Pharmacoeconomics and Outcomes Research
Expert-defined terms from the Professional Certificate in Health Economics and Market Access course at LearnUNI. Free to read, free to share, paired with a professional course.
Absolute Risk Reduction (ARR) – a measure of the difference in event rate… #
Related terms: Relative Risk Reduction, Number Needed to Treat. ARR = control event rate – experimental event rate. Example: if 10% of patients on standard care experience a heart attack versus 6% on a new drug, ARR = 4%. Practical use: informs clinicians how many patients benefit per 100 treated. Challenge: small absolute differences can be misleading if baseline risk is low.
Adverse Event (AE) – any undesirable medical occurrence in a patient rece… #
Related terms: Serious Adverse Event, Pharmacovigilance. AEs are recorded regardless of causality. Example: mild nausea reported in a trial of an antihistamine. Practical application: AEs feed into safety profiles that affect market access decisions. Challenge: under‑reporting and attribution bias can distort true incidence.
Adjusted Incremental Cost‑Effectiveness Ratio (ICER) – the ratio of the d… #
Related terms: Unadjusted ICER, Sensitivity Analysis. Adjustments may control for baseline imbalances. Example: after propensity‑score matching, the adjusted ICER of a biologic versus standard therapy is $45,000 per QALY. Practical use: provides a more accurate estimate for reimbursement bodies. Challenge: selection of covariates and model specification can influence results.
Aggregate Data – summary information compiled from multiple individuals,… #
Related terms: Individual Patient Data, Meta‑analysis. Example: a published trial reports mean blood pressure reduction of 8 mmHg. Practical application: often the only data available for health‑technology assessments (HTAs) in early stages. Challenge: loss of granularity limits subgroup analyses and may hide heterogeneity.
Allocation Efficiency – the degree to which resources are directed toward… #
Related terms: Cost‑Effectiveness, Resource Allocation. Example: allocating funds to vaccination programs yields higher health gains than spending on low‑impact treatments. Practical use: guides policymakers in budgeting. Challenge: ethical considerations and equity concerns may conflict with pure efficiency.
Budget Impact Analysis (BIA) – an economic evaluation estimating the fina… #
Related terms: Cost‑Effectiveness Analysis, Affordability. Example: a BIA projects that introducing a new oncology drug will increase a hospital’s drug spend by $2 million over five years. Practical application: helps payers decide whether they can absorb the cost. Challenge: requires accurate utilization forecasts and may be sensitive to price changes.
Cost‑Benefit Analysis (CBA) – an economic evaluation that compares costs… #
Related terms: Cost‑Effectiveness Analysis, Willingness‑to‑Pay. Example: a CBA of a smoking‑cessation program calculates a net benefit of $150 million from reduced healthcare costs and productivity gains. Practical use: enables comparison across sectors. Challenge: assigning monetary values to health outcomes (e.g., life years) is contentious.
Cost‑Effectiveness Analysis (CEA) – compares the relative costs and outco… #
Related terms: Incremental Cost‑Effectiveness Ratio, Quality‑Adjusted Life Year. Example: a CEA finds that a new insulin analog costs $30,000 per QALY versus $25,000 for the standard analog. Practical application: informs reimbursement thresholds. Challenge: results depend on perspective (societal vs payer) and chosen outcome measures.
Cost‑Effectiveness Threshold (CET) – the maximum amount a decision‑maker… #
g., per QALY). Related terms: Willingness‑to‑Pay, ICER. Example: the UK’s National Institute for Health and Care Excellence (NICE) commonly uses £20,000–£30,000 per QALY. Practical use: serves as a benchmark for judging ICERs. Challenge: thresholds may not reflect true opportunity costs or societal values.
Cost‑Utility Analysis (CUA) – a form of CEA that incorporates patient pre… #
Related terms: Quality‑Adjusted Life Year, Health State Utility. Example: a CUA of a migraine prophylactic yields 0.02 QALYs gained per patient at an incremental cost of $500. Practical application: facilitates comparison of interventions across disease areas. Challenge: utility measurement methods (e.g., EQ‑5D, SF‑6D) can produce divergent results.
