the consumption of health care resources. Quite simply, they represent the total costs (i.e. all the costs incurred in the delivery of a service) of a health care system divided by the units of production. For example, a large teaching trust hospital might treat 75 000 patients a year (finished consultant episodes, FeE) and have a total annual revenue cost of £ 1 5 0 million. The average cost per FeE is therefore £2000. Fixed costs are those which are independent of the number of units of production and include heating, lighting and fixed staffing costs. Variable costs, on the other hand, are dependent on the numbers of units of production. The costs of the consumption of antibiotics is a good example of variable costs. © 1998 The British Infection Society
46
J. Cooke
The invariable increases in the medicines budget in a particular institution which is treating more patients or those with a more complex pathology have often been erroneously interpreted by financial managers as a failure to m a n a g e this budget effectively. In order to better describe the costs associated with a health care intervention, economists employ the expression Marginal Costs to describe the costs of producing an extra unit of a particular service. The term Incremental Cost is employed to define the difference between the marginal costs of alternative interventions. In an attempt to analyse all the costs associated with therapy, Gladen and colleagues have developed a hierarchical method of classifying costs associated with antibiotic administration, in order to arrive at a comprehensive estimate of global costs associated with each dosing regimen. 2 This method segregates individual costs into five comprehensive "orders": (i) First-order costs (drug acquisition price factors) List price Transportation charges Contracts Direct versus distributor procurement Incentives, rebates, quantity discounts, special deals package and size considerations (ii) Second-order costs Preparation and administration costs Labour costs P h a r m a c y preparation and materials (CIVAS) Administration supplies (e.g. IV sets) Inventory carrying costs Clinical p h a r m a c y services and other secondary pharmacy functions Monitoring and oversight (P & T committees) (iii) Third-order costs Monitoring costs to guarantee efficacy and minimize toxicity Laboratory tests, X-rays and scans Mandated consultations (iv) Fourth-order costs Drug-related complications Adverse drug reactions and drug interactions (v) Fifth-order costs (arising from suboptimal efficacy) Delay in reaching therapeutic drug levels Unexpected resistance Emerging resistance Superinfection Slow therapeutic response Institutional costs of resistance in nosocomial strains Legal costs
In addition, hospital charges, including those for "hotel services" such as heating and lighting overheads, meals and accommodation, which m a y constitute a major cost, should be considered. These are frequently included in an average cost per patient day. First-order costs, drug acquisition costs, are those which are most frequently scrutinized by health care managers and drug and therapeutics committees. A recent survey of chief pharmacists in the U.K. showed that 86.7% of their hospitals had a formulary of some description and only 12.8% had no Drugs and Therapeutics Committee. Only 17.3% of respondents admitted to having received any formalized training in health economics, despite being in post for a m e a n of 7.1 years, and only 19.4% were aware of the existence of any national guidelines for the economic evaluation of medicines. When asked which economic aspects were considered in formulary listing, 90% volunteered the acquisition cost of the medicine to be the most important. 3 Second-order costs are associated with the use of resources associated with the preparation and administration of medicines and include the time taken by the various types of staff as well as the various equipment and consumables used in the process. 4 ~ Third-order costs include costs of various tests and investigations associated with the use of particular antimicrobials such as monitoring for levels of aminoglycosides or glycopeptides. ~ Fourth-order costs include those associated with adverse drug reactions to prescribed therapy. For example, it has been calculated that each case of nephrotoxicity associated with aminoglycoside therapy costs U.S. $2500. 7 Furthermore, costs of U.S. $1.5 million were awarded against a hospital for not monitoring the levels of aminoglycosides w h e n this resulted in a young w o m a n suffering permanent vestibular damage. 8 These types of costs are now being incorporated into risk m a n a g e m e n t strategies. Fifth-order costs include those associated with drug resistance, which can lead to an institution having to use more expensive and wider spectrum agents which are invariably more toxic. In a study of 50 consecutive cases of Clostridiurn difficile infection a prospective comparison was made with control patients who were admitted to the same geriatric wards within 72 h of the cases. Cases with C. difficile infection stayed in hospital significantly longer (mean 21.3 days) than the controls. The total additional costs associated with C. difficile infection amounted to more t h a n £ 4 0 0 0 per case; 94% of these costs were associated with increased duration of stay?
