Health Economics II –2010 Health Economic Evaluations Part III

Lecture 2

Cost-effectiveness analysisQALYs and cost-utility analysis

Nils-Olov Stålhammar

Type of analysis - the outcome measurement

Type of analysis Costs Effect

Cost-minimization Money Not measured

Cost-effectiveness Money Natural units; Life years gained, relapses

Cost-consequence Money Several disease specific measures

Cost-utility Money Combining length and quality of life, QALYs

Cost-benefit Money Money

Cost-effectiveness analysis

• CEA is of most use when operating with a given budget and there is a limited range of options within a given field

However, the measure of effectiveness must be appropriate with respect to the objective

• But can also guide broader resource allocation, but with a ‘narrow’ measure of effectiveness (compared to CUA more is left to the decision maker’s judgment )

Incremental cost-effectiveness ratio

• ICER=

Decision rules of CEA/CUA

Average cost-effectiveness ratio• CERa=Ca/Ea

• CERb=Cb/Eb

ba

ba

EECC

C

E

a

b

0

Decision rules of CEA/CUA

Effect EA

Possible outcomes in CEA(CUA)Comparison of two alternatives, A and BAlternative B may fall in area I, II, III or IV

Cost

CA

IVHigher costPoorer effect

IHigher costBetter effect

IILower costBetter effect

IIILower costPoorer effect

A

Decision rules of CEA/CUAExample from Karlsson and Johannesson, 1996*

Assumptions• Three patient groups of equal size, 1000 homogeneous pts per

group• Mutually exclusive treatments are available, i.e. a patient can

only receive one of the treatments• Constant returns to scale, i.e. C and E per patient are

independent of the number of patients treated• C and E in one group are not dependent on choice of treatment

in another group• Fixed budget, i.e. a given amount of resources is available

*) Karlsson, Johannesson. The decision rules of cost-effectiveness analysis. Pharmacoeconomics, 1996;9:113-20

Decision rules of CEA/CUAExample from Karlsson and Johannesson, 1996

Patient group I Patient group II Patient group IIIC E C/E C E C/E C E C/E

A 100 10 10 F 200 12 17 K 100 5 20

B 200 14 14 G 400 16 25 L 200 8 25

C 300 16 19 H 550 18 31 M 300 12 25

D 400 19 21

E 500 20 25

Average cost-effectiveness ratios do not provide relevant informationIncremental cost-effectiveness ratios have to be calculated!

Decision rules of CEA/CUAExample from Karlsson and Johannesson, 1996

Patient group I Patient group II Patient group III

ΔC ΔE ΔC/ΔE ΔC ΔE ΔC/ΔE ΔC ΔE ΔC/ΔE

A 100 10 10 F 200 12 17 K 100 5 20

B 100 4 25 G 200 4 50 L 100 3 33

C 100 2 50 H 150 2 75 M 100 4 25

D 100 3 33

E 100 1 100

ICER is estimated between treatment alternatives within the same patient group, i.e. a comparison with the next most effective mutually exclusive alternative

Decision rules of CEA/CUAExample from Karlsson and Johannesson, 1996

• Dominance– A treatment is dominated if it is more costly and less effective than another

treatment; d is dominated by a• Extended dominance

– A treatment can also be dominated when its ICER is higher than that of the next more effective treatment; b should be ruled out because of extended dominanceC

bc

0E

a

d

A combination of a and c, i.e. some patients get a and some patients get c, will give more effectiveness at the same cost or same effectiveness at a lower cost, than b alone

Decision rules of CEA/CUAExample from Karlsson and Johannesson, 1996

Patient group I Patient group II Patient group III

ΔC ΔE ΔC/ΔE ΔC ΔE ΔC/ΔE ΔC ΔE ΔC/ΔE

A 100 10 10 F 200 12 17 K 100 5 20

B 100 4 25 G 200 4 50 L 100 3 33

C 100 2 50 H 150 2 75 M 100 4 25

D 100 3 33

E 100 1 100

ICER is estimated between treatment alternatives within the same patient group, i.e. a comparison with the next most effective mutually exclusive alternative