Discounting – the process of reducing future costs and outcomes to presen… #
Related terms: Discount Rate, Present Value. Example: applying a 3 % annual discount rate, a cost incurred in five years is multiplied by 0.86. Practical use: standardises analyses over multi‑year horizons. Challenge: choice of discount rate can materially affect cost‑effectiveness conclusions.
Economic Modeling – the construction of mathematical representations of d… #
Related terms: Decision Tree, Markov Model, Simulation. Example: a Markov model simulates transitions among health states for patients with chronic kidney disease over a lifetime horizon. Practical application: fills data gaps when trial evidence is limited. Challenge: model validity depends on assumptions and data quality.
Effectiveness – the extent to which an intervention produces the intended… #
Related terms: Efficacy, Real‑World Evidence. Example: a vaccine’s efficacy in clinical trials is 95 % whereas its effectiveness in the community is 85 %. Practical use: informs payers about expected performance post‑launch. Challenge: effectiveness can vary by population, adherence, and health system factors.
Evidence‑Based Medicine (EBM) – the conscientious, explicit, and judiciou… #
Related terms: Systematic Review, Clinical Guidelines. Example: clinicians follow EBM by integrating randomized trial data with patient preferences. Practical use: ensures that health‑technology assessments rely on robust data. Challenge: rapid emergence of new evidence can outpace guideline updates.
External Validity – the degree to which study findings can be generalised… #
Related terms: Generalisability, Real‑World Evidence. Example: a trial conducted in tertiary hospitals may have limited external validity for primary‑care settings. Practical application: influences the weight given to trial data in HTA dossiers. Challenge: heterogeneity across health systems reduces applicability.
Health Technology Assessment (HTA) – a systematic evaluation of the prope… #
Related terms: Reimbursement Decision, Evidence Synthesis. Example: HTA agencies review clinical and economic evidence before recommending a new immunotherapy for reimbursement. Practical application: guides policy and formulary decisions. Challenge: balancing speed of access with thoroughness of evaluation.
Incremental Cost‑Effectiveness Ratio (ICER) – the ratio of the difference… #
Related terms: Cost‑Effectiveness, Net Monetary Benefit. Formula: (Cost_A – Cost_B) / (Effect_A – Effect_B). Example: an ICER of $40,000 per QALY for a novel anticoagulant versus warfarin. Practical use: benchmarked against CETs to judge value. Challenge: uncertainty around both numerator and denominator requires probabilistic analysis.
Incremental Net Benefit (INB) – a reformulation of the ICER that expresse… #
Related terms: Willingness‑to‑Pay, Cost‑Effectiveness Threshold. Formula: (λ × ΔEffect) – ΔCost, where λ is the CET. Example: with λ = $50,000 per QALY, ΔEffect = 0.03 QALY, ΔCost = $800, INB = $50,000 × 0.03 – $800 = $700. Practical application: simplifies statistical testing of cost‑effectiveness. Challenge: requires selection of an appropriate λ.
Intention‑to‑Treat (ITT) Analysis – a principle where participants are an… #
Related terms: Per‑Protocol Analysis, Crossover. Example: in a trial of a new antihypertensive, all randomised participants are included in the ITT population. Practical use: preserves randomisation benefits and reflects real‑world use. Challenge: non‑adherence can dilute treatment effects, leading to conservative estimates.
Markov Model – a type of economic model that represents transitions betwe… #
Related terms: State Transition Model, Cycle Length. Example: a Markov model for hepatitis C includes states: chronic infection, compensated cirrhosis, decompensated cirrhosis, liver transplant, death. Practical application: captures long‑term disease progression and recurrent events. Challenge: requires reliable transition probabilities and may oversimplify complex pathways.
Maximum Acceptable Price (MAP) – the highest price at which a new product… #
Related terms: Price Negotiation, Budget Impact. Example: for a CET of $30,000 per QALY, the MAP of a novel therapy is calculated at $12,000 per patient per year. Practical use: informs payer negotiations and manufacturer pricing strategies. Challenge: MAP varies across countries and payer perspectives.
