2. Comparing relevant alternatives

Different types of economic evaluation can be applied and they can be distinguished by the outcomes that are considered in each and how they are valued. The main types are briefly described below.

Cost-effectiveness analysis (CEA) assesses if a new health technology provides value relative to other existing health technologies. It is an estimation of costs incurred using the existing treatment vs. the new treatment whilst also considering the health outcomes associated with all technologies in question. The difference is known as potential cost-savings or cost-increase. The effects of the different technologies are usually measured using unidimensional final (e.g., life-years gained) or surrogate outcomes (e.g., progression-free survival), providing information on the ‘greatest effect for a given cost’, or alternatively, a ‘given effect at minimum cost’. Since implicitly different disease (therapeutic) areas use different units (or metrics) to measure outcomes, CEA carries the potential disadvantage that direct comparison of the results between disease areas is not possible in the same way as in cost-utility analysis (CUA).

Cost–utility[1] analysis (CUA) is an expansion of the cost-effectiveness analysis by using health-related outcomes that allow the measurement and comparison of different outcomes with the same metric e.g., when health technologies affecting a wide range of medical conditions are being compared. A widely used approach is to take the composite measures referred to as quality-adjusted life years (QALYs). QALYs are a type of outcome measure that takes into account both aspects of the quantity (longevity/mortality) and the health-related quality of life (HRQoL, e.g. morbidity, psychological, functional, social, and other factors). (see lesson 6). CUA is therefore also referred to as cost-per-QALY analysis. Cost–utility analyses commonly result in a relative measure of costs per QALY gained: the incremental cost-effectiveness ratio (ICER)[2]. The ICER is then compared to a threshold value below which a technology is judged to offer a cost-effective use of resources, or, more straightforward, value for money.

Note of caution: There is still ongoing debate about the use of QALYs in economic evaluation within HTA on methodological and societal grounds. Critics argue that the QALY oversimplifies how actual patients would assess risks and outcomes, and that its use may restrict patients with disabilities ore rare and ultra-rare diseases from accessing treatment. Proponents of the measure acknowledge that the QALY has some shortcomings, but that its ability to quantify tradeoffs and opportunity costs from the patient and societal perspective make it a critical tool for equitably allocating resources.[3], [4], [5]

Cost–benefit analysis (CBA) evaluates both costs and consequences in monetary terms (e.g., in Euros). For this, it is necessary to assign a monetary value to any consequences (outcomes) associated with the health technologies assessed. Notably the allocation of a monetary value to benefits of a health technology, for which precise estimates are difficult to obtain, poses methodological challenges and limits the use of this form of economic evaluation.

Cost-minimisation analysis (CMA) (also called cost analysis) looks at the costs associated with the health technologies to be compared, to identify the one associated with the lowest costs. In some cases, analysts  may be tempted to assume the health technologies under consideration to have the same desired effects (benefits) and undesired effects (risks/harms), and simply focus on costs. While this may seem to be an efficient way to examine the value of a new medicine, in reality, new medicines are seldom ‘equivalent’ to other medicines; and therefore, if differences between the technologies in outcomes cannot be adequately distinguished, then other approaches may be more useful.

Budget impact analysis (BIA) assesses the financial and organisational impact of adopting a new health technology without directly taking health consequences into account (or comparing alternatives). It is therefore at best a ‘partial’ economic evaluation and different from economic evaluations which attempt to provide information about the most economically efficient ways to utilise or allocate available health-care resources.