Assessing the Economic Value of Pharmaceutical Products and Services

Abstract

The evaluation of drug therapy in the US has undergone major transformations in the 20th century. Since 1962, the primary indicators for a drug to be approved by the Food and Drug Administration have been safety and efficacy. Due to increased public demand for value for money, the economic outcome (efficiency) has become the third objective (in addition to safety and efficacy) in the evaluation of pharmaceuticals. Pharmacoeconomic analyses identify, measure, and compare the costs and consequences of two or more programs from one or several perspectives, which provide explicit sets of criteria that may be useful in deciding among different uses for scarce resources. This article introduces the basic concepts and techniques in pharmacoeconomics including types of costs and benefits, perspective of analysis, discounting, efficacy and effectiveness, decision analysis, and sensitivity analysis. Four types of pharmacoeconomic analyses are discussed: cost-effectiveness analysis, cost-benefit analysis, cost-minimization analysis, and cost-utility analysis. Estimating costs is basically similar among the four types of analyses; the major difference is the outcome measure. In addition, cost-of-illness analysis is also discussed. Because cost-of-illness analysis examines the economic burden of an illness on society, it provides the baseline information for the other types of pharmacoeconomic analyses and marketing decision-making. Copyright © 1995 by W.B. Saunders Company