Net Monetary Benefit (NMB) – an alternative expression of cost‑effectiven… #
Related terms: Incremental Net Benefit, Willingness‑to‑Pay. Formula: (λ × ΔEffect) – ΔCost. Example: using λ = $100,000 per QALY, ΔEffect = 0.05 QALY, ΔCost = $3,000, NMB = $2,000. Practical application: facilitates probabilistic sensitivity analysis. Challenge: depends heavily on the chosen λ.
Number Needed to Treat (NNT) – the number of patients that must be treate… #
Related terms: Absolute Risk Reduction, Clinical Impact. Formula: 1 / ARR. Example: with an ARR of 0.04, NNT = 25. Practical use: communicates effectiveness in an intuitive manner to clinicians and payers. Challenge: NNT varies with baseline risk and follow‑up duration.
Patient‑Reported Outcome (PRO) – any report of the status of a patient’s… #
Related terms: HRQoL, Instrument Validation. Example: a PRO questionnaire captures pain intensity in osteoarthritis patients. Practical application: PROs inform value‑based pricing and label claims. Challenge: ensuring reliability, cultural adaptation, and regulatory acceptance.
Pharmacoeconomics – the branch of health economics that evaluates the cos… #
Related terms: Cost‑Effectiveness, Market Access. Example: pharmacoeconomic studies assess whether a new biologic provides sufficient health gain relative to its price. Practical use: supports reimbursement dossiers and formulary decisions. Challenge: data scarcity, methodological heterogeneity, and differing payer priorities.
Pharmacovigilance – the science and activities relating to the detection,… #
Related terms: Safety Reporting, Post‑Marketing Surveillance. Example: a national database collects spontaneous AE reports for a newly launched antidiabetic drug. Practical application: informs risk‑management plans and label updates. Challenge: under‑reporting and causality assessment can limit signal detection.
Population‑Based Study – an observational study that includes all individ… #
Related terms: Cohort Study, Real‑World Evidence. Example: a national claims database is used to assess the long‑term costs of heart failure management. Practical use: provides large‑scale effectiveness and cost data. Challenge: confounding and data quality issues may bias results.
Probabilistic Sensitivity Analysis (PSA) – a technique that assesses unce… #
Related terms: Monte Carlo Simulation, Cost‑Effectiveness Acceptability Curve. Example: a PSA generates 10,000 iterations of a cost‑utility model, producing a distribution of ICERs. Practical application: quantifies the probability that an intervention is cost‑effective at various CETs. Challenge: requires robust parameter distributions and computational resources.
Quality‑Adjusted Life Year (QALY) – a composite measure that combines len… #
Related terms: Utility, Cost‑Utility Analysis. Example: a patient lives 2 years at a utility of 0.6, yielding 1.2 QALYs. Practical use: standard metric for comparing disparate health interventions. Challenge: ethical concerns about valuing lives differently and methodological issues in utility elicitation.
Real‑World Evidence (RWE) – clinical evidence regarding the usage and pot… #
Related terms: Real‑World Data, Pragmatic Trial. Example: registry data show that a new anticoagulant reduces stroke incidence by 15 % in routine clinical practice. Practical application: complements RCT data in HTA submissions. Challenge: data heterogeneity, missingness, and confounding.
Real‑World Data (RWD) – data relating to patient health status and the de… #
Related terms: Electronic Health Record, Claims Database. Example: prescription claims provide information on drug utilization patterns. Practical use: fuels RWE studies, budget impact models, and post‑marketing safety surveillance. Challenge: data governance, privacy, and standardisation.
Reference Case – a set of methodological assumptions (perspective, time h… #
) used as a benchmark for economic evaluations. Related terms: Base‑Case Analysis, Sensitivity Analysis. Example: NICE’s reference case adopts a 3.5 % discount rate and a NHS perspective. Practical application: ensures comparability across submissions. Challenge: rigid reference cases may not reflect local health‑system nuances.
