Good research practices for measuring drug costs in cost-effectiveness analyses: a managed care perspective: the ISPOR Drug Cost Task Force report--Part III.

OBJECTIVES: The objective of this report is to provide guidance and recommendations on how drug costs should be measured for cost-effectiveness analyses conducted from the perspective of a managed care organization (MCO). METHODS: The International Society for Pharmacoeconomics and Outcomes Research (ISPOR) Task Force on Good Research Practices-Use of Drug Costs for Cost Effectiveness Analysis (DCTF) was appointed by the ISPOR Board of Directors. Members were experienced developers or users of CEA models. The DCTF met to develop core assumptions and an outline before preparing a draft report. They solicited comments on drafts from external reviewers and from the ISPOR membership at ISPOR meetings and via the ISPOR Web site. RESULTS: The cost of a drug to an MCO equals the amount it pays to the dispenser for the drug's ingredient cost and dispensing fee minus the patient copay and any rebates paid by the drug's manufacturer. The amount that an MCO reimburses for each of these components can differ substantially across a number of factors that include type of drug (single vs. multisource), dispensing site (retail vs. mail order), and site of administration (self-administered vs. physician's office). Accurately estimating the value of cost components is difficult because they are determined by proprietary and confidential contracts. CONCLUSION: Estimates of drug cost from the MCO perspective should include amounts paid for medication ingredients and dispensing fees, and net out copays, rebates, and other drug price reductions. Because of the evolving nature of drug pricing, ISPOR should publish a Web site where current DCTF costing recommendations are updated as new information becomes available.

Good research practices for measuring drug costs in cost-effectiveness analyses: a societal perspective: the ISPOR Drug Cost Task Force report--Part II.

OBJECTIVES: Major guidelines regarding the application of cost-effectiveness analysis (CEA) have recommended the common and widespread use of the "societal perspective" for purposes of consistency and comparability. The objective of this Task Force subgroup report (one of six reports from the International Society for Pharmacoeconomics and Outcomes Research [ISPOR] Task Force on Good Research Practices-Use of Drug Costs for Cost Effectiveness Analysis [Drug Cost Task Force (DCTF)]) was to review the definition of this perspective, assess its specific application in measuring drug costs, identify any limitations in theory or practice, and make recommendations regarding potential improvements. METHODS: Key articles, books, and reports in the methodological literature were reviewed, summarized, and integrated into a draft review and report. This draft report was posted for review and comment by ISPOR membership. Numerous comments and suggestions were received, and the report was revised in response to them. RESULTS: The societal perspective can be defined by three conditions: 1) the inclusion of time costs, 2) the use of opportunity costs, and 3) the use of community preferences. In practice, very few, if any, published CEAs have met all of these conditions, though many claim to have taken a societal perspective. Branded drug costs have typically used actual acquisition cost rather than the much lower social opportunity costs that would reflect only short-run manufacturing and distribution costs. This practice is understandable, pragmatic, and useful to current decision-makers. Nevertheless, this use of CEA focuses on static rather than dynamic efficacy and overlooks the related incentives for innovation. CONCLUSIONS: Our key recommendation is that current CEA practice acknowledge and embrace this limitation by adopting a new standard for the reference case as one of a "limited societal" or "health systems" perspective, using acquisition drug prices while including indirect costs and community preferences. The field of pharmacoeconomics also needs to acknowledge the limitations of this perspective when it comes to important questions of research and development costs, and incentives for innovation.

Good research practices for measuring drug costs in cost effectiveness analyses: issues and recommendations: the ISPOR Drug Cost Task Force report--Part I.

