Abstract
Background
There is a lack of a uniform proxy for defining direct medical costs in the US. This potentially important source of variation in modelling and other types of economic studies is often overlooked. The extent to which increased expenditures for an intervention can be offset by reductions in subsequent service costs can be directly related to the choice of cost definitions.
Objective
To demonstrate how different cost definitions for direct medical costs can impact results and interpretations of a cost-effectiveness analysis.
Methods
The IMS-CORE Diabetes Model was used to project the lifetime (35-year) cost effectiveness in the US of one pharmacological intervention ‘medication A’ compared with a second ‘medication B’ (both unspecified) for type 2 diabetes mellitus. The complications modelled included cardiovascular disease, renal disease, eye disease and neuropathy. The model had a Markov structure with Monte Carlo simulations.
Utility values were derived from the published literature. Complication costs were obtained from a retrospective database study that extracted anonymous patient-level data from (primarily private payer) adjudicated medical and pharmaceutical claims. Costs for pharmacy services, outpatient services and inpatient hospitalizations were included. Cost definitions for complications included charged, allowed and paid amounts, and for medications included both wholesale acquisition cost (WAC) and average wholesale price (AWP). Costs were reported in year 2007 values.
Results
The cost-effectiveness results differed according to the particular combination of cost definitions employed. The use of charges greatly increased costs for complications. When the analysis incorporated WAC medication prices with charged amounts for complication costs, the incremental cost-effectiveness ratio (ICER) for medication A versus medication B was $US6337 per QALY. When AWP prices were used with charged amounts, medication A became a dominant treatment strategy, i.e. lower costs with greater effectiveness than medication B. For both allowed and paid scenarios, there was a difference in the ICER of over $US10 300 per QALY when medication prices were defined by WAC versus AWP. Ratios of medication costs to cardiovascular complication costs ranged from under 0.45 to over 1.7, depending upon the combination of costing definitions.
Conclusions
Explicitly addressing the cost-definition issue can help provide meaningful cost-effectiveness data to payers for policy development and management of healthcare expenditures. It can also help move the pharmacoeconomics and outcomes research fields forward in terms of both methodology and practical application.
Similar content being viewed by others
References
Menzin J, Boulanger L, Langley-Hawthorne C, et al. Potential short-term economic benefits of improved glycemic control. Diabetes Care 2001; 24: 24–51
Kantor J, Margolis DJ. Treatment options for diabetic neuropathic foot ulcers: a cost-effectiveness analysis. Dermatol Surg 2001; 27: 347–51
Brandle M, Zhou H, Smith BRK, et al. The direct medical cost of type 2 diabetes. Diabetes Care 2003; 26: 2300–4
Maciejewski ML, Maynard C. Diabetes-related utilization and costs for inpatient and outpatient services in the Veterans Administration. Diabetes Care 2004; 27: 69–73
Drug Topics Redbook. Montvale (NJ): USA Thomson PDR, 2006
Gencarelli DM. Average wholesale price for prescription drugs: is there a more appropriate pricing mechanism? [online]. Available from URL: http://www.nhpf.org/library/details.cfm/2372 [Accessed 2009 Jun 12]
Technician training tutorial: billing for Rx drugs. Pharmacists’ letter [online]. Available from URL: http://www.pharmacistsletter.com [Accessed 2009 Jun 12]
Clarke P, Gray A, Legood R, et al. The impact of diabetes-related complications on healthcare costs: results from the United Kingdom Prospective Diabetes Study (UKPDS Study No. 65). Diabetes Med 2003; 20: 442–50
American Diabetes Association. Economic costs of diabetes in the US in 2007. Diabetes Care 2008; 31: 1–20
