The economics of drug discovery and the ultimate valuation of pharmacotherapies in the marketplace.

Although it is commonly believed that the innovation of new medicines is of paramount importance for improving the health and quality of life of patients, there is also a keen recognition regarding upward-spiraling costs of innovation, drug discovery, and drug development against a backdrop of dwindling successes in research and development (R&D) efforts. We propose a new model of valuation of pharmacotherapies that attempts to secure an adequate return on investment in innovation by ensuring optimal pricing and reimbursement.

Estimating the Bayesian loss function. A conjoint analysis approach.

Current health economic literature does not provide clear guidelines on how uncertainty around cost-effectiveness estimates should be incorporated into economic decision models. Bayesian analysis is a promising alternative to classical statistics for incorporating uncertainty in economic analysis. Estimating a loss function that relates outcomes to societal welfare is a key component of Bayesian decision analysis. Health economists commonly compute the loss function based on the quality-adjusted life-years associated with each outcome. However, if welfare economics is adopted as the theoretical foundation of the analysis, a loss function based in cost-benefit analysis (CBA) may be more appropriate. CBA has not found wide use in health economics due to practical issues associated with estimating such a loss function. In this paper, we present a method based in conjoint analysis for estimating the CBA loss function that can be applied in practice. We illustrate the use of the methodology using data from a pilot study.

Annual cost of care for Crohn's disease: a payor perspective.

OBJECTIVE: The aim of this study was to estimate the annual cost of care of patients with Crohn's disease according to treatment setting. METHODS: Using a 1994 integrated claims database, patients with a Crohn's-related medical claim (ICD-9 code 555) from 10/01/94 to 09/30/95 were included in this analysis. These patients were stratified into three mutually exclusive disease severity groups: group 1, required hospitalization for Crohn's; group 2, required chronic glucocorticoid or immunosuppressive drug therapy for >6 months; group 3, all remaining patients. Direct charges (based on reimbursement) and utilization of resources were reported for each group. RESULTS: Six-hundred-seven patients were analyzed: 117(19%) in group 1, 31(5%) in group 2, and 459(76%) in group 3. Average age of all patients was 48 years and 43% of these patients were men. Average annual charges for all patients totaled $12,417. Group I patients experienced the highest mean charges ($37,135), whereas patients in groups 2 and 3 incurred $10,033 and $6,277. Approximately 25% of patients accounted for 80% of the total charges. CONCLUSIONS: Crohn's disease is associated with high cost. Although a minority of Crohn's patients required hospitalization, they tended to have higher utilization and were responsible for a majority of total expenditures. New therapies have the potential to reduce overall cost of care, if they prevent Crohn's-related hospitalizations.

Potential savings in the cost of caring for Alzheimer's disease. Treatment with rivastigmine.

OBJECTIVE: To estimate savings in the cost of caring for patients with Alzheimer's disease (AD) during 6 months, 1 year and 2 years of treatment with rivastigmine. An intermediate objective was to estimate the relationship between disease progression and institutionalisation. DESIGN AND SETTING: We assessed the relationship between Mini-Mental State Examination (MMSE) score and institutionalisation using a piecewise Cox proportional hazard model. To estimate cost savings from treatments lasting 6 months, 1 year and 2 years, estimates of the probability of institutionalisation were integrated with data from two 6-month phase III clinical trials of rivastigmine and a hazard model of disease progression. MAIN OUTCOME MEASURES AND RESULTS: Our data suggest that savings in the overall cost of caring for patients with mild and moderate AD can be as high as $US4839 per patient after 2 years of treatment. Furthermore, the probability of institutionalisation increases steadily as MMSE score falls. Among our study individuals, age, race, level of education and marital status were significant predictors of institutionalisation, whereas gender had little effect. CONCLUSIONS: Using rivastigmine to treat AD results in a delay in disease progression for patients who begin treatment during the mild or moderate stages of the disease. By delaying the probability that a patient will be institutionalised, the cost of caring for AD patients can be significantly reduced.

Estimating the willingness to pay for drug abuse treatment: a pilot study.

