The four types, of economic evaluation summarized in the table below, differ in the manner that outcomes are measured.
Table 3.1 Pharmacoeconomic Methodologies
Methodology Cost Measurement Unit
Outcome Unit Cost-Minimization Analysis
(CMA)
Monetary value Assume to be equivalent in comparative groups
Cost-Effective Analysis (CEA) Monetary value Natural units (life years gained, mmol/L blood glucose, mm Hg blood pressure)
Cost-Utility Analysis (CUA) Monetary value Quality adjusted life-year or other utilities
Cost-Benefit Analysis (CBA) Monetary value Monetary value
The above four basic methodologies central to pharmacoeconomic evaluations will be briefly discussed in the following sections.
3.2.1. Cost-Minimization Analysis (CMA)
This type of analysis is used to compare interventions in which outcomes are demonstrated or assumed to be equivalent in other words outcomes have identical efficacy/efficiency and safety profiles (Walley, et al. 2004; Bootman, et al. 1998). The costs of the interventions are then compared. For example CMA can be used to compare two generically equivalent drugs in which the outcome has been proven to be equal. The acquisition and administration costs of the two drugs may differ significantly and these are compared using CMA methodology (Bootman, et al.
1998). However, in practice this analysis is hardly ever used (Fleurence, 2003).
3.2.2. Cost-Effective Analysis (CEA)
Cost-effective analysis is a technique that utilizes a series of analytical and mathematical procedures, aimed at assisting decision-makers in identifying a preferred choice among possible treatment alternatives with different efficacy/effectiveness and safety profiles (Bootman, et al.
1998; Venturini & Johnson, 2002). As with other methodologies, CEA intervention inputs (costs) are measured in monetary terms, whilst the outputs are measured in natural unit measures.
Therefore, for interventions to be captured using CEA the outcome must be able to be measured, or scored, in a common natural unit. These natural unit measures may include: heart attacks avoided, disability days avoided and quality of life scores. Quality of life scores are obtained from health-related quality of life (HRQoL) instruments, which can be used to measure the quality of life of a patient in a number of domains (for example physical, emotional and social) and provide scores for each (Fleurence, 2003; McGhan, Rowland, & Bootman, 1978).
For example, the cost-effectiveness of treating an ulcer with drugs from two different classes can be analyzed using CEA. The desired outcomes, ulcer alleviation can be measured in common natural units and the input costs for each drug per natural outcome unit can then be compared. In CEA, costs and consequences of two treatment alternatives can also be compared in terms of the additional cost incurred in-relation to the additional beneficial effects achieved known as incremental CEA.
3.2.3. Cost-Utility Analysis (CUA)
Cost-utility analysis is a method that is used to measure benefits in outcomes in terms of both quantity and quality of life. The unit of measurement is quality adjusted life years (QALYs). In health economics, a ―utility‖ is the measure of the preference or value that an individual or society places on a health state (Fleurence, 2003).
For cost-utility analysis there is a defined outcome and the cost to attain a unit of the outcome is measured in monetary terms (Bootman, et al. 1998; Walley, et al. 2004). Cost-utility analysis can be applied in a variety of cases such as: to aid in making decisions regarding alternative healthcare programs (for example surgery versus chemotherapy), when both mortality and morbidity are affected by intervention and a combined unit of outcome is preferred; and when the quality of life is the vital outcome.
3.2.4. Cost-Benefit Analysis (CBA)
Cost-benefit analysis is a methodology in which a monetary value is assigned to both the implementation of the service and or drug (inputs) and the benefits (outputs) in-order to determine the net cost of the intervention (Venturini & Johnson, 2002; Fleurence, 2003). Cost-benefit analysis is used to evaluate either single or multiple interventions with different outcomes, such as diagnostic, screening or therapeutic interventions. The net economic value of an intervention can be defined as a loss or gain. However some benefits are difficult to measure, especially in monetary terms, such as improved patient quality of life, and improved patient-satisfaction with healthcare systems. These benefits are deemed ―intangible benefits‖ and are left to the decision-makers to include in their final deliberations (Bootman, et al. 1998).
There are two main methods to measure health gains in a CBA: the human capital approach and the willingness to pay (WTP) approach. The human capital approach values a health improvement on the basis of the future productive worth to society as a consequence of being able to return to work. In a WTP approach, the utility an individual gains from an intervention is valued as the maximum amount they would be willing to pay for an intervention.
3.2.4.1. Human Capital (HC) Approach
In accounting principles, capital is defined as an asset available for use in the generation of another prospective asset (Association of Chartered Certified Accountants, 2009). The financial value of the asset can be ascertained from its anticipated earnings. In the human capital approach people are treated as an asset or an investment to society. The human capital approach values benefits attained by society by avoiding premature death of a human being, thus loss of human capital results in reduced productivity (Bootman, et al. 1998).
Future productivity is based on health improvement results in being able to return to work and earn wages. Death due to ill-health, is considered a loss to others (society) and thus forgone earnings can be determined and quantified (Bootman, et al. 1998; Fleurence, 2003). However the human capital approach has been greatly criticized as being unethical since, for example, the life of non-working people, such as the elderly or children, is considered to be of zero value, if not negative (Walley, et al. 2004).