phad final.txt

Stipulated that drugs must be proved "safe" and "effective prior to marketing

Efficacy are the benefits of the drug in IDEAL circumstances vs effectiveness are benefits of the drug obtained in ACTUAL, real world use

1. Preclinical Stage 2. Clinical Stage 1 (Phase 1) 3. Clinical Stage 2 (Phase 2) 4. Phase 3 clinical trials 5. Phase 4 - Post Marketing monitoring

• All activity prior to use in humans
• ie Drug discovery, animal testing to determine potential uses, SE, toxicity, and safe dosage parameters

Drug that may show therapeutic benefit but not economically promising

Drug enters IND (Investigation New Drug) status when used in humans

Phase 1 of clinical pharmacology

Study of absorption, metabolism, & excretion rates of the drug and its metabolites

Typically young, healthy, male volunteers

Drug's first use in patients with the disease of interest.

• Drug is given to patients in a "natural" setting.
• Note: not enough patients are used in this stage to see rare SE (1 in 10k)

• Post market monitoring
• Not a legal, required phase

• does it actually take?
• Suppose to be 180 days following its submission but can be up to 7 years
• on avg ~ 12 months in 1997

• Therapeutic type
• Chemical type

• Type P: Priority is for REVIEW not approval
• Type S: Standard

$200k

• Type 1: new molecular/Chemical entity NME/MCE
• Type 2: New salt, ester, or derivative
• Type 3: New formulation

• 1. Limited Number of subjects
• 2. Time Consideration
• 3. Expensive
• 4. Artificial Environment
• 5. Usually little formal monitoring of drug effect after approval

• 3 times the reciprocal of the incidence in order to have a 95% chance of seeing an event
• Example: 1:1000 = 3k subjects needed

• Too short - not enough time to observe delayed effects such as DES and uterine cancer in female offspring
• Too long - depresses and discourages new drug development, limits # of developers, and keeps new drugs from patients

1.25 billion + dollars

Clinical studies do not duplicate "real world" use of drug

A grant of legal monopoly to any person who "invents or discovers a new and useful process / thing"

A market in which there is only one seller and many buyers

Awards

The governing body chooses the direction of innovation

At first 17 years now 20 years due to Uruguay Agreements Act of 1994

Protects intellectual property

• ONLY TO EXCLUDE all others from making, using, or selling their invention. No right for owner to make, use or sell.
• Patent owner's right is a ______right.
• negative

Any work, name, symbol or device, or any combo thereof adopted and used by a manufacturer or merchant to identify and distinguish his product from the others

• 1. Indicates origin or source
• 2. Used to extend monopoly through identification and loyalty
• 3. Product differentiation through marketing

Trademarks

Made it easier for generics to be approved while it also allowed Brand company to extend patent and the first to come out with the generic

• Gross National Product
• Gross Domestic Product

GNP is everything the US produces in the world vs GDP is everything the US produces inside the US

GDP

GDP

Consumer Price Index and it measures changes in the prices of goods purchased by the typical urban family of 4

Medical Price Index and its a sub-index of CPI, looking at the medical field

Producer Price Index and it measures changes in the prices for a manufacturer

new price to the original price x 100

It became the payor due to medicare and medicaid

• 1. Health care expenditures
• 2. Population increase
• 3. Increased utilization/intensity of services
• 4. Inflation/health care inflation

• Can't do anything about: Population increase and general inflation
• We can control health care inflation and health care utilization
• Compare and contrast price indexes include change over time for selected health care goods and services

Medical care

• Hospital service is major
• Rx drugs are a close second

• Household: burden not changed much at all
• Business and Gov't: Burden increased ALOT

The employees

It has steadily dropped

US has the highest health spending of % GDP

• Infant Mortality Rate and Male Life expectancy?
• US and Cuba have nearly the same IMR and we are not the highest for MLE

Nevada and Utah

• Young Americans: Accidents
• Middle Age Death: Heart disease
• Late Middle Age Death: Heart, cancer, stroke, liver "life style disease"

• 1. Many buyers and sellers in the market
• 2. Offerings are for a standardized product or service which has an elastic demand
• 3. Market entry for new firms is free from barriers and resources are easily transferable
• 4. Consumers have complete info on prices, quality, and other factors

A condition where there is a definite relationship between the price of a product and the quantity which would be purchased

Everyone gets sick therefore everyone is a buyer

• 1. Nearly universal demand
• 2. Unpredictability of illness
• 3. Inelastic demand and supply
• 4. Health care as a "right"
• 5. Variation in products/services
• 6. Barriers to market entry
• 7. Lack of consumer information/interest
• 8. Physician as agent
• 9. Third partyism/insurance

• Health care is considered what kind of item?
• Elasticity tends to be more common for luxury items while most health care is deemed a necessity

Because society deems it as a right they see to it that the goods/services should be paid for by the gov't and thus ignore the price of health care being charged yet still demanding the same level of care

• Education
• Certification
• Licensure

Limited information for both price and quality

• Change in per capita income
• Change in tastes of preference
• Change in relative price
• Change in financial system
• Supply of manpower/facilities

More $ = more demand

• Describe how change in tastes and preference affects health care demand and supply
• Individuals decide they want more or less Health care, preference- preventative vs acute MD vs non-MD

price increase = demand decrease

• Patient increased out of pocket cost
• Physicians: HMO can put them at risk

To spread risk

• Probabilistic event over a population
• Irregular event on an individual basis
• Event must result in substantial loss
• Loss must be measurable

The ability to determine the probability of an event or hazard occurring.

