The Pharmaceutical Journal
Vol 268 No 7193 p506-507
13 April 2002

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What is health economics and what is its use?

Three key concepts that have to be considered in economics are choice, costs and consequences, and evaluation, said BETHAN GEORGE, academic department of pharmacy, Barts and the London NHS Trust. Health economics is founded on the assumption that resources are scarce so choices have to be made. In order to make decisions, information about the efficacy and safety of an intervention and the resource requirement to provide it need to be known. The basic economic calculation is a balance between costs and consequences.

Consequences can be considered in three ways: natural units (such as changes in blood pressure), health-related quality of life or monetary value. "Traditionally monetary value was considered on the basis of compensation claims or lost earnings but now it is on a patient's willingness to pay."

ELS HOLLANDERS, hospital pharmacist, University of Ghent and Antwerp, Belgium, explained that the types of cost are medical versus non-medical, fixed versus variable, direct versus indirect, and intangible. Costs depend on the perspective from which they are calculated, eg, society, a hospital or a patient.

Ms GEORGE explained that four types of economic evaluation exist:

1. Cost minimisation analysis There is no difference in the effectiveness of two activities so the cost assessment is based on which is less expensive.
2. Cost-effectiveness The effectiveness of the interventions are either unknown or unequal and outcomes tend to be measured in natural units. A ratio between the cost and effectiveness is calculated.
3. Cost-utility analysis This is a particular type of cost-effectiveness analysis. The outcomes are measured in terms of quality of life.
4. Cost-benefit analysis Outcomes are measured in monetary terms and a net gain is looked for.

An economic analysis indicates whether to use more or less of a particular intervention. "However, an economic evaluation informs choice, it cannot be used independently of a value of judgement or prioritisation," she said. In addition, it does not provide information about opportunity costs: what has to be given up in order to introduce a new intervention.

Therefore, how outcomes of analyses are used is not uniform. Some people have used them to construct league tables detailing interventions from the most to least cost-effective and allocated a budget from the top down but this fails to take into account quality of life.

ANDREA MESSORI, Italian Society of Hospital Pharmacists, said that the most important parameters used in pharmacoeconomics are cost per life year gained and survival gain.

Cost per life year gained is calculated by dividing the difference in cost between using two treatments, by the difference in survival between the two treatments. The outcome is the cost per life year gained of using one treatment as opposed to the other. The result should be used to make a strategic decision of whether all patients on one treatment could be moved to the other. The international cut-off point for accepting drugs is $50,000 (£35,700) per life year gained, he said. Survival gain is calculated for a number of patients and includes patients who have responded and not responded to treatment. For example, in a group of 100 patients where only one responds but that patient survives for an additional 14 years, the survival gain is about two months per patient. The typical degree of improvement seen with new drugs is between two and 10 months per patient.

Professor BRANKO KOPIJOV, department of health services, University of Washington, said that selecting the correct efficacy information is an important part of designing a pharmacoeconomic analysis. "Drugs perform differently in real life from randomised controlled trials and so the type of information examined has to be taken into account when conducting analyses." When choosing clinical data on which to base pharmacoeconomic analyses, it is best to select a trial conducted in patients closest to the population in which the drug is to be used.

JOSIP CULIG, consultant in clinical pharmacology, Zagreb Institute of Public Health, Croatia, said that pharmacoeconomic analyses should be conducted on a national basis. "There are important differences in culture, monitoring systems and pricing systems so universal guidelines would not be possible." For example, data suggested that in terms of heart disease, people in the United Kingdom had greater belief in behavioural changes whereas the French population placed greater reliance on advances in pharmaceuticals.

Professor WILLIAM McGHAN, professor of pharmacy and health policy, Philadelphia College of Pharmacy, said that the United States spends a higher proportion of its gross domestic product on health than any other country yet a recent World Health Organization report ranked it only 37th out of 191 countries in terms of the health service provided. "This indicates that the US has real problems in efficiency. The challenge for us it to appreciate the impact we have as pharmacists in looking at drug costs and to ask if money is being spent wisely. Pharmacoeconomics allows us to find the efficiency point."