Cost Issues in Sequential Therapy Types of health economic evaluations There are a n u m b e r of different types of health economic evaluations.
Cost benefit analysis. In cost benefit analysis (CBA) consequences are measured in terms of the total cost associated with a p r o g r a m m e where both costs and consequences are measured in monetary terms. Whilst this type of analysis is preferred by economists, its employment in healthcare is problematical as it is frequently difficult to ascribe pecuniary values to clinical outcomes such as pain relief, avoidance of stroke or improvements in quality of life. However, methods are available to address these issues. CBA can be usefully employed at a macro level for strategic decisions on health care programmes. For example, a countrywide immunization program can be fully costed in terms of resource utilization consumed in running the programme. This can then be valued against the reduced mortality and morbidity which occur as a result of the programme.
Cost effectiveness analysis (CEA). Cost effectiveness analysis can be described as an examination of the costs of two or more programmes which have the same clinical outcome as measured in physical units, e.g. lives saved or reduced morbidity. Treatments with dissimilar outcomes can also be analysed by this technique. Where two or more interventions have been shown to be or are assumed to be similar, then if all other factors are equal (e.g. convenience, side effects, availability, etc.), selection can be made on the basis of cost. This type of analysis is called cost minimization analysis (CMA). CMA is frequently employed in formulary decision making where often the available evidence for a new product appears to be no better t h a n for existing products. This is invariably w h a t happens in practice, as normally clinical trials on new medicines are statistically powered for equivalence as a requirement for licensing submission.
Cost utility analysis (CUA). An alternative measurement for the consequences of a health care intervention is the concept of utility. Utility provides a method for estimating patient preference for a particular intervention in terms of the patient's state of well being. Utility is described by an index which ranges between 0 (representing death) and I (perfect health). The product of utility and life years gained provides the term quality adjusted life year (QALY). The calculation of QALYs provides a method which enables decision makers to compare different health interventions and assign priorities for decisions on resource allocation. However, the use of QALY league
47 UK NHS Drug Spend 1980-1995
3500 3000 2500 ,~ 2000 1500 1000 5OO 0
g~
~ ~g
~ g ~ g g g
~ g g~
Figure 1. U.K. expenditure on medicines. FHS: Family Health Service; HCHS: Hospital and Community Health Service. ( , ) GP expenditure; (D) hospital expenditure.
tables has provided an area of contentious debate amongst stakeholders of health care.
Costs of Health Care Around half of the total UK expenditure on health is associated with hospital care, and a typical acute general hospital's revenue costs might be distributed as follows: Salaries & wages Medical & dental Nursing Prof & tech Other Total Staff
% 6 48 10 17 81
Non staffing Medicines Medical & surgical Provisions Other (rates, heating, etc.) Total Non-Staff
% 3 6 2 8 19
In the United Kingdom medicines account for about 10% of health care expenditure. Most of this cost is incurred in the primary care setting, where around 7% is spent on antimicrobials (virtually all oral). In the average hospital between 3 and 5% of total costs are attributable to medicines and antimicrobials account for up to 25% (mean 15%) of these costs. Parenteral formulations are generally more expensive than oral, therefore they account for a disproportionately high part of the total cost. Thus the first-order (drug acquisition) costs are only associated with a very small part of the total expenditure on healthcare and yet these bear a considerable focus of
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J. Cooke
effort for economies. Whilst a reduction in the unnecessary use of medicines is viewed as being desirable, this does not necessarily increase the efficiency of the organization. Rather, efficiency should be measured in terms of treating patients better or treating more patients from the same budget. More t h a n four-fifths of a hospital's expenditure goes on staffing costs, and therefore it might be expected that anything which reduces this element might be considered to be a desirable goal. The ability to transfer these basic economic principles into practice has been a considerable challenge to the protagonists of pharmacoeconomics. A n u m b e r of studies have demonstrated the effectiveness, in clinical terms, of switch therapy. 1°-27 The use of clinical pharmacists intervening to promote switch therapy from intravenous to oral ranitidine was estimated to be able to save around U.S. $23 000 a year in a teaching hospital. 