OBJECTIVES: The assignment of prices or costs to pharmaceuticals can be crucial to results and conclusions that are derived from pharmacoeconomic cost effectiveness analyses (CEAs). Although numerous pharmacoeconomic practice guidelines are available in the literature and have been promulgated in many countries, these guidelines are either vague or silent about how drug costs should be established or measured. This is particularly problematic in pharmacoeconomic studies performed from the "societal" perspective, because typically the measured cost of a brand name pharmaceutical is not a true economic cost but also includes transfer payments from some members of society (patients and third party payers) to other members of society (pharmaceutical manufacturer stockholders) in large part as a reward for biomedical innovation. Moreover, there are numerous and complex institutional factors that influence how drug costs should be measured from other CEA perspectives, both internationally and within the domestic US context. The objective of this report is to provide guidance and recommendations on how drug costs should be measured for CEAs performed from a number of key analytic perspectives. METHODS: ISPOR Task Force on Good Research Practices-Use of Drug Costs for Cost Effectiveness Analysis (Drug Cost Task Force [DCTF]) was appointed with the advice and consent of the ISPOR Board of Directors. Members were experienced developers or users of CEA models, worked in academia, industry, and as advisors to governments, and came from several countries. Because how drug costs should be measured for CEAs depend on the perspectives, five Task Force subgroups were created to develop drug cost standards from the societal, managed care, US government, industry, and international perspective. The ISPOR Task Force on Good Research Practices-Use of Drug Costs for Cost Effectiveness Analysis (DCTF) subgroups met to develop core assumptions and an outline before preparing six draft reports. They solicited comments on the outline and drafts from a core group of 174 external reviewers and more broadly from the membership of ISPOR at two ISPOR meetings and via the ISPOR web site. RESULTS: Drug cost measurements should be fully transparent and reflect the net payment most relevant to the user's perspective. The Task Force recommends that for CEAs of brand name drugs performed from a societal perspective, either 1) CEA analysts use a cost that more accurately reflects true societal drug costs (e.g., 20-60% of average sales price), or when that is too unrealistic to be meaningful for decision-makers, 2) refer to their analyses as from a "limited societal perspective." CEAs performed from a payer perspective should use drug prices actually paid by the relevant payer net of all rebates, copays, or other adjustments. When such price adjustments are confidential, the analyst should apply a typical or average discount that preserves this confidentiality. CONCLUSIONS: Drug transaction prices not only ration current use of medication but also ration future biomedical research and development. CEA researchers should tailor the appropriate measure of drug costs to the analytic perspective, maintain clarity and transparency on drug cost measurement, and report the sensitivity of CEA results to reasonable drug cost measurement alternatives.

'Me-Too' Innovation in Pharmaceutical Markets.

Critics of me-too innovation often argue that follow-on drugs offer little incremental clinical value over existing pioneer products, while at the same time increasing health care costs. We examine whether consumers view follow-on and pioneer drugs as close substitutes or distinct clinical therapies. For five major classes of drugs, we find that large reductions in the price of pioneer molecules after patent expiration-which would typically lead to decreased consumption of strong substitutes-have no effect on the trend in demand for follow-on drugs. Our findings are likely unaffected by health insurance, competitive pricing of me-toos, marketing, and switching costs.

The decision to conduct a head-to-head comparative trial: a game-theoretic analysis.

Recent Medicare legislation calls on the Agency for Healthcare Research and Quality to conduct research related to the comparative effectiveness of health care items and services, including prescription drugs. This reinforces earlier calls for head-to-head comparative trials of clinically relevant treatment alternatives. Using a game-theoretic model, the authors explore the decision of pharmaceutical companies to conduct such trials. The model suggests that an important factor affecting this decision is the potential loss in market share and profits following a result of inferiority or comparability. This hidden cost is higher for the market leader than the market follower, making it less likely that the leader will choose to conduct a trial. The model also suggests that in a full-information environment, it will never be the case that both firms choose to conduct such a trial. Furthermore, if market shares and the probability of proving superiority are similar for both firms, it is quite possible that neither firm will choose to conduct a trial. Finally, the results indicate that incentives that offset the direct cost of a trial can prevent a no-trial equilibrium, even when both firms face the possibility of an inferior outcome.

Pharmacoeconomic analysis of caspofungin versus liposomal amphotericin B as empirical antifungal therapy for neutropenic fever.

