ECONOMIC EVALUATION IN

HEALTH SECTOR (HTA)

Dr. Jarir At Thobari, MSc, DPharm, PhD

Faculty of Medicine, UGM

Dept. Pharmacology and Therapy
Div. Pharmacoepidemiology &
Pharmacoeconomy
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Increasing demand of healthcare

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Budget & resources constraint

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Financing HIV in developing countries

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Increasing choices of technology

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 HTA for decision making
• Increase expenditure on drug therapy
• Resources limited (scarcity of budget)
 Solution?
– Efficient use of resources within the health care setting
(e.g. switch to cheaper generic drugs1,2)
– Making choices → priority

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HTA system

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 Clinical
effectiveness
Medical & Social
biological aspects
knowledge

HTA
Epidemiology
Costs and
financing

Organisatio- Ethical
nal aspects conse-
quences

Based on Habbema et al., 1989

What is health technology assessment
(HTA)?
HTA is a multidisciplinary field of policy analysis. It studies the medical, social,
ethical, and economic implications of development, diffusion, and use of
health technology.

Any intervention that may be used to promote health, to prevent, diagnose or

treat disease or for rehabilitation or long-term care. This includes the
pharmaceuticals, devices, procedures and organizational systems used in
health care.

Source: INAHTA/glossary http://www.inahta.net/

 Using HTA to inform priority setting

• Applied HTA can be considered as a process for

considering scientific evidence, economic evidence and
social values, to inform decisions as to whether to fund a
treatment / service
– Includes cost-effectiveness analysis (CEA); not just clinical
effectiveness
– Drawing comparisons: Compared to the status quo, what do we
gain out of the new treatment, and at what extra cost?
– Not a merely technical exercise: The process and social values
are equally important
• NOTE: HTA is one component to support overall quality improvement…
Definition of areas

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 Economic evaluation (PE)

INPUT PHARMACEUTICAL OUPUT

PRODUCT OR SERVICE

Cost Analysis
(a partial economic evalution) Clinical or Outcome Study
(not an economic study)

Pharmacoeconomic Analysis
 Economic Evaluations

Cost A Intervention A Consequences A

Cost B Intervention B Consequences B

Difference Difference in
in costs? consequences?
Relationship?
Cost Effectiveness
new drug/device is cost-effective!
• Reduce the cost
• More benefit
• Which one more effective and lower costs
• Optimal balance costs and effect
• Good effect for lowest cost
• Highest benefit and lowest cost and safe
• Willingness to pay for optimal balance
• Cheaper and better!
• More expensive and better
• Cheaper and lower benefit
• Cheaper and same benefit
 More Expensive

Negative Positive
Consequences Consequences

Less Expensive
 Components of economic evaluation (Torrance, 1986)
Resources Health
Health care
consumed improvement
programme
(costs) (consequences)

Value of
Direct Health Economic health
costs effects benefits improvement
per se

Indirect Economic Ad hoc

costs morbidity benefits numeric
(prod. Loss) direct scales

Indirect
Intangible Willingness
mortality benefits
cost to pay
(prod. gains)

Intangible Utilities
benefits (Qaly’s)

1st ed 1987
 Costs from what perspective?
Health care costs
- Direct medical costs Procedures
Treatment Health care
Care perspective
Healthcare payments
Societal
- Indirect medical costs As above but due to a longer
life (expectancy)
perspective
Non-health care costs
- Direct non-medical costs Informal care
Non-healthcare payments
Travel and time
- Indirect non-medical costs Productivity costs
Other societal sectors
Intangibles Happiness
Well-being Decision makers’
perspective
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 Hospitalized Tarif (in IDR million)
for Non-bacterial Infection based on JKN tariff 2014
Hospital Class Severity Level
Mild Moderate Severe
Hospitalization
- Hospital Class A
o Class 3 3408 4244 4530
o Class 2 4090 5093 5435
o Class 1 4771 5942 6341
- Hospital Class B
o Class 3 1948 3081 3522
o Class 2 2338 3697 4226
o Class 1 2727 4314 4930
- Hospital Class C
o Class 3 1557 1989 2123
o Class 2 1868 2387 2547
o Class 1 2980 2784 2972
- Hospital Class D
o Class 3 1299 1676 2075
o Class 2 1559 2011 2490
o Class 1 1818 2347 2905
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Cost components during dengue outbreaks in
Indonesia. All in US$ of the year 2011; Vector
control: 465,676 US$ (7%); Surveillance: 13,722
US$ (0.2%); IEC: 2,927 US$ (0.04%); Direct cost:
3,288,168 US$ (48.7%); Indirect cost: 2,979,902
US$ (44%).

