Cost-effective Prescribing

Dr. Máirín Ryan

Pharmacoeconomics

Pharmacoeconomics: that branch of health economics that focuses upon the costs and benefits of drug therapy

limited resources maximum health impact from a given budget cost-effective prescribing

Economic evaluation always involves a comparative analysis of alternative courses of action

Opportunity Cost

PPARS Herceptin for breast cancer

National Centre for Pharmacoeconomics

• Established with financial support from the Department of Health and Children

• Aims to promote expertise in Ireland for the advancement of the discipline of pharmacoeconomics through education, practice and research

D ep t o f H ea lth R esea rch E d u ca tio n

C en tre

www.ncpe.ie

Drug expenditure (€ Millions) under the Community Drugs Scheme between 1994 and 2004

0

200

400

600

800

1000

1200

1400

1600

GMSTotal

Top 10 products of highest cost to the GMS for the year ended 2004 in the order of their total ingredient cost

0 5 10 15 20 25 30

AMLODIPINE

ESOMEPRAZOLE

CLOPIDOGREL

LANSOPRAZOLE

SALMETEROL AND DRUGS FOR COPD

OLANZAPINE

OMEPRAZOLE

PRAVASTATIN

CLINICAL NUTRITIONAL PRODUCTS

ATORVASTATIN

€ million

1. Product Mix: Prescribing of newer more expensive medications:

OmeprazoleLansoprazoleEsomeprazolePantoprazoleRabeprazole

PravastatinAtorvastatinSimvastatin

2. Volume effect: Growth in the number of prescription itemsThe number of eligible GMS patients has fallen by 9.1% from 1.27 million in 1993 to 1.16 million in 2003. However, the 32.3 million items prescribed in 2003 represent an 87% increase over the 10 year period.

10% of GMS expenditure 2003 (€51.3m)

8.3% of GMS expenditure 2003 (€42.9m)

The main reasons driving such growth in pharmaceutical expenditure include:

Spending on Drugs is a major Target for Savings in Health Care costs because of the ...

• Volume of Drug Expenditure• Highly visible nature of drug utilization• Perception that the drug budget is not being used

to the best advantage• Perception that savings can be made without

detriment to patients• Avoids having to address sensitive issues relating

to other areas of the Health Care Budget

Improving cost-effectiveness of pharmaceutical expenditure

• Review pricing mechanism

• Generic prescribing

• Cost-effective prescribing

IPHA agreement: governs price of drugs in Ireland

• Price linked to high price countries• Automatic reimbursement• Price freeze since 1993• Contribution of pharmaceutical industry to the

economy

• 2006 Renegotiation– Realignment of prices– Generic substitution– PE evaluation prior to reimbursement

Netherlands

Denmark

Germany

France

Ireland

Britain

Ireland links its drug price by formula to those of five other member states

Interdependence of European pharmaceutical prices

Finland:Weighted EU average

Sweden: EU median

Denmark:EU average

Germany:No external Reference

France: No external reference

Spain:Average FR, IT

Portugal:Minimum FR, IT, SPA

Italy: All EU prices

Greece: Lowest EU price

Belgium: Average DK, FIN, FR, GER, NL, NOR, SWE, UK

Netherlands:Average BE, FR, GER, UK

Ireland: Minimum price-UK or average of DK, FR, GER, NL, UK

UK: No external reference

Source: Evidence-based health care reimbursement systems in Europe. ISPOR 2003

International Pharmaceutical Price Comparisons

Tilson et al. The high cost of medicines in Ireland: is it time to change the pricing mechanism? Eur J

Health Econ.

