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Cost-utility Analysis (CUA) A form of economic study design in which interventions which produce different consequences, in terms of both quantity and quality of life, are expressed as 'utilities'. These are measures which comprise both length of life and subjective levels of well being. The best known utility measure is the 'quality adjusted life year' or QALY. In this case, competing interventions are compared in terms of cost per utility (cost per QALY).

Economics; a study about making choices • Valuation of one good is always expressed in terms of another • Simple example is putting a $ sign to everything • Another way is to examine in terms of other goods • This is not simple in health care settings as many aspects of health is often difficult to assess in terms of a monetary value • Many often use DALY or QALY against the cost (cost per DALY or QALY)

Opportunity Cost is a way of expressing a value of one good in terms of another • Simple production possibilities frontier curves allow us to illustrate the rate of ‘trade’ between the two goods evaluated given that we have: • Fixed value ‘set’ – e.g. budget • Expected opportunity cost of one good in terms of another is determined by PPF • Economic evaluations in health care takes these basic concepts of economics to the next level to determine which intervention brings the most ‘bang for buck’

In developing countries the top ten diseases are: (1) Lower respiratory infections (9.1) (2) Diarrhoeal diseases (8.1) (3) Conditions arising during the perinatal period (7.3) (4) Unipolar major depression (3.4) (5) Tuberculosis (3.1) (6) Measles (3.0) (7) Malaria (2.6) (8) Ischaemic heart disease (2.5) (9) Congenital abnormalities (2.4) (10) Cerebrovascular disease (2.4) The differences between regions of the world are also marked when the percentage of DALYs lost by age is compared. In sub-Saharan Africa over 50% of the burden is due to mortality and morbidity in the 0–4 age group

In developed countries the top ten causes of DALYs lost are: (1) Ischaemic heart disease (9.9) (2) Unipolar major depression (6.1) (3) Cerebrovascular disease (5.9) (4) Road traffic accidents (4.4) (5) Alcohol use (4.0) (6) Osteoarthritis (2.9) (7) Trachea, bronchus and lung cancers (2.9) (8) Dementia and other degenerative and hereditary central nervous system disorders (2.4) (9) Self-inflicted injuries (2.3) (10) Congenital abnormalities (2.2)

Cost Utility analysis • In a cost-utility analysis (CUA), outcomes are measured as healthrelated preferences, which are most often expressed as QALYs gained (i.e. a final outcome). • This type of evaluation is useful when interventions have an impact on the HRQL, and on the length of life. • A CUA uses a generic outcome measure that permits decision makers to make broad comparisons across different conditions and interventions. • This feature facilitates the allocation of resources based on maximizing health gains.


How are benefits measured?

How are results expressed?

What is the decision making rule?

Proven equal


Choose that which costs least

Cost Benefit Analysis


Net present value (NPV) in £ Benefit cost ratio

NPV > 0 B:C ratio > 1

Cost Effectiveness Analysis

Natural units, e.g. pain free days life years gained

Cost effectiveness ratio (CER)= Costs/outcome

That with the lowest CER is best value for money*

Cost Consequences Analysis

In a variety of different natural units.

CERs for each alternative measure of effectiveness

That with the lowest CER is best value for money*

Cost Utility Analysis

Quality Adjusted Life Years (QALYs)

Cost effectiveness ratio= Costs/QALYs

That with the lowest CER is best value for money*

Cost minimisation

* and those with a CER lower than society’s ‘threshold’ CER are desirable

Hierarchy of utility methods

National Institute for Health and Clinical Excellence. Guide to the methods of technology appraisal (June 2008). edJune2008

• The standard gamble approach is based on the conceptual framework for examining decisions under uncertainty. • The two uncertain health states are often perfect health and death and can be valued as 1 and 0, respectively. • The two uncertain health states don’t have to include perfect health and death. The certain health state will be in between the two outcomes associated with the gamble. • The probability, or p value, derived from this scenario reflects the utility for the certain health state under consideration

History of Quality Adjusted Life Years • A 1985, good quality, 10 year cohort study of HS showed: – Life expectancy is reduced by one year compared to national life tables – HS sufferers spent, on average: • 120 person days per year with: – limited mobility – episodic incontinence – moderate pain – depression of mood

QALY – Measure for Health Effects in CUA • The method employs mobility, physical activity and social activity as criteria; another common method employs disability and distress as criteria • Life expectancy is then multiplied by the quality of life rating to yield QALYs, i.e. adjusting the length of time affected through the health outcome by the utility value (on a scale of 0 to 1) • QALYs- Other names Years of Healthy Life (YHL – US), Health Adjusted Person Years (HAPY) , Health Adjusted Life Expectancy (HALE)- Canada