PURPOSE: An analysis was conducted that evaluated and compared the cost differences between caspofungin and liposomal amphotericin B when the medications were used as empirical antifungal therapy for persistent fever during neutropenia. METHODS: Rates of drug use and impaired renal function (IRF) were based on data from published studies. IRF was defined as a doubling of the serum creatinine level or, if the creatinine level was elevated at enrollment, an increase of at least 1 mg/dL. The estimates of the costs for drug acquisition and treating IRF were derived using published data and applied to compare caspofungin with liposomal amphotericin B. Sensitivity analyses were performed by varying the IRF and relative acquisition costs to assess the effect of these factors on the cost differences. RESULTS: The acquisition costs per patient were 6942 dollars for liposomal amphotericin B and 3996 dollars for caspofungin. The estimated cost per patient from IRF was 3173 dollars for liposomal amphotericin B and 793 dollars for caspofungin. Combining drug acquisition and IRF costs, the overall treatment cost per patient for caspofungin was 5326 dollars less than for liposomal amphotericin B. In sensitivity analyses of drug costs, the price of liposomal amphotericin B would have to be 23.95 dollars per vial for the overall treatment costs to be equal. CONCLUSION: Comparison of cost estimates derived from published data revealed that a combined estimate of acquisition costs and costs related to the treatment of IRF was lower for caspofungin than for liposomal amphotericin B for empirically treating patients with neutropenic fever.

Costs and survival of patients with colorectal cancer in a health maintenance organization and a preferred provider organization.

BACKGROUND: Colorectal cancer is relatively frequent among adults of working age, yet few studies have examined treatment, outcomes, and costs for people under 65 years of age with this disease. OBJECTIVE: The objective of this study was to compare the initial treatments, survival, cancer-related medical costs, and overall medical costs for working-aged persons with colorectal cancer in 2 large health insurance plans in Washington State, one a preferred provider organization (PPO) and the other a group model health maintenance organization (HMO). STUDY POPULATION: This study consisted of patients, aged 20-64 years, diagnosed with colorectal cancer in both health plans from 1996 to 1998. For each cancer case, up to 5 control subjects, matched on age and sex, were selected for the analysis. METHODS: We calculated unadjusted, attributable, and overall medical costs using the Kaplan-Meier sample average estimator. We calculated relative mortality rates using Cox regression. We used propensity scores to adjust overall costs and survival for potential confounding factors. RESULTS: Two hundred ten persons in the PPO and 136 persons in the HMO, aged 20-64 years, were diagnosed with cancer over the observation period and included in this study. Patients in the PPO were more likely to have local excision of their tumor (16% compared with 11%) and were less likely to receive chemotherapy (48% compared with 60%). The overall medical costs for the cancer cases were $46,000 in the HMO and $46,400 in the PPO (95% confidence interval for the difference: -$19,300 to 20,100). The cancer-attributable medical costs over 2 years were $40,400 in the HMO and $44,300 in the PPO (95% confidence interval for the difference: -$17,400 to 25,200). Survival was similar in the 2 health plans: the hazard ratio was 0.89 for those enrolled in the PPO (95% confidence interval: 0.50 to 1.59). Adjustment for potential confounding factors altered the results little. CONCLUSIONS: There were differences in the initial treatment of the patients in each health plan, but costs and survival were not significantly different between the 2 plans.

Caspofungin versus amphotericin B for candidemia: a pharmacoeconomic analysis.

BACKGROUND: In a randomized, comparative, clinical trial, caspofungin was found to be as effective as amphotericin B deoxycholate (ampho B) for treating candidemia (favorable outcomes in 71.7% and 62.8% of patients, respectively) and exhibited a generally better safety profile, particularly with respect to impaired renal function (IRF) (P = 0.02). OBJECTIVE: The goal of this study was to examine whether cost savings generated from the reduced rates of IRF observed in the clinical trial would be enough to offset the higher acquisition cost of caspofungin relative to ampho B. METHODS: We developed an economic model in which 100 hypothetical patients with candidemia were treated with caspofungin or ampho B. Rates of IRF and duration of drug therapy were taken from the clinical trial. Information on the cost of treating IRF was obtained through a search of MEDLINE using the terms amphotericin and cost, amphotericin and resource, amphotericin and hospital, and amphotericin and toxicity; and the medical subject headings kidney failure, acute/drug therapy; kidney failure, acute/epidemiology; kidney failure, acute/etiology; kidney/drug effects; cost of illness; costs and cost analysis; kidney failure, acute, and economics; and kidney failure, acute/economics. In addition, the Web site was searched for relevant references, and the Merck publication alert system was used. Antifungal drug costs were estimated using data from IMS Health. Costs were reported in year-2003 US dollars. RESULTS: In the base case, the model projected that using caspofungin instead of ampho B would result in substantially lower treatment costs for IRF, which would more than offset the higher drug acquisition cost (cost-offset percentage, 122%), leading to a net mean savings of 758.60 US dollars per patient. These results were not very sensitive to the difference in daily drug cost, but were sensitive to the mean cost attributable to treating IRF. As that varied, the cost-offset percentage varied from 61% (substantial cost offset) to 183% (cost savings). CONCLUSIONS: The results of this economic model suggest that, based only on differences in drug acquisition cost and renal toxicity, the use of caspofungin instead of ampho B in patients with candidemia may be a cost-saving strategy from the perspective of a hospital.

