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Health economic evaluation and reimbursement of pharmaceuticals
EUROPEAN
ELSEVIER
European Journal of Pharmaceutical Sciences 2 (1994) 56
JOURNAL
OF
PHARMACEUTICAL SCIENCES
Health economic evaluation and reimbursement of pharmaceuticals Michael F. D r u m m o n d University of York, Centre for Health Economics, York 401 5DD, UK
Economic evaluation compares the costs and consequences of alternative health care programmes and treatments. It provides data on the health gain attained in relation to the cost. There is a family of techniques of varying degrees of complexity. The different techniques vary in the extent to which the consequences of therapy are measured and valued. In cost-minimization analysis the consequences are assumed (or shown) to be identical and the analysis reduces to a comparison of costs alone. In cost-effectiveness analysis the consequences are measured in natural units or effects such as life years gained or disability days avoided. In cost-utility analysis valuations are made of different health states. In cost-benefit analysis both costs and consequences are expressed in money terms [1]. In economic assessments of drug therapy the comparison of costs needs to be wider than just the relative acquisition costs of the drugs. (For example, it should include the costs of administration and the cost impact of side effects.) Also, any differences in cost need to be balanced against the health impacts of differences in efficacy and side effects. The cheapest drug is not necessarily the most cost-effective. Health care decision makers are now taking much more interest in economic evaluations of pharmaceuticals, and some countries, most notably Australia and Canada, have proposed guidelines for studies [2,3]. In judging economic evaluations it is important to consider whether the alternatives are realistic or relevant, whether the assessment was based on reliable medical evidence, whether the costing was accurate, whether the assumptions were reasonable and whether, overall, the evaluation was free of bias. With the advent of government guidelines for the provision of cost-effectiveness data, economic evidence has been elevated to a status similar to that of evidence of efficacy and safety, which is required before licensing of pharmaceutical prod0928-0987/94/$07.00 ~ 1994 Elsevier Science B.V. All rights reserved SSD1 0928-0987(94)00034-W
ucts. Whilst the precise nature of government requirements is likely to vary from place to place, they pose a number of practical problems for pharmaceutical companies, in the funding of studies and in the need to modify the clinical trials program to facilitate economic data collection [4]. Economic evaluation requirements have been viewed by various parties as a basis for pricing and reimbursement, as a form of cost containment and as a way of securing more value for money in the health care system. It is unlikely that economic evidence could ever form the sole basis for setting price, since both industry and government often seek to introduce other factors into the price negotiations. Requirements for economic evidence may also be an inefficient form of cost containment, compared with other methods such as budgetary caps. They offer some potential as a way of securing more value for money, but they should be applied equally across all health technologies. In the future there needs to be much more clarity of purpose in government guidelines, and methodological standards for economic analysis need to be refined.
References [1] Drummond, M.F., Stoddart, G.L. and Torrance, G.W. (1987) Methods for the economic evaluation of health care programmes. Oxford, Oxford University Press. [2] Commonwealth of Australia (1992) Guidelines for the pharmaceutical industry on preparation of submissions to the Pharmaceutical Benefits Advisory Committee, including submissions involving economic analyses. Department of Health, Housing and Community Services, Canberra. [3] Detsky, A.S. (1993) Guidelines for economic analysis of pharmaceutical products: a draft document for Ontario and Canada. PharmacoEconomics 3, 354-361. [4] Drummond, M.F. (1992) Cost-effectiveness guidelines for reimbursement of pharmaceuticals: is economic evaluation ready for its enhanced status? Health Economics 1, 85-92.
ELSEVIER
European Journal of Pharmaceutical Sciences 2 (1994) 56
JOURNAL
OF
PHARMACEUTICAL SCIENCES
Health economic evaluation and reimbursement of pharmaceuticals Michael F. D r u m m o n d University of York, Centre for Health Economics, York 401 5DD, UK
Economic evaluation compares the costs and consequences of alternative health care programmes and treatments. It provides data on the health gain attained in relation to the cost. There is a family of techniques of varying degrees of complexity. The different techniques vary in the extent to which the consequences of therapy are measured and valued. In cost-minimization analysis the consequences are assumed (or shown) to be identical and the analysis reduces to a comparison of costs alone. In cost-effectiveness analysis the consequences are measured in natural units or effects such as life years gained or disability days avoided. In cost-utility analysis valuations are made of different health states. In cost-benefit analysis both costs and consequences are expressed in money terms [1]. In economic assessments of drug therapy the comparison of costs needs to be wider than just the relative acquisition costs of the drugs. (For example, it should include the costs of administration and the cost impact of side effects.) Also, any differences in cost need to be balanced against the health impacts of differences in efficacy and side effects. The cheapest drug is not necessarily the most cost-effective. Health care decision makers are now taking much more interest in economic evaluations of pharmaceuticals, and some countries, most notably Australia and Canada, have proposed guidelines for studies [2,3]. In judging economic evaluations it is important to consider whether the alternatives are realistic or relevant, whether the assessment was based on reliable medical evidence, whether the costing was accurate, whether the assumptions were reasonable and whether, overall, the evaluation was free of bias. With the advent of government guidelines for the provision of cost-effectiveness data, economic evidence has been elevated to a status similar to that of evidence of efficacy and safety, which is required before licensing of pharmaceutical prod0928-0987/94/$07.00 ~ 1994 Elsevier Science B.V. All rights reserved SSD1 0928-0987(94)00034-W
ucts. Whilst the precise nature of government requirements is likely to vary from place to place, they pose a number of practical problems for pharmaceutical companies, in the funding of studies and in the need to modify the clinical trials program to facilitate economic data collection [4]. Economic evaluation requirements have been viewed by various parties as a basis for pricing and reimbursement, as a form of cost containment and as a way of securing more value for money in the health care system. It is unlikely that economic evidence could ever form the sole basis for setting price, since both industry and government often seek to introduce other factors into the price negotiations. Requirements for economic evidence may also be an inefficient form of cost containment, compared with other methods such as budgetary caps. They offer some potential as a way of securing more value for money, but they should be applied equally across all health technologies. In the future there needs to be much more clarity of purpose in government guidelines, and methodological standards for economic analysis need to be refined.
References [1] Drummond, M.F., Stoddart, G.L. and Torrance, G.W. (1987) Methods for the economic evaluation of health care programmes. Oxford, Oxford University Press. [2] Commonwealth of Australia (1992) Guidelines for the pharmaceutical industry on preparation of submissions to the Pharmaceutical Benefits Advisory Committee, including submissions involving economic analyses. Department of Health, Housing and Community Services, Canberra. [3] Detsky, A.S. (1993) Guidelines for economic analysis of pharmaceutical products: a draft document for Ontario and Canada. PharmacoEconomics 3, 354-361. [4] Drummond, M.F. (1992) Cost-effectiveness guidelines for reimbursement of pharmaceuticals: is economic evaluation ready for its enhanced status? Health Economics 1, 85-92.