Relative Risk (RR) – the ratio of the probability of an event occurring i… #
Related terms: Odds Ratio, Hazard Ratio. Example: an RR of 0.75 indicates a 25 % risk reduction with the experimental therapy. Practical use: conveys treatment effect magnitude. Challenge: interpretation can be misleading when baseline risk is high.
Resource Utilisation – the quantity of health‑care services (e #
g., hospital days, physician visits) consumed by patients. Related terms: Cost Data, Utilisation Patterns. Example: a study records average inpatient length of stay of 4.2 days for patients on a new chemotherapy regimen. Practical application: feeds into cost calculations for economic models. Challenge: variability across settings and the need for accurate unit cost attribution.
Scenario Analysis – an exploratory technique that evaluates the impact of… #
Related terms: Sensitivity Analysis, Deterministic Analysis. Example: a scenario assumes a 20 % price discount for a drug, resulting in a lower ICER. Practical use: helps decision‑makers understand how changes in key drivers affect cost‑effectiveness. Challenge: selection of plausible scenarios and communication of results.
Sensitivity Analysis – the systematic variation of model inputs to assess… #
Related terms: One‑Way Sensitivity, Tornado Diagram. Example: varying the utility value for a health state between 0.5 and 0.8 changes the ICER from $35,000 to $55,000 per QALY. Practical application: identifies parameters with greatest influence on outcomes. Challenge: may not capture joint parameter uncertainty.
Standardised Mortality Ratio (SMR) – the ratio of observed deaths in a st… #
Related terms: Observed‑to‑Expected Ratio, Epidemiologic Measure. Example: an SMR of 1.2 indicates 20 % higher mortality than the general population. Practical use: assesses disease burden and informs cost‑of‑illness studies. Challenge: requires accurate reference rates and adjustment for age‑sex distribution.
Survival Analysis – statistical methods for analyzing time‑to‑event data,… #
Related terms: Kaplan‑Meier Curve, Cox Proportional Hazards Model. Example: a Kaplan‑Meier plot shows median overall survival of 18 months for patients receiving immunotherapy. Practical application: provides transition probabilities for Markov models. Challenge: handling non‑proportional hazards and competing risks.
Systematic Review – a structured, comprehensive synthesis of research evi… #
Related terms: Meta‑analysis, Evidence Grading. Example: a systematic review aggregates RCTs comparing two antihypertensive agents. Practical use: forms the evidence base for HTA dossiers. Challenge: publication bias and heterogeneity can limit conclusions.
Time‑Trade‑Off (TTO) – a utility elicitation technique where respondents… #
Related terms: Standard Gamble, Utility Measurement. Example: a respondent is willing to give up 2 years of 10‑year life expectancy to avoid a health state considered intolerable, yielding a utility of 0.8. Practical application: generates health state utilities for CUAs. Challenge: respondent understanding and cultural differences affect results.
Utility – a numeric representation of the preference for a given health s… #
Related terms: QALY, Preference‑Based Measure. Example: a utility of 0.65 reflects moderate impairment. Practical use: core input for cost‑utility analyses. Challenge: measurement methods (direct vs indirect) can produce divergent values.
Value‑Based Pricing (VBP) – a pricing strategy that sets drug prices base… #
Related terms: Cost‑Effectiveness, Price Negotiation. Example: a health system adopts VBP, linking reimbursement to an ICER below $25,000 per QALY. Practical application: aligns incentives for manufacturers to demonstrate value. Challenge: requires robust evidence and consensus on thresholds.
Willingness‑to‑Pay (WTP) – the maximum amount an individual or society is… #
Related terms: Cost‑Effectiveness Threshold, Contingent Valuation. Example: a WTP of $50,000 per QALY is often cited in US cost‑effectiveness studies. Practical use: informs CET selection and NMB calculations. Challenge: WTP varies across populations and may be influenced by income or cultural factors.
