Basic Concept of Economic Evaluation

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Professor Hsiu-Hsi Chen

Graduate Institute of Epidemiology and Preventive Medicine, College of Public

Health, National Taiwan University7-May-2018

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--Cost-benefit analysis was conducted to determine whether it is worthwhile to initiate a routine varicella vaccination program in Taiwanfrom different perspectives. Using the human capital approach, the discounted net cost for vaccination program was New Taiwan Dollars (NTD) 281 million from health care payer's perspective. Taking indirect costs into account, the net saving due to vaccination program was NTD 425 million from the societal perspective. In terms of benefit-cost ratio, a mass varicella vaccination program could only save NTD 0.34 in discounted costs for each dollar incurred in a vaccination program from health care payer's perspective whereas save NTD 2.06 from the societal viewpoint. Results based on the willingness-to-pay (WTP) method showed the Net Present Value (NPV) of the vaccination program was estimated as -NTD 272 million. We conclude that a routine varicella vaccination program is worthwhile from the societal perspective but neither from health care payer's nor from consumer decision based on the perspective of WTP.

Vaccine 21 (2003) 3982–3987

B

• AIM: To assess cost-effectiveness of hepatitis B virus (HBV) vaccination strategies from health care payer and societal perspectives, focusing on the long-term effect, in Taiwan where prevalence of HBV and Hepatitis B e Antigen (HBeAg) is high.

• METHODS: A decision analysis was performed to compare total costs and effectiveness between two vaccination strategies: universal vaccination and no-vaccination. The Markov process was defined as a series of states including acute HBV infection, asymptomatic carrier, chronic hepatitis, compensated and decompensated liver cirrhosis, hepatoma, and death. Direct and indirect costs were also imputed based on estimates. The incremental cost-effectiveness ratio (ICER) per life-year gained and quality-adjusted life years gained were calculated at a 3% discount rate. By assigning a series of specific distributions to each parameter, a probabilistic cost-effective analysis using Monte Carlo simulation was conducted to yield 5000 ICER replicates.

• RESULTS: The effectiveness of a universal vaccination program for reducing hepatocellular carcinoma cases and deaths was approximately 86%. The average life years gained per subject as a result of such a universal vaccination was 3.9. The vaccination program dominated over a no-vaccination program (less cost and more effectiveness).

• CONCLUSIONS: A universal vaccination program against hepatitis B infection is not only effective for reducing long-term sequelae but is also a cost-savingprimary preventive strategy, which supports a universal infant immunization in endemic area with high prevalence of HBV and HBeAg.

(Drummond ,1987)

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Examines only Examines onlyconsequences costs

Outcome Costdescription description

Efficacy or Cost analysiseffectivenessevaluation

Cost-outcome description

Distinguishing characteristics of health care evaluation

Cost-effectiveness analysis Cost-utility analysis Cost-benefit analysis

Are both costs (inputs) and consequences (outputs) of the alternatives examined?

Is there comparisonof two or more alternatives?

No Yes

No

Yes

1A PARTIAL EVALUATION 1BPARTIAL EVALUATION

3A PARTIAL EVALUATION 3B FULL ECONOMIC EVALUATION

General Framework for economic evaluation of vaccination program: Concept of opportunistic cost and relative comparison

Vaccination (A) No Vaccination (B)

Direct Cost Vaccine Medical cost A

Medical Cost B

Indirect Cost

Work-Loss Costs A

Work-Loss Cost B

Effectiveness(1)

Mortality A Mortality B

Effectiveness (2)

Morbidity or Complications A

Morbidity or Complications B

Cost

Benefit

Can benefit outweigh cost incurred in immunization program?

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o+

-

+

-

A

Intervention more effectiveand more costly than O

III

III IV

Effect difference

Intervention more effective and less costly than O

Intervention less effective and less costly than O

Intervention less effective and more costly than O

Cost difference

The cost-effectiveness plane

o+

-

+

-

A III

III IV

Area under WTP is cost-effective

Slope=λ, WTP(willingness to pay)

B

Average- and Incremental Cost-effectiveness (Utility) Ratio

� (1) Average Cost-effectiveness Ratio (ACER)

AR1=C1/E1

AR2=C2/E2

� (2) Incremental Cost-Effectiveness Ratio (ICER)

ICER=(C1-C2=��C)/(E1-E2=�E)12

Cost-Benefit Analysis

�Benefit �Monetary Value

� Human Capital Approach

� Willing to Pay (WTP)

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Cost-Benefit Analysis

3. How much money will be accrued in return for $1

invested in any new intervention program.

Benefit/cost ratio > 1

Benefit/cost ratio < 1

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� �Nr1SP�

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S = amount of future expense

P = present value of S

r = discount rate

N = number of time periods until the expense is incurred

Assuming 7% discount rate

S=$1000

� �508$

07.011000

10 ��

�P

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Discounting : time preference on cost-effective analysis

Compare A & B program

Year Cost of A Cost of B

1 5 15

2 10 10

3 15 4

30 29

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221

r1S

r1S

r1SP

��

��

��

r=0.05

PA=26.79

PB=26.81

Estimates

� 1 : Cost side Base-case: 3%-5%

Sensitivity analysis: 0%-8%

� 2: Effectiveness (health outcome) side Base-case:3%-5%

Sensitivity analysis: 0%-10%

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Perspective of Cost-effectiveness

�Societal viewpoint�Provider�Patient

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Decision Decision 1

Decision 2

Sequale 1

Sequale 1

Effectivenes

sCompariso

n

Cost Direct Cost

Expenditures for time and skills of health care professionals and laymen who provide services, facilities, and equipment used or purchased, supplies consumed, access costs, transportation, telephone calls, child care hospitalization needed to receive care

Indirect

Cost

Lost productivity of the patient or others because of time taken off work for treatment or because of the health care professional’s recommendations to reduced or avoid certain work activities

Intangible

resources1.satisfactions lost

2.dissatisfactions added

Discount

Rate0% 3% 5%

Basic Components in Economic Evaluation

Microsimulation( Monte Carlo Simulation )

Macrosimulation(Markov Cohort Simulation)

Ratio 1

Incremental Cost Effectiveness Ratio (ICER)

Ratio 2 Ratio 3

Sensitivity Analysis

One-way Two-way Three-way

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Results of Deterministic Model

ICUR

Viewpoint

1 2

1 2

7539 62740= 1419070.08 66.19

IC C CICERIE E E

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Cost-benefit analysis

Thank you.