Economic Aspects of Evaluation - Evaluation Methods in Biomedical Informatics - page 318

represented for simplicity; all three strategies evaluated are more expen-
sive and better than the current strategy. Assume that there are three pos-
sible strategies for treating a particular disease, and they have different
costs and effects, as shown in the table. Current therapy is described by
strategy A, which costs $10,000 and produces a mean of 3.5 years of sur-
vival. Two new therapies have been devised: strategy B costs $20,000 (an
additional $10,000 compared to strategy A) but produces a longer survival
of 4.5 years (an additional year compared to strategy A). A third treatment
(strategy C) is even more expensive at $35,000, but does produce improved
results, with patients living 5.0 years after receiving that therapy.
To calculate the ICER, the first step is to calculate the net costs and
effects of moving from the base strategy to the next best strategy. From
strategy A to B, the net cost is $10,000, the net effectiveness is 1 year: the
ICER is therefore $10,000/life year gained. Then, the use of strategy C
instead of strategy B costs an additional $15,000 ($35,000-$20,000), and
gains another 0.5 life years (5.0-4.5): the ICER of moving from strategy B
to strategy C is $30,000/life year. The calculations are illustrated graphically
in Figure 11.3. The net costs and effects (in terms of life years) are plotted
in the cost-effectiveness plane. The slope of the line between each possible
strategy is the ICER of that strategy.
It is left to health policy makers to decide how they will use such figures.
For example, if controlling health expenditure is important, they may decide
to sanction widespread use of strategy B but reserve strategy C for those
patients most likely to benefit, in view of its much higher ICER.

Cost-Benefit Analyses: The Cost-Benefit Ratio
As noted in the section on types of cost analyses, cost-benefit analyses
(CBAs) are distinguished by the valuation of both the costs and outcomes
of a strategy in monetary terms. The cost-benefit ratio then simply measures
the ratio between the incremental costs of choosing a strategy over the ben-
efits (measured in monetary units) of each strategy:

Cost -

-

Cost

B A

Monetary Benefit Monetary Benefit

B A

The advantage of CBA, and one of the reasons for its use in many fields
other than health care, is that the interpretation of the cost-benefit (CB)
ratio is straightforward: any strategy with a CB ratio less than 1 means that
the benefits are valued more than the costs, and instituting that strategy
produced a net benefit. Cost-benefit ratios of greater than 1 indicate that
the costs are greater than the benefits: such projects should not usually be
undertaken. This applies even for projects undertaken for the public good
since if something has a value, for the purpose of CBA it is necessary to
quantify that value in dollars. The value of the public good is then contained
in the benefit side of the equation. The problem often is trying to agree on