Previous economic studies of the benefits of drug treatment have limited their estimation to tangible benefits, and thus have underestimated the benefits of drug treatment. The willingness-to-pay (WTP) approach is a more encompassing benefit valuation method that captures both tangible and intangible benefits and accords with valuation concepts used by economists. In this study, we report the results of a pilot study in which we used the contingent valuation (CV) method to value drug treatment. We conducted mall intercept surveys in two communities: the Triad area in North Carolina and Brooklyn, New York. We estimated WTP models for two different drug treatment programs: a program for all drug users and a program specifically targeted to women drug users. We modeled respondents' WTP for drug treatment as a function of their demographics and to responses from attitudinal/experience questions. The mean WTP for both types of drug treatment programs was estimated to be approximately $37 per respondent. Finally, we demonstrated how the results of the CV method may be used in a benefit-cost analysis of drug treatment.

Are QALYs an appropriate measure for valuing morbidity in acute diseases?

In this paper, we examine the problems associated with using quality adjusted life years (QALYs) as the measure of effectiveness to evaluate interventions for acute conditions. We illustrate the way in which using commonly accepted benchmarks for costs per QALY, in order to adopt interventions for acute conditions, might result in decisions that are not consistent with maximizing net societal benefit. We suggest that an alternate methodology, such as willingness to pay, may be more appropriate to make allocation decisions for acute conditions.

Inhaled corticosteroids for asthma therapy: patient compliance, devices, and inhalation technique.

BACKGROUND: Patient compliance, inhalation devices, and inhalation techniques influence the effectiveness of inhaled medications. METHODS: This article presents the results of a systematic literature review of studies measuring compliance with inhaled corticosteroids, measuring inhalation technique with different inhalation devices, and estimating the proportion of inhaled drug that is deposited in the lung. RESULTS: Overall, patients took the recommended doses of inhaled medication on 20 to 73% of days. Frequency of efficient inhalation technique ranged from 46 to 59% of patients. Education programs have been shown to improve compliance and inhalation techniques. The lung deposition achieved with different inhalers depends on particle size as well as inhaler technique. CONCLUSION: This review demonstrates that multiple factors may come between a prescription of an inhaled corticosteroid and the arrival of that medicine at its target organ, the lung.

Economic assessment of platelet glycoprotein IIb/IIIa receptor blockade with abciximab and low-dose heparin during percutaneous coronary revascularization: results from the EPILOG randomized trial. Evaluation in PTCA to Improve Long-term Outcome with abciximab GP IIb/IIIa blockade.

BACKGROUND: In the EPILOG trial (Evaluation in PTCA to Improve Long-term Outcome with abciximab GP IIb/IIIa blockade), abciximab administered with weight-adjusted heparin diminished the risk of ischemic complications within 30 days by 56% among patients undergoing percutaneous coronary revascularization, without increased bleeding complications. METHODS AND RESULTS: A prospective economic assessment was performed in the 2792 patients enrolled in EPILOG. Patients were randomized to receive placebo with standard-dose weight-adjusted heparin, abciximab with low-dose weight-adjusted heparin, or abciximab with standard-dose weight-adjusted heparin during percutaneous coronary intervention. Hospital billing data for the baseline hospitalization were collected for 2581 patients (92.4% of total) and imputed for the remainder, with physician fees estimated from the Medicare Fee Schedule. For the baseline hospitalization, medical costs (hospitalization and physician fees) averaged $9632 for the placebo arm compared with $8758 (P:=0.005) and $9092 (P:=0.176) for the abciximab with low-dose and standard-dose heparin arms, respectively. Inclusive of average drug cost ($1454 to $1457), the net incremental baseline cost of these 2 abciximab strategies was $583 with low-dose weight-adjusted heparin and $914 with standard-dose weight-adjusted heparin. During 6-month follow-up, average hospital costs were not significantly different in the 3 treatment groups; cumulative net incremental costs were $1236 and $1268 in the abciximab with low-dose and standard-dose heparin groups, respectively. CONCLUSIONS: Treatment with abciximab and low-dose, weight-adjusted heparin during percutaneous coronary revascularization reduces ischemic events and associated costs, thereby offsetting some of the cost of the drug. The suppression of bleeding complications associated with this agent by heparin dose reduction optimizes the economic attractiveness of this treatment strategy.

