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Costutility analysis

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Costutility analysis(CUA) is a form offinancial analysisused to guide procurementdecisions. The most common and well-known application of this analysis is in

pharmacoeconomics,especially healthtechnology assessment(HTA).

Contents

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1 CUA in health economicso 1.1 Advantages and disadvantageso 1.2 Criticism of cost-utility analysis

2 References 3 See also

[edit] CUA in health economics

In health economics the purpose of CUA is to estimate the ratio between the cost of a health-related intervention and the benefit it produces in terms of the number of years lived in full

health by the beneficiaries. Hence it can be considered a special case ofcost-effectivenessanalysis,and the two terms are often used interchangeably.

Cost is measured in monetary units. Benefit needs to be expressed in a way that allows healthstates that are considered less preferable to full health to be given quantitative values.However, unlikecostbenefit analysis,the benefits do not have to be expressed in monetaryterms. In HTAs it is usually expressed inquality-adjusted life years(QALYs).

If, for example, intervention A allows a patient to live for three additional years than if nointervention had taken place, but only with a quality of life weight of 0.6, then theintervention confers 3 * 0.6 = 1.8 QALYs to the patient. If intervention B confers two extra

years of life at a quality of life weight of 0.75, then it confers an additional 1.5 QALYs to thepatient. The net benefit of intervention A over intervention B is therefore 1.81.5 = 0.3QALYs.

Theincremental cost-effectiveness ratio(ICER) is the ratio between the difference in costsand the difference in benefits of two interventions. The ICER may be stated as (C1C0)/(E1

E0) in a simple example where C0 and E0 represent the cost and gain, respectively, fromtaking no health intervention action. C1 and E1 would represent the cost and gain,respectively of taking a specific action. So, an example in which the costs and gains,respectively, are $140,000 and 3.5, would yield a value of $40,000. These values are oftenused by policy makers and hospital administrators to determine relative priorities whendetermining treatments for disease conditions. It is important to note that CUA measures

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relative patient or general population utility of a treatment orpharmacoeconomicintervention. Its results give no absolute indicator of the value of a certain treatment.

TheNational Institute for Health and Clinical Excellence (NICE)is part of theNationalHealth Service (NHS)in the UK and has been usingQALYsto measure the health benefits

delivered by various treatment regimens. There is some question as to how well coordinatedNICEandNHSare in making decisions about resource allocation. According to a recentstudy cost effectiveness often does not appear to be the dominant consideration in decisions

about resource allocation made elsewhere in theNHS.[1]WhileQALYsare used in theUnited States, they are not utilized to the same degree as they are in Europe.

In the United Kingdom, as of January 2005, the (NICE)is believed to have a threshold ofabout 30,000 per QALYroughly twice the mean income after taxalthough a formalfigure has never been made public[2]Thus, any health intervention which has an incrementalcost of more than 30,000 per additionalQALYgained is likely to be rejected and anyintervention which has an incremental cost of less than or equal to 30,000 per extraQALY

gained is likely to be accepted as cost-effective. This implies a value of a full life of about2.4 million.

In North America, a similar figure of US$50000 per QALY is often suggested as a thresholdICERfor a cost-effective intervention.

A complete compilation of costutility analyses in the peer reviewed medical literature isavailable at theCEA Registry Website

[edit]Advantages and disadvantages

On the plus side, CUA allows comparison across different health programs and policies byusing a common unit of measure (money/QALYsgained). CUA provides a more completeanalysis of total benefits than simplecostbenefit analysisdoes. This is because CUA takesinto account the quality of life that an individual has, while CBA does not.

However, in CUA, societal benefits and costs are often not taken into account. Furthermore,some economists believe that measuringQALYsis more difficult than measuring themonetary value of life through health improvements, as is done with costbenefit analysis.This is because in CUA you need to measure the health improvement effects for everyremaining year of life after the program is initiated. While forCBAwe have an approximate

value of life($2 million is one of the estimates), we do not have aQALYestimate for nearlyevery medical treatment or disease.

In addition, some people believe that life is priceless and there are ethical problems withplacing a value on human life.

Also, the weighting ofQALYsthroughtime-trade-off,standard gamble, orvisual analoguescaleis highly subjective.

[edit]Criticism of cost-utility analysis

There are criticisms ofQALY.One involves QALY's lack of usefulness to the healthcareprovider in determining the applicability of alternative treatments in the individual patient

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environment,[3]and the absence of incorporating the patients willingness to pay (i.e.behavioral economics)in decisions to finance new treatments.[4]Another criticism involvesage; elderly individuals are assumed to have lower QALYs since they do not have as manyyears to influence the calculation of the measurement; so comparing a health interventions

impact on a teenagers QALYs to an older individuals QALYs may not be considered fair

since age is such an important factor. Specific health outcomes may also be difficult toquantify, thus making it difficult to compare all factors that may influence an individuals

QALY. Example: Comparing an interventions impact on the livelihood of a single woman toa mother of three; QALYs do not take into account the importance that an individual personmay have for others lives.

In the US, the health care reform law (Patient Protection Affordability and Care Act)hasforbiden the use of QALYs as a threshold to establish what type of health care is cost

effective or recommended. Also, The Secretary shall not utilize such an adjusted life year(or such a similar measure) as a threshold to determine coverage, reimbursement, or incentive

programs under title XVIII.[5][6]

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