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 Types of Pharmacoeconomic Studies

Methodology Cost Outcome

Measurement Unit Measurement Unit
Cost-Minimization Analysis (CMA) Dollars or Monetary Units Assumed to be equivalent in
comparable groups
Cost-Effectiveness Analysis (CEA) Dollars or Monetary Units Natural units (life years gained, mm
Hg blood pressure, mMol/L blood
glucose)
Cost-Utility Analysis (CUA) Dollars or Monetary Units Quality-adjusted life year (QALY) or
other utilities
Cost-Benefit Analysis (CBA) Dollars or Monetary Units Dollars or monetary units

Rascati, 2009
Other Types of economic evaluation
• Cost Consequences Analysis (CCA)
– List of costs and various outcomes presented but
no comparisons made
• Cost of illness
– Estimate of total economic burden (prevention,
treatment, losses in productivity) of particular
condition (illness) or disease on society

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Case study: Costing study for vector Control Dengue
Fever in Yogyakarta
• PICO: patient/population, Intervention, Comparison,
Outcome
• P (dengue cases in Yogya), I (vector control), C (no vector
control), O (incidence dengue fever, fatality rate,
hospitalization dengue fever)
• Costing
– Hospitalization costs due to DF
– Home care DF patient
– Transportation to health facilities
– Production lost cost
– Programmatic cost
– Disability cost

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 Direct medical costs
• Hospitalization costs due to DF
– Inpatient cost
– Fee for HCP
– Lab
– Pharmacy (drugs and devices)
– Radiology
– Administration
– Blood transfusion

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 Direct medical costs
• Many form of the severity for DF (mild,
moderate, severe), for mild and moderate may
not hospitalized, but only visit outpatient clinic
• Primary health center/outpatient clinic costs
– Administration
– Drugs
– Lab test
– Doctor fee
– Transportation

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 Direct non-medical costs
• Transportation costs of patient/family to visit
health facilities
• Additional nutrition or supplement

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 Programmatic cost
• Vector control program costs
– Fee staff
– Logistic (tools, devices, drugs, chemical, etc.)
– Transportation
– Consumption
– Campaign

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 Indirect costs
• Productivity lost

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 Outcome
• Compare between the impact of intervention
(vector control) vs. no intervention
• Outcome:
– Incidence of DF
• Should include mild, moderate and severe cases.
• To prevent one cases
– Hospitalization
• Only number hospitalized
• To prevent one hospitalization
– Mortality
• Only fatality rate
• To prevent one death

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Different effects → different economic evaluations

Effects Economic Evaluation

• Natural effects - Cost Effectiveness Analysis (CEA)
• Utilities - Cost Utility Analysis (CUA)
• Monetary terms - Cost Benefit Analysis (CBA)
Broad comparison

Level of analysis

Narrow comparison
 Cost-Minimization Analysis (CMA)

Definition

Sample Problem

Common
Applications
Advantages and
Disadvantages
Dollars or Monetary Units Assumed to be equivalent in
comparable groups

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 Cost-Minimization Analysis (CMA)

Cost-Minimization Analysis (CMA)

– PE analysis where outcomes of two or more
interventions are assumed to be equivalent
• Thus, only costs of intervention are compared
– Objective: choose the least costly alternative

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 Cost-Minimization Analysis (CMA)
Example Problem: Administration of prostaglandin E2 gel intracervically to expectant
mothers on the day before labor was to be induced.
• Outpatient Group: administer medication → monitor 2 hours → send home overnight
→ admit next day → induce labor
• Inpatient Group: administer medication → monitor 2 hours → send to maternity unit
for the night → induce labor
Type of Cost Costs for Outpatients Costs for Inpatients Statistical Difference
(n = 40) (n = 36)
Mean (SD) Mean (SD)
Labor cost $575 ($366) $902 (482) Yes (p = 0.002)
Delivery cost $471 ($247) $453 ($236) No (p = 0.754)
Pharmacy cost $150 ($102) $175 ($139) No (p = 0.084)
Hospital Costs $3835 ($2172) $5049 ($2060) Yes (p = 0.015)

Would you recommend the outpatient program?

