Pharmacoeconomics- Role in Healthcare Industry and its Analysis


The term Pharmacoeconomics was coined by Townsend in 1968. Pharmacoeconomics is a branch of economics that deals with the principle of costs benefits, cost-effectiveness, cost-minimization, cost of illness, and cost-utility analysis to compare pharmaceutical products and treatment strategies. Comparing all these properties for pharmaceutical products provides proper analysis for risks and benefits. It provides efficient allotment of scanty resources by competing with alternative medications and treatments available in the market.  These decisions can be monitored and guided by the Health Technology Assessment process that informs the government, about the social, economic, and health-related use and impact of this development. The pharmacoeconomic method measures cost in financial terms; the differences lie in the valuation of outcomes.

Pharmacoeconomics Analysis and Modelling

Pharmacoeconomics policy is increasingly used to help decision-makers analyze the value of health intervention. This allows the effective and affordable use of healthcare resources. Pharmacoeconomics focuses on modeling methods. The following pharmacoeconomic methods are compared and contrasted cost-of-illness analysis (COI), budget-impact analysis (BIA), cost-comparison analysis, cost-minimization analysis (CMA), cost-effectiveness analysis (CEA), cost-utility analysis (CUA), cost-consequence analysis (CCA), and cost-benefit analysis (CBA)

The pharmacoeconomic analysis consists of the following listed steps-

  1. Understanding and analyzing the root cause of the problem -During the process of drug development which is a risk and time-consuming process, and how to allocate R&D sources, pharmacoeconomics have an important role.
  2. Determining the study’s perspective and its impact – During the process of drug discovery pharmacoeconomic helps to study how new drugs introduced into the market will be beneficial to the population. 
  3. Determining the secondary options and replacements- Since one particular treatment or medicine cannot be sufficient, one must also think of secondary treatment or alternatives.
  4. Selecting the appropriate pharmacoeconomic method- one must focus on such treatments which are affordable, can be used by the mass population and that are easily available.
  5. Placing financial values on the outcomes
  6. Identifying study resources- the resources required must be thoroughly analyzed and the outcomes can be decided on that basis.
  7. Establishing the probabilities of the outcomes- The outcomes must be analyzed that what will be the result and what if the result won’t be successful.
  8. Applying decision analysis
  9. Discounting costs or performing a sensitivity or incremental cost analysis
  10. Presenting the results  

Role and Need of Pharmacoeconomics in Current Health Care System

Indian Pharmaceutical Industry is the third-largest producer of medicine in the world and a diversity of medicines are available in the market. Pharmacoeconomics is one of the key tools that had a vital role in the pharmaceutical industry and helps to decide which drug needs to be introduced into the market and what will be its role on the population. It helps in communicating with external decision-makers (payer-prescribers and patients). In the Indian healthcare industry, the formulary system is weak and treatment protocols only exist in theory. People are still not completely aware of medical insurance. All these prevalent issues lead to the implementation of pharmacoeconomic. It helps in evaluating the affordability and access of the right medicines to the right person. It helps in balancing the costs with outcomes of therapies or treatment. The economic, clinical, and humanistic outcomes for pharmacoeconomic evaluation view drugs as the combination of clinical, economic, and humanistic outcomes. It will help doctors and pharmacists that which clinical outcome, the patient characteristic is suitable for a particular intervention.


Time and money are two precious things and their expenditure should be done smartly and wisely. Pharmacoeconomics provides a tool that helps to enhance the quality of practice by strengthening the evaluation process and increasing the probability that could help to deliver better treatments and resources. In the upcoming time process are increasingly rapidly and since the pharmaceutical industry deals with lots of experiments for new treatments and medicines. Pharmacoeconomics centers on the economic evaluation of pharmaceuticals. The role of pharmacoeconomic comes that how one can minimize this expenditure with better outcomes.


Ritika Gupta

Ritika Gupta is an MPharm. graduate who is keen on spreading awareness about various unexplored medical fields through her writings.

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