QALY – Measure for Health Effects in CUA • Three most widely used techniques to measure directly the preference of individuals for health outcome are – Scale: Rating Scale – rank the health outcome, Category rating, Visual analogue scale, Ratio scale – Standard Gamble- measuring cardinal preferences: choosing between two alternatives, with probability attached to the states – Time trade off • Health state i for time t (life expectancy of an individual with chronic condition) followed by death

• A CUA should be used in the Reference Case where meaningful HRQL differences between the intervention and alternatives have been demonstrated, and where appropriate preference (utility) data are available. Preferences should be derived using valid approaches. • The results of a CEA or CUA should be expressed as an incremental cost-effectiveness ratio (ICER). • The net benefit measure may be used as an additional (but not alternative) measure to the ICER, where a specific willingness-to-pay threshold has been assumed. The willingness-to-pay threshold and the associated ICER should be stated for each net benefit estimate.

Cost Utility Ratio

Quality adjusted Life Years (QALYs) •

A measure of outcome which incorporates both quality and length of life.

Can capture changes in quality of life, length of life or both

Facilitates comparisons between health care services with very different effects upon health

Estimating QALYs, changes in QALYs and cost per QALY gained

Quality-adjusted life years (QALYs) • Adjust quantity of life years saved to reflect a valuation of the quality of life • Adjust the quantity of life in a health state to give an outcome measure which represents both quality and quantity. – If healthy QALY = 1 – If unhealthy QALY < 1

– QALY can be <0

QALY procedure • Identify possible health states - cover all important/relevant dimensions of QoL • Derive utility ‘weights’ for each state • Multiply life years (spent in each state) by ‘weight’ for that state.

• Change in QALYs =  QoL x time +  life expectancy

– Utilities are used to “weight” time according to quality of life spent during that time • A health state with a utility of 0.5 lasting two years is equivalent to one year in full health – Allows us to consider differences in treatments which involve changes in quality as well as quantity of life

Calculating QALYs example • Weights: – Good health = 1 – moderate health = 0.8 – poor health = 0.5

• LYs: – Year 1 + year 2 + year 3 = 3 LYs (1+1+1)

• QALYs: – Year 1(x0.5), year 2(x0.8), year 3(x1) = 2.3 QALYs (0.5+0.8+1)

• Intervention may increase recovery such that – year 1(x0.8), year 2(x1), year 3(x1) = 2.8 QALYs (0.8+1+1)

• No difference in LYs but gain in QALYs

Example QALYs • •

A person who gets some disability at the age of 10, lives with the condition for 35 years, and suffers premature death at the age of 45. • If the life expectancy is 60 years, • and the health related quality of life weight associated with the condition is 0.75, The (undiscounted) lifetime QALYs of this person =1.0 x 10 (QALYs before onset of disease) + 0.75 x 35 (QALYs during disease) = 36.25. The QALY loss would be 1.0 x 60 (QALYs in case of full health for full life expectancy) – 36.25 = 23.75. Like the LY measure, QALYs can be presented discounted or undiscounted, although the former is most common.

DALYs • Disability-adjusted life years are another outcome measure that can be used in cost-utility analysis. • Disability-adjusted life years were developed in the international community primarily to measure disease and injury burden and to be able to make comparable estimates of these burden measures across countries. • DALYs weights are slightly different than the qualityadjusted life year weights, • with an inverted scale of 0 referring to perfect health, or no disabilities, and 1 referring to death, or 100 percent disabled.

DALYs • Developed to quantify burden of disease and disability. • Applications: • Used primarily for burden of disease and injury estimates. • Most CUAs in US; Europe uses QALYs. • CUAs in resource-poor countries use DALYs due to World Bank and WHO guidance. • DALY weights: • Inverted scale: 0 = health, 1 = death. • Estimated for diseases or injuries and disabling sequelae. • Based on preferences of experts, not individuals

DALY Methods • Combination of: Years of life lost (YLL) Years of life lived with disability (YLD) • DALY weights – Person trade-off (PTO) exercises: Experts asked to trade off numbers of people to keep alive with different conditions. Measures relative desirability of conditions, not disability (activity limitations).

Use of DALYs in Setting Priorities â&#x20AC;˘ Comparisons of DALYs with funding allocations by disease or risk factor. DALYs best predictor of funding by disease category. Heart disease and stroke 1st and 4th in DALYs but 4th and 11th in NIH research funding. â&#x20AC;˘ Comparison of burden measure rankings by disease.

