Inpharma 1661 - 25 Oct 2008

Considering loss aversion ineconomic evaluations

The effects of loss (of effectiveness) aversion onhealth and healthcare costs should be captured in thedenominator and numerator of the incremental cost-effectiveness ratio (ICER), respectively, according toAfschin Gandjour from the University of Cologne,Germany.1

Loss aversion refers to the tendency for people tostrongly prefer avoiding losses over acquiring gains, andmay be considered an emotional fear reaction. Hence,the amount of money consumers are willing to accept toforgo an intervention is greater than what they arewilling to pay for the same benefit. Based on thisdisparity, it has been suggested that cost savings mayneed to be relatively large for an intervention that is lesseffective than the comparator, and therefore the ICERthreshold used could be different to that used for anintervention that is more effective and more costly.However, such use of a non-uniform or ‘kinked’threshold has been criticised, with the argument thatloss aversion needs to be ignored if the goal of thehealthcare system is to maximise health.

Averting a kinked thresholdGandjour argues that the ICER should capture the

effects of loss aversion, which would eliminate the needfor a kinked threshold. He suggests an approach inwhich loss aversion can be captured in the ICER’snumerator (out-of-pocket payments by the patient toobtain the no longer subsidised treatment) ordenominator (effect on the patient’s well-being of notbeing able to obtain the more effective treatment).

However, in an accompanying editorial, Johan LSeverens from Maastricht University, The Netherlands,comments that "Gandjour adds to an interestingdebate but presents too simple a solution".2 He saysthat Gandjour ignores the fact that cost-effectivenessinformation may serve different decision makers,limiting his argument to the individual patient.According to Severens, while it is technically feasible tocapture patients’ loss aversion in the ICER, it is irrelevantfor societal decision making, where societal values forhealth states are preferable. While it remains to be seenhow a policy decision maker’s loss aversion could becaptured in the ICER, he believes that "the loss aversioncan only be part of the interpretation and acceptability ofthe patient population-based ICER".

Severens finishes by proclaiming, "nevertheless, thequestion remains: whose loss aversion counts!"1. Gandjour A. Loss aversion and cost effectiveness of healthcare programmes.

PharmacoEconomics 26: 895-898, No. 11, 1 Jan 2008.2. Severens JL. Loss aversion and cost effectiveness of healthcare programmes:

whose aversion counts anyway? PharmacoEconomics 26: 899-900, No. 11, Jan2008.

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Inpharma 25 Oct 2008 No. 16611173-8324/10/1661-0001/$14.95 Adis © 2010 Springer International Publishing AG. All rights reserved