The National Program of Cancer Registries: explaining state variations in average cost per case reported.

INTRODUCTION: The Centers for Disease Control and Prevention's National Program of Cancer Registries is a federally funded surveillance program that provides support and assistance to state and territorial health departments for the operation of cancer registries. The objective of this study was to identify factors associated with the Centers for Disease Control and Prevention's costs to report cancer cases during the first 5 years of the National Program of Cancer Registries. METHODS: Information on expenditures and number of cases reported through the National Program of Cancer Registries was used to estimate the average cost per case reported for each state program. Additional information was obtained from other sources, and regression analyses were used to assess the contribution of each factor. RESULTS: Average costs of the National Program of Cancer Registries differed substantially among programs and were inversely associated with the number of cases reported (P < .001). The geographic area of the state was positively associated with the cost (P = .01), as was the regional cost of living (P = .08), whereas the program type (i.e., enhancement or planning) was inversely associated with cost (P = .08). CONCLUSION: The apparent existence of economies of scale suggests that contiguous state programs might benefit from sharing infrastructure and other fixed costs, such as database management resources, depending on the geographic area and population size served. Sharing database management resources might also promote uniform data collection and quality control practices, reduce the information-sharing burden among states, and allow more resources to be used for other cancer prevention and control activities.

Colorectal cancer screening attitudes and practices in the general population: a risk-adjusted survey.

OBJECTIVES: To characterize self-reported colorectal cancer (CRC) screening behavior, and to identify characteristics of CRC screening practices, stratified by risk. METHODS: Using random-digit-dial methodology, we conducted telephone surveys in US adults 50 years of age and older. Respondents provided data on utilization of CRC screening tests; demographic characteristics; and awareness, concerns, attitudes and beliefs about the tests, CRC, and health care. On the basis of available guidelines, three definitions of adequate screening were considered. RESULTS: Among persons reporting having ever had a CRC screening exam, the exam was more likely to have been a fecal occult blood test than a radiologic or endoscopic exam (p < .0001). Subjects at increased CRC risk were more likely to have met the screening criteria (p < .001) compared with average-risk subjects. Receipt of information or advice about cancer screening tests, male gender, and concern about managed care were positively associated with adequate screening. Smoking, low health self-monitoring, and an average risk for CRC reduced the probability of CRC screening. CONCLUSIONS: Lack of awareness about screening remains common, regardless of CRC risk. Providing information and advice about cancer screening may be the single most important tool available to improve screening rates.

Does initial choice of antimicrobial therapy affect length of stay for patients with complicated intra-abdominal infections?

Outcomes for complicated intra-abdominal infection are influenced by operation for source control, patient-related factors, and medical management, including antibiotic treatment. We analyzed length of stay (LOS) at 33 hospitals for 2,150 patients discharged between February 2002 and June 2003, who were > 18 years, had intra-abdominal infection, and received one of 6 first-line antimicrobials. A regression tree analysis selected important variables, their interactions, and their order of significance in explaining LOS. A linear mixed model evaluated the difference in LOS between treatment groups. Adjusted LOS was calculated by the least squares means from the model and was used to assess treatment differences. Mean LOS analyzed by initial antimicrobial therapy and stratified by diagnosis showed LOS for ampicillin/sulbactam and ertapenem to be significantly shorter from levofloxacin, ceftriaxone, and piperacillin/tazobactam (all P < 0.05). Adjusting for all other factors, the variables associated with severity (e.g., diagnosis, ICU stay, and comorbidities) had the greatest impact on adjusted LOS (all P < 0.001). Our findings indicate ampicillin/sulbactam and ertapenem were associated with shorter hospital stays, which may be explained by unaccounted for underlying severity of infection and/or by surgeons stratifying antimicrobial selection according to severity of illness.

