Economic Evaluation
-Health Economics
Dr. Jarir At Thobari, MSc, DPharm, PhD
Faculty of Medicine, UGM
1. Dept. Pharmacology and Therapy Div. Pharmacoepidemiology & Pharmacoeconomy
2. Clinical Epidemiology & Biostatistics Unit
Increasing demand of healthcare
Budget & resources constraint
Financing HIV in developing countries
Increasing choices of technology
HTA for decision making
•
Increase expenditure on drug therapy
•
Resources limited (scarcity of budget)
♦ Solution?– Efficient use of resources within the health care setting – Efficient use of resources within the health care setting
(e.g. switch to cheaper generic drugs1,2)
– Making choices priority
Clinical effectiveness
Social aspects Medical &
biological
What is health technology assessment
(HTA)?
HTA is a multidisciplinary field of policy analysis. It studies the medical, social, ethical, and economic implications of development, diffusion, and use of
health technology.
Any intervention that may be used to promote health, to prevent, diagnose or Any intervention that may be used to promote health, to prevent, diagnose or treat disease or for rehabilitation or long-term care. This includes the
pharmaceuticals, devices, procedures and organizational systems used in health care.
Using HTA to inform priority setting
• Applied HTA can be considered as a process for
considering scientific evidence, economic evidence and
social values, to inform decisions as to whether to fund a treatment / service
– Includes cost-effectiveness analysis (CEA); not just clinical – Includes cost-effectiveness analysis (CEA); not just clinical
effectiveness
– Drawing comparisons: Compared to the status quo, what do we gain out of the new treatment, and at what extra cost?
– Not a merely technical exercise: The process and social values
are equally important
Definition of areas
HTA system
Economic evaluation (PE)
INPUT PHARMACEUTICAL OUPUT
PRODUCT OR SERVICE
Cost Analysis
(a partial economic evalution) Clinical or Outcome Study (not an economic study)
Economic Evaluations
Intervention A Consequences A
Cost A
Cost B
Difference in costs?
Consequences B Intervention B
new drug/device is cost-effective!
• Reduce the cost
• More benefit
• Which one more effective and lower costs
• Optimal balance costs and effect
• Good effect for lowest cost
• Good effect for lowest cost
• Highest benefit and lowest cost and safe
• Willingness to pay for optimal balance
• Cheaper and better!
• More expensive and better
• Cheaper and lower benefit
Negative
Consequences
Positive Consequences More Expensive
Consequences Consequences
Components of economic evaluation (Torrance, 1986)
Costs from what perspective?
Health care costs
- Direct medical costs Procedures Treatment Care
Healthcare payments
- Indirect medical costs As above but due to a longer life (expectancy)
Health care perspective
Societal perspective
Non-health care costs
- Direct non-medical costs Informal care
Non-healthcare payments Travel and time
- Indirect non-medical costs Productivity costs Other societal sectors
Intangibles Happiness
Well-being Decision makers’
Hospitalized Tarif (in IDR million)
for Non-bacterial Infection based on JKN tariff 2014
Hospital Class Severity Level
Mild Moderate Severe
Hospitalization
- Hospital Class A
o Class 3 o Class 2
o Class 1
- Hospital Class B
o Class 3
- Hospital Class C
o Class 3 o Class 2 o Class 1
- Hospital Class D
Types of Pharmacoeconomic Studies
Methodology Cost
Measurement Unit
Outcome
Measurement Unit Measurement Unit Measurement Unit
Cost-Minimization Analysis (CMA) Dollars or Monetary Units Assumed to be equivalent in comparable groups
Cost-Effectiveness Analysis (CEA) Dollars or Monetary Units Natural units (life years gained, mm Hg blood pressure, mMol/L blood glucose)
Cost-Utility Analysis (CUA) Dollars or Monetary Units Quality-adjusted life year (QALY) or other utilities
Cost-Benefit Analysis (CBA) Dollars or Monetary Units Dollars or monetary units
•
Cost Consequences Analysis (CCA)
– List of costs and various outcomes presented but no comparisons made
•
Cost of illness
Other Types of economic evaluation
•
Cost of illness
– Estimate of total economic burden (prevention, treatment, losses in productivity) of particular condition (illness) or disease on society
Different effects different economic evaluations
Effects Economic Evaluation
• Natural effects - Cost Effectiveness Analysis (CEA)
• Utilities - Cost Utility Analysis (CUA)
• Monetary terms - Cost Benefit Analysis (CBA)
Cost-Minimization Analysis (CMA)
Definition
Sample Problem
Common Applications
24
Dollars or Monetary Units Assumed to be equivalent in comparable groups
Common Applications
Cost-Minimization Analysis (CMA)
– PE analysis where outcomes of two or more interventions are assumed to be equivalent
• Thus, only costs of intervention are compared
Cost-Minimization Analysis (CMA)
• Thus, only costs of intervention are compared
– Objective: choose the least costly alternative
Example Problem: Administration of prostaglandin E2 gel intracervically to expectant mothers on the day before labor was to be induced.
