What do you - as a pharma marketeer - need to know about the four main types of health economic analysis?

You need to convince payers that the extra price you are asking for your product is worth it. To do this, you have to prove to them that the overall increase in cost from using your drug is justified by the overall extra benefits. Therefore, you have to prove that your product is better value than other products that are competing for their limited resources (i.e. money). In order to be able to do that, your company should have planned and executed the right type of economic analysis long before launch.

So, what is the appropriate type of economic analysis?

1. One approach is Cost Minimization Analysis (CMA). It just looks at the overall cost impact. This includes the cost of your drug and all the other costs and savings involved in switching to your drug. For example, you may save the cost of the drug that you are replacing, but add the cost of, say, an antiemetic that has to be prescribed with your drug. The problem with this approach is that it is only justified if you have an identical clinical effect to the drug you are replacing.
2. Cost Effectiveness Analysis (CEA) estimates the cost per improvement in some clinical measure. Examples: the cost per angina attack avoided, or the cost per asthma attack avoided, or the cost per hospital visit avoided. This measure has a broader application but still limits comparison to drugs with the same outcome.
3. Cost Utility Analysis (CUA) measures the cost per improvement in ‘Quality Adjusted Life Year’. A QALY is the result of multiplying the quantity of life by the quality of life. The meaning of this can best be illustrated by the following example: a patient living 10 years with a “quality of life” of 0,5 has the same number of QALYs as a patient living 5 years with a "quality of life" of 1, i.e. perfect health.
4. Finally, Cost Benefit Analysis (CBA) measures the cost per improvement measured in money. This one has a pure economic perspective since it puts a monetary value on all benefits, including a life year saved. This is the broadest type of analysis because money values can be applied to any area of activity. We could, for example, compare the value of a life-saving drug with the value of, say, road crash barriers. The problem is that it is politically impossible to value a human life!

Armed with the right analysis done the right way, you are much better prepared for effective pricing and reimbursement negotiations.

“ Gary is able to articulate his broad knowledge and experience to different levels of participants. This is an exceptionally well planned, delivered and managed course that gave me great insight into the area but also gave practical applications of the theory.”

Lewis Pearson, Pricing Manager, Pfizer - UK