Several years ago, BMJ had a whole series of articles on economic evaluations. I saved the
references at the time, and am just now getting back to review them. There are a lot of
important lessons in these articles, and like all articles in BMJ (except for their most
recent 12 months of publications), the full free text is available on the web.
Economic data, such as costs or charges, often follow a skewed distribution. Normally I
consider a log transformation anytime I suspect a skewed distribution, but there are good
reasons to avoid the log transformation for economic data.
The outcomes in an economic evaluation can take three forms. First, you can analyze the
cost required to prevent one event (if an intervention cost a million dollars and it was
expected to prevent a total of 200 hip fractures, then you have to pay $5,000 per hip
fracture). This analysis is somewhat simplistic and hard to compare across different studies.
This analysis also fails to recognize that some medical gains come at the expense of quality
of life. So quality of life is a second approach used in economic evaluations. Most measures
of quality of life, however, do not allow relative comparisons. So you can't, for example,
say that a new intervention that costs twice as much as the current standard is justified
because it raised the average quality of life from 5 points to 10 points. So a third approach
is to estimate a utility measure. This measure places relative values on certain events. For
example, the "cost" of surgery might be five times as bad as having to endure a year of drug
treatments, but only half as bad as having to put up with a year of dialysis treatment. There
are standard approaches for interviewing patients to help discover their relative disdain of
various medical events.
A very nice summary of the three forms for an economic evaluation appears in
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Economics notes: measuring outcomes in economic evaluations. Torgerson D, Raftery J.
Bmj 1999: 318(7195); 1413.
[Medline] [Full
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Another important issue is discounting. Economists will typically include a discount
calculation for economic benefits that don't appear until many years later. This makes sense
because most people would rather have money today and would view a comparable amount of money
six years down the road as less valuable. Even if they didn't want to spend the money right
away, they would be able to invest the money and get a return on their investment. But should
the future value of health benefits be discounted?
The main argument against discounting health benefits is that health, unlike
wealth, cannot be invested to produce future gains. The Department of Health has thus
recommended that health related benefits should not be discounted though more recent
advice suggests future health benefits should be discounted but at a very low rate of
1.5%'2%.5 An important reason for discounting future costs and benefits is 'time
preference,' which refers to the desire to enjoy benefits in the present while deferring
any negative effects of doing so. Examples of human behaviour which implicitly discount
future health effects abound. For instance smoking and drinking give current pleasure
while incurring future (discounted) detrimental health effects. Indeed, research has
indicated that smokers value future health benefits at a lower rate than non'smokers.6
This desire to enjoy pleasurable benefits in the present time is often reflected in
differential pricing of goods and services. Consider the hire of a video for home
viewing. Despite the increased cost of newly released videos, many people are willing to
pay the extra cost rather than wait until the price falls. Economic notes.
Discounting. Torgerson DJ, Raftery J. Bmj 1999: 319(7214); 914-5.
[Medline] [Full
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Another important consideration is prevalence costs versus incident costs.
Two methods of costing illness exist'the prevalence and incidence approaches. The
prevalence method is the commonest and estimates the total cost of a disease incurred in
a given year. The more data hungry incidence based approach involves calculating the
lifetime costs of cases first diagnosed in a particular year, providing a baseline
against which new interventions can be evaluated. Economic note: cost of illness
studies. Byford S, Torgerson DJ, Raftery J. Bmj 2000: 320(7245); 1335.
[Medline] [Full
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This is a subtle distinction, but very important. Prevalence will tend to give greater
weight to those individuals who survive longer and less weight to those individuals who die
quickly (or in another context, those who recover quickly).
Opportunity costs are important to an economic evaluation. Here's a nice definition:
The concept of opportunity cost is fundamental to the economist's view of costs.
Since resources are scarce relative to needs,1 the use of resources in one way prevents
their use in other ways. The opportunity cost of investing in a healthcare intervention
is best measured by the health benefits (life years saved, quality adjusted life years (QALYs)
gained) that could have been achieved had the money been spent on the next best
alternative intervention or healthcare programme. Economic Notes: opportunity cost.
Palmer S, Raftery J. Bmj 1999: 318(7197); 1551-2.