• Outpatient Group: administer medication monitor 2 hours send home overnight admit next day induce labor
• Inpatient Group: administer medication monitor 2 hours send to maternity unit for the night induce labor
Type of Cost Costs for Outpatients (n = 40)
Costs for Inpatients (n = 36)
Statistical Difference
Cost-Minimization Analysis (CMA)
Would you recommend the outpatient program?
(n = 40)
Hospital Costs $3835 ($2172) $5049 ($2060) Yes (p = 0.015)
Common Applications
– Common CMA application:
• Cost comparison of two generic medications rated as
equivalent by Drug Regulatory
Cost-Minimization Analysis (CMA)
equivalent by Drug Regulatory
• Cost comparison of same drug therapy in different
settings
– Not appropriate for comparing different classes of medications
Advantages and Disadvantages
– Advantage: simplest analysis to conduct
– Disadvantage: cannot be used when outcomes of each intervention are different
Cost-Minimization Analysis (CMA)
each intervention are different
29
30
31
Cost-Effectiveness Analysis (CEA)
Dollars or Monetary Units Natural units
(life years gained, mm Hg blood pressure, mmol/L
blood glucose)
Common Applications
Advantages and Disadvantages
Cost-Effectiveness Analysis
– PE analysis where outcomes are measured in natural or clinical units
– CEA is most common type of PE analysis
Cost-Effectiveness Analysis (CEA)
Two methods of reporting cost-effectiveness: • Average Cost-Effectiveness Ratio (CER) =
Cost of Intervention
Effectiveness of Intervention
• Incremental Cost-Effectiveness Ratio (ICER) = Cost of Intervention B – Cost of Intervention A
•
Effectiveness of oral antidiabetic (OAD)
– OAD- A (new drug) : 25/100 patients
– OAD- B (standard drug) : 19/100 patients
Cost-Effectiveness Analysis (CEA)
•
Clinical outcome:
– number of patients with ≥ 1% decrease in ‘HBA1c’ over one year
Cost/unit
(USD)* No. ofunits patientsNo. of Total cost(USD) Medicine A
Medicine cost 40 12 100 48,000
Lab cost 20 1 100 2,000
Adverse event 50 2 100 10,000
Cost-Effectiveness Analysis (CEA)
Adverse event 50 2 100 10,000
Physician 25 2 100 5,000
Total 65,000
Medicine B
Medicine cost 25 12 100 30,000
Lab cost 20 2 100 4,000
Adverse event 50 3 100 15,000
Physician 25 3 100 7,500
Total 56,500
• Comparison between OAD - A and B for 100 patients for 1 year
Medicine A Medicine B
• Net costs USD* 65,000 56,500
• Effectiveness
No. patients with ≥ 1%
Cost-Effectiveness Analysis (CEA)
No. patients with ≥ 1% decrease in glycosylated
hemoglobin 25 19
• Incremental Cost Effectiveness Ratio =
(65,000-56,500)/(25-19) = USD1,416.67 per extra patient with ≥ 1% decrease in glycosylated hemoglobin
CB Treatment B
EB- EA
CB-CA EB-EA ICER =
CB-CA
Average and incremental ratios
ICER: Incremental Cost-Effectiveness Ratio
CA
O EA
Treatment A
Programme Costs Effects
Average vs. ICER
B
Common Applications
– Common CEA application: medications with the same type of primary outcomes, and most often for treatment of the same types of health
Cost-Effectiveness Analysis (CEA)
for treatment of the same types of health condition
– CEA is only performed when the outcome of one intervention is both better than another AND the cost is greater.