Are health states "timeless"? The case of the standard gamble method.

The standard gamble method, as currently recommended for use in health care program evaluation, provides an individual's preference score or "utility weight" for living in a given health state for the rest of the individual's life. Many researchers interpret this value as a time-independent or "timeless" one and order health states on a scale of zero (death) to one (full health), regardless of the time spent in the health state. This article examines whether preference scores for a severe pain health state are "timeless," or in other words whether the utility independence assumption is satisfied. Our study results suggest that for the majority of respondents, the preference scores are not independent of time.

Willingness to pay as a measure of health benefits.

In this paper, we discuss the use of cost-benefit analysis (CBA) for evaluating new healthcare interventions, present the theoretical basis for the use of willingness to pay as a method for valuing benefits in a CBA and describe how to obtain willingness-to-pay (WTP) measures of health benefits and how to use these values in a CBA. We review selected economic studies on consumer demand and consumer surplus and studies presenting WTP estimates for healthcare interventions. The theoretical foundations of willingness to pay as a measure of commodity value are rooted in consumer demand theory. The area under the fixed income consumer demand curve represents the consumer's maximum willingness to pay for the commodity. We identify 3 types of potential benefits from a new healthcare intervention, namely patient benefits, option value and altruistic value, and suggest WTP questions for valuing different combinations of these benefits. We demonstrate how responses to these questions can be adjusted for income effects and incorporated into economic evaluations. We suggest that the lack of popularity of CBAs in the health area is related to the perceived difficulty in valuing health benefits as well as concern over how CBA incorporates the distribution of income. We show that health benefits can be valued using simple survey techniques and that these values can be adjusted to any desired income distribution.

Valuing outcomes in health care: a comparison of willingness to pay and quality-adjusted life-years.

Quality-adjusted life-years (QALYs) and willingness to pay (WTP) are two preference-based measures of health-related outcomes. In this article, we compare these two measures in eliciting individuals' preferences for health outcomes associated with shingles. To collect the necessary preference data, we administered computer-interactive interviews to a sample of 65- to 70-year-olds. We found no significant correlation between QALYs and WTP across individuals. We discuss our findings and argue that our results raise questions about whether QALYs and WTP are equivalent preference-based measures of health outcomes.

Treatment patterns and distribution of low-density lipoprotein cholesterol levels in treatment-eligible United States adults.

To estimate the fraction of United States (U.S.) adults who are eligible for treatment to reduce elevated low-density lipoprotein (LDL) cholesterol levels based on Adult Treatment Panel II (ATP II) guidelines and the percent reduction in LDL cholesterol required by those who qualify for treatment, we analyzed data on 7,423 respondents to Phase 2 of the third National Health and Nutrition Examination Survey (NHANES III) administered between 1991 and 1994. Approximately 28% of the U.S. adult population aged > or = 20 years is eligible for treatment based on ATP II guidelines. Eighty-two percent of adults with coronary heart disease are not at their target LDL cholesterol level of 100 mg/dl. Of those eligible for treatment, 65% report that they receive no treatment. Overall, 40% of people who qualify for drug therapy require an LDL cholesterol reduction of > 30% to meet their ATP II treatment goal. Approximately 75% of those with coronary heart disease who qualify for drug therapy require an LDL cholesterol reduction of >30%. Although elevated LDL cholesterol levels can be treated, prevalence rates in the U.S. adult population remain high. Several recent studies indicate that a considerable percentage of people treated with drug therapy do not reach their treatment goals. The findings in this study provide at least a partial explanation for why many patients receiving therapy do not reach their treatment goals: they require a larger reduction in LDL cholesterol than many therapies can provide.

Cost effectiveness of pramipexole in Parkinson's disease in the US.