Potential cost savings on the GMS scheme from substitution of a Danish, average European and UK price

20.95

16.54

9.38

0

5

10

15

20

25

Danish price Average Europeanprice

UK price

Mill

ion

€

Tilson et al. The high cost of medicines in Ireland: is it time to change the pricing mechanism? Eur J Health Econ Vol 5 No 4 Nov 2004; 341-344

Potential cost savings (million €) for individual drugs by substituting prices

Danish price

Average European price

UK price

Omeprazole 2.16 1.09 2.7

Pravastatin 2.85 2.85 0.85

Lansoprazole 2.74 1.57 1.61

Sertraline 1.01 1.01 1.29

4

5

6

7

8

9

10

11

12

13

14

AUS BEL FIN FR GER IRL ITA NL POR DNK GB N

Ex-Mnf-Price Wholesaler Margin Pharmacy Margin VAT

Difference in distribution costsDifference in distribution costsBasis: €5 ex-manufacturer priceBasis: €5 ex-manufacturer price

Source: Bohn, Schering 2002

Conclusion

Possible explanations for the differences in prices:Possible explanations for the differences in prices:

The wholesale margin is higher in Ireland than in The wholesale margin is higher in Ireland than in the UK and Denmark.the UK and Denmark.

Exchange rate fluctuations.Exchange rate fluctuations.

Generic substitution in Denmark makes market Generic substitution in Denmark makes market more competitive.more competitive.

Price freeze in Ireland since 1993 – no system in Price freeze in Ireland since 1993 – no system in Ireland to revise prices in line with the reference Ireland to revise prices in line with the reference countries.countries.

Improving cost-effectiveness of pharmaceutical expenditure

• Review pricing mechanism

• Generic prescribing

• Cost-effective prescribing

The potential impact of introducing a

system of generic substitution on the

Community Drug Schemes in Ireland

Lesley Tilson, Kathleen Bennett, Michael Barry.Eur J Health Economics Sep 2005 Vol 6 Issue 3. 267-273

Objectives

1.1. To investigate the level of generic drug To investigate the level of generic drug utilisation on the GMS and DP schemes for all utilisation on the GMS and DP schemes for all Health Board areas in 2003.Health Board areas in 2003.

2.2. To carry out a cost-minimisation analysis to To carry out a cost-minimisation analysis to determine the potential savings to the drugs determine the potential savings to the drugs budget if a system of generic substitution were budget if a system of generic substitution were implemented.implemented.

The percentage of the ingredient cost spent on generic items on the GMS and DP schemes in 2003

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

Generic Branded generic Proprietary drug with equivalentgeneric

Proprietary drug with noequivalent generic

DPS GMS

Potential Savings from Generic Substitution

Substitution of cheapest generic equivalent

Substitution of average price of generic equivalent

Substitution of maximum price of generic equivalent

Estimated savings on the GMS

€12.7 million €10.9 million €9.0 million

Estimated savings on the DPS*

€9.1 million €7.7 million €6.4 million

* Including savings due to the 50% pharmacy mark-up

Prescribe generically!

Improving cost-effectiveness of pharmaceutical expenditure

• Review pricing mechanism

• Generic prescribing

• Cost-effective prescribing:

Cost-effective prescribing

How well are we doing?• Do we prescribe generically?• Do we adhere to evidence based guidance

on treatment and prevention?• Do we prescribe the safest therapies?• Do we select the most cost-effective

options?

National Centre for Pharmacoeconomics, January 2006Total Ingredient cost € of all statin medications (ATC class C10AA) to the GMS

between Jan'00 and Sep'05

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

ingr

edie

nt c

ost

C10AA01 Simvastatin branded C10AA01 Simvastatin genericC10AA03 Pravastatin branded C10AA03 Pravastatin genericC10AA04 Fluvastatin C10AA05 AtorvastatinC10AA06 Cerivastatin C10AA07 Rosuvastatin

Statin prescribing in Ireland

• Under prescribing…target 25%– 8% in 2002

• IHD 52%, Diabetes 40%

• Doses lower than in the pivotal trials– E.g. pravastatin 20mg

Regional variation in prescribing for diabetes and use of secondary

preventative therapies in Ireland.

