Pharmacoeconomics: An Overview of Pharmacoeconomics: History, Trends, and Recent Growth

Society produces and consumes goods and services. Economics, traditionally defined, is the study of how fixed resources or production (there's only so much of any one thing) satisfies unlimited consumption (everyone always wants to consume more!). Initially, the discipline used the familiar notions of supply-and-demand analysis to find relationships between production and consumption and determine, for any specific good or service or subset of the market, how market and public-provision arrangements were optimal.

In the earlier days of health economics, until perhaps the mid-1980s, the standard tools of the health economist were the same as the tools used by all economists--tools such as the study of supply and demand--because most health economists were trained in economics and just happened to be interested in the market forces driving the health system. In those days, economic studies were used to inform government policies largely dealing with reimbursement for health care services or drugs, and other policy issues. Governments and, to a lesser degree, health provider associations used such studies. Some were commissioned from private consultants and academics; in other instances, these groups directly hired health economists.

Then came the emergence of the new "evidence-based" movement in medicine. This movement, starting in the mid-1980s but gaining popularity throughout the last decade, was based on the principle that medicine was no different from any other science, and that any medical treatment or therapy should be justifiable using standard scientific rules of "evidence" and should be statistically sound. Because of this movement, drugs and other therapies have been increasingly required to "prove themselves" both therapeutically and economically. Since 1993 in Australia, pharmaceutical companies have had to submit an economic study on the implications of introducing new drugs in order for the government to consider placing the drug on the formulary for government reimbursement. Soon after, Ontario also introduced such a requirement, which is now the standard in several Canadian provinces. The Netherlands is now introducing a similar provision. This move resulted in the promotion of the discipline of "pharmacoeconomics," which involves the application of the economic framework to the study of drug utilization and effectiveness. A number of new investigators moved into the discipline, and because of its clinical subject matter, many of these were from the clinical and pharmaceutical areas. As a result, the discipline began to change, absorbing new ideas and methods from epidemiology, clinical medicine, and psychology.

Today, health economics has two faces. The first is the more traditional one, which looks at government provision and market structure issues and has been termed (by clinicians) "macroeconomic" issues. Practitioners of this area are almost always traditionally trained health economists and are hired by governments, universities, and some professional groups, such as medical associations. This area has not been growing very much.

The second face--which is much larger in terms of activity--is that of health economic evaluation. Today this discipline is very much multidisciplinary. The field has absorbed numerous clinicians and pharmacists, as well as individuals from other biological disciplines. These individuals have some training in health economics, but usually much less than is required for a Ph.D., or even a master's degree in basic economics. The field of health economic evaluation has absorbed ideas on the measurement of quality of life from psychology, the measurement of outcomes from epidemiology, and the measurement of costs from accounting and economics--all presented in a framework that has been adapted from basic economics.

To the extent that the evidence-based movement develops and is adopted by policy-making bodies and professional associations, this new discipline of health economic evaluation will become even more widely used. Pharmaceutical companies will hire health economists (in the broader definition) to support and evaluate their studies relating to the justification of new drugs. Formulary-making bodies will require health economic expertise to evaluate the submissions and to conduct their own studies. In addition, governments are beginning to examine nondrug therapies in terms of their economic implications; the field of "health technology assessment" is one that absorbs a number of different disciplines in the evaluation of a wider group of therapies, and the cornerstone of this field is health economic evaluation.

With governments expanding their health mandates and simultaneously scrutinizing their budgets, and with the health professions increasingly being required to justify their activities, the broader field of health economics evaluation will afford employment both for traditionally trained economists, as well as for persons trained in clinical and other sciences, with some additional work in this area.

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