Types of Economic Evaluation Before we begin to perform production of any products or services, first, we must determine and analyze

the cost and its possible outcome to the benefactors and the consumers. An economic evaluation is usually performed in order to make a set of criteria which may be used for the decision-making process. Drummond, Stoddart and Torrance (1987) define an economic evaluation as the comparative analysis of alternative courses of action in terms of both their costs and consequences. People usually misinterpret economic evaluation as an accounting exercise or means to convert program outcomes into a definite value. It was stated in the Canadian Journal of Psychiatry (1989) that A second problem with economic evaluations is that many of the costs and benefits of treatments are extremely difficult to quantify economically. In addition, it is very difficult to put a dollar value on what often may be the most significant benefit of an effective intervention (i.e. increased satisfaction, well-being, self-esteem and personal happiness in the recipient) I have stated a while ago that economic evaluation can be used to provide a set of criteria for decision making. However, these criteria should not be used as a sole criterion for making a decision. There are many types of evaluations which address costs, outcomes, or both. An economic evaluation that involves both costs and outcomes, and involves comparison of two or more suggested programs, was referred to as the Full Economic Evaluation. An evaluation that only considers costs or outcomes alone is called Partial Economic Evaluation. There are four main types of Full Economic Evaluation. Those are cost-minimization analysis, cost-effectiveness analysis, cost-utility analysis, and cost-benefit analysis.

1. Cost-minimization Analysis Measures and compares input costs, and assumes outcomes to be equivalent. Thus, the types of interventions that can be evaluated with this method are limited. The strength of each CMA lies in the acceptability by the readers or evaluators that outcomes are indeed equivalent. In this setting, with the assumption that the outcomes of the interventions are measurably identical, the least cost option is chosen. Also, Take note that this method has limited use because it can only compare alternatives with the same outcomes

Example: Treatment Program and Cost

Drug A: AMX Antibiotic Cost: 385 Php/Treatment course

Effect

90% Treatment Success

Drug B: Amoxicillin Cost: 189 Php/Treatment course

10% Failure 2% Minimal Side effects

Dr. Jonas D.

*The illustration was taken from Economics in Health for the Allied Health Sciences by Policarpio

-------Note the variation in cost. Two different program leads to same outcome----Application: Cost-Minimization Analysis of Darbepoetin Alpha vs Epoetin Alpha By Eric J. Kruep and Lorne E. Basskin Purpose: The cost of darbepoetin alfa versus that of epoetin alfa in a hospital setting was studied. Methods: The study was an observational, retrospective review of the hospitalwide use of darbepoetin and epoetin during hospital admissions beginning in the period from January 2003 through April 2003. After the identification from daily charge reports of patients who used at least one of the study drugs during an admission, charts were requested for review. Drug product costs were determined from hospital purchasing information. Material and labor costs were combined to estimate drug administration costs. Total costs were calculated as the sum of drug product costs and administration costs. Results: A total of 429 epoetin records and 80 darbepoetin records were included. The two cohorts were similar with respect to demographic characteristics. With respect to costs, the only significant difference between cohorts was in daily administration costs, which were lower for patients receiving darbepoetin. Sensitivity analysis found lower costs for darbepoetin only after the dose-conversion ratio (DCR) was increased to above 256.74 units:1 g. The overall DCR based on the median daily dose of each drug was 244.90 units:1 g. Conclusion: A cost-minimization study in a hospital showed no cost difference between treatment with epoetin and darbepoetin.
*Sample study was taken from Medscape American Journal of Health-System Pharmacy Am J Health Syst Pharm. 2005;62(24):2597-2603.

2. Cost-Effective Analysis Cost-effectiveness analysis is a decision-making assistance tool. It identifies the economically most efficient way to fulfill an objective. In evaluation, the tool can be used to discuss the economic efficiency of a program or a project. It aims to tell the people which program best achieves a given objective at the least cost or which program will maximize the efficiency of the expenditures in a given fixed budget. Since CEA involves comparison of costs with the health effects of each program or intervention being evaluated, we can deduce that in the end of the evaluation process we will arrive at a ratio that compares cause and effect. In simple terms, this can be expressed as Total Cost/Total effect = Cost-effect ratio In other books, this ratio is referred as the Incremental Cost-Effectiveness Ratio or ICER. This can be expanded to this equation: ICER= (C1 C2)/(E1 E2)
Where C1 and E1 represent the cost and effect in intervention or treatment group and C2 and E2 represent the cost and effect in control care group

Example: Option Use Barangay Health Centers Use mobile clinics Use Jollibee stores Number of Immunized Children 35, 000 45, 000 38, 670 Total Cost of the Project P 3, 500, 000 P 5, 750, 000 P 3, 750, 000 Cost-Effectiveness Ratio P 98.59/child immunized P 127.77/child immunized P 96.97/child immunized

* Table taken from Economics in Health for the Allied Health Sciences by Dr. Jonas D. Policarpio

Prepared by: John Paulo R. Puno, MD, RMT, MSMT, RMA(AMT), (ASCP)CLS, MBA, DPPA (JOKE LANG YUN ^^^ HAHAHAHA XDD)