A. Main Types of Economic Analysis in HTA

There is a variety of approaches to economic analysis, the suitability of any of which depends on the purpose of an assessment and the availability of data and other resources. It is rarely possible or necessary to identify and quantify all costs and all outcomes (or outputs or benefits), and the units used to quantify these may differ.

Main types of economic analysis used in HTA include the following.

• Cost-of-illness analysis: a determination of the economic impact of an illness or condition (typically on a given population, region, or country) e.g., of smoking, arthritis, or diabetes, including associated treatment costs
• Cost-minimization analysis: a determination of the least costly among alternative interventions that are assumed to produce equivalent outcomes
• Cost-effectiveness analysis (CEA): a comparison of costs in monetary units with outcomes in quantitative non-monetary units, e.g., reduced mortality or morbidity
  • Cost-utility analysis (CUA): a form of cost-effectiveness analysis that compares costs in monetary units with outcomes in terms of their utility, usually to the patient, measured, e.g., in QALYs
  • Cost-consequence analysis: a form of cost-effectiveness analysis that presents costs and outcomes in discrete categories, without aggregating or weighting them
• Cost-benefit analysis (CBA): compares costs and benefits, both of which are quantified in common monetary units.
• Budget-impact analysis (BIA): determines the impact of implementing or adopting a particular technology or technology-related policy on a designated budget, e.g., of a drug formulary or health plan.

The differences in valuation of costs and outcomes among these alternative are shown in Box V-1.

Box V-1. Types of Economic Analysis Used in HTA

• Cost Consequence

  | $ | vs. | Natural units | |

• Cost Utility

  | $ | ÷ | Utiles (e.g., QALYs) | | Cost Benefit | $ | ÷ or² - | $ | | Budget Impact | $ | vs. | None³ or maximize various⁴ |

¹Any currency²Cost-benefit ratio (¸) or net of costs and benefits (-) ³That is, determine impact of an intervention/program on a designated non-fixed budget⁴That is, maximize some outcome within a designated fixed (“capped”) budget"

Cost-minimization analysis, CEA and CUA necessarily involve comparisons of alternative interventions. A technology cannot be simply cost effective on its own, though it may be cost effective compared to something else.

Because it measures costs and outcomes in monetary (not disease-specific) terms, CBA enables comparison of disparate technologies, e.g., coronary artery bypass graft surgery and screening for breast cancer. A drawback of CBA is the difficulty of assigning monetary values to all pertinent outcomes, including changes in the length or quality of life. CEA avoids this limitation by using more direct or natural units of outcomes such as lives saved or strokes averted. As such, CEA can only compare technologies whose outcomes are measured in the same units. In CUA, estimates of utility are assigned to health outcomes, enabling comparisons of disparate technologies.

Two basic approaches for CBA are the ratio approach and the net benefit approach. The ratio approach indicates the amount of benefits (or outcomes) that can be realized per unit expenditure on a technology vs. a comparator. In the ratio approach, a technology is cost beneficial vs. a comparator if the ratio of the change in costs to the change in benefits is less than one. The net benefits approach indicates the absolute amount of money saved or lost due to a use of a technology vs. a comparator. In the net benefits formulation, a technology is cost-beneficial vs. a comparator if the net change in benefits exceeds the net change in costs. The choice between a ratio approach and a net benefits approach for a CBA can affect findings. The approach selected may depend upon such factors as whether costs must be limited to a certain level, whether the intent is to maximize the absolute level of benefits, whether the intent is to minimize the cost/benefit ratio regardless of the absolute level of costs, etc. Indeed, under certain circumstances these two basic approaches can yield different preferences among alternative technologies. shows basic formulas for determining CEA, CUA, and CBA.

Box V-2. Basic Formulas for CEA, CUA, and CBA

A: Technology A C: Technology C (a comparator)

Cost-Effectiveness Ratio: $Cost_A - $Cost_C CB Ratio = ^_ Effect_A -Effect_C

 For example: “$45,000 per life-year saved” or “$10,000 per lung cancer case averted”

Cost-Utility Ratio: $Cost_A - $Cost_C CU Ratio = ^_ Utile_A - Utile_C

 Utiles, units of utility or preference, are often measured in QALYs. So, for example: “$150,000 per QALY gained” or “$12,000 per QALY gained”

Cost-Benefit, Ratio Approach: $Cost_A - $Cost_C CB Ratio = ^__ $Benefit_A - $Benefit_C

   For example: “Cost-benefit ratio of 1.2”

Cost-Benefit, Net Benefit Approach: CB Net = ($Cost_A - $Cost_C) – ($Benefit_A - $Benefit_C)

   For example: “Net cost of $10,000”