Pharmacoeconomics

In health care there is a scarcity of resources​ that requires we ration them.

Opportunity cost​ is the idea that by doing one thing we lose the [blank_start]opportunity[blank_end] of doing something else​. The opportunity 'cost' is the [blank_start]benefit[blank_end] that we would have got from the next best [blank_start]alternative[blank_end] use​, that we miss out on. We aim to identify the (health) benefit that could have been gained from the best available alternative​.

Health care cannot be considered a commodity as there is not demand for health (and health care is a way of generating health)​.

Economic evaluation is an [blank_start]organized[blank_end] consideration of the [blank_start]factors[blank_end] involved in a decision to​ commit [blank_start]resources[blank_end] to one use instead of another​. Economic evaluation will create an [blank_start]estimate[blank_end]. A Cost-Effectiveness Analysis gives estimates of the​: Extra cost (i.e. ∆C > 0)​ Extra effect (i.e. ∆E > 0)​ Extra cost for one more unit of effect (i.e. is [blank_start]∆C / ∆E[blank_end] big?)​

The language of trade-offs: 1. [blank_start]Plain language[blank_end] (we can spend more money to live longer)​. The extra benefit’s extra cost (extra cost per extra benefit)​ 2. [blank_start]Math[blank_end] (eg new treatment costs an extra $30,000 and gives an extra year​ of life)​. Difference in cost / Difference in effectiveness. (30,000/1=30,000) 3. [blank_start]Economics[blank_end] (just jargon)​. Incremental cost effectiveness ratio (ICER) = ΔC/ΔE​. The same calculation as in math, but we like the word “incremental"​. 4. [blank_start]Graph[blank_end]​. We can plot the ICER on the cost-effectiveness plane​.

[blank_start]Cost-Utilit[blank_end]y Analysis eg the QALY assesses two outcomes, [blank_start]quality of life and life years[blank_end]. Quality, ie QoL is usually scored with ‘perfect health’ = [blank_start]1[blank_end] and death = [blank_start]0[blank_end]​. If a treatment gives 10 extra years of life at a quality of 0.5, the [blank_start]QALY[blank_end] is 10*0.5 = 5.