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Economic considerations can help derive an appropriate sample size. For example,
transcervical endometrial resection cost 727 pounds, and has a 27% recurrence rate, yielding
an average cost per patient of 923 pounds. Amore expensive procedure, endometrial laser
ablation, costs 772 pounds, but if it has a lower recurrence rate, that would justify the
added expense. How low would that rate have to be? Well, a bit of math will show you that a
19% recurrence rate is about the break even point. Any recurrence rate less than 19% would
yield a lower overall average cost per patient. This analysis, of course, does not account
for the non-economic costs associated with recurrence. But it does show that a study
comparing the recurrence rate of the two procedures ought to have enough power to readily
detect a shift from 27% to 19%, and perhaps even a smaller shift. Two more examples, cited in
the same journal article, have fewer details, but illustrates the types of economic
considerations used
Though it is not always possible to set sample sizes by economic criteria,
economics can often usefully inform sample size calculations. For example, the minimum
economic sample size for a clinical trial of thiazide diuretics for preventing hip
fractures should be large enough to detect a 10% reduction in fracture rates as this is
the point where cost savings due to averting hip fractures equal the costs of the
intervention. Another point of economic importance might be where the cost effectiveness
ratio is equal to that of the next best alternative treatment. For instance, a sample
size calculation for a clinical trial of in vitro fertilisation compared with tubal
surgery for treating infertility suggested that for the cost effectiveness ratios of the
two treatments to be equal, then in vitro fertilisation must result in 12% more live
births than tubal surgery. Cost effectiveness calculations and sample size.
Torgerson DJ, Campbell MK. BMJ 2000: 321; 697.
[Full text]
[PDF]
Further reading
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Guidelines for authors and peer reviewers of economic submissions to the BMJ.
Drummond MF, Jefferson TO. BMJ 1996: 313(7052); 275-283.
[Medline] [Full text]
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Economics notes: types of economic evaluation. Palmer S, Byford S, Raftery J. Bmj
1999: 318(7194); 1349.
[Medline] [Full
text] [PDF]
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Economics notes: measuring outcomes in economic evaluations. Torgerson D, Raftery J.
Bmj 1999: 318(7195); 1413.
[Medline] [Full
text] [PDF]
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Economic Notes: opportunity cost. Palmer S, Raftery J. Bmj 1999: 318(7197); 1551-2.
[Medline] [Full
text] [PDF]
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Economics notes: handling uncertainty in economic evaluation. Briggs A. Bmj 1999:
319(7202); 120.
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Can it work? Does it work? Is it worth it? The testing of healthcare interventions is
evolving. Haynes B. Bmj 1999: 319(7211); 652-3.
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Economic notes. Discounting. Torgerson DJ, Raftery J. Bmj 1999: 319(7214); 914-5.
[Medline] [Full text]
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Helicobacter pylori infection and early onset myocardial infarction: case-control and
sibling pairs study. Danesh J, Youngman L, Clark S, Parish S, Peto R, Collins R. Bmj
1999: 319(7218); 1157-62.
[Medline]
[Abstract] [Full
text] [PDF]
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Using cost effectiveness information. Briggs A, Gray A. British Medical Journal 2000:
320(7229); 246.
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Economic note: cost of illness studies. Byford S, Torgerson DJ, Raftery J. Bmj 2000:
320(7245); 1335.
[Medline] [Full
text] [PDF]
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Costing in economic evaluation. Raftery J. Bmj 2000: 320(7249); 1597.
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text] [PDF]
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Analysis and interpretation of cost data in randomised controlled trials: review of
published studies. Barber JA, Thompson SG. BMJ 1998: 317(7167); 1195-1200.
[Abstract]
[Full text]
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Handling uncertainty in economic evaluations of healthcare interventions. Briggs AH,
Gray AM. British Medical Journal 1999: 319(7210); 635-8.
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How should cost data in pragmatic randomised trials be analysed? Thompson SG, Barber
J. British Medical Journal 2000: 320(7243); 1197-2000.
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Economics notes: Cost effectiveness calculations and sample size. Torgerson DJ,
Campbell MK. BMJ 2000: 321(7262); 697.
[Full text]
[PDF]
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Use of unequal randomisation to aid the economic efficiency of clinical trials.
Torgerson DJ, Campbell MK. BMJ 2000: 321; 759.
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07/08/2008.
