Cost-utility analysis

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Cost-utility analysis is a form of economic analysis used to guide procurement decisions, especially health technology assessment (HTA).

[edit] Description

A unit of QALY is defined as a year of perfect health. Health is measured on a spectrum from 0 to 1, where 0 health refers to death, and 1 refers to a state of perfect health. If, for example, intervention A allows a patient to live for three additional years than if no intervention had taken place, but only at a level of health of 0.6, than the intervention confers 3* 0.6 = 1.8 units of QALY to the patient. If intervention B confers two extra years of life at a health level of .75, than it's corresponding QALY rating is 1.5. ICER is a ratio of the differences between the costs and effects of two interventions - the difference in effects is therefore 1.8 - 1.5 = 0.3 QALY.

The meaning and usefulness of QALY is debated. Perfect health is hard, if not impossible, to define. Some argue that there are conditions worse than death, and that therefore there should be negative values possible on the health spectrum (indeed, some health economists have incorporated negative values into calculations). Determining the level of health depends on measures that some argue places disproportionate importance on physical pain or disability over mental health. The effects of a patient's health on the quality of life of others - caregivers, family etc. also does not figure into these calculations.

The cost is measured in monetary units such as pounds sterling or US dollars, and the benefit of the item being considered needs to be expressed in a quantitative form. Unlike cost-benefit analysis, this does not have to be in monetary terms. In HTAs it is usually expressed in quality-adjusted life years (QALYs). A threshold value of so many pounds (or dollars) per QALY is set.

As of January 2005, the National Institute for Health and Clinical Excellence (NICE) of the United Kingdom is believed to have a threshold of about £30,000 per QALY, although a formal figure has never been made public ^[1]. Thus, any health intervention which has an incremental cost of more than £30,000 per additional QALY gained is likely to be rejected and any intervention which has an incremental cost of less than or equal to £30,000 per extra QALY gained is likely to be accepted as cost-effective.

A complete compilation of cost-utility analyses in the peer reviewed medical literature is available at the CEA Registry Website

[edit] References

^ Devlin, Nancy; David Parkin (2004). "Does NICE have a cost-effectiveness threshold and what other factors influence its decisions? A binary choice analysis.". Health Economics 13 (5): pp. 437-52.