1. Introduction to economic evaluation

The increasing role of economics in health policy and health decision-making has been somewhat controversial. In a world with infinite resources for health and healthcare, economic evaluation would play a minor role. However, in 'real-world' health systems where scarce resources must be allocated, economic evaluation can provide evidence and develop guidance for decision-makers on the reimbursement and administration of new health technologies in a given (national) healthcare system.

In this context, HTA can be regarded as a bridge between research evidence and health policy. 

In addition to the methodological aspects of economic evaluation, two elements are critical to the relevance and application of economic evaluation in HTA: 

• the context in which the evaluation will be used, and 
• the perspective adopted — that is, which costs and benefits are considered

Costs

There are different types of costs that should be considered when conducting an economic analysis in HTA. Cost item classification may vary in many ways, such as the costs of health-care technologies that are covered by the health-care sector, other sectors or patients and families.

Time, productivity or wider-economic costs can also be classified separately. The inclusion or exclusion of cost items may depend upon chosen perspective or analytical approach.

Costs are a product of resources, such as:

• Units of medicines or devices
• Services, staff hours, etc.
• Facility time

Understanding Unit Costs

Unit cost = total cost (all fixed + variable costs involved) to produce, store, and deliver one unit.

--> Ideally reflects real value but often estimated using accounting data or interviews.

When costing a resource, care must be taken that this is carried out in a clear and transparent manner using appropriate costing methods. For example, when costing practitioner services, care must be taken to distinguish between:

• Charges (the amount billed by the practitioner)
• Costs (the amount billed for services used – e.g., blood test, x-ray imaging), particularly where doctors are able to charge different fees to different patient groups or insurance providers.

Productivity and Indirect Costs

Economists must decide whether to include indirect costs, such as:

• Temporary absence from work due to illness (patient or caregiver)
• Reduced working capacity due to illness or disability
• Lost productivity due to premature death

These factors carry a real economic burden, as individuals unable to work are unable to earn an income and contribute to the economy (e.g., as taxpayers). However, these costs are often excluded from analyses conducted from a health care provider perspective.

Common Pitfalls

Even among evaluations claiming to be based on a particular situation, costs and outcomes may vary widely or be incorrectly applied. However, it is generally agreed that all costs related to the disease or technology in question should be included in the analysis.

Comparing relevant alternatives

Economic evaluation involves comparing the costs and consequences of at least two options — typically a new medicine versus the standard-of-care treatment.

❓ What's the goal?

Ideally, a new medicine should:

• Improve health outcomes important to patients
• Lower healthcare costs

But even when this is not fully achievable, it's crucial that the right comparison is made.

❓ Why does the comparison matter?

If a new medicine is compared to an unusually expensive or rarely used alternative, it may appear more cost-effective than it actually is. Such comparisons can mislead decision-makers.

❓ What is needed for meaningful comparison?

To link health effects and costs, decision-makers need:

• Accurate and relevant information on both the new and existing care treatments
• Understanding of the economic implications of adopting a new health technology over another in the healthcare system, often under the pressure of having to manage limited healthcare funds.