• Low frequency
• poor predictability

• 1. Transfer risk
• 2. Pooling of risk

Premium = [(Probability of loss)(amount of loss)(risk factor)]+administrative costs

• Premium
• Deductible
• Copayment
• Coinsurance

The periodic payment required to keep a health insurance policy active

An amount that must be paid by the insured to the provider for each visit

An amount that must be paid by the insured before benefits will kick in. This amount is renewalable over a specific time frame

An occurrence where both the insured person and the insurance company share the covered cost in a specific ratio 20:80

Makes the patient be aware of the price of health care, decreases the cost of the insurer

Individual(s) covered on the insurance policy

Seeing what is covered, what kind of events you are being insured against

Things and events that your insurance will not cover

The conditions and services that your insurance police will cover. Lots of stipulations like generics only or step therapy

Also known as elimination period, refers to the time between the date on which you apply for insurance and when the insurance is effective

Cancellation is when the insurance company voids your policy and Renewability refers to whether insured has the right to continue coverage

Non cancelable guaranteed renewable

Refers to a clause that states that after a certain period of time no misstatements on your application will void the policy, unless they can prove you did it on purpose

Refers to the fact that a claim will not be double paid if there are two insurance

Refers to situations in which benefits are paid, often to the patient, predetermined amount to cover the loss.

Covers specifically services which patients receive while hospitalized. (lab work) Excludes physician care

Covers physician care

Sometimes referred to as catastrophic insurance Idea that covers very expensive illness

• 1. Supplement to a "basic" hospital-physician-surgeon expense policy
• 2. Combination of "basic" and "supplemental" policies into one which provides comprehensive protection, esp. for large, unpredictable medical expenses.

Policies designed specifically for the elderly/ for medicare

Designed to provide a range of maintenance and health services for the chronically ill, disabled, or mentally retarded

• 1. Ineffective at cost control
• 2. Often results in overutilization of health care
• 3. Some remain uninsured or underinsured

• 1. Increase cost sharing to decrease utilization and make consumers more cost conscious
• 2. Standardize payment schedules, rather than basing payments on historic provider changes
• 3. Place health care providers at financial risk

• 1. Increase cost sharing
• 2. Institute prior approval mechanism
• 3. Encourage substitution of outpatient for inpatient care when appropriate

• 1. Encourage use of comprehensive HMOs
• 2. Set "higher" minimum standards of health ins.
• 3. Expand government programs/NHI

Approx 16% or 45-58 million people

• 1. Young - many uninsured are children
• 2. Not terribly poor
• 3. Working
• 4. Work for small companies

• 1. Public
• 2. Private

Medicare and Medicaid

• Commercial ins
• Blue Cross/Blue Shield
• Self-insured employers

Refers to situations where an insurer has a group of very ill patient ie expensive patients

• 1. Decrease chance of adverse selection
• 2. Lower administrative costs
• 3. Tax advantage for employees

• 1. 1 salesman for a group contract of 1000 vs 20 or 30 sales for 1000 individual contracts
• 2. Less paperwork / individual check up to determine premium ie less work overall

Private individual

Medicare and Medicaid respectively

Insurance philosophy that people have paid taxes into Social Security, so now they're receiving the benefits they paid for previously

Welfare philosophy, designed to redistribute the wealth from the have to the have nots

Entirely the federal government

funded jointly by the state and the federal govt.

• Fed - establishes the regulations and guidelines
• State - responsible for the actual direction and day-to-day operations

integration of financing and provision of care

• 1. HMOs (health maintenance organizations)
• 2. PPOs (preferred provider organizations)
• 3. Managed fee-for-service
• 4. Point of service

• 1. Serves a voluntarily enrolled population
• 2. Assumes responsibility for assuring delivery of a stated range of comprehensive health care services
• 3. Receives fixed payments from enrollees which are relatively independent of use of services
• 4. Assumes much of the financial risk or gain in the provision of health care services

• The responsibility for delivery of services
• The comprehensive nature of those health care services

HMOs only require a minimum cost-sharing

HMOs demand for a higher quality of care and better utilization because their money is at risk. Prevention vs treatment

• Staff model
• Group model
• Independent practice association
• Network model

• HMO employs the physicians
• Physicians paid a flat rate and fixed hours

• HMO contracts with existing medical groups to serve the HMO's membership.
• Medical groups are paid usually on capitation

• HMOs contract with individual physicians
• Physicians may be paid on a fee-for-basis or a capitation basis

Groups models with contract with more than one group practice and groups models with contract with independent practitioners

Over the years the number of HMOs has decreased due to mergers but the amount of people covered has increased

