Economics
Table: Health Economic data
| Treatment | Life-Year Gained | Health Utility Index
(in each year) |
Net Cost
(per Patient) |
ICER ($/QALY) |
| A (Current practice) | 0.3 | 0.8 | $ 300 | |
| B | 0.4 | 0.7 | $ 1,500 | 33,333 |
| C | 0.5 | 0.5 | $ 500 | 20,000 |
Question 1: Given the available budget of $150,000 per year, how many people could be treated with each option? Please show your calculation and explain briefly. (20%)
The number of people treated per year would be calculated from dividing the available budget of $150,000 per year by the Cost (per patient).
No. of Patients in option (A) = $ 150,000/ $ 300
Number of patient treated by option A per year is 500. This number of patients who could be treated is equal the number of incidence of cancer in the area as covered by the APC of 500 new cases each year. The current option (A) directly suits in the available budget with same number patients’ coverage as in the calculations resolve.
No. of Patients in option (B) = $ 150,000/ $ 1,500
Number of patient treated by option B per year is 100. This number of patients is less than the number of incidence of cancer in the area as covered by the APC of 500 new cases each year. The option (B) is therefore inconvenient since it only serves 100 patients out of the 500 expected cases, a very low fraction to be voted as the suitable in comparison to other available options.
No. of Patients in option (C) = $ 150,000/ $ 500
Number of patient treated by option C per year is 300. This number of patients from the available budget is less than the number of incidence of cancer in the area as covered by the APC of 500 new cases each year. This option (C) creates a ratio of 300 patients from 500 expected cases, which would leave a big ratio of patients unattended.
Question 2: Measuring the cost-effectiveness by the incremental cost-effectiveness ratio (ICER), which treatment is the most cost-effective for a hospital use? Please show your calculation and explain briefly. (20%)
In measuring the cost-effectiveness by the incremental cost-effectiveness ratio (ICER), the Incremental cost effective got from dividing the incremental cost by the incremental benefit. Incremental cost is calculated from relating the additional cost of the more expensive program to the program that is just slightly less expensive than it. Incremental benefit on the other hand is similarly calculated by taking health benefit of implementing a program which are the QALYs (life year gained by utility index) relative to the program just less expensive than it.
Taking the current action as action (A), The incremental cost-effectiveness ratio (ICER) = incremental cost / incremental benefit
Therefore ICER of comparing action C to A is; Incremental cost = ($ 500 – $ 300), Incremental benefit = QALYs C (0.25) – QALYs A (0.24)
Incremental cost-effectiveness ratio (ICER) comparing C to A = ($ 200 / 0.01 QALYs)
ICER on C to A= $ 20,000/QALY
This Incremental cost-effectiveness ratio (ICER) means that if we chose to implement action C in place of action A, it would cost $ 20,000 per unit additional health benefit that we would get from effecting action C.
Therefore ICER of comparing action B to C is; Incremental cost = ($ 1500 – $ 500), Incremental benefit = QALYs B (0.28) – QALYs C (0.25)
Incremental cost-effectiveness ratio (ICER) comparing B to C = ($ 1000 / 0.03 QALYs)
ICER on C to A= $ 33,333.33/QALY
This Incremental cost-effectiveness ratio (ICER) means that if we chose to implement action B in place of action C, it would cost $ 33,333.33 per unit additional health benefit that we would get from effecting action C.
In comparing the ICER in all implementations, action A would be the most cost-effective for a hospital use, followed by action C and lastly action B.
Question 3: From a patient perspective, which treatment is the most effective? Please show your calculation and explain briefly. (20%)
From a patient perspective, treatment by action B is the most effective. Since individual patients consider the effectiveness and quality of treatment, they would prefer the ICER costing $ 33,333.33 per unit additional health benefit, irrespective of the number of patients who would receive the treatment or not. Patients put into consideration effectiveness of the treatment, with respect to the source of fund. Therefore, in efforts to receive quality and length of life, individual patients would prefer action B to either A or C from the available budget of $ 150,000.
Incremental cost-effectiveness ratio (ICER) comparing B to C = ($ 1000 / 0.03 QALYs)
ICER on C to A= $ 33,333.33/QALY
Question 4: From a society perspective, which treatment generates the greatest health gains given the funds available? Please show your calculation and explain briefly. (20%)
From the society perspective, treatment by action A would generate the greatest health gains given the $ 150,000 amount of funds available. The society defines health gain from the maximum number of patients served within a specified period. In action A, the maximum number of patients who can be served at the specified budget of $ 150,000 at $ 300 cost per patient is 500 patients.
Number of patients in action A = $ 150,000 / $ 300 = 500
Therefore, the society would consider an action with the maximum number of people served from the available budget of $ 150,000, for the whole society heath gain. In choice of treatment action A, the maximum number of patients served is propositional to the number of services available at the current budget fund. Even though action C has a higher Life-year gain of 0.5 compared to action A of 0.3, the society would consider equity in service deliverance with respect to the number of treatment cases expected in the society and the available funds.
Question 5: Which treatment would you recommend to the area prescribing committee (APC): A, B or C? (20%)
To the area prescribing committee (APC), the Incremental cost-effectiveness ratio (ICER) would be the determinant from the selection of appropriate in the comparison of all actions which can be facilitated within the prescribed period and funds. From Incremental cost-effectiveness ratio (ICER) comparing C to A of $ 20,000/QALY and the Incremental cost-effectiveness ratio (ICER) comparing B to C of $ 33,333.33/QALY, the committee would be equitable if the service is offered to the maximum patients per year from the available funds.
In addition, there is good evidence supporting the effectiveness of the three medicines (A, B and C) in improving health outcomes and therefore, the treatments are mutually exclusive such that there is no evidence that patients are better off switching from one to another. More so, the effectiveness does not depend on patient or disease characteristics and all costs fall within the first year of treatment. On treatments, the costs vary only according to the drug selected, since staff time and other health care services are fixed and have the same requirements for each treatment. In conclusion, the annual budget available for commissioning treatment is US$150,000 while the incidence of this cancer in the area covered by the APC is 500 new cases each year. This implies that the committee should favor serving 500 people at a cost of $ 300 per person to other service action for less number of patients. Action A, $ 150,000/ $ 300 = 500 people. Action B, $ 150,000/ $ 1,500 = 100 people. Action C, $ 150,000/ $ 500 = 300 people. The APC should select Action A for maximum cancer treatment service.
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