Basic Concept in Pharmacoeconomics

Abstract

Pharmacoeconomics or health economics has been introduced to healthcare organizations in several countries. It is able to help decision makers in the planning of health activities or the allocation of resources to be used efficiently. Understanding of basic economics is important for health administrators. Two economic branches incorporated to the health aspect are microeconomics and macroeconomics. Microeconomics concentrates on the preference made by the individual. Concepts or theories explained individual behavior in healthcare such as elasticity of demand and supply, equilibrium in perfectly competitive markets, and market failure that includes adverse selection and moral hazards. These concepts explain why a product, the consumer has purchased, costs higher than an equilibrium price or why an amount of product sold in the market is lower than an equili-brium amount. Macroeconomics, the other branch of economics, focuses on the overall performance of an economy system, government policy, and budget allocation. Therefore, to understand and apply pharmacoeconomics to healthcare system, concepts of economics are crucial.