Cost Effectiveness Analysis slideshare.pptx

One of the Full economic analysis

1. Cost-Effectiveness Analysis By Yisehak Azaje [ B.Pharm ., MSc ] 8/23/2025 1 Yisehak Azaje [ B.Pharm ., MSc ]

2. Objectives At the end of this chapter you will be able to: Describe when CEA should be used Differentiate between effectiveness and efficacy Discuss issues to consider when undertaking or evaluating CEA Interpret CEA ratios and ICER 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 2

3. Introduction CEA is considered a full economic analysis The term cost-effectiveness analysis (CEA) is often used generically to refer to all forms of economic evaluation. The evaluation of the benefits and costs of drugs and other health technologies. All the principles that apply to costs are applicable in this analysis Choosing to direct resources to (spend money on) a particular health care intervention Means that other interventions may need to be modified, delayed or even abandoned 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 3

4. Applied in the context of drug selection to help make explicit the costs and consequences of resource allocation decisions. ? A technique for making decisions at the margin, in situations where the question may be framed as, ‘Is it worth spending an additional $x to achieve the additional benefits offered by the new drug compared to existing therapy?’ 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 4

5. Compares the total relevant cost of therapy to the effectiveness when the outcomes (Clinical, Economic, Humanistic) for the alternatives are NOT equal. Cost-effectiveness analysis is a method of comparing alternative treatments in which the costs and consequences of the treatments vary. CEA involves comparing programs or treatment alternatives with different safety and efficacy profiles. CEA is a method to determine which program or treatment accomplishes a given objective at the least cost . 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 5

6. In CEA , the effectiveness is expressed in terms of nonmonetary units that describes the desired objective. Lives saved (life years gained) Disability days avoided Cases treated Limitation: CEA cannot be used to compare interventions with different health outcomes because of its nonmonetary measurement of outcomes. outcome measure in non-dollar units (natural units) 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 6

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9. When should CEA be used? When a limited range of options within a given field are available- given a limited budget E.g. when we want to maximize the # of cases detected in a screening program Here appropriateness of outcome measures is very important Final outcomes Vs intermediate outcomes Generally final outcomes should be selected 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 9

10. Examples of effectiveness measures used in CEA 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 10

11. Basic steps for conducting CEA 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 11

12. Basic steps for conducting CEA Frame the problem to be analyzed Define the study question, perspective and time horizon Identify the baseline and options to be analyzed Baseline ( palacebo , standard, existing treatment, null) and new intervention Identify the outcome measure Intermediate or final outcome (both negative and positive outcomes should be included) Identify the relevant costs Depends on perspective of the study (patient, provider, payer, societal) Construct the decision model Markov or decision tree 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 12

13. Analyze and interpret the results Average C/E ratio (ACER) = Cost A/Effect A Marginal C/E ratio (MCER) = Cost A’-Cost A/Effect A’- Effect A Incremental C/E ratio (ICER) = Cost A- Cost B/Effect A- Effect B Perform sensitivity analysis ICER = $500/life saved Prepare presentation of results 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 13

14. How are effectiveness data to be obtained? Effectiveness versus efficacy In CEA, we want to measure effectiveness Effectiveness =/=Efficacy Clinical trials are often used to estimate effectiveness for CEAs, but they are designed to measure efficacy. Should we estimate effectiveness from clinical trial data? 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 14

15. How are effectiveness data to be obtained? Advantages of using clinical trial data Early availability of estimates Some audiences are comfortable with clinical trials & suspicious of other approaches Wealth of data opens door to more types of statistical analysis 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 15

16. How are effectiveness data to be obtained? Disadvantages of using clinical trial data External validity Representativeness of patients Representativeness of providers Protocol-driven procedures and care Choice of comparator Extrapolating beyond time-frame of the trial Statistical significance & sample sizes 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 16

17. An alternative approach: Effectiveness trials Benefit from randomization, but patients are treated as “normal patients” (more or less) Alleviates confounding effects of protocol requirements 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 17

18. Using model to estimate effectiveness Why a model? [Decision Tree, Markov and Microsimulation model] Extend beyond time horizon of trial Compare all relevant clinical strategies Integrate data from multiple sources Evaluate “what if ” scenarios 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 18

19. Relationship; levels of evidence and grades of recommendation 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 19

20. Effectiveness data… Evidence for effectiveness may be obtained from RCTs, observational data, uncontrolled experiments, descriptive series, and expert opinion. Where direct primary or secondary empirical evaluation of effectiveness is not possible (for example, in important subpopulations or in differing time frames), the use of modeling to estimate effectiveness is a valid mode of scientific inquiry. 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 20

21. Discounting Most interventions involve costs and consequences that are spread out over time More often than not, these flows differ from one program to the next One important example is prevention versus treatment Cost and benefit flows have a time value Fair comparisons of interventions requires that these flows be adjusted and translated to their present value. 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 21

22. In cost-effectiveness analyses from a societal perspective, the costs and health consequences of all programs should be expressed in terms of their present value to society. In the Reference Case analysis , costs and health effects should be discounted at the same rate . Given currently available data on real economic growth and real rates of interest, we recommend 3% as the most appropriate real discount rate for CEA. Sensitivity analyses should be conducted on the discount rate; a reasonable range is 0% to 7%. 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 22

