AMCP Special Report: Adopting technologies based on cost-effectiveness ratios requires value judgment

Incremental cost-effectiveness ratios produced by pharmacoeconomic modeling are the gold standard for evaluating drug alternatives, but the result of such an analysis often requires a value judgment on the part of the managed care organization (MCO), Daniel C. Malone, PhD, RPh, said at the Academy of Managed Care Pharmacy's (AMCP's) 2005 Educational Conference last month in Nashville, Tenn.

"The decision to purchase technology or not is not an easy one to make," said Dr Malone, associate professor, Colleges of Pharmacy and Public Health, Center for Health Outcomes and Pharmacoeconomics, University of Arizona, Tucson.

In situations of equal cost-effectiveness for 2 or more therapies, a budget impact analysis would favor the therapy for the condition that is less prevalent, leading to lower expenditures. This practice "does not make a lot of sense from an ethical standpoint, but it makes budget sense," Dr Malone said.

The model should answer the question, "What are you expecting if you use one drug versus another?" Dr Malone said. "You should clearly be able to see the costs, benefits, and risks with economic models."

The following elements are contained in a pharmacoeconomic model: a measure of the effect of a drug, based on clinical end points; the mortality associated with the drug; the life years gained by its use; and the quality-adjusted life years gained. The model should attempt to transform "efficacy" data into "effectiveness" data. Effectiveness of a drug, for example, will be affected by compliance, such that low persistence rates will decrease effectiveness.

Based on the effectiveness of the drug and the costs associated with it (drug acquisition expenses, therapy-related medical care, and adverse events), a cost-effectiveness analysis is produced. A cost-effectiveness analysis is a formal method for comparing the cost and benefits of a medical intervention to determine whether it is of sufficient value to adopt or reimburse. The result produced is an incremental cost-effectiveness ratio.

There are 4 possible interpretations of the cost-effectiveness analysis:

If new drug A costs $75 and has an effectiveness of 50%, and old drug B costs $100 and has an effectiveness of 30%, the cost for drug A would be –$125 per successfully treated patient, making it a dominant technology that would be adopted. If new drug C costs $125 and has an effectiveness of 10%, in comparing it to old drug B, drug B would cost the same –$125 per additional successfully treated patient.

"The take-home message is that it's all relative," said Dr Malone. "In order to interpret the results, you need to look at the relative changes in costs and effects."

A sufficient amount of time should be set aside to properly evaluate a model. "Don't expect to fully comprehend a model in 20 minutes," he said.

Although a degree of uncertainty can be tolerated with cost-effectiveness data, the evaluation of safety and efficacy data should carry low uncertainty. "You don't want to be wrong about safety and efficacy," Dr Malone said.