Question

1. What are economic evaluations? What information do they provide to us? Why does society use economic evaluations when it comes to health care?

2. Describe the three types of economic evaluations that are performed and types of health outcomes that are used for the analyses. What are the drawbacks in these types of evaluations?

3. How are economic evaluations utilized in healthcare?

4. What are the areas of concern in the pharmaceutical industry and why? How are these concerns economic in nature? What are benefits associated with pharmaceutical products?

Answer 1

1. In summary, economic evaluation is how we measure the cost effectiveness of a solution. The cheapest option might not give us the best value for investment always and so is true for the most expensive one. So we must see how much value we are getting on per unit of money spent and thats where economic evaluations come in. The information that they provide to us is if the health intervention is 'cost effective'. The society uses them because we have limited resources and must figure out which intervention will give us the most benefit on a per investment unit basis.

2. The main types of economic evaluations are- A) Cost effectiveness analysis B) Cost Minimization analysis and C) Cost utility analysis. There is one more called Cost benefit, but the mentioned 3 are the main ones.

• Cost effectiveness analysis:The outcomes in this case are not same and are measured on a particular scale, such as number of lives saved or reduction in pain score etc. Then cost effectiveness per unit is used, such as lives saved per dollar etc. Then the best health intervention on that basis is used. The main drawback here is that since the benefits are different, for example in onc case we might be measuring lives saved and in another pain reduced, how do we decided in which to spent? 1 million dollars will save 3 lives and they will reduce pain of 100 customers. Which one do we choose? It does not tell us that.
• Cost minimization: This is used when the final result of all the different interventions is same. In that case we simply choose the cheapest option. The drawback here is that they do not take into consideration the inherent drawbacks surrounding the measure of result of the methods.
• Cost utility: The outcomes here are combined both in terms of quantity and quality of life. Because of this it can be used to compare across different interventions and health issues. We can use the most well known measurment, Quality Adjusted Life year (QALY). The main issue surrounding this method is when we compare it across different health issues. What is the measure of quality here? Is chronic pain in the same league as being in no pain but incapacitated? How do we compare these to arrive at QALY for both?

3. As mentioned above, there are different ways of using the economic evaluations, but one more important point in the way these get used in healthcare is the use of margin cost rather than average cost. We always look at the margin cost which will be required for the next benefit, for example the next life saved. This is done because a lot of benefit will be derived without any intervention. Many people will get cured of Dengue without much medical intervention, so applying average cost will give us extremely high return on investment. So we must look at the cost that will take to save the next life which would not have been saved without the intervention.

4. The main concern in the pharmaceutical industry is the return on investment. New drugs take extremely high amount of investment in terms of time and money, and hence companies require their cost to be pretty high for at least a few years to recoup the investment. But that results in a lot of people not being able to buy the drugs. That creates a moral dilemma. These are economic in nature because the high price crowds out the buyers by shifting the costs up. The benefits associated with pharmaceutical products are obvious. They not only help in saving lives, they help in improving the quality of lives too. Using our terms above, we can say they are a very important factor in high QALY. Pharmaceutical products not only include medicines, they also include accessories such as crutches, wheelchairs and casts. They include implants and tools for doctors to use and machines to diagnose patients and much more.