Pharmacoeconomics

Pharmacoeconomics centers on the economic evaluation of pharmaceuticals, and can use cost-minimization analysis, cost-benefit analysis, cost-effectiveness analysis or cost-utility analysis. Quality-adjusted life years have become the dominant outcome of interest in pharmacoeconomic evaluations, and many studies employ a cost-per-QALY analysis. Economic evaluations are carried out alongside randomized controlled trials and using methods of decision-analytic modeling. Pharmacoeconomics is a useful method of economic evaluation of various treatment options. As more expensive drugs are being developed and licensed it has become imperative especially in context of developing countries where resources are scarce to apply the principles of pharmacoeconomics for various drugs and treatment options so that maximum improvement in quality of life can be achieved in minimum cost.[3]

In 1993, Australia became the first nation to use pharmacoeconomic analysis as part of the process for deciding whether new drugs should be subsidized by the Federal Government. The Pharmaceutical Benefits Advisory Committee (PBAC) advises Federal Government ministers on whether new drugs should be placed on a list for of drugs that consumers can then purchase from pharmacies at a subsidized price. Since 1993, this approach to evaluating costs and benefits is used in Canada, Finland, New Zealand, Norway, Sweden, and the UK.

Spending on new pharmaceuticals and R&D, although expensive, is considered to bring net benefits, as it decreases overall health care costs. A study of 30 countries estimated that 73% of the increase in life expectancy in recent decades is due to new pharmaceuticals alone. Another study found that new drugs have reduced hospital usage by 25% per decade by replacing more expensive forms of care like surgery. It has been estimated that the cost per additional life-year gained thanks to pharmaceutical innovation was US$2,730, compared with US$61,000 for dialysis, a commonly used benchmark.[4]