Cost-effectiveness analysis

From Wikipedia, the free encyclopedia

In economics, cost-effectiveness refers to the comparison of the relative expenditure (costs) and outcomes (effects) associated with two or more courses of action. In the context of pharmacoeconomics, cost-effectiveness is a ratio of cost (resource expenditures associated with the therapeutic intervention) to relevant measure of effectiveness. Examples might include: cost/cure; cost/life-year gained; cost/mm Hg reduction diastolic blood pressure; cost/symptom-free day. The selection of a proper denominator should be based on clinical judgment in the context of the therapeutic modality being employed.

Cost-effectiveness is typically expressed as an incremental cost-effectiveness ratio (ICER), the ratio of change in costs : change in effects.

   ICER =  (change in costs) / (change in effects)

Although ICER is an acronym for "incremental cost effectiveness ratio", the term "incremental" does not have the standard economic meaning. Normally, the effects of an incremental change refer to the effect of an additional unit of a specific measurement - for example, the effect of an additional dollar spent on a public health awareness campaign. However, in this case, we are not comparing the effects of an incremental change in some intervention, but rather the effect of switching interventions.

The equation for ICER often takes the following form:

(cost of intervention A in dollars) - (cost of intervention B in dollars)
 -----------------------------------------------------------------------
(QALY for intervention A)  - ( QALY for intervention B)

In North America, US$50000 per quality-adjusted life year (QALY) is often suggested as the upper limit of an acceptable ICER. In other words, if the cost of conferring one extra year of "perfect" health to a patient exceeds US$50000, then policy makers will usually dismiss this new intervention as too costly.

Also, in environmental terms, "cost-effective measures" is alluded to various (mostly industrial)attempts to prevent environmental degradation as written in principle 15 of the Rio declaration in the Earth Summit conference 1992.

A complete compilation of cost-utility analyses in the peer reviewed medical literature is available at the CEA Registry Website