C Usher at alPharmacoepidemiology & Drug Safety 2005

Diabetes in Ireland

• Diabetes: growing epidemic – Ageing population, diet, sedentary lifestyle

• Cardiovascular disease accounts for 70% of deaths• Irish Cardiovascular Strategy:

– Secondary preventative therapies e.g. statins, aspirin, BP control

• National Health Strategy– Equity of access?

Standardised Hospital Discharge Rates for persons with diabetes / health board region

Region IDDM NIDDM

EHB 110.3 104.1

WHB 98.6 95.1

MHB 112.8 130

MWHB 114.7 111.4

SEHB 97.3 116.1

NWHB 77.6 87.1

SHB 104.3 96.4

NEHB 98.8 109.2

Adjusted ORs for prescribing of ASPIRIN to NIDDM patients by gender

00.20.40.60.8

11.21.41.61.8

EHBW

HB

MWHB

NEHB

NWHB

SEHBSHB

MHB

Adjusted ORs for prescribing of STATINS to NIDDM patients by gender

00.20.40.60.8

11.21.41.61.8

2

EHB WHBMWHBNEHBNWHB SEHB SHB MHB

Adjusted ORs for prescribing of ACEi to NIDDM patients by gender

0

0.2

0.4

0.60.8

1

1.2

1.4

EHBW

HB

MWHB

NEHB

NWHB

SEHBSHB

MHB

Cost-effective prescribing

How well are we doing?• Do we prescribe generically?• Do we adhere to evidence based guidance

on treatment and prevention?• Do we prescribe the safest therapies?• Do we select the most cost-effective

options?

Usage of paracetamol containing combination analgesics remains high

in primary care

C Usher et al. BJCP 2005

Background• Distalgesic: compound opiate analgesic (dextroprooxyphene 32.5mg and paracetamol 325mg).• Indication: mild to moderate pain.• Controversial? Repeated use may result in tolerance, cases of abuse also reported (McBride, 1995).• Use in elderly regarded as inappropriate (Fick, 2003).

Aim

Compare prescribing of DISTALGESIC with PARACETAMOL alone and PARACETAMOL COMBINATION

products.

Drug Total no. prescriptions % of total no. prescriptions

Co-proxamol* 366,212 42%

Paracetamol 500mg 271,636 31% (29% tabs., 2% supp.)

Paracetamol 500mgCodeine 8mgCaffeine 30mg

122,004 14%

Paracetamol 500mgCodeine 30mg

61,544 7%

Paracetamol 500mgDihydrocodeine 10mg

50,889 6%

Paracetamol 500mgMetoclopramide hydrochloride 5mg

8,404 1%

Total number of prescriptions on the GMS in 2003 for paracetamol-containing analgesic preparations.

*Dextropropoxyphene hydrochloride 32.5mg, paracetamol 325mg. Usher et al., 2005

Odds Ratios and 95% Confidence Intervals for patients receiving follow-up prescriptions for the paracetamol-containing analgesic preparations 12 months

post initiation of therapy

Usher et al., 2005

OR (95% CI) Female vs. male#

OR (95% CI) Over 65s vs. Under 65s#

Co-proxamol 1.18 (1.07-1.28)*** 1.71 (1.57-1.86)*** Paracetamol only 1.28 (1.16-1.39)*** 2.67 (2.44-2.93)*** Paracetamol combinations 1.33 (1.20-1.47)*** 1.69 (1.53-1.87)*** # Reference category. *p<0.05; **p<0.01; ***p<0.001.

Cost-effective prescribing

How well are we doing?• Do we prescribe generically?• Do we adhere to evidence based guidance

on treatment and prevention?• Do we prescribe the safest therapies?• Do we select the most cost-effective

options?

Cost-effective prescribing of Proton Pump Inhibitors

• 10.1% of the GMS drugs budget for 2002 was attributable to the Proton Pump Inhibitors.

• Four of the five PPI’s licensed in Ireland with the exception of Rabeprazole are among the top thirty products of highest cost to the GMS.

• A review by the UK’s National Institute of Clinical Excellance (NICE) concluded that the efficacy of individual PPI’s did not differ significantly, and the choice of agent should be based on licensed indication and cost (July 2000).