Advantages and Disadvantages
– Advantages:
• Health units are common outcomes routinely measured in clinical
trials – familiar to clinicians
• Outcomes are easier to quantify than CUA or CBA
– Disadvantages:
Cost-Effectiveness Analysis (CEA)
– Disadvantages:
• Interventions with different types of outcomes cannot be
compared
• Can’t combine more than one important outcome
• Difficult to collapse both the effectiveness and the side effects into one unit of measurement
• CEA estimates extra cost associated with each additional unit of
outcome, but who is to say that added cost is worth added outcomes? Requires judgment call.
The Cost Effective Plane of ICER
Differences in effectiveness
Note: Origin is reference intervention
-Maximum acceptable ratio
New treatment more costly
Maximum ICER
New treatment less effective
New treatment more effective
Maximum acceptable ratio
Go / No Go
• Introduce Cost-saving programs if health gains >= 0
• Laupacis et al (1992)
– < Can$20,000 Go ; > Can$100,000 No Go
– Inbetween → professional judgment required
– Inbetween → professional judgment required
• Owens (1998)
– < US$50,000 Go ; > US$50,000 No Go
• NICE: ₤ 30,000 ₤ 50,000
• Netherlands: € 20,000 € 50,000
Maximum acceptable
• Willingness to pay
• WHO Commission on Macroeconomics and Health
– cost-effective:
• interventions had a positive net benefit at a
• interventions had a positive net benefit at a
willingness-to-pay of three times the per capita GDP
– highly cost-effective:
– interventions had a positive net benefit at a
willingness-to-pay of one times the per capita GDP
Cost-Utility Analysis (CUA)
Definition
Sample Problem
Common Applications
48
Dollars or Monetary Units Quality-adjusted life year (QALY) or other utilities
Common Applications
Advantages and Disadvantages
Cost-Utility Analysis (CUA)
– A PE analysis which measures outcomes based on years of life that are adjusted by
“utility” weights(patient preferences); range [0, 1]
– Most common utility is the Quality-Adjusted Life Year (QALY)
• 1.0 QALY = 1 year of life in perfect health
• 0.0 QALY = death
Cost-Utility Analysis (CUA)
• 0.0 QALY = death
• 0.0 < QALY < 1.0: a year when health is diminished by disease or treatment
Quality Adjusted Life Years (QALYs) weight the life years remaining by the utility weight (QALY)
• Ex: 4 years of life post cancer treatment at 0.6 utility wt = 2.4 QALYs
– Average vs. Incremental Cost per QALY: (similar to CEA):
• Average Cost per QALY = Incremental Cost per QALY =
– Cost of Intervention Cost of Intervention B – Cost of Intervention A
– QALYs of Intervention QALYs of Intervention B – QALYs of Intervention A
1
HRQoL - Health state value or utility 4 * 0.9 = 3.6
3 * 0.7 = 2.1
2 * 0.2 = 0.4
Total QALY: 6.3
5 * 1.0 = 5.0
2 * 0.8 = 1.6
4 * 0.2 = 0.8
7.4
Health Related Quality of Life (HRQoL)
Cost-Utility Analysis (CUA)
0
Life expectancy 9 years 11 years
Example
Human papillomavirus (HPV) vaccine +screening vs. screening only.
A. Current Screening Program Only
(“PAP test”)
B. HPV Vaccine at 90% Efficacy + Screening
Total Lifetime Costs $1111 $1400
Quality-Adjusted Life
25.9815 QALYs 25.9934 QALYs
Cost-Utility Analysis (CUA)
Would you recommend the new HPV vaccine program?
Would you recommend the new HPV vaccine program?
Adapted from Goldie SJ, Kohli M, Grima D, Weinstein MC, Wright TC, Bosch FX, et al. Projected Clinical Benefits and Cost-effectiveness of a Human Papillomavirus 16/18 Vaccine. J Natl Cancer Inst. 2004;96(8):604-615; as reported in Arnold, 2010
Quality-Adjusted Life
Expectancy 25.9815 QALYs 25.9934 QALYs
Average
Cost-Utility Ratio (Cost / QALYs)
$1111 / 25.9815 QALYs = $42.76 per QALY
$1400 / 25.9934 QALYs = $53.86 per QALY
Example 2
Dabigatran 150 mg twice daily vs. warfarin for stroke prophylaxis in 70-year-old patients with atrial fibrillation.
A. Warfarin B. Dabigatran
Total Costs $23,000 $43,700
Cost-Utility Analysis (CUA)
Would you recommend dabigatran over warfarin?