Decision rules of CEA/CUAExample from Karlsson and Johannesson, 1996

Patient group I Patient group II Patient group III

ΔC ΔE ΔC/ΔE ΔC ΔE ΔC/ΔE ΔC ΔE ΔC/ΔE

A 100 10 10 F 200 12 17 K 100 5 20

B 100 4 25 G 200 4 50 M 200 7 29

D 200 5 40 H 150 2 75

E 100 1 100

Dominated alternatives are excluded and ICERs are recalculated

0

100000

200000

300000

400000

500000

600000

0 5000 10000 15000 20000 25000

E

C

Patient group I Patient group II Patient group III

Decision rules of CEA/CUAExample from Karlsson and Johannesson, 1996

A

B

C

D

E

F

G

H

K

L

M

Decision rules of CEA/CUAExample from Karlsson and Johannesson, 1996

Treatment alternatives to be implemented can be determined by• The size of the budget available

– The maximum price we are willing to pay for a unit of effectiveness will then be determined implicitly

or• The maximum price we are willing to pay for a unit of

effectiveness– The size of the budget will then be determined implicitly

Decision rules of CEA/CUAExample from Karlsson and Johannesson, 1996

The budget as the decision rule

Budget Treatment MC Effectiveness

Group I Group II Group III

0-99 900 Some: 0Some: A

0 0 10 0-9 990

100 000 A 0 0 17 10 000

100 200-299 800

A Some: 0Some: F

0 17 10 012-21 988

300 000 A F 0 20 22 000

300 100-399 900

A F Some: 0Some: K

20 22 005-26 995

Decision rules of CEA/CUAExample from Karlsson and Johannesson, 1996

0

20

40

60

80

100

120

0 5000 10000 15000 20000 25000

Effectiveness

MC

Patient group IPatient group IIPatient group III

Decision rules of CEA/CUAExample from Karlsson and Johannesson, 1996

0

20

40

60

80

100

120

0 5000 10000 15000 20000 25000

Effectiveness

MC

Patient group IPatient group IIPatient group III

All in I get A

In I some get A some get B

All in I get B

Decision rules of CEA/CUAExample from Karlsson and Johannesson, 1996

Marginal cost of producing effectiveness

0

20

40

60

80

100

120

0 10000 20000 30000 40000 50000 60000Aggregate effectiveness

Mar

gina

l cos

t (IC

ER)

A F K BM

DG

H

E

Area under MC curve = total costA specific price (threshold) implies a specific budget

Type of analysis - the outcome measurement

Type of analysis Costs Effect

Cost-minimization Money Not measured

Cost-effectiveness Money Natural units; Life years gained, relapses

Cost-consequence Money Several disease specific measures

Cost-utility Money Combining length and quality of life, QALYs

Cost-benefit Money Money

Quality Adjusted Life YearsHealth index orUtility or QALY weight

0

0.80.91

Life expectency, years4 5

Without treatment

With treatment

QALYs without treatment = 4 x 0.9 = 3.6QALYs with treatment = 5 x 0.8 = 4.0

How to estimate QALY-weights

• Rating Scale, Category Scaling, Visual Analogue Scale– Note; respondents are not faced with a ’choice’

• SG – Standard Gamble– A choice between a certain intermediate health state

and a treatment with two possible outcomes, dead and healthy

• TTO – Time Trade Off – A choice between living for a given time in a poor

health state and living for a shorter time in full health

P ( 0<P<1) is used as the index of QoL

STATE i

HEALTHY

DEADAlte

rnative 1

Probability p

Probability 1-p

Alternative 2

Standard Gamble

Time

QoL

Alternative 2

Alternative 1

HEALTHY 1.0

STATE i hj

DEAD 0

0 t T

The value of t for which the respondent is indifferent is used to construct an indexof QoL for the state i: h = t