Source: McGowan et al. Cost-effective prescribing of proton pump inhibitors in the GMS scheme. IMJ (2004).

Total GMS Expenditure (€) on PPIs in the ERHA between Jan 2001and Dec 2002

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Jan'0

1

Feb'01

Mar'01

Apr'01

May'01

Jun'0

1Ju

l'01

Aug'01

Sep'01

Oct'01

Nov'01

Dec'01

Jan'0

2

Feb'02

Mar'02

Jun'0

2Ju

l'02

Aug'02

Sept'0

2

Oct'02

Nov'02

Dec'02

€

Omeprazole Pantoprazole Lansoprazole Rabeprazole Esomeprazole

Estimated annual savings following substitution of Losec mups with alternative PPIs during maintenance therapy according to prescribing

practices in the GMS scheme (2002)

Drug (Trade Name) Strength mg Percentage of prescriptions dispensed at given strength

Estimated savings when substituted for omeprazole (Losec Mups) corrected for % prescriptions at higher and lower doses

Generic Omeprazole (Losamel)

20mg 100% € 3,135,971

Esomeprazole (Nexium) 20mg40mg

52%48%

€ 3,355,926

Lansoprazole (Zoton) 15mg30mg

28%72%

€ 4,233,020

Pantoprazole (Protium) 20mg40mg

34%66%

€ 5,728,656

Generic Omeprazole (Ulcid)

20mg 100% € 6,419,600

Rabeprazole (Pariet) 10mg20mg

19%81%

€ 6,829,631

Generic Omeprazole (Lopraz)

20mg 100% € 6,843,294

Pharmacoeconomic Evaluation in Europe in 2004Norway: Pharmacoeconomic data required for reimbursement; official guidelines in operation.

Finland:Pharmacoeconomic evidence mandatory for evaluating newtherapies for reimbursement and may also be requested for existing therapies.

Sweden:Cost-effectiveness data required for reimbursement.

Denmark:Cost-effectiveness data may be requested for reimbursement decisions.

Britain:National Institute of Clinical Excellence (NICE) evaluatesthe cost effectiveness of medicines. Guidelines updated April 2004.

Germany:Guidelines prepared. No formal requirement for reimbursement but likely to play a growing role in the future.

France:Not aformal requirement but increasingly used in reimbursement decisions; Guidelines prepared.

Spain:Not a formal requirement. Guidelines prepared.

Portugal:Cost benefit analysis incorporated into reimbursement decisions.

Italy:Proof of cost-effectiveness required For pricing and reimbursement decisions.

Greece: Guidelines for pharmacoeconomic studies prepared; cost-effectiveness data may be requested.

Belgium: Not a formal requirement but a standard report format for economic evaluations has been published.

Netherlands:Pharmacoeconomic evidence explicitly required for reimbursement of new products.

Ireland: Guidelines for pharmacoeconomic studies prepared; cost-effectiveness data may be requested.

Value for money: costs vs benefits

Costs

Drug costs+

Outpatient visits+

Inpatient costs

Benefits:

- More symptom free days- Less hospital admissions- Increased quality of life- Increased survival

CONSIDER A NEW INTERVENTION,

IFMore effective and/or Less adverse events and/or More convenient

THENLess Other Drugs?Less Tests and Imaging?Less Physicians Consults?Less Interventions?Less or Shorter Hospital stay?

Typical Example: Cost Analysis of Drug B Vs. ASuppose B works better and is moreconvenient

Average other treatment costs

•Physicians

•Hospital

•Surgery

•Oth. Drugs

•Tests

•…….

Total cost

Average acquisition cost

CAB

B A +

SAB

B A

=

Snet = net saving

B A

Cost Analysis of Drug B Vs. A (2)Idem but differences areLess pronounced

Average other treatment costs

•Physicians

•Hospital

•Surgery

•Oth. Drugs

•Tests

•…….