Farmer KC, Schwartz III WJ, Rayburn WF, Turnbull G. A cost-minimization analysis of intracervical prostaglandin for cervical
ripening in an outpatient versus inpatient setting. Clin Ther. 1996;18(4):747-756.; as reported in Rascati, 2009
 Cost-Minimization Analysis (CMA)

Common Applications
– Common CMA application:
• Cost comparison of two generic medications rated as
equivalent by Drug Regulatory
• Cost comparison of same drug therapy in different
settings
– Not appropriate for comparing different classes of
medications

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 Cost-Minimization Analysis (CMA)

Advantages and Disadvantages

– Advantage: simplest analysis to conduct
– Disadvantage: cannot be used when outcomes of
each intervention are different

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Clin Transl Oncol (2017) 19:1454–1461

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Clin Transl Oncol (2017) 19:1454–1461

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Cost-Effectiveness Analysis (CEA)
Definition

Sample Problem

Common
Applications
Advantages and
Disadvantages
Dollars or Monetary Units Natural units
Exercise (life years gained, mm Hg
blood pressure, mmol/L
blood glucose)

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Cost-Effectiveness Analysis (CEA)
Cost-Effectiveness Analysis
– PE analysis where outcomes are measured in natural
or clinical units
– CEA is most common type of PE analysis

Two methods of reporting cost-effectiveness:

• Average Cost-Effectiveness Ratio (CER) =
Cost of Intervention
Effectiveness of Intervention
• Incremental Cost-Effectiveness Ratio (ICER) =
Cost of Intervention B – Cost of Intervention A
Effectiveness of Intervention B – Effectiveness of Intervention A
Average and incremental ratios

CB Treatment B
CB-CA
ICER =
EB-EA CB-CA
EB - EA
CA Treatment A

O EA EB
Effect (Utility, Benefit)

ICER: Incremental Cost-Effectiveness Ratio

 Average vs. ICER
Breast screening
Programme Costs Effects C/E ΔC/ΔE
A 110 20 5.50 -
B 120 29 4.14 1.11
C 150 50 3.00 1.43
D 190 60 3.17 4.00
E 240 70 3.42 5.00

Average ratios have no role in decision making

Cost-Effectiveness Analysis (CEA)

Common Applications
– Common CEA application: medications with the
same type of primary outcomes, and most often
for treatment of the same types of health
condition
– CEA is only performed when the outcome of one
intervention is both better than another AND the
cost is greater.

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Cost-Effectiveness Analysis (CEA)
Advantages and Disadvantages
– Advantages:
• Health units are common outcomes routinely measured in clinical
trials – familiar to clinicians
• Outcomes are easier to quantify than CUA or CBA
– Disadvantages:
• Interventions with different types of outcomes cannot be
compared
• Can’t combine more than one important outcome
• Difficult to collapse both the effectiveness and the side effects into
one unit of measurement
• CEA estimates extra cost associated with each additional unit of
outcome, but who is to say that added cost is worth added
outcomes? Requires judgment call.

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 The Cost Effective Plane of ICER
+
IV I
Difference in cost

<< Effective >> Effective

>> Costs >> Costs
- +
<< Effective >> Effective
<< Costs << Costs
III II
-
Differences in effectiveness
Note: Origin is reference intervention
 Maximum acceptable ratio
New treatment
more costly

Maximum ICER

New treatment
New treatment
more effective
less effective

New treatment
less costly
 Maximum acceptable ratio
Go / No Go
• Introduce Cost-saving programs if health gains >= 0
• Laupacis et al (1992)
– < Can$20,000 Go ; > Can$100,000 No Go
– Inbetween → professional judgment required
• Owens (1998)
– < US$50,000 Go ; > US$50,000 No Go
• NICE: ₤ 30,000 → ₤ 50,000
• Netherlands: € 20,000 → € 50,000
• Belgium: € 50,000
 Maximum acceptable
• Willingness to pay
• WHO Commission on Macroeconomics and Health
– cost-effective:
• interventions had a positive net benefit at a
willingness-to-pay of three times the per capita GDP
– highly cost-effective:
– interventions had a positive net benefit at a
willingness-to-pay of one times the per capita GDP

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 Cost-Utility Analysis (CUA)

Quality-adjusted life year

Dollars or Monetary Units (QALY) or other utilities

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 Cost-Benefit Analysis (CBA)

Dollars or Monetary Units

Dollars or Monetary Units

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 Cost-Benefit Analysis (CBA)

Cost-Benefit Analysis (CBA)

– A PE analysis in which both costs and benefits are valued
in monetary units
– The results of a CBA can be presented in several formats:
1. Net Benefit = Total Benefits – Total Costs
Cost beneficial if Net Benefit > 0
2. Benefit-to-Cost Ratio = Total Benefits / Total Costs
Cost beneficial if Benefit-to-Cost > 1
3. Internal Rate of Return (IRR) = The rate of return that equates the
present value of benefits to the present value of costs
4. Break-Even Point = The time required to recoup the investment

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THANK YOU

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