Cost-utility analysis

Cost-utility analysis

Cost-utility analysis (CUA) is a form of economic analysis used to guide procurement decisions. The most common and well-known application of this analysis is in pharmacoeconomics, especially health technology assessment (HTA).

CUA in health economics

In health economics, the purpose of CUA is to estimate the ratio between the cost of a health-related intervention and the benefit it produces in terms of the number of years lived in full health by the beneficiaries. Hence it can be considered a special case of cost-effectiveness analysis, and the two terms are often used interchangeably.

Cost is measured in monetary units. Benefit needs to be expressed in a way that allows health states that are considered less preferable to full health to be given quantitative values. However, unlike cost-benefit analysis, the benefits do not have to be expressed in monetary terms. In HTAs it is usually expressed in quality-adjusted life years (QALYs).

If, for example, intervention A allows a patient to live for three additional years than if no intervention had taken place, but only with a quality of life weight of 0.6, then the intervention confers 3 * 0.6 = 1.8 QALYs to the patient. If intervention B confers two extra years of life at a quality of life weight of 0.75, then it confers an additional 1.5 QALYs to the patient. The net benefit of intervention A over intervention B is therefore 1.8 - 1.5 = 0.3 QALYs.

The incremental cost-effectiveness ratio (ICER) is the ratio between the difference in costs and the difference in benefits of two interventions. A threshold value is often set by policy makers, who may decide that only interventions with an ICER below the threshold are cost effective (and therefore should be funded).

In the United Kingdom, as of January 2005, the National Institute for Health and Clinical Excellence (NICE) is believed to have a threshold of about £30,000 per QALY, although a formal figure has never been made public [ [cite journal
last = Devlin
first = Nancy
coauthors = David Parkin
date = 2004
title = Does NICE have a cost-effectiveness threshold and what other factors influence its decisions? A binary choice analysis
journal = Health Economics
volume = 13
issue = 5
pages = pp. 437–52
doi = 10.1002/hec.864
[ Article also available directly from the authors at City University, London, UK.]
] Thus, any health intervention which has an incremental cost of more than £30,000 per additional QALY gained is likely to be rejected and any intervention which has an incremental cost of less than or equal to £30,000 per extra QALY gained is likely to be accepted as cost-effective.

In North America, US$50000 per QALY is often suggested as a threshold ICER for a cost-effective intervention.

A complete compilation of cost-utility analyses in the peer reviewed medical literature is available at the [ CEA Registry Website]


See also

*Cost-benefit analysis

Wikimedia Foundation. 2010.

Look at other dictionaries:

  • Cost–utility analysis — (CUA) is a form of financial analysis used to guide procurement decisions. The most common and well known application of this analysis is in pharmacoeconomics, especially health technology assessment (HTA). Contents 1 CUA in health economics 1.1… …   Wikipedia

  • Cost–benefit analysis — (CBA), sometimes called benefit–cost analysis (BCA), is a systematic process for calculating and comparing benefits and costs of a project for two purposes: (1) to determine if it is a sound investment (justification/feasibility), (2) to see how… …   Wikipedia

  • Cost-effectiveness analysis — (CEA) is a form of economic analysis that compares the relative costs and outcomes (effects) of two or more courses of action. Cost effectiveness analysis is distinct from cost benefit analysis, which assigns a monetary value to the measure of… …   Wikipedia

  • Cost-benefit analysis — is a term that refers both to:* a formal discipline used to help appraise, or assess, the case for a project or proposal, which itself is a process known as project appraisal; and * an informal approach to making decisions of any kind. Under both …   Wikipedia

  • Cost-Effectiveness Analysis Registry — The Cost Effectiveness Analysis Registry was developed by the Center for the Evaluation of Value and Risk in Health at the Institute for Clinical Research and Health Policy Studies, Tufts Medical Center, Boston, MA. The Registry contains detailed …   Wikipedia

  • utility and value — ▪ economics Introduction       in economics, the determination of the prices of goods and services.       The modern industrial economy is characterized by a high degree of interdependence of its parts. The supplier of components or raw materials …   Universalium

  • Utility — This article is about the economic concept. For other uses, see Utility (disambiguation). Part of a series on Utilitarianism …   Wikipedia

  • analysis — /euh nal euh sis/, n., pl. analyses / seez /. 1. the separating of any material or abstract entity into its constituent elements (opposed to synthesis). 2. this process as a method of studying the nature of something or of determining its… …   Universalium

  • Cost-plus pricing — is a pricing method used by companies to maximize their profits. The firms accomplish their objective of profit maximization by increasing their production until marginal revenue equals marginal cost, and then charging a price which is determined …   Wikipedia

  • Utility frequency — The waveform of 230 volt, 50 Hz compared with 110 V, 60 Hz. The utility frequency, (power) line frequency (American English) or mains frequency (British English) is the frequency at which alternating current (ac, also AC) is transmitted from a… …   Wikipedia