OBJECTIVE: Pramipexole was recently approved in the US for treatment of the symptoms of idiopathic Parkinson's disease (PD). Although pramipexole has been found to be safe and efficacious when compared with placebo, little data are yet available on its cost effectiveness when compared with baseline treatment. The aim of this study was to estimate the costs and cost effectiveness (cost utility) of pramipexole compared with baseline treatment in patients with early and advanced PD. DESIGN AND SETTING: We developed a cost-effectiveness (CE) model in the US setting that linked Unified Parkinson's Disease Rating Scale (UPDRS) Part II (activities of daily life) and III (motor) scores to disease progression, costs and patient utility. Data for the model were obtained from clinical trials, a literature review and a survey of 193 patients' health resource use and utility. We used cost and quality-adjusted life-year (QALY) estimates from the model to estimate the incremental cost effectiveness of pramipexole relative to baseline treatment patterns. We performed separate analyses for patients with early and advanced PD. We also performed extensive sensitivity analyses by adding other dopamine agonists to the no-pramipexole treatment regimen and varying disease progression parameters. The study was conducted from the societal perspective, although data presentation allows interpretation of cost effectiveness from either the societal or payer perspective. MAIN OUTCOME MEASURES AND RESULTS: For patients with both early and advanced PD, treatment with pramipexole had higher costs but was more effective than baseline treatment. For patients with early onset of PD, the incremental total CE ratio for pramipexole was $US8837/QALY. For patients with advanced PD, the incremental CE ratio was $US12 294/QALY (1997 costs). These ratios were lower than the CE ratios of many widely used medical treatments. CONCLUSIONS: Subject to the inherent limitations of modelling chronic disease progression and subsequent healthcare costs and patient utility, the results suggested that pramipexole was a cost effective treatment for patients with early and advanced PD in the US.

The cost-effectiveness of ibutilide versus electrical cardioversion in the conversion of atrial fibrillation and flutter to normal rhythm.

Atrial fibrillation and atrial flutter are cardiac rhythm disorders that are often symptomatic and may interfere with the heart's function, limiting its effectiveness. These arrhythmias are responsible for a large number of hospitalizations at a significant cost to the healthcare system. Electrical cardioversion (EC) is the most common nonpharmacologic intervention used to convert atrial fibrillation and atrial flutter to normal rhythm. Electrical cardioversion is highly successful in converting patients to normal rhythm; however, it is more traumatic and resource intensive than pharmacologic treatment. Recently, a new rapid-acting drug, ibutilide, was approved for the conversion of atrial fibrillation and atrial flutter. Ibutilide is administered through intravenous infusion and does not require anesthetization of the patient, as is required for EC. A decision-tree model was developed to estimate the cost-effectiveness of ibutilide therapy compared with EC therapy. Clinical outcomes were based on a phase III trial of ibutilide, and resource use was based on the literature and physician clinical judgment. A stepped conversion regimen of first-line ibutilide followed by EC for patients who fail to convert is less expensive and has a higher conversion rate than first-line EC. Sensitivity analysis shows that our results are robust to changes in cost and effectiveness estimates.

Estimating the cost effectiveness of atovaquone versus intravenous pentamidine in the treatment of mild-to-moderate Pneumocystis carinii pneumonia.

Pneumocystis carinii pneumonia (PCP) is the most common severe opportunistic infection, and one of the most costly, among people with AIDS. Over 50% of patients experience toxic effects of the major anti-PCP medications- cotrimoxazole (trimethoprim-sulfamethoxazole) and pentamidine. Recently, the US Food and Drug Administration approved a new oral drug therapy, atovaquone, as an alternative to pentamidine for the treatment of people with mild-to-moderate PCP who are intolerant of cotrimoxazole. We developed a decision tree model to estimate the costs and cost effectiveness of atovaquone therapy compared with intravenous pentamidine therapy for cotrimoxazole-intolerant patients with mild-to-moderate PCP. Clinical outcomes were based on data from a phase III trial comparing the 2 medications. Our economic outcomes were based on treatment algorithms derived from discharge data, published reports and the clinical judgement of the co-authors. We estimate the total expected cost of treating a patient for an episode of PCP with atovaquone to be $US3990 compared with $US6545 for pentamidine under our baseline scenario (1995 dollars). Our decision model also provides insight into the large cost-savings benefits of treating mild-to-moderate PCP on an outpatient basis.