Health Economics: An Introduction to Economic Evaluation Third Edition Gisela Kobelt Health Economics: An Introduction to Economic Evaluation Third Edition Gisela Kobelt 2013 Office of Health Economics Southside, 7th Floor 105 Victoria Street London SW1E 6QT United Kingdom www.ohe.org ©2013 All rights reserved Printed in the United Kingdom ISBN 978-1-899040-44-5 This monograph has undergone a rigorous peer review by the independent OHE Editorial Board and other experts in the field. The views expressed in this publication are those of the author and do not necessarily represent those of OHE. About the Office of Health Economics Founded in 1962, the OHE’s terms of reference are to: • Commission and undertake research on the economics of health and health care • Collect and analyse health and health care data for the UK and other countries • Disseminate the results of this work and stimulate discussion of them and their policy implications. The OHE’s work is supported by research grants and consultancy revenues from a wide range of UK and international sources. About the Author Gisela Kobelt is Managing Director of European Health Economics France, a company specialising in economic evaluation of health interventions and training courses in health economics and economic evaluation. Until the end of 1997, Gisela was Vice President, Corporate Health Economics, at the Pharmacia & Upjohn Corporate Management Center in Stockholm and London. Prior to her responsibilities with Pharmacia, she created and headed the health economics department at Sandoz in Basel. Since 2007, has been a visiting professor at the Department of Orthopedics/Rheumatology at the University of Lund, Sweden. Gisela holds a master’s degree from the University of Strasbourg, an MBA from the Institute for Management Development in Lausanne, and a PhD in health economics from the Karolinska Institute. Author of over 90 scientific publications in the field of health economics, several book chapters and numerous reports, Gisela serves on several editorial boards. Acknowledgements I am grateful to Professor Bengt Jönsson of the Stockholm School of Economics and to the OHE reviewers for their advice and helpful comments on the manuscript. — Gisela Kobelt ii FOREwORD FOrEwOrd The Office of Health Economics is pleased to offer the third edition of this valuable guide to health economics. The second edition of this publication appeared in 2002. In the decade since, the use of economic evaluation of new medical technologies as a basis for decisions about access to and reimbursement of medicines and medical services has expanded to an increasing number of countries and types of technology. At the same time, the methods themselves have evolved in response to experience and to changes in the ability to capture and analyse data. This new edition reflects those changes. This book presents a comprehensive overview of approaches to health economic evaluation, illustrated throughout with examples and with guidance about what methods are appropriate in which situations. written in an accessible style, the book offers important background both for those who will undertake evaluations and those who will use them as the bases for decisions. The author, Gisela Kobelt, has extensive experience in economic evaluation, making her perspective particularly insightful. Professor Adrian Towse, Director Office of Health Economics iii COnTEnts COntEnts Foreword ...........................................................................................................iii Illustrations ......................................................................................................vi study Examples ...............................................................................................viii 1 Health Economics: General Issues ...................................................................1 The economics of health and health care ........................................................................1 Challenges in health care: the context .....................................................................2 The role of health economic evaluation studies in market access ........................................4 The importance of economic evaluation for the development of new technologies .................9 2 Forms of Health Economic Evaluation ............................................................12 Introduction .............................................................................................................. 12 Types of economic evaluation ...................................................................................... 13 Outcome measurement in economic evaluation.............................................................. 14 Physiological measures and clinical events ............................................................. 15 Survival............................................................................................................. 16 Quality-adjusted survival ..................................................................................... 16 Monetary outcomes ............................................................................................ 18 Patient-reported outcomes ................................................................................... 18 Cost data for economic evaluation ............................................................................... 19 Perspectives ............................................................................................................. 19 Steps in cost assessment ............................................................................................ 20 Cost-of-illness studies ................................................................................................ 23 Prevalence-based studies ..................................................................................... 24 Incidence-based studies ...................................................................................... 27 Costing approaches ............................................................................................. 28 3 Analytical Approaches to Economic Evaluation ..............................................32 Decision analysis and modelling techniques ................................................................... 33 Decision trees .................................................................................................... 33 Markov chain analysis ......................................................................................... 34 Estimating cost effectiveness ...................................................................................... 36 Cost-minimisation analysis ................................................................................... 36 Cost-effectiveness analysis .................................................................................. 38 iv COnTEnts Technical issues ......................................................................................................... 46 Time perspective or discounting ............................................................................ 46 Cost of added years of life ................................................................................... 47 Patient groups, stratification of risk and sub-analysis ............................................... 48 Uncertainty: sensitivity analysis and confidence intervals ......................................... 49 Meta-analysis and network meta-analysis: indirect comparison ................................. 50 Cost-utility analysis.................................................................................................... 53 Utilities ............................................................................................................. 54 Cost-benefit analysis .................................................................................................. 75 Contingent valuation ........................................................................................... 76 4 Guidelines for Economic Evaluation ..............................................................81 5 Conclusions ...................................................................................................83 Glossary ...........................................................................................................86 references .......................................................................................................90 Further reading ...............................................................................................94 v illustrationS ILLUstrAtIOns Figure 1.1. Major contributors to the growth of health care costs ...............................................2 Figure 1.2. Examples of measures for containing spending on prescription drugs in Europe ...........3 Figure 1.3. Assessment criteria for new therapies ....................................................................3 Figure 1.4. Definition and forms of economic evaluation ............................................................4 Figure 1.5. Bodies involved in determining market access .........................................................6 Figure 1.6. Use of economic evaluation in various countries .......................................................7 Figure 1.7. Documenting value for money ............................................................................. 10 Figure 1.8. Economic evaluation during and after development