Zero‑Order Markov Model – a model in which the probability of moving to a… #
Related terms: Memoryless Property, State Transition. Example: a disease progression model where each cycle’s transition probabilities are fixed regardless of prior cycles. Practical application: simplifies modeling of chronic conditions. Challenge: may oversimplify diseases with history‑dependent progression.
Adherence – the extent to which a patient’s behavior corresponds with agr… #
Related terms: Compliance, Persistence. Example: electronic monitoring shows 78 % adherence to a daily oral medication. Practical use: influences real‑world effectiveness and cost‑effectiveness. Challenge: measuring adherence accurately and addressing barriers.
Benefit‑Risk Assessment – the systematic evaluation of the positive thera… #
Related terms: Safety Profile, Efficacy. Example: a benefit‑risk ratio compares the reduction in cardiovascular events to the incidence of bleeding. Practical application: guides regulatory approval and labeling. Challenge: quantifying benefits and risks on a common scale.
Cost‑of‑Illness (COI) Study – an analysis that estimates the total econom… #
Related terms: Economic Burden, Resource Use. Example: a COI study for diabetes reports $327 billion in annual U.S. costs. Practical use: provides context for value assessments and prioritisation. Challenge: capturing productivity losses and informal care accurately.
Discount Rate – the annual percentage used to convert future costs and ou… #
Related terms: Discounting, Time Preference. Example: a 3 % discount rate reduces a $10,000 cost occurring in 5 years to $8,600 today. Practical application: standardises economic evaluations over time. Challenge: differing rates across jurisdictions can affect comparability.
Effect Modifier – a variable that changes the magnitude or direction of t… #
Related terms: Interaction, Subgroup Analysis. Example: age modifies the efficacy of a vaccine, with greater benefit in children than adults. Practical use: informs targeted reimbursement and personalized medicine. Challenge: detecting true modifiers requires adequate power and appropriate statistical methods.
External Consistency – the degree to which model outputs align with indep… #
Related terms: Model Validation, Calibration. Example: a model predicts a 5‑year survival of 70 % for a cancer cohort, matching registry data. Practical application: builds confidence in model predictions for decision‑makers. Challenge: limited external data may impede validation.
Health Economic Evaluation – the comparative analysis of alternative inte… #
Related terms: Cost‑Effectiveness Analysis, Cost‑Utility Analysis. Example: an evaluation compares a new vaccine to existing prophylaxis, reporting ICER and NMB. Practical use: supports resource allocation decisions. Challenge: methodological choices (perspective, time horizon) influence results.
Incremental Cost‑Utility Ratio (ICUR) – the ICER expressed specifically i… #
Related terms: ICER, Cost‑Utility Analysis. Example: an ICUR of $22,000 per QALY for a new antihypertensive versus generic therapy. Practical application: directly comparable to QALY‑based thresholds. Challenge: utility measurement uncertainties propagate to the ICUR.
Markov Cohort Model – a deterministic version of a Markov model where a c… #
Related terms: State Transition, Cycle Length. Example: a cohort of 1,000 patients with chronic hepatitis progresses through fibrosis stages annually. Practical use: estimates long‑term costs and outcomes without individual simulation. Challenge: assumes homogenous transition probabilities within each cycle.
Monte Carlo Simulation – a computational technique that uses random sampl… #
Related terms: Probabilistic Sensitivity Analysis, Stochastic Modeling. Example: 10,000 iterations of a cost‑effectiveness model generate a distribution of ICERs. Practical application: quantifies overall decision uncertainty. Challenge: requires specification of appropriate input distributions and sufficient computational power.
Net Health Benefit (NHB) – the health gain expressed as a QALY equivalent… #
Related terms: Net Monetary Benefit, Value of Information. Formula: ΔEffect – (ΔCost / λ). Example: with λ = $50,000 per QALY, ΔEffect = 0.04 QALY, ΔCost = $1,200, NHB = 0.04 – (1,200/50,000) = 0.016. Practical use: offers a health‑focused metric for decision analysis. Challenge: depends on the chosen λ and may be less intuitive for some stakeholders.