O’Brien JA, Shomphe LA, Kavanagh PL, et al. Direct medical costs of complications resulting from type 2 diabetes in the US. Diabetes Care 1998; 21: 1122–8
O’Brien JA, Patrick AR, Caro J. Estimates of direct medical costs for microvascular and macrovascular complications resulting from type 2 diabetes mellitus in the United States in 2000. Clin Ther 2003; 25: 1017–38
Palmer AJ, Roze S, Lammert M, et al. Comparing the long-term cost-effectiveness of repaglinide plus metformin versus nateglinide plus metformin in type 2 diabetes patients with inadequate glycaemic control: an application of the CORE diabetes model in type 2 diabetes. Curr Med Res Opin 2004; 20: S41–51
Palmer AJ, Roze S, Valentine WJ, et al. The CORE diabetes model: projecting long term clinical outcomes, costs and cost-effectiveness of interventions in diabetes mellitus (types 1 and 2) to support clinical and reimbursement decision making. Curr Med Res Opin 2004; 20: S5–26
Palmer AJ, Roze S, Valentine WJ, et al. Validation of the CORE diabetes model against epidemiological and clinical studies. Curr Med Res Opin 2004; 20: S27–40
Minshall ME, Oglesby AK, Wintle ME, et al. Estimating the long-term cost-effectiveness of exenatide in the United States: an adjunctive treatment for type 2 diabetes mellitus. Value Health 2008; 11:22–33
Palmer AJ, Roze S, Valentine WJ, et al. Cost-effectiveness of detemir-based basal/bolus therapy versus NPH-based basal bolus therapy for type 1 diabetes in a UK setting: an economic evaluation based on meta-analysis results of four clinical trials. Curr Med Res Opin 2004; 20: S1729–46
Tunis SL, Minshall ME. Self-monitoring of blood glucose in type 2 diabetes: cost-effectiveness in the United States. Am J Man Care 2008; 14: 131–40
Briggs AH, Wonderling DE, Mooney CZ. Pulling cost-effectiveness analysis up by its bootstraps: a non-parametric approach to confidence interval estimation. Health Econ 1997; 6: 327–40
Clarke P, Gray A, Holman R. Estimating utility values for health states of type 2 diabetic patients using the EQ-5D (UKPDS 62). Med Dec Making 2002; 22: 340–9
Tengs TO, Wallace A. One thousand health-related quality-of-life estimates. Med Care 2000; 38: 583–637
Begg S, Vos T, Barker B, et al. The burden of disease and injury in Australia 2003. Canberra (ACT): Australian Institute of Health and Welfare, 2007 [online]. Available from URL: http://www.aihw.gov.au/publications/index.cfm/title/10317 [Accessed 2009 Jun 12]
Carrington AL, Mawdsley SK, Morley M, et al. Psychological status of diabetic people with or without lower limb disability. Diabetes Res Clin Pract 1996; 32: 19–25
National Institute for Health and Clinical Excellence (NICE). Technology appraisal guidance on the use of long-acting insulin analogues [online]. Available from URL: http://www.nice.org.uk/guidance/ [Accessed 2009 Jun 12]
IMS pricing and reimbursement. 2007 Oct. (Data on file; available from author)
Pelletier EM, Smith PJ, Boye KS, et al. Direct medical costs for type 2 diabetes mellitus complications in the US commercial payer setting: a resource for economic research. Appl Health Econ Health Policy 2008; 6 (2–3): 103–12
Hart AC, Hopkins CA, Ford B, eds. ICD-9-CM for hospitals (vol 1, 2 & 3). 6th ed. Salt Lake City (UT): Ingenix, 2006
Beebe M, Dalton JA, Duffy C, et al. editors. Current procedural terminology (CPT) 2006. Professional edition. Chicago (IL): American Medical Association, 2005
ICD-9-CM official guidelines for coding and reporting, effective April 1, 2005 [online]. Available from URL: http://www.cdc.gov/nchs/data/icd9/icdguide.pdf [Accessed 2009 Jun 12]
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Tunis, S.L. A Cost-Effectiveness Analysis to Illustrate the Impact of Cost Definitions on Results, Interpretations and Comparability of Pharmacoeconomic Studies in the US. Pharmacoeconomics 27, 735–744 (2009). https://doi.org/10.2165/10899600-000000000-00000
Published:
Issue Date:
DOI: https://doi.org/10.2165/10899600-000000000-00000