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what is being measured with different types of analysis: cost-minimization
cost: dollars
outcome: clinical measure

comparing money to a clinical measure (two blood pressure drugs that have the same outcome but different costs)
what is being measured with different types of analysis: cost-effectiveness
cost: dollars
outcome: clinical measure

comparing the money for two drugs that may have slightly different effectiveness outcomes.
what is being measured with different types of analysis: cost-benefit
cost: dollars
outcome: dollars

cost of service/drug versus cost of the benefit/risk
what is being measured with different types of analysis: cost-utility
cost: dollars
outcome: clinical measure / dollars / quality-adjusted life years

cost of service/drug compared to how many quality years are added to life
what is being measured with different types of analysis: cost of illness
nothing (not assessed)
CMA
cost minimization analysis

used when two or more therapeutic interventions are EQUIVALENT in terms of their outcomes or consequences

Purpose is to choose the least costly of equivalent alternatives.
CEA
cost effectiveness analysis

outcomes are measured on same scale, however are NOT equivalent
CBA
cost-benefit analysis

outcomes can be measured in different units, both cost and benefits are in dollars

Only analysis we are discussing where the outcome measure is also cost. All the others compare cost to some other type of outcome measure.
CUA
cost-utility analysis

like CEA, except the outcome is QALYs, uses utility values on scale of 0-1 (death-perfect health).
what pharmacoeconomics is and what it evaluates
Definition: describes a compilation of methodologies that evaluate economic, clinical, and humanistic outcomes (ECHO) of pharmaceutical products and services

Can be used to evaluate formulary products, treatment guidelines, prior authorizations and step-therapy policies, disease management, etc.
Apply understanding of QALY in a cost-utility analysis
- Quality Adjusted Life Years
- Takes into account if additional life years are of quality or not, using utility value scale. You could do a CEA, but maybe the additional life years are in a coma and on a ventilator versus being able to live at home with little to no assistance.
- To determine the QALY you multiply the additional years by the utility value.
- The total cost is then divided by the QALY to get the CU ratio (Cost/QALY)
Decision Analysis
utilizes a statistical model to analyze clinical and resource data already in the literature
Two Types of Decision Analysis
- decision tree
- markov model
Decision Tree
Direct observation not feasible, sum of probabilities of a cost occurring x the cost estimated for treatment alternatives
Markov Model
- In terms of "health states", better for chronic diseases, looks at probability of being well, ill, or dead.
- Takes into account a patient may go between well and ill multiple times, only dead once
PE
Pharmacoeconomics

describes a compilation of methodologies that evaluate the economic, clinical, and humanistic dimensions of pharmaceutical products and services.

Some examples are to help decide which medications to put on a formulary, what medication(s) to start with and then switch to based on data, and many others.
CCA
cost-consequence analysis

Presents all costs and all effects in a disaggregated tabular format (combined under appropriate categories) so that decision makers can better choose the costs and consequences that fit their perspective.
Efficiency
lowest cost per unit output; best allocation of resources that optimize productivity.
Efficacy
it works; positives outweigh negatives.
Effectiveness
it works in the real world; works for individuals for which it was intended.
Direct medical costs
Resources consumed for medical services or products that are directly related to the product or service being evaluated.

Examples: physician services, medications, labs, X-rays, etc.
Direct nonmedical costs
Resources consumed as a result of the medical product or service being provided
.
Examples: transportation, special diets, etc.
Indirect costs
Resources spent that are indirectly associated with the product or service (i.e. loss of productivity)
.
Controversial because it is difficult to measure
Intangible costs
Pain and suffering

Very difficult to measure
Measuring costs
- Frequently, involves counts of units of the resources consumed.
- Units may be of number of goods or time consumed.
Valuing costs
- Placing a dollar value to the measured resource, good, or service.
- Additionally, must include opportunity costs - value of the resource in its next best use (i.e. loss of a forgone gain).
Discounting
if costs of products or services extend over more than one year, the time value of money must be taken into account (i.e. interest and inflation).
Sensitivity analysis
testing the variability of outcome or cost assumptions under different scenarios - best, expected, worst case.
Valuation of lives saved:
- Human capital approach
- Willingness-to-pay approach
Human capital approach
- Income that would have been earned over remaining productive years.
- Does not recognize value to family and friends.
Willingness-to-pay approach
Individuals are asked, "How much would you be willing to pay to decrease the risk of ____ (death, disease, pain, etc.)?

Advantage is that - at least in theory - it values the full range of benefits.

Disadvantage is that it is difficult to obtain.
Randomized controlled trials
- Patients are recruited and randomly assign to groups each receiving a different treatment alternative.
- A standardized treatment protocol is followed for all.
- Patients and investigators are blinded as to which treatment in which they are participating.
- Advantage is strong internal validity - results are attributable the treatment.
- Disadvantages are that it is costly and results are not reflective of "the real world."
Naturalistic designs
- Patients are still randomly assigned; but,
- The patients recruited and the care delivered are representative of those seen in routine practice.
Retrospective analysis
- Uses observational data (i.e. actual claims).
- Advantages are that it reflects actual costs of routine clinical care ("real world"), comprehensive, large sample.
Decision analysis
- Systematic approach to decision making under conditions of uncertainty.
- Rather than the study being done prospectively or collecting data on individual patients, clinical and resource data are collected from the literature and are utilized in a statistical model that simulates the variability in the decision making process.
Decision trees
Direct observation not feasible.

Time or money constraints are prohibitive.

Sum of probabilities of a cost occurring x the cost is the estimated cost of each treatment alternative.
Markov models
Better for chronic diseases since decisions are in terms of "health states" - well, ill, dead - and it can follow patients through transitions from one state to another.

Preferred for problems involving continuous risk, timing of events is important, events may happen more than once.
Triple Aim
- Improving the patient experience of care (including quality and satisfaction)
- Improving the health of populations
- Reducing the per capita cost of health care
CON
Certificates of need

state has to approve capital improvements to reduce duplication of services.
PSROs
Professional Standards Review Organizations

national network of utilization review programs for cost-containment and quality assurance; replaced with more local peer review organizations (PROs).
DRGs
Diagnosis-Related Groups

set schedule of fees paid to hospitals based on a diagnosis (episode of care).

If care is provided for less, then the hospital keeps the difference; if more, the hospital absorbs the loss.
OBRA
Omnibus Budget Reconciliation Act

Requiring pharmacists to keep patient profiles
Conduct prospective drug utilization reviews
Provide Rx medication counseling to Medicaid patients
HIPAA
Health Insurance Portability and Accountability Act (HIPAA) of 1996*
HSAs
Health Savings Accounts

Tax-free savings accounts to be used for out-of-pocket medical expenses for individuals who select a high deductible health insurance plan.
MSA
medical savings account
Patient Protection and Affordable Care Act Changes to Private Insurance
Must provide dependent coverage for children up to age 26
Prohibit pre-existing condition exclusions for children
Prohibit lifetime limits for individuals
Limit elimination periods to 90 days
Limit deductibles to $2,000 for individuals and $4,000 for families
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