Patient‑Level Simulation – a modeling approach that tracks individual pat… #
Related terms: Microsimulation, Discrete Event Simulation. Example: a microsimulation model assigns each patient a unique set of comorbidities influencing transition probabilities. Practical application: captures variability and complex interactions. Challenge: data‑intensive and computationally demanding.
Probabilistic Model – an economic model that incorporates probability dis… #
Related terms: PSA, Monte Carlo Simulation. Example: a probabilistic model assigns a beta distribution to utility values and a gamma distribution to cost inputs. Practical use: produces confidence intervals for ICERs. Challenge: requires robust parameter distribution selection.
Quality‑Adjusted Survival – the integration of survival time with quality… #
Related terms: QALY, Life‑Year Gained. Example: a patient survives 3 years with a utility of 0.7, resulting in 2.1 quality‑adjusted life years. Practical application: used when utility data are only available for survival periods. Challenge: may overlook temporary health state improvements.
Reference Price – a price set by a payer for a group of therapeutically s… #
Related terms: Price Capping, Reimbursement Policy. Example: a health system establishes a reference price of $150 per tablet for all statins. Practical use: encourages price competition and cost containment. Challenge: may limit patient choice and affect market dynamics.
Scenario‑Based BIA – a budget impact analysis that evaluates multiple pla… #
g., uptake rates, price changes). Related terms: Deterministic BIA, Sensitivity Analysis. Example: a scenario assumes 30 % market share for a new drug versus 10 % in a conservative scenario. Practical application: provides decision‑makers with a range of potential financial outcomes. Challenge: forecasting accuracy and communicating complexity.
Standardized Cost‑Effectiveness Ratio (SCER) – an ICER adjusted to a comm… #
Related terms: Adjusted ICER, Comparative Effectiveness. Example: adjusting an ICER to a 3 % discount rate and societal perspective yields an SCER of $38,000 per QALY. Practical use: enables benchmarking across jurisdictions. Challenge: methodological harmonisation is required.
Surrogate Endpoint – a biomarker or intermediate outcome used as a substi… #
Related terms: Clinical Endpoint, Validation. Example: reduction in LDL‑cholesterol is a surrogate for decreased cardiovascular events. Practical application: shortens trial duration and facilitates early HTA submissions. Challenge: surrogate must be reliably linked to true clinical outcomes.
Therapeutic Index – the ratio of a drug’s toxic dose to its effective dos… #
Related terms: Safety Profile, Dose‑Response. Example: a therapeutic index of 10 suggests the toxic dose is ten times the effective dose. Practical use: informs dosing guidelines and risk assessments. Challenge: variability among patients can affect the index’s applicability.
Time Horizon – the period over which costs and outcomes are evaluated in… #
Related terms: Lifetime Horizon, Short‑Term Horizon. Example: a lifetime horizon captures all future costs and QALYs for a chronic disease intervention. Practical application: ensures that long‑term benefits are not omitted. Challenge: longer horizons increase uncertainty and require more assumptions.
Utility Elicitation – the process of obtaining health state preferences f… #
Related terms: Preference Measurement, Health State Valuation. Example: a TTO interview yields a utility of 0.85 for moderate osteoarthritis pain. Practical use: supplies the utility inputs for CUAs. Challenge: methodological choices affect validity and comparability.
Value of Information (VOI) – an analytical framework that quantifies the… #
Related terms: Expected Value of Perfect Information, Expected Value of Sample Information. Example: a VOI analysis estimates that investing $2 million in a further trial could yield $10 million in health gains. Practical application: guides research prioritisation and funding allocation. Challenge: complex calculations and assumptions about future data quality.
Willingness‑to‑Pay Threshold (WTP Threshold) – synonymous with cost‑effec… #
Related terms: CET, Decision Rule. Example: a payer adopts a WTP threshold of €25,000 per QALY for new technologies. Practical use: determines whether an ICER is deemed acceptable. Challenge: thresholds may be arbitrary, differ across diseases, and evolve over time.