The Public Financing of Pharmaceuticals

The Public Financing of Pharmaceuticals

An Economic Approach

Edited by Jaume Puig-Junoy

This book provides a complete approach to the economics of financing medicines and policy implications for the efficiency and equity of health systems. In all health systems with majority public financing, pharmaceutical reimbursement is one of the key factors in policies of change and transformation of health services in order to face the future with guarantees of financial sustainability.

Chapter 8: Economic evaluation and pharmaceutical policy

J.L. Pinto Prades and X. Badía Llach

Subjects: economics and finance, health policy and economics, industrial economics, public finance


J.L. Pinto Prades and X. Badía Llach INTRODUCTION The rapid increase in expenditure on pharmaceuticals has awakened growing interest in the economic evaluation of medicines. New drugs are introduced periodically and the pharmaceutical companies claim price rises to cover their research and development (R&D) expenses. In some cases the health benefits produced by these new drugs is small, but expenditure on health care in general and pharmaceuticals in particular is growing at rates in excess of 10 per cent a year in Spain. All this has led to interest in taking a closer look at the value of the health gains we are buying in exchange for this ever greater expenditure on medicines. In analysing this type of issue, economic evaluation can play an important role, as it comprises a series of techniques that allow the estimation of both costs and benefits. The main types of economic evaluation (EE) are cost-effectiveness analysis (CEA), cost–benefit analysis (CBA) and cost-utility analysis (CUA). CEA uses ‘natural’ measures of the outcome, that is, it defines the unit of measurement of the outcome in terms of the most immediate objective of health expenditure. In CUA, health benefit is measured in quality-adjusted life-years (QALYs). The QALY is a measure of health that combines the two basic components that define health, namely the quantity and the quality of life. The figure in QALYs is obtained by multiplying years of life by a weight that reflects the quality of life during those years. The quality...

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