Would you recommend dabigatran over warfarin?
Adapted from Shah S, Gage B. Cost-effectiveness of dabigatran for stroke prophylaxis in atrial fibrillation. Circulation 2011;123(22):2562-70.
Quality-Adjusted Life
Expectancy 8.40 QALYs 8.65 QALYs
Average
Cost-Utility Ratio (Cost / QALYs)
$23,000 / 8.4 QALYs = $2738 per QALY
$43,700 / 8.65 QALYs = $5052 per QALY
Common Applications
•
CUA is useful when
utility adjustments
are
needed, such as when:
– Length of life (quantity) and quality of life are different
Cost-Utility Analysis (CUA)
different
– Length of life (quantity) is unaffected and quality of life is different
– Outcomes are very different
•
CUA is not warranted when:
– Number of life years saved (quantity) is different but
quality of each year of life is very similar
Advantages and Disadvantages
– Advantages:
• Can incorporate both morbidity and mortality
• Can compare multiple programs with either similar or unrelated outcomes (anticoagulation and diabetes clinics) Can use a threshold or cutoff cost per QALY (such as
Cost-Utility Analysis (CUA)
unrelated outcomes (anticoagulation and diabetes clinics)
• Can use a threshold or cutoff cost per QALY (such as
$50,000) and decide somewhat objectively if an intervention is cost effective
– Main disadvantages:
• No consensus on calculating utility weights
• Utility weights are “rough estimates”
• Many clinicians are not familiar with QALYs
Question:
•
Do negative QALYs make sense?
Cost-Utility Analysis (CUA)
Question:
• Do negative QALYs make sense?
Answer:
Cost-Utility Analysis (CUA)
Answer:
• Some researchers point out that there are disease states worse than death – such as living in
uncontrollable, excruciating pain, or living in a coma – so negative QALYs may be needed to depict these
values. Whether or not negative QALYs make sense is debatable.
Intervention $ / QALY
GM-CSF in elderly with leukemia 235,958 EPO in dialysis patients 139,623 Lung transplantation 100,957 End stage renal disease management 53,513
QALY League Table
11/6/2017 57
End stage renal disease management 53,513 Heart transplantation 46,775 Didronel in osteoporosis 32,047
PTA with Stent 17,889
Breast cancer screening 5,147
Viagra 5,097
Treatment of congenital anorectal malformations 2,778
•• FunctioningFunctioning
– Social: get along with family and friends
– Physical: perform daily activities
– Emotional: stability and self-control
Health Related Quality of Life (HRQoL)
– Emotional: stability and self-control
– Intellectual: decision-making ability
• Perceptions
– Life satisfaction: sense of well-being
– Health Status: compared to others Quality of life is multi factorial. Being in a wheelchair does not preclude a satisfying life
Perfect health 1.00
Influenza (2 weeks) 0.99
Diabetes (without serious complications) 0.93
Mild angina pectoris 0.92
Health Related Quality of Life (HRQoL)
Mild angina pectoris 0.92
Major outcomes of Chlamydia 0.89
Serious asthma 0.64
AIDS 0.44
Specific Instruments
• Arthritis Impact Measurement Scales (AIMS)
• Asthma Quality of Life Questionnaire (AQLQ)
• Diabetes Quality of Life (DQOL)
• Kidney Disease Quality of Life (KDQOL)
• Kidney Disease Quality of Life (KDQOL)
• Quality of Life Epilepsy (QOLIE)
Methods to assess preferences
Direct method
– Individuals asked to choose (declare preferences) between their current health state and alternative health status scenarios
health status scenarios
– Individuals make these choices based on their own comprehensive health state (or the composite
Direct measures of Health
Direct measures of
Health--State Preferences
State Preferences
• May be necessary if effects of intervention are
complex:
– Multiple domains
– Effects not captured in disease-specific instrument
– Effects not captured in disease-specific instrument
• Not the “community value” specified by Gold et al
• Methods:
– Visual Analog Scales
– Standard Gamble
Value a health state
• You are in a wheelchair
• No pain or discomfort
• No psychosocial problems
Visual Analogue Scale (VAS)
• It is easy to use and achieve high response rate
• It is a choice-less assessment
Best
imaginable health state
Yogyakarta, March 2009 Master Program of Basic Medical Sciences
50 Please draw a line at the point on
the scale that summarises your current health status
Your own health state today
Worst
Standard Gamble
Healthy (p)
Dead (1-p)
taking gamble on a new treatment for which the outcome is uncertain
Dead (1-p)
State i
living in health state
Standard Gamble
95%
Alternative 2:
uncertain outcome
Complete health Measures the preferences of individuals under risky situations
Alternative 1: certain outcome uncertain outcome
100%
5%
Death
Standard Gamble (SG)
•
Wheelchair
•
Life expectancy is not important here
•
How much are risk on death are you prepared
to take for a cure?
to take for a cure?
