Page 37 - DLIS102_LIBRARY_AND_ITS_USERS

Library and its Users

Notes General application

The concept of cost effectiveness is applied to the planning and management of many types of organized
activity. In the acquisition of military tanks, for example, competing designs are compared not only
for purchase price, but also for such factors as their operating radius, top speed, rate of fire, armor
protection, and caliber and armor penetration of their guns. If a tank’s performance in these areas is
equal or even slightly inferior to its competitor, but substantially less expensive and easier to produce,
military planners may select it as more cost effective than the competitor. Conversely, if the difference
in price is near zero, but the more costly competitor would convey an enormous battlefield advantage
through special ammunition, radar fire control and laser range finding, enabling it to destroy enemy
tanks accurately at extreme ranges, military planners may choose it instead—based on the same cost
effectiveness principle.
Cost effectiveness analysis is also applied to many other areas of human activity, including
the economics of automobile usage.

CEA in pharmacoeconomics

In the context of pharmacoeconomics, the cost-effectiveness of a therapeutic or preventive intervention
is the ratio of the cost of the intervention to a relevant measure of its effect. Cost refers to the resource
expended for the intervention, usually measured in monetary terms such as dollars or pounds. The
measure of effects depends on the intervention being considered. Examples include the number of
people cured of a disease, the mm Hg reduction in diastolic blood pressure and the number of
symptom-free days experienced by a patient. The selection of the appropriate effect measure should
be based on clinical judgment in the context of the intervention being considered.
A special case of CEA is cost-utility analysis, where the effects are measured in terms of years of full
health lived, using a measure such as quality-adjusted life years or disability-adjusted life years.
Cost-effectiveness is typically expressed as an incremental cost-effectiveness ratio (ICER), the ratio
of change in costs to the change in effects.
A complete compilation of cost-utility analyses in the peer reviewed medical literature is available
from the Cost-Effectiveness Analysis Registry website.
A 1995 study of the cost-effectiveness of over 500 life-saving medical interventions found that the
median cost per intervention was $42,000 per life-year saved. A 2006 systematic review found that
industry-funded studies often concluded with cost effective ratios below $20,000 per QALY and
low quality studies and those conducted outside the US and EU were less likely to be below this
threshold. While the two conclusions of this article may indicate that industry-funded ICER measures
are lower methodological quality than those published by non-industry sources, there is also a
possibility that, due to the nature of retrospective or other non-public work, publication bias may
exist rather than methodology biases. There may be incentive for an organization not to develop or
publish an analysis that does not demonstrate the value of their product. Additionally, peer reviewed
journal articles should have a strong and defendable methodology, as that is the expectation of the
peer-review process.

Self Assessment
State whether the following statements are true or false:
6. 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.
7. The concept of cost effectiveness is applied to the planning and management of many types
of organized activity.

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