• More acceptable to physicians
• Lower capital investment
• easier to cover a large geographic area
• patient preferences

• Less physician loyalty to HMO
• Uncertainty about ability of IPA to control cost

• 1. In house pharmacies
• 2. Closed network
• 3. Open network

Distinguishing feature is that the pharmacy is owned by the HMO and it is most commonly affiliated with staff model HMOs

HMO is only contracted to a limited number of community pharmacies

• 1. Promoting health
• 2. Reduce Utilization
• 3. Putting providers at risk
• 4. Quality Incentives

• Routine physicals
• Immunizations
• Well-baby care
• ie preventive care, prevention programs

The technical aspect of care such as coverage of preventive care, lower out-of-pocket costs, less paper, etc

Just as good and very often better than traditional , fee-for-service plans

• 1. Discounted services
• 2. Patient freedom-of-choice
• 3. Provider risk
• 4. Utilization review
• 5. Provider benefits

Patients can seek physicians for health care at their own choice. Will have coverage regardless of the doc. but if out of network they will pay more

• 1. Allows for the potential for what could be a substantial increase in provider's patient base
• 2. PPOs guarantee rapid payment of claims

• out-of-pocket cost savings
• freedom-of-choice
• increased access to care

• Reduced health care expenses
• Counters cost shifting
• utilization is monitored

• Maintain or expand patient base
• Relatively quick claims payment
• Still paid on a fee-for-service basis

Projects should only be pursued if the benefits outweigh the costs

That it is assumed that if an intervention is available to help the patient it will be applied no matter what the cost

By logic all of a society's resources would go to health care (not possible)

Refers to Economics, Humanistic, and Clinical Outcomes

Refers to humanistic ie the quality of life of the patient.

To give the best possible outcome achievable within the economic constraints

• 1. Resources are limited
• 2. There must be competing alternatives
• 3. The costs of inputs must be available
• 4. The consequences of inputs must be known

• 1. Efficacy
• 2. Effectiveness
• 3. Equity
• 4. Efficiency

• How well the drug does in the real world
• ie patient non compliance, SE, multiple disease

How the drug performs under ideal conditions, defines the upper limits of the drug's ability to treat the drug ie perfectly used

• Can patient get access to it
• ie Barriers such as cost, geographical, knowledge or cultural restrictions

• In the end is this drug worth doing.
• Are all the resources put into this drug worth it

Efficiency

• A sub-specialty of micro economics
• Used to analyze pharmaceutical industry with micro econ tools

The examination of the allocation of resources every. Macro is applied to large economies such as nations which micro is applied to ideal competitive markets to predict behavior

Analysis of the market in the health sector since it is is different than normal competitive markets

Looks at the very special case of pharmaceutical products

• 1. Allows us to see if an action is worth doing
• 2. Allows us to determine which purchase or policy or action gives us the most value.

• 1. Define problem
• 2. Select the perspective
• 3. Identify relevant alternatives
• 4. Establish framework and scope of analysis
• 5. Identify, Measure and Value Cost and Consequences
• 6. Analyze, interpret and derive conclusions

• It must be in an answerable form
• It must be measurable
• The key is to be very specific and define a narrow problem

• Payer - direct cost that must be paid
• Provider -Direct cost that impact budget
• Public (society)- All direct and indirect cost regardless of who pays them
• Patient - direct cost (out of pocket) and indirect cost (loss of work or travel expenses)

To make the alternative courses of action/treatments and the consequences of each explicit

• The who
• The what
• The when and how of data collection

The lost opportunity cost

The consumption of a resource that could otherwise have been used for something else

• 1. influenced by the perspective that is adopted
• 2. Common costs that are dropped
• 3. The magnitude of costs (too small not considered, too big will dominate analysis)

To sensitivity analysis

• Direct
• Indirect
• Medical
• Nonmedical

• Those resources consumed due to illness or intervention.
• Can be clinical or therapeutic

• non-clinical resources consumed in response to illness or treatment
• Best example: costs to travel to get treatment

Things such as lost earnings or lower productivity of the patient

Costs like pain and suffering of patient

Depends on the perspective we take at the beginning of the process

Costs involving the financing of buildings, land, and equipment etc.

Costs involved in the resources being used during care or service

Costs that are consumed regardless of whether a product or service will be provided ie mortgage on building, electric

Costs that are related to the amount of production or services provided

Sum of all resources consumed

Cost of the resources used per unit of production

Incremental increase in resources consumed to produce one more unit of product

The lowest marginal cost

Marginal cost

The simple determination or measurement of the cost of a single alternative

It is the Cost of illness also known when an entire disease state is examined

How and where resources are being used

When two or more alternatives are compared only on cost

Cost Minimization Analysis, it compares 2 or more alternatives when the effect has been proven to be equal

• Cost-benefit Analysis
• The first and most formal economic analysis where everything is converted to monetary value

Since everything is converted to a monetary value it is difficult to accurately assess direct benefits like improved standard of living

Cost Effectiveness Analysis, intent is to determine which alternative produces units of change at the lowest cost per unite of change

Cost utility analysis, a variant of CEA, it expresses the consequence in terms of utility