Introduction to pharmacoeconomics
Pharmacoeconomics refers to the branch of health economics which measures and compares the costs involved in pharmaceutical products (typically drugs) and services. It takes into account the research investment, production, distribution, storage, pricing and further use by patients.
Pharmacoeconomics is useful when assessing the affordability and value of accessing a drug prescribed to a determined subgroup of patients. Indeed, pharmacoeconomic analyses are increasingly used to help decision-makers assess the value of health interventions.
Pharmacoeconomics provides a set of analytic tools which can be used to compare and contrast. The most common ones are:
- Cost-of-illness analysis (COI)
- Budget-impact analysis (BIA)
- Cost-comparison analysis
- Cost-minimisation analysis (CMA)
- Cost-effectiveness analysis (CEA)
- Cost-utility analysis (CUA)
- Cost-consequence analysis (CCA)
- Cost-benefit analysis (CBA)
Commonly, tools like decision trees and comparison models are put in place to proceed with the proper assessment.
Overview of drug pricing
The price of a medicine or a health technology is not static, as it generally depends on the markets (drug competition, country economy, patent repayment, etc.) and it changes over time. Prices can be measured and evaluated as the price paid to the manufacturer, the price paid by the consumer or patient, or prices from suppliers. Typically, a new medicine is launched under patent and may have a high price until the patent expires and competition and/or generic products emerge. Prices of generic versions that are registered following patent expiry usually decrease rapidly, often by more than 90% compared to originator brand.
When it comes to the particular case of lung cancer, new immunotherapy and targeted therapies have usually a high price. This is challenging public health care systems or patients who have to pay for them out of pocket. The recent approval of novel high-priced medicines for many conditions has prompted a new global debate on medicine costs and calls for a fair pricing model for both drug development and drug supply.
Equitable access to essential, high-quality and affordable essential medicines and other medical technologies depends on affordable and fair pricing and effective financing schemes. Promoting affordable and fair prices and cost-effective interventions is central to the achievement of universal health coverage.
An ‘affordable and fair’ price is one that can reasonably be funded by patients and health budgets and simultaneously sustains research and development, production and distribution within a country.
Overview of Health Technology Assessment (HTA)
Health Technology Assessment (HTA) refers to the systematic evaluation of properties, effects and impact of health technology (medicines, devices, vaccines, procedures and systems) which measures the social, economic, organisational and ethics of a health intervention or a health technology.
Health technology assessment is intended to provide a bridge between the world of research and the world of decision-making. HTA is an active field internationally and has seen continued growth fostered by the need to support management, clinical, and policy decisions. It has also been advanced by the evolution of evaluative methods in the social and applied sciences, including clinical epidemiology and health economics. Health policy decisions are becoming increasingly important as the opportunity costs from making wrong decisions continue to grow. HTA is now also used in assessment of innovative medical technologies like telemedicine e.g. by use of the Model for assessment of telemedicine (MAST).
Organisations and institutions in charge of running HTA evaluations are commonly designed as HTA agencies. Typically, they have regional or national scope and they use different approaches to assess the value of a determined health technology based on local policies. There are also supranational HTA bodies, such as EUnetHTA, which has gained importance recently for their growing efforts on having joint assessments to provide a common European framework to evaluate the introduction of new techonologies.
Factors influencing drug pricing
Many factors have a weight when it comes to price setting. The most common ones are:
- Uniqueness of the drug
- Drug competition
- Cost savings by preventing the need of certain medical processes
- National regulation
- Patent expiration – Generic/biosimilars availability
Due to the increasing number of high price medicines and health technologies, a set of different pricing mechanisms are in place. The purpose of having these mechanisms tries to leverage the several interests involved from the different stakeholders taking place in the health system environment (patients, payers, regulators, researchers, industry, etc.).
The main pricing mechanisms are as it follows:
- Value-based pricing. Linked to perceived value of a new treatment to health systems.
- Outcomes-based pricing. Linked to patients achieving clinical or other outcomes.
- Indication-specific pricing. Different prices for the same drug when used in different indications.
- Conditional approval. Linked to the continuous provision of evidence on benefit-risk assessment while drug is still being developed but has shown some benefits at the time of the approval.
- Coverage with evidence development. When clinical evidence is often limited at the time of launch and their long-term (cost-) effectiveness heavily depends on how they are adopted into routine clinical practice.
- Combination medicine pricing. In a scenario where a new drug may not be cost effective, even when given away for zero price.
- Volume discount. High amount purchase for covering public health issues – i.e. flu vaccination campaigns.
Patient involvement in HTA processes
Patient and public involvement in the HTA process and the act of balancing individual needs with those of the population is important. Measures should be taken in order to address inequalities between the strength of the voices of professional and industry interests and those of citizens and patients. Simply advocating that a new technology is ‘needed’ once it is being assessed is not enough to influence or sway the decisions of publicly accountable decision-makers and the HTA bodies that support them. Rather, a good way to put patient participation in place might be characterised as involvement (versus representation). Across HTA bodies, patients are participating in more aspects of HTA. Active patient and public involvement in HTA may include various combinations of activities such as1
- Serving as members of HTA boards, committees, and workgroups
- Identifying potential topics for HTA
- Early identification of potential target groups for HTA reports
- Setting priorities among HTA topics
- Identifying health outcomes and other impacts (economic, social, etc.) to be assessed
- Reviewing proposals or bids by outside organizations/contractors to conduct HTAs
- Providing expert input to an appraisal committee
- Submitting evidence for HTAs
- Reviewing draft HTA reports and recommendations
- Helping to design and prepare patient-friendly HTA report summaries
- Dissemination of HTA findings to policymakers, patient groups, and other target groups
- Evaluating the use of HTA recommendations
As patient organisations become familiar with HTA, they are increasing their engagement in debates about policy priorities and access. Patient organisations are also now using HTA recommendations to inform action and lobbying to access new therapies or improve the usage of existing therapies.