QALYs vs DALYs vs LYs gained • The total population of Africa is some 655 million people (2005) • An annual loss of about 358 million disability adjusted life years (DALYs). • The most important causes of disease burden HIV AIDS, childhood diarrhoea, measles, malaria, respiratory infections • The life expectancy in the region is generally short, with 47 years in Tanzania and 37 years in Malawi as examples • Effective treatment or prevention is available for most of the above conditions, but health care budgets that are extremely scarce represent effective barriers against improved population health • Generally for the region, health care budgets are in the range 3-20 USD per capita per year

â&#x20AC;˘ Life years are calculated as the remaining life expectancy at the point of each averted death. â&#x20AC;˘ Life expectancies may be taken from life tables that are specific for each setting or standardized across larger regions â&#x20AC;˘ LYs gained can be discounted (3%-5%), to adjust for time differences, or presented undiscounted example, discounting has been criticized for discriminating future generations and for being immoral Others claim that for the sake of consistency, discounting of health as well as costs is necessary

• QALYs and DALYs represent an implicit tradeoff between quantity for quality of wellbeing. • Such trade-offs are well known from many aspects of life

• The different health measures LY, QALYs and DALYs are weighted in different ways. • They are all adjusted for the life expectancy of people affected, giving more weight to the young. • They are all usually discounted, giving more weight to immediate over distant outcomes. • The effect of discounting on net benefit should be considered • Only DALYs and QALYs are weighted to account for disease severity in order to summarize mortality and morbidity. • DALYs are age-weighted

Were healthcare use and health outcome consequences adjusted for the different times at which they occurred?

• Undiscounted – Year 1 costs = 1,000 – Year 2 costs = 1,000 – Year 3 costs = 1,000 – Year 4 costs = 1,000 – Year 5 costs = 1,000

Discounted @ 6% Year 1 = £1000 Year 2 = £943 Year 3 = £890 Year 4 = £840 Year 5 = £792 TOTAL = £4,465

The effect of discounting on the weight of future health effects.

Users and uses of health outcomes data

Utility ‘weight’ • Utility = satisfaction/value/preference • Utility weights are necessarily subjective – Represent individual’s preferences for, or value of, one or more health states.

• Must – Have interval properties – Be “anchored” at death (0) and good health (1) [can be negative]

The weights should be based on individual preferences for the health states There is more debate on whose preferences (e.g., patients, policymakers, general public) should be considered,

although the majority opinion seems to consider the general publicâ&#x20AC;&#x2122;s preferences as the most valid

Group Exercise • docetaxel (Taxotere®, in combination with cisplatin and 5-fluorouracil (5-FU) for the induction treatment of patients with resectable locally advanced squamous cell carcinoma of the head and neck • Here, the addition of docetaxel to cisplatin and 5-FU compared with the use of cisplatin and 5-FU alone produces an additional 2.08 QALYs at an additional cost of £3,824 per patient, which means that it costs £1,832 (£3,824/2.08) to generate an additional QALY by using docetaxel in combination with cisplatin and 5-FU.

Techniques to â&#x20AC;&#x2DC;weightâ&#x20AC;&#x2122; utility Question framing

Certainty (values) Scaling

Rating scale Category scale Visual analogue scale Ratio scale


Time trade-off Paired comparison Equivalence Person trade-off

Response method

Uncertainty (utilities)

Standard gamble

Utilities and HS – Description of HS health states to experts for opinion – Eliciting utilities with HS sufferers – Visual analogue scale – Time trade off – Standard Gamble – Mapping on to health state measures for which preferences are known e.g. EQ5D – Mobility – Self-care – Usual activity – Pain / discomfort – Anxiety / depression

Sources of ‘utility’ weights 1 : Evaluation specific • Develop evaluation specific description of relevant health state and then derive weight directly by survey using one of the previous techniques

• Advantages – Sensitive – account for wider QoL (process, duration, prognosis) • Disadvantages – resource intensive – lack of comparability

Sources of ‘utility’ weights 2: ‘Generic’/‘multi-attribute’ instrument • can be used to measure strength of preference • Predetermined weights for specified combination of dimensions of health yielding a finite number of health state values • Advantages – Supply weights “off the shelf” – Comparable across studies

• Disadvantages – insensitive to small changes – dimensions may not be sufficiently comprehensive – weights may not be transferable across groups

Health outcome measurement For example, the Quality of Well-Being Index assesses mobility, physical activity and social activity. An interviewer asks what the patient did as a result of illness during the last six days. Scoring for particular functions is based on preference weights derived from the normal population. The benefits represented by particular outcomes can be compared with the costs of doing so. 1. The goal of health care and action, to protect, promote and preserve health status: requires standardized assessments. 2. To understand the concepts of health outcomes assessment, distinguish between: • efficacy • effectiveness • efficiency • process and outcomes.