23. Analyzing uncertainty Every evaluation will contain some degree of uncertainty, imprecision, or methodological controversy. There is uncertainty surrounding: Probabilities of various health outcomes Resource utilization, Costs, Discount rate We need to see if this uncertainty really matters. How do we do that? Traditional sensitivity analysis Threshold analysis 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 23

24. “Traditional” sensitivity analysis Univariate (“one-way”) sensitivity analysis Bivariate (“two-way”) sensitivity analysis Multivariate sensitivity analysis Scenario analysis (e.g. best case, worst case) 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 24

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26. Uncertainty advantages An assessment of the implications of uncertainty surrounding this decision is an essential part of any decision-making process for a number of reasons. To assess the potential value of acquiring additional evidence that could better inform this decision in the future. 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 26

27. Uncertainty advantages… To identify the type of evidence that might be needed and how further research might be designed. To consider whether a decision to approve or reimburse an intervention or to invest in a new service should be delayed until the additional evidence required becomes available. 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 27

28. Uncertainty advantages… 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 28

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30. Probabilistic sensitivity analysis in CEA Basic idea: Incorporate information about the probability distributions for the uncertain variables or parameters in the analysis Analytic methods Graphical depiction in C-E space CE acceptability curve Net benefit analysis 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 30

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32. Cost-effectiveness plane 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 32

33. Important consideration in CEA Incremental decision index Conduct sensitivity and/or statistical analyses to determine the influence of uncertainty on conclusions Interpret the cost-effectiveness results 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 33

34. Some definitions in CEA Cost-effectiveness ratio (CER) is a method of calculating the cost per unit of benefit of a drug or other therapeutic intervention. It is the ratio of the resources used per unit of benefit of the drug or intervention and implies that the calculation has been made relative to ‘no treatment’ This ratio, when calculated relative to no treatment, is sometimes referred to as an ‘average’ or ‘absolute’ CER 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 34

35. Average CER = Cost A/Effect A However, an average CER calculated in isolation may be of limited usefulness. In most cases we are interested in establishing the net cost-effectiveness of an intervention Its costs and health outcomes, compared with some alternative , such as the treatment most likely to be replaced by the intervention. 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 35

36. Some definitions in CEA An incremental CER represents the change in costs and health benefits when one health care intervention is compared with an alternative one If drug A is clearly superior to drug B and costs less, then the decision is relatively straightforward. In this case, drug A is said to be dominant over drug B. If drug A offers less benefit at greater cost then the choice is again straightforward why pay more if you expect to derive less benefit? 𝐼𝑛𝑐𝑟𝑒𝑚𝑒𝑛𝑡𝑎𝑙 𝐶𝐸𝑅 = 𝐶𝑜𝑠𝑡 𝐴 − 𝐶𝑜𝑠𝑡 𝐵 𝐸𝑓𝑓𝑒𝑐𝑡 𝐴 − 𝐸𝑓𝑓𝑒𝑐𝑡 𝐵 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 36

37. A therapy is a cost-effective strategy when the outcome is worth the cost relative to competing alternatives 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 37

38. CEA If drug A offers additional benefit at a higher cost then our calculation of an incremental cost-effectiveness ratio (ICER) comes into play. The question is then: Are the extra benefits to be gained from using this drug worth the additional costs? This involves a difficult value judgment; what is an acceptable CER for one person, or in one setting or at one time, may be unacceptable in another. In order to attempt to answer this question we calculate the ICER a means of expressing the additional cost (or expenditure required) to deliver each incremental unit of benefit 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 38

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40. Calculating ICER Construct an incremental decision index/ratio Check for dominance of one alternative over another, i.e., one alternative produces the same or greater effect and costs less OR provides more effect for the same cost Eliminate dominated alternatives (“no brainers”) 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 40

41. Rank order remaining alternatives from lowest to highest total cost Calculate incremental ratio between least costly and next more costly alternative Incremental costsA -B/incremental health effectA -B If there are more than 2 alternatives, proceed to next more costly alternative (C) and calculate an incremental ratio between B and C, and so on. 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 41

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44. Presenting CEA results Presentation of a CEA should include the following ( Haddix et al 2003) – The study perspective, time frame and analytic horizon – The study question – The assumptions used to build the model – A description of the intervention – Evidence of the effectiveness of the intervention – Identification of all relevant costs 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 44

45. Inclusion or exclusion of productivity costs Discount rate Results of incremental analysis Results of sensitivity analysis Discussions Financial implications The adoption of a therapy with even a modest ICER may involve Expenditure which exceeds a given budget (and is therefore unaffordable) or which precludes expenditure within other programmes . When conducting CEAs, to also include the financial implications of the introduction of the new drug or other health care intervention. 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 45

46. Grades of recommendation for values of ICER 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 46

47. Other Thresholds for the ICER USA - $50,000 per QALY UK (NICE=National Institute for Health and Care Excellence) - £20,000-30,000 per QALY Problem is that setting a threshold for the ICER is too controversial Limitations of CEA It is much less easily applied to decisions involving treatments for different diseases. 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 47

48. Comparisons are not possible between programmes (or even within the same programme ) where there is no common metric. Even where it is possible to measure and incorporate final clinical outcomes, we are still left with a uni -dimensional measure 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 48

49. THANK YOU! 8/23/2025 Yisehak Azaje [B.Pharm., MSc] 49