T

Time Trade Off

Some quality weights (utilities) for health states

Full health (reference state) 1.00Life with menopausal symptoms (RS) 0.99Side effects of hypertension treatment (RS) 0.95-0.99Mild angina (RS) 0.90Kidney transplant (TTO, patients) 0.84Moderate angina (RS) 0.70Hospital dialysis (TTO, Hamilton, patients) 0.59Hospital dialysis (TTO, St John´s, patients) 0.57Hospital dialysis (TTO, general public) 0.56Severe angina (RS) 0.50Anxious/depressed much of the time (TTO) 0.45Being blind or deaf or dumb (TTO) 0.39Dead (reference state) 0.00

Source: Torrance (1987)

Health state Quality weight

Preferences, values and utilities

Response method Question framing

Certainty (values) Uncertainty (utilities)

Scaling Rating scaleCategory scalingVAS

Choice TTOPerson trade-off *)

SG

*) Person Trade Off measurement; How many pts in a certain state of health should have their lives extended by one year in order to be equivalent to extending the lives of 100 healthy individuals with 1 year?

To estimate QALY-weights – some remarks

• VAS less ’attractive’ from a theoretical point of view• SG can be expected to result in higher weights than TTO

due to:– People are risk averse– People have a positive rate of time preference

• SG may be preferable compared to TTO since it involves uncertainty

• However, the ability to map utilities can be questioned for both methods

• Who is to give the weights?– Patients know what it is like, but cope– General public bear the costs and are potential patients

Multi-attribute health status classification • Health states are described with respect to a number of

attributes (e.g. mobility, pain..), each with a number of levels

• Utility scores are derived with VAS, SG or TTO, but necessary to interpolate some of the utilities– Composite approach

• Respondents value a subset of states• Econometric modelling is used to give values to all states

– Decomposed approach• Involves asking respondents to value each level within a

dimension/attribute assuming that all other dimensions are constant

• Composite health states are generated with a multi-attribute function

• Stringent conditions for the multi-attribute function

Multi-attribute health status classification

• EuroQoL; EQ-5D– Five dimensions; mobility, self-care, usual activities,

pain/discomfort, anxiety/depression– Three levels for each dimension– Also a VAS– 243 health states plus ‘unconscious’ and ‘dead’– Values derived for different countries, different

population groups and with different techniques (VAS and TTO)

http://www.euroqol.org/home.html

EQ-5DMobilityI have no problems in walking aboutI have some problems in walking aboutI am confined to bed

Self-CareI have no problems with self-careI have some problems washing or dressing myselfI am unable to wash and dress myself

Usual Activities (e.g. work, study, housework, family or leisure activities)I have no problems with performing my usual activitiesI have some problems with performing my usual activitiesI am unable to perform my usual activities

Cont…

EQ-5D…ContPain/DiscomfortI have no pain or discomfortI have moderate pain or discomfortI have extreme pain or discomfort

Anxiety/DepressionI am not anxious or depressedI am moderately anxious or depressedI am extreme anxious or depressed

Multi-attribute health status classification

• The McMaster Health Utility Index– HUI3 has eight attributes; vision, hearing, speech,

ambulation, dexterity, emotion, cognition, and pain– 5-6 levels per attribute– Defines 972 000 unique health states– Utility scores derived with VAS and SG among 504

adults, Hamilton, Ontario (replicated in French population with similar results)

http://www.healthutilities.com/

Guidelines’ views

• The Dental and Pharmaceutical Benefits Agency, (Tandvårds och läkemedelsförmånsverket, TLV):

– “QALY weightings based on appraisals of persons in the health condition in question are preferred before weightings calculated from an average of a population estimating a condition depicted for it.”