Valuing Health Outcome/Effects • Putting money values on benefits (and costs) of health and health care • Various ways of valuing benefits and costs: economists: benefit = net benefits; costs= opportunity costs • Time is an important cost in health - often valued by a person’s hourly wage rate - however, this infers the non working time of workers (and all the time of non workers) is valued less or not at all - alternative is to apply an average wage to all time • Measure of Productivity Changes – debate- double counting, often included in QALY or WTP, if equity included in policy objectives, than estimation of productivity costs may introduce unwanted biasness

Valuing Health Outcome/Effects â&#x20AC;˘ There have been attempts to place money values on human life through analysis of: - fatal accident compensation awards, and - life insurance cover â&#x20AC;˘ However, estimates vary enormously and are systematically linked to income and wealth

Willingness to Pay (WTP) as Valuing Health and Health Care • WTP is a technique which can potentially be used to place monetary values on any aspect of health or health care - including the value of human life • In WTP, a course of action and its benefits are described and people are asked how much they would be willing to pay for that course of action • A monetary value of benefit is derived; benefits and costs are now directly comparable and (positive or negative) benefits can be calculated • WTP can be used to value close substitutes (as in CEA) and broader alternatives (as in CUA)

ELICITATION OF WEIGHTS 1-Visual Analogue Scale (VAS): It does not involve a trade-off between quantity for quality of years.

2-The time trade-off (TTO) methodology: people are asked to choose between two certain alternatives involving trade-off between quantity and quality of life. TTO questions is the most common technique for elicitation of HRQoL weights in QALYs, although VAS and standard gamble are also sometimes used

3- Person trade-off (PTO): people are asked to trade off extending the lives of people with full health vs improving the health expectancy of people with some disability from sub-optimal to perfect health.

4-Standard gamble (SG) approach: respondents are asked to choose between the certainty of an intermediate health state, the uncertainty of a treatment with two possible outcomes (cure Vs death)

â&#x20AC;˘ From a theoretical point of view, one may expect that weights elicited with SG are higher than the VAS because of risk aversion. One may also expect TTO weights to be higher than VAS weights because of time preferences.

AGE WEIGHTING • Age weighting is a concept unique to the DALY methodology • It is intended to account for the fact that people are supported by others during infancy and at an advanced age, but support others during adulthood • This notion is called welfare interdependence.

• Welfare interdependence does not imply that the time lived at different ages are more or less important to those individuals, but that the social value is different. It can be argued that welfare interdependence is an arbitrary choice for an age-weighting function.

EQUITY WEIGHTING • equity weighting is at current not standard procedure neither in DALYs, nor QALYs or LYs gained. • Some argued for a version of the fair innings, where the quality of a person’s life is important as well as the length of it

• Two major barriers to implementing equity weighted QALYs or DALYs: 1-no agreement as to over which notion of disease severity one should pursue equity. Is it for example acute ill-health, or is it life time ill-health 2-both estimation of equity weights and implementation of them in QALY maximization exercises is scarce.

â&#x20AC;˘ LY gained is a pure measure of mortality, the two latter seeks to incorporate morbidity by doing disability- and quality of life weighting. A major difference between QALY and DALY is that the latter measure in addition incorporates age-weights

QALY Instruments • EuroQol

• Quality of Well Being • Health Utility Index • SF-6D

How is quality of life measured?

Measuring health on a generic HR-QoL instrument: the EQ-5D

How is quality of life valued? Example of a ‘tariff’ of social values (a value set) for the EQ5D

Health status example: EQ-5D

EuroQol • Simplest instrument • -Five questions—self-care, mobility, usual activities, pain, anxiety/depression • -Scoring system developed in U.K. • -U.S. scoring system by the end of 2003 • -Also includes a visual analog scale • -Pain has largest impact for scores based on previously developed algorithm

Quality of Well Being • Longer instrument • Asks about past six days rather than just today • Symptoms, role function, social function • Symptoms are a mixture of symptoms and other characteristics

Health Utility Index • More used to to some problems • Fairly short instrument

• Allows for interesting interaction between health DOMAINS

SF-6D â&#x20AC;˘ Based on SF-36 instrument that has a long history of being used but was unable to generate QALY scores until recently Paper came out in 2002 in Journal of Health Economics â&#x20AC;˘ Allows use of an instrument that is more familiar to many researchers

Standard Gamble • Ask respondent to indicate what risk of dying he would be willing to accept in order to obtain a treatment that would either cure or kill • Not realistic medical decision making • People are so afraid of death this often leads to an overestimate of the utility of a health state or an underestimate of the utility of disease elimination

Time Tradeoff â&#x20AC;˘ Different type of question in comparison with the questions for the standard gamble â&#x20AC;˘ Given a lifetime with a medical condition, how many years are you willing to give up in order to have optimal health

Visual Analog Scale • Very much like asking a respondent to rate his/her health on a scale of 0-100 • -0 is worst imaginable • -100 is optimal health • Tends to be lower than other measures as not making as explicit a tradeoff

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