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Understanding the economics of healthcare

Patients, government, and industry spend some $3 trillion a year on healthcare, making it one of the most pressing issues facing our country. Unsurprisingly, rising healthcare costs have sparked a national debate, one that is largely associated with the uncertainties surrounding healthcare spending, according to Roger Edwards, an assistant professor in the department of pharmacy practice.

For tomorrow’s healthcare workers, navigating that debate is of critical importance. For this reason,  “Evaluation of Pharmaceuticals and Pharmacy Practice”—a class for doctoral students in the pharmacy program—is treated as the equivalent of a capstone course.

This semester, Edwards worked with some 135 fifth-year students on 23 projects that synthesized economic and clinical information. Each project aimed to tease out the cost effectiveness of pharmaceutical treatments for various health conditions, from HIV to Alzheimer’s disease. Twenty projects were submitted to the professional section of the American Society of Health-System Pharmacists Midyear Clinical Meeting in Las Vegas, Nev., and all of them were accepted.

Earlier this month, 71 of the students attended the meeting and presented their findings to a professional audience comprising healthcare decision makers in industry and academia. An Undergraduate Provost Research award covered travel expenses for the students who presented their work.

Seventy-one Northeastern students presented research at the American Society of Health-System Pharmacists Midyear Clinical Meeting. Photo by Jack Reynolds.

“The entire research experience has grown my confidence in being able to apply these skills in any future setting,” said student Dennis Tung. In collaboration with five classmates, he presented an analysis of Riluzole, the drug used in Veterans Administration hospitals across the country to treat ALS, an illness that disproportionately affects veterans.

Riluzole treatments cost a total of $10.6 million per year, accounting for approximately two percent of the VA’s budget. After reviewing nine studies pertaining to the safety, efficacy, and patient outcomes of Riluzole treatment and four economic studies pertaining to the drug’s cost effectiveness, the student group performed a budget-impact analysis.

Ultimately, the group used its data to recommend that the VA keep Riluzole in its treatment protocol.

Other groups designed decision trees to evaluate the cost effectiveness of one drug over another. For example, fidaxomicin and vancomycin both treat a bacterial infection that kills 14,000 patients each year. The current treatment, vancomycin, costs $1 billion annually. Fidaxomicin, on the other hand, was newly approved in the spring of 2011 and costs more per treatment, but some studies have shown that it reduces readmission rates. The student group analyzing this tradeoff found that hospitals would lose the cost of 50 to 80 hospital days per 100 patients if they switched to the new treatment.

These two models—decision tree and budget analysis—are the dominant methods for evaluating the economic and clinical implications of healthcare practices, said Edwards. “If we can teach our students to be better consumers of health-economic information then we are serving a broader purpose of them being health professionals in the community,” he explained. “They need to be critical consumers of this kind of information and they cannot do that unless they study the literature and do a hands-on project.”