28 In an open controlled trial, patients admitted for lower respiratory tract infection were randomized to treatment with either oral co-amoxiclav, intravenous followed by oral co-amoxiclav, or intravenous followed by oral cephalosporins. There were no significant differences between the groups in clinical outcome or mortality; however, patients randomized to oral co-amoxiclav had a significantly shorter hospital stay than the two groups given intravenous antibiotic (median 6 vs. 7 and 9 days, respectively). The oral antibiotics were cheaper, easier to administer, and if used routinely in the 800 or so patients admitted annually would lead to savings of around £ 1 7 6 000 a year. 1° However, a counterargument might be raised that the patient should never have been admitted to an acute hospital in the first place. In another study the routine practice of having a 24hour observation period following switching from intravenous to oral antibiotic therapy was questioned. 29 A campaign to promote the use of oral versus intravenous antibiotics in a 1000-bed Canadian teaching hospital employed eye-catching reminders attached to patient's charts. Substantial cost savings were achieved for metronidazole and clindamycin, and the programme has been expanded to cover fiuconazole, cefuroxime and ciprofloxacin as well. 3° A review of the selection of antibiotic treatment for serious, hospital-associated infections concluded that for selected patients, use of oral rather t h a n intravenous antibiotics could lead to significant cost savings in terms of drugs and administration, and to benefits for the patient without adverse clinical consequences. 31 An evaluation of the economic benefit associated with the early conversion of therapy from IV ceftriaxone to the comparable oral third-generation cephalosporin, cefpodoxime proxetil showed that in the cefpodoxime study group, the average time receiving intravenous and
oral antibiotics was 9.1 days at a total cost of $3040.26 for the 20 patients. In the control group, the average time receiving intravenous and oral antibiotics was 11.9 days at a total cost of $3961.26. A saving of $46.05 per patient was achieved. Patients receiving sequential therapy averaged 1 less day of hospitalization. 32 An evaluation of a standard form for recommending changes from injection to oral dosage forms supported by p h a r m a c y technicians demonstrated that the technicians produced savings which roughly equalled the staff costs. Furthermore, nurses gained time for providing services other t h a n drug administration) 3 A parenteral-to-oral (IV-po) sequential program was undertaken in a Canadian teaching and tertiary care referral hospital with 1100 beds, where a random sample of 78 patients receiving cefuroxime was compared with a random sample of 50 patients receiving IV-po cefuroxime. The clinical effectiveness of the two regimens was similar. Mean costs of drug therapy per day was less for the sequential group (U.S. $15.78 t h a n the IV group (U.S. $25.47, P
Are cost savings real? There is considerable debate about the true value of the various costs included in economic evaluations. Often a perceived saving within one budget results in greater expenditure for the health service as a whole. Moreover,
Cost Issues in Sequential Therapy
49
Table I. Estimate of the effect on the healthcare budget of savings on specified items in the U.K. Item
Effects of savings
Notes
Drug costs Consumables Lab costs Staff costs
+ + + +
Resistance Risk m a n a g e m e n t Treatment setting
+ + + +
Budgets can be held centrally or locally Both budgets should be held localiy Often there are fixed overheads associated with the delivery of the service Only w h e n wards can be closed or w h e n overtime or bank staff time can be reduced Data is present but the application remains theoretical Not yet sophisticated e n o u g h to consider in real terms Providing sufficient support is available in the n e w setting
+ + + + + + +
+ = s a v i n g s are marginal and dependent on organizational changes; + + = s a v i n g s are dependent on service costings; + + + = s a v i n g s are realizable on a hospital perspective; + + + + = s a v i n g s are real and significant.
resources saved m a y be used to treat more patients, increasing total expenditure. In the U.K. drug costs receive a lot of attention, despite consideration of their minor impact on total healthcare expenditure (Table I).
Conclusion There are a number of situations where economic savings can be obtained by the judicious switching from intravenous to oral antimicrobial therapy. Recent surveys have indicated that health care decision makers still regard acquisition costs as the the most important factor for drug selection. Awareness of the principles of economic evaluation needs to be raised if health economics is to be effectively incorporated into strategic and operational planning. It does not matter how well a health economic evaluation is carried out if the mechanisms are not in place to use the results.
Acknowledgement The author would like to sincerely t h a n k Miss Sue Austen, Drug Information P h a r m a c y Manager, South Manchester University Hospitals NHS Trust for assistance with the literature searches.
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