Endogeneity bias in the absence of unobserved heterogeneity.

PURPOSE: To demonstrate that endogeneity bias can still arise even when no unobserved heterogeneity exists. METHODS: A formal mathematical proof and a Monte Carlo simulation are used to demonstrate that ordinary estimation techniques will generate biased parameter estimates. RESULTS: The Monte Carlo results support the formal proof. Even in the absence of unobserved heterogeneity, ordinary least squares estimation that does not account for the endogenous nature of an explanatory variable resulted in a parameter estimate for the endogenous variable that was significantly biased (by a factor of 1.42 for the simple model and 1.98 for the saturated model). Alternatively, controlling for endogeneity using the instrumental variables approach led to an unbiased parameter estimate. CONCLUSIONS: Endogeneity bias can still occur even when unobserved heterogeneity is not present.

Preferences and person trade-offs: forcing consistency or inconsistency in health-related quality of life measures?

We consider assumptions about preferences implicit in the person trade-off exercises used to derive health-related quality of life measures for the Global and US Burden of Disease Projects. Because these methods and their results have the potential of being adopted by other researchers, a critical review of this methodology and its assumptions is warranted. Exercise participants are told that quality of life valuation is approached using two different questions to reveal logical inconsistencies in each person's responses. An inconsistency is claimed to exist if a participant's two responses violate a particular mathematical relationship, and participants are forced to modify their responses to satisfy that relationship. We demonstrate that this supposed 'logical' relationship need not hold for logically consistent, rational individuals, and we prove that the relationship will in fact hold only for a particular class of social value functions exhibiting two characteristics that may not be consistent with the preferences of some participants. These results imply that the forced modification may invalidate some responses, as it may require some participants to provide final answers that are inconsistent with their true preferences. We then discuss preference characterizations in the existing person trade-off literature, from which this relationship may have been derived.

Variation in average costs among federally sponsored state-organized cancer detection programs: economies of scale?

BACKGROUND: Societal cost-effectiveness analysis and its variants help decision makers achieve an efficient allocation of resources across the set of all possible health interventions. Sometimes, however, decision makers are focused instead on the efficient allocation of resources within a particular intervention program that has already been implemented. This is especially true when the intervention is being delivered at several different sites. An analysis of average cost across program sites may help program officials to maximize the health benefits that can be achieved with limited resources. In this article, the authors present such an analysis, with special attention paid to the possible existence and implications of economies of scale. METHODS: Focusing on federally sponsored, state-organized cancer detection programs, the authors modeled 19 state programs as productive processes and examined their average costs over a 2- to 5-year period of operation. They considered 3 alternative definitions of output: women served, screens performed, and conditions detected. Average federal costs and average total costs were estimated for each grant period. Multivariate regression analysis was used to help explain the variation in average costs. RESULTS: The average cost estimates were distributed in a skewed pattern with the majority of observations falling close to the median and substantially below the mean. For all measures considered, average cost decreased as output expanded. This inverse relationship between average cost and output level persisted even after controlling for the effects of other predictors, suggesting the possible existence of economies of scale. DISCUSSION: The potential existence of economies of scale calls into question the assumption of a constant average cost frequently made in economic analyses of proposed public health programs. It also implies that a) differences in output level should be taken into account when comparing operating efficiency across program sites; b) conclusions from societal cost-effectiveness analyses may depend on the level of output at which the programs are evaluated; c) cost projections could be inaccurate if they do not take into account the decrease in average cost that occurs as output expands; and d) gains might be possible if similar programs with limited output potential are integrated, perhaps through cost sharing.