• NICE:– “Information on changes in HRQL as a result of treatment should be

reported directly by patients (and directly by carers when the impact of treatment on the carer’s health is also important). The valuation of changes in HRQL reported by patients should be based on public preferences elicited using a choice-based method in a representative sample of the UK population.”

Alternatives to QALYs• HYE - Healthy Years Equivalent

– The number of years in perfect health that are equivalent to a particular profile of health states over remaining life time

• SAVE- Saved Young Life Equivalents – Based on Person Trade Off measurement; extending

lives of 100 healthy individuals with 1 year = extending lives of X patients in designed health state with 1 year

• DALY – Disability Adjusted Life Years– Measures time lost due to premature death (compared

to the greatest reported national average life expectancy) and due to disability (scores on a discrete scale with 7 categories, assigned by health care workers as PTO-scores)

From Neuman PJ, et al. Value in Health 2005;8(1):3-9

Growth in CUA- literature

From Neuman PJ, et al. Value in Health 2005;8(1):3-9

Quality of CUA- literature

’Old’ exam question. Part III a) Give two reasons why QALY is an often

recommended measure of outcome in a health economic evaluation.

b) Describe in detail VAS, SG and TTO as methods for eliciting preference weights (QALY weights). (Use illustrations.)

c) Why can SG be expected to result in higher QALY weights than TTO?

’Old’ exam question. Part III Assume the following:- There are three patient groups with 1000 homogeneous patients per group- A number of mutually exclusive treatments are available for each patient

group (see table below), i.e. a patient can only receive one of the treatments

- There are constant returns to scale, i.e. cost (C) and effect (E) per patient are independent of the number of patients treated

- C and E in one group are independent on choice of treatment in another group

- In addition to the 11 alternatives listed in the table, there also exist ‘do nothing’ alternatives which are assumed to have zero cost and zero effectiveness

- The fixed budget that can be used for treatment in these three patient groups is 700 000.Cont.

’Old’ exam question. Part III

Cont.

Patient group I Patient group II Patient group III

Alternative C E Alternative C E Alternative

C E

A 100 10 F 200 12 K 100 5B 200 14 G 400 16 L 200 8C 300 16 H 550 18 M 300 12D 400 19

E 500 20

Cont.

’Old’ exam question. Part III Cont. • a) Which treatments should be chosen, given that the

objective is to maximise the effectiveness of the resources spent on treatment for these 3 patient groups? (You must describe and illustrate the necessary steps in the calculations needed to arrive at your answer.)

• b) What is the total effectiveness and the marginal cost of producing effectiveness when the budget is being optimally used, i.e. when the budget is allocated in accordance with your answer to question a).

’Old’ exam question. Part III While discounting of costs occurring in the future is generally accepted, discounting of future health effects is sometimes questioned. Describe two often given reasons for not discounting future health effects and give two arguments in favour of discounting future health effects.

’Old’ exam question. Part III Explain the difference between ‘utilities’ and ‘values’. Give a plausible explanation to the common empiric finding that the utility for a specific health state is higher than the corresponding value.

’Old’ exam question. Part III Regarding the estimation of QALYs a) Describe in detail Visual Analogue Scale, Standard Gamble and Time Trade Off as methods for eliciting preference weights (QALY weights). Support your description by using illustrations. b) An alternative way of measuring the effect of, for instance, a treatment on health outcomes is to use a pre-scored multi-attribute health status classification system. Give a brief description of what this means.

’Old’ exam question. Part III According to an assessment of two treatment alternatives, alternative A results in a cost per patient of 1 MSEK and a life expectancy of 10 years. The corresponding numbers for alternative 2 are 1,5 MSEK and 12 years. a) Calculate average and incremental cost-effectiveness ratios.  b) Is it possible to decide which alternative that is most cost-effective? Explain. c) Suggest cost and effectiveness for a hypothetical third alternative that would be dominated by extended dominance. Explain the concept of extended dominance.