– Max. risk is 20%
– 100% life on wheels = (100%-20%) life on feet
Time Trade Off
Healthy 1.0
t
x time
State i hi
Time Trade off
How much reduction in total life
Time Trade-Off (TTO)
• Wheelchair
– With a life expectancy: 50 years
• How many years would you trade-off for a cure?
– Max. trade-off is 10 years
– Max. trade-off is 10 years
• QALY(wheel) = QALY(healthy)
– Y * V(wheel) = Y * V(healthy)
– 50 V(wheel) = 40 * 1
Indirect
Indirect measures of Health
measures of
Health--State Preferences
State Preferences
•
Short Form-6D
•
EuroQol (EQ-5D)
•
Health Utility Index (HUI)
•
Health Utility Index (HUI)
Euro Qol 5D
• Mobility
1. No problems walking
2. Some problem walking about 3. Confined to bed
• Self-care
1. No problems with self-care
2. Some problems washing or dressing self
• Pain/discomfort
1. No pain or discomfort
2. Moderate pain or discomfort 3. Extreme pain or discomfort
• Anxiety/depression
1. Not anxious or depressed
2. Moderately anxious or depressed 2. Some problems washing or dressing self
3. Unable to wash or dress self
• Usual activities
1. No problems with performing usual activities (e.g. work, study, housework, family or leisure activities)
2. Some problems with performing usual activities
3. Unable to perform usual activities
2. Moderately anxious or depressed 3. Extremely anxious or depressed
EQ-5D space: 35
Scoring patient 11223
Full health = 1.000
Constant - 0.081
Mobility (level 1) - 0
Self-care (level 1) - 0
Usual activities (level 2) - 0.036
Usual activities (level 2) - 0.036
Pain/discomfort (level 2) - 0.123
Anxiety/depression (level 3) - 0.236
N3 - 0.269
Healthy 1.0
0.8
DALYs
QALY vs. DALY
70
Life expectancy (years)
Dead 0.0
20 50
Cost-Benefit Analysis (CBA)
Definition
Sample Problem
Common Applications
78
Dollars or Monetary Units Dollars or Monetary Units
Common Applications
Advantages and Disadvantages
Cost-Benefit Analysis (CBA)
– A PE analysis in which both costs and benefits are valued
in monetary units
– The results of a CBA can be presented in several formats:
1. Net Benefit = Total Benefits – Total Costs
Cost-Benefit Analysis (CBA)
1. Net Benefit = Total Benefits – Total Costs
Cost beneficial if Net Benefit > 0
2. Benefit-to-Cost Ratio = Total Benefits / Total Costs
Cost beneficial if Benefit-to-Cost > 1
3. Internal Rate of Return (IRR) = The rate of return that equates the present value of benefits to the present value of costs
4. Break-Even Point = The time required to recoup the investment
Example problem: Implementation of a pharmacy bar-code system to reduce medication dispensing errors.
5-year time horizon Pharmacy Bar-Code System
Total (Incremental) Costs $2.24 million
Cost-Benefit Analysis (CBA)
Was the bar-code system a good financial decision?
Total (Incremental) Benefits $5.73 million
Net-Benefit =
Total Benefits – Total Costs $5.73 million - $2.24 million = $3.40 million
Benefit to Cost Ratio =
Total Benefits / Total Costs $5.73 million / $2.24 million = 2.56
Adapted from Saverio M, et al. Cost-Benefit Analysis of a Hospital Pharmacy Bar Code Solution. Arch Intern Med. Apr 23, 2007;167(8):788-94.
Internal Rate of Return 104% annualized return on investment
Common Applications
•
CBA is most useful when
– Analyzing a single intervention to determine whether its
total benefits exceed the costs, or
Cost-Benefit Analysis (CBA)
total benefits exceed the costs, or
– Comparing alternative interventions to see which one
achieves the greatest benefit.