Average acquisition cost

Total cost

CAB

B A

+

SAB

B A

=

B A

Cnet = net cost

Cost EffectivenessThe cost effectiveness of a therapeutic intervention may be expressed in terms of natural units such as life years gained or infection avoided

i.e. COST/LYG

It may be expressed in utility terms i.e. preferences that individuals or society may have for a set of health outcomes. The effects of treatment on both patient quality of life and survival are determined.

i.e. COST/QALY

Incremental Cost Effectiveness

Cost A – Cost BEffect A – Effect B

or

CostEffect

The Cost-Effectiveness Plane

Higher Cost

Lower Cost

HigherEffectiveness

Q1

Ceiling Incremental Cost-Effectiveness Ratio

Q3

Q4

Q2

LowerEffectiveness

COST-EFFECTIVENESS PLANEDifference in cost

Difference in effect

Maxim

um w

illing

ness

to pa

y

Region

of co

st-eff

ectiv

enes

s

Economic Modelling: why is it necessary?

• Absence of hard data

• Need to synthesise comparisons:• e.g. head-to-head comparisons of therapies

• Need to extrapolate• Over time – e.g. beyond trial follow-up period• Between intermediate and final outcomes

Cost-Effectiveness of Statins for the Secondary Prevention of

Coronary Heart Disease in Ireland

M Barry, A Heerey. IMJ May 2002;(95):133-135

Modelling the impact of statins for secondary prevention in Ireland

• The disease is divided into distinct states e.g. well, non fatal MI, Death

• Transition probabilities are assigned for movement between these states

• Estimates of resource use are attached to each state and transitions within the model (attaching weights)

• Running the model over a large number of cycles enables the estimation of long term costs and outcomes

Death

Well (IHD)

Nonfatal MI

Transition probabilities required

Clinical effectiveness: 4S

Epidemiological: Irish life tables

Death

Well (IHD)

Nonfatal MI

Resource utilisation associated with transition states

Drug costs

Monitoring: Dr visits & labs

Hospitalisation for MI

Death

Well (IHD)

Nonfatal MI

Cost-effectiveness of statins for secondary prevention

atorvastatin fluvastatin pravastatin simvastatin

Starting age = 40 yrsCombined sex

€1,172 €2,358 €3,900 €2,788

Males > 40yrs

€1,189 €2,257 €3,646 €2,643

Females > 40yrs

€1,194 €2,593 €4,412 €3,099

Cost per quality adjusted life year

Cost / QALY league tables

Intervention Cost/QALYStatins for hypercholesterolaemia €1,172ACE inhibitor in heart failure €1,337Beta blocker post MI €7,333Radiation therapy in breast cancer €35,000Mild acute HZV €90,000EPO to augment autologous blood donation in elective surgery

€45,000,000

CEA of statins summary

• Cost-effectiveness analysis indicates that all statins available in Ireland are highly cost-effective for the secondary prevention of IHD

• Adopting new drug strategies may result in increased drug expenditure but savings in other healthcare budgets. Formal economic evaluation allows comparison of increased costs with improvement in benefit

Role for economic evaluation• Individual patient level?• Policy level

– Useful additional information to inform development of guidelines

– Provides useful metric to combine all costs and savings associated with drug therapy and allow comparison within and between diseases

If a therapy is not clinically effective, it cannot be cost-effective

MAIN LESSONS FROM THE USE OF ECONOMIC

EVALUATION AT THE CENTRAL LEVEL

• Demonstration of clinically-important benefits is still paramount.

• Economic data are more important when there is substantial budgetary impact.

• In reimbursement decisions, total refusal is rare; limitations or restrictions in use are much more common.

Drummond 2005

HOW ARE REIMBURSEMENT RULES OR GUIDANCE

IMPLEMENTED?• Depends on the jurisdiction and clinical setting.• Use of hospital-based drugs can be influenced

by budgetary controls and formulary listing.• Use of drugs in primary care can be influenced

by clinical guidelines (e.g. approval ‘on authority’), financial incentives and formulary restrictions.

Drummond 2005

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