Cost Utility Analysis -FINAL EXAM

What is Cost-Utility Analysis (CUA)?

CUA is an economic evaluation method in healthcare used to compare different treatments or interventions.

It compares:

✅ Costs of treatment
✅ Outcomes (benefits) of treatment

But instead of only measuring survival, it measures benefit using:

👉 QALY = Quality Adjusted Life Year

That means:

• How long a person lives

• How good their health is while living

So CUA helps answer:

👉 “Is this treatment worth the money?”

In academic publications , a CUA study id often called a “ cost effectiveness study”

What is QALY?

QALY = Quality Adjusted Life Year

It combines:

A. Quantity of life = Number of years lived B. Quality of life = Health condition during those years

QALY Scale

Health-related quality of life is measured between:

• 1 = Perfect health

• 0 = Death / as bad as dead

Sometimes worse than death can be negative.

Why QALY is Important

It allows comparison between treatments for different diseases.

Example:

Cancer treatment

Heart surgery

Asthma medicine

All can be compared using QALYs.

How to Get the “Q” in QALY (Quality Score)

A. Direct Methods

Patients are asked directly.

1. Time Trade-Off (TTO)

Patient chooses between:

• Living longer in current illness

• Living fewer years in perfect health

2. Standard Gamble (SG)

Patient chooses between:

• Staying in current illness

• Risky treatment:

  • Full health OR

  • Death

Indirect Methods

Using quality of life questionnaires/instruments like:

• EQ-5D

• HUI Mark 3

• SF-6D

• SF-36

Time Trade-Off (TTO) Explained

The lecture explains:

Patient has:

• y years left in current health

Asked:

“How many years x in perfect health would be equal to that?”

Then:

Utility = x / y

Example:

Patient has 10 years left with chronic disease.

They say 8 years in perfect health feels equal.

Utility:

8 / 10 = 0.8

So their health state value = 0.8

Explain:

• 60 years- old women , sever RA , 20 years life expenctancy in reality.

• I f you were given perfect QOL with a shoter life expenctancy . how many years of life expectancy combined with perfect QOL do you consider equivalent to your current combination of QOL and life expantancy?

• 10/20=0.5

• If she said 20 years of perfect health equals that it would be wrong because that would mean perfect health and nobody has perfect health.

Standard Gamble (SG) Explained

Patient chooses between:

Option 1:

Stay with migraine forever

Option 2:

Treatment with:

• 80% chance full health

• 20% chance death

If patient is indifferent, then utility = probability of good outcome.

So:

Utility = 0.8

What is ICER?

Extra cost needed to gain 1 extra QALY.

Example :

Old treatment:

• Cost = $10,000

• QALY = 3

New treatment:

• Cost = $20,000

• QALY = 5

ICER:

(20,000 − 10,000) / (5 − 3)

= 10,000 / 2

= $5,000 per QALY

Meaning:

Need $5,000 for each extra QALY gained.

Threshold ICER or willingness to pay

Countries decide a maximum amount they are willing to pay for 1 QALY.

Explain : US: $50000 per Qaly

ICER is BELOW threshold:

✅ Treatment usually funded

Because it gives good value

• The lower the threshold the better

If ICER is ABOVE threshold:

Usually not funded

Because too expensive for benefit.

Why “Tend Not to be Funded” (not absolute)?

Because sometimes expensive treatment is still funded if:

1. Disease is severe

Example: life-threatening cancer

2. No alternative treatment exists

3. Ethical reasons

4. Rare disease

So threshold is a guide, not strict law.

Examples of Thresholds

UK (NICE):

£30,000 per QALY

If life expectancy = 80 years

And value = £30,000 per QALY

Then:

80 × £30,000 = £2.4 million

Approximate economic value of full healthy life.

Advantages of CUA

Compares Different Diseases: CEA can not do that

Unlike normal cost-effectiveness analysis.

Can compare:

• Diabetes treatment

• Cancer drug

• Heart transplant

Can capture the value of improvements in Includes Both Morbidity and Mortality

Morbidity = illness/suffering ( measures in disease severity and frequency )

Mortality = death

CUA measures both.

Disadvantages of CUA

1. QOL Tools May Miss Mild Disease

Small symptoms may not be captured.

2. Chronic Disease Problem

Assumes utility stays same over time.

But real patients may:

• Adapt and feel better later

• Become worse later

So utility changes.

Most Costly Pharmacoeconomic Analysis

CUA requires:

• Surveys

• Data collection

• Complex analysis

So expensive to perform.

What CUA Cannot Do

CUA is useful but not enough alone for resource allocation.

Why?

Because society values other things too:

• Fairness

• Equity

• Urgency

• Rare diseases

• Children vs elderly

• Social impact

So decisions should not depend only on QALYs.