Cost-utility analysis (CUA) is a type of economic analysis that compares treatment alternatives by integrating measures of patient preferences and health-related quality of life. CUA uses quality-adjusted life years (QALYs) as the measure of health outcome, which combines both quantity and quality of life into a single metric. The preferred treatment is the one with the lowest cost per QALY gained. QALYs are calculated by multiplying the expected survival time in a health state by a weight representing the quality of life in that health state on a scale of 0 to 1, with 0 being death and 1 being perfect health. CUA allows for comparison of interventions that impact both mortality and morbidity.

1. Chapter VII
Cost Utility Analysis
1

2. May you have a 11111 day
2

3. CUA
• Pharmacoeconomists sometimes want to include a measure of
patient preference or quality of life when comparing competing
treatment alternatives.
• Cost-utility analysis (CUA) is a method for comparing treatment
alternatives that integrates patient preferences and HRQOL.
3

4. CUA….
For pharmacotherapy decisions:
• various factors like patient preferences, patient satisfaction, impact
of disease and Rx of disease on a patient's health related QOL are
applied in PE.
QOL: the assessment of functional effects of illness and its consequent
therapy as perceived by the patient.
 Expressed as emotional, physical or social impacts on patients
 QOL can be measured with the help of structured questionnaires
filled by patients.
4

5. CUA….
• Often the utility measurement used is a quality-adjusted life year
(QALY) gained.
• QALY is a common measure of health status used in CUA, combining
morbidity and mortality data.
• Results of CUA are also expressed in a ratio, a cost-utility ratio (C:U
ratio).
• The preferred treatment alternative is that with the lowest cost per
QALY (or other health-status utility).
5

6. Taxonomy
6

7. CUA….
When to use CUA
Health-Related Quality of Life is the important outcome
Programmes affect both mortality and morbidity and you want to
combine both effects
Programmes affect wide range of outcomes and you want common unit
for comparison
when comparing programs and treatment alternatives:
that are life extending with serious side effects (e.g., cancer
chemotherapy),
those which produce reductions in morbidity rather than mortality
(e.g., medical treatment of arthritis)
7

8. CUA….
When not to use
Only have intermediate outcome data
Effectiveness data show outcomes are equivalent
Effectiveness data show dominance
Extra cost of obtaining utility values is itself not CE
8

9. CUA….
• Cost-utility analysis is a special form of CEA.
• CUA tried to combine the quality and quantity of life in its outcome
measures.
What is the U in CUA?
Utility - It refers to level of satisfaction or usefulness that consumers
derive from the consumption of goods and services.
• Utility weights are necessarily subjective - they elicit an individual’s
preferences for, or value of, one or more health states.
9

10. METHODS USED TO MEASURE AND ESTIMATE UTILITY
• The precise meaning of a given utility estimate is dependent on
the approach,
scaling method and
source of values used in its derivation
• There is little consensus as to which approach is preferred
10

11. Components of utility measurement
I. Scaling method/ Measuring “Utility”
 Rating scale
 Standard gamble
 Time trade-off
 Person trade-off
II. Approach
• Direct
• Holistic or composite
• Generic multi-attribute utility (MAU)
instrument
iii. Source of values
• Patients
• Health care providers
• General public
11

12. Y..
12

13. Time Trade-Off (TTO)
• Choice between two certain outcomes
• Years of life traded for quality of life
• Years of healthy life you would give up to avoid living in a state of
poor health
13

14. Example
• You have arthritis (unable to do household and personal care tasks,
difficulty walking)
• Choose between living with arthritis for the next 10 years (followed by
immediate death) or living in full health for a shorter length of time
(followed by immediate death)
• Would you choose 1 year of full health (followed by death) or 10 years with
arthritis (followed by death)?
• Would you choose 9 years of full health (followed by death) or 10 years
with arthritis (followed by death)?
• ‘Flip-flop’ until “preference value” is found
14

15. • Utility of Health State A is T/10
T is the number of years in full health
10 is the number of years in Health State A
If years in full health selected was 6
Utility (HSA)= 6/10 = 0.60
The better Health State A is, the less the years of healthy life you
would give up
15

16. Standard Gamble (SG)
• Classical method of assessing preferences
• Choose between certain outcome and a gamble
• Conforms to axioms of expected utility theory
• Incorporates uncertainty, therefore better reflects real
treatment decisions
• If respondent is risk neutral then utilities from SG should be
the same as from TTO
16

17. 17

18. • You have end-stage renal disease and face the prospect of
being on dialysis for the remaining 40 years of your life
• You are offered a hypothetical intervention (e.g. a xenograft)
that will involve the gamble:
Immediate return to full health (probability = p)
Immediate death (probability = 1- p)
18

19. • Preference value of ‘Being On Dialysis’ = p
19

20. Two means of obtaining “utility” weights:
1. Evaluation specific/’holistic’ measures – develop evaluation
specific (‘holistic’) description of health state and then derive
weight for that specific state directly by population survey.
2. Use ‘generic’ or ‘multi-attribute’ instruments – use
predetermined weights, based on combination of dimensions of
health yielding a finite number of health states/values
20

21. • CUA:
‘cost per quality adjusted life year’,
‘cost per healthy year equivalent’ or
‘cost per disability adjusted life year’.
• Natural units cannot capture both outcomes
• We need other measures like DALY and QALY
21

22. Limitations of CUA
• Measurement of utility is very time and resource intensive.
• Lack of consensus on measurement methods
In general, researchers agree that “choice-based” approaches
(e.g., standard gamble, time trade-off) are more appropriate.
22

23. Life Years
• Simplest and widely used measure of health
• Used when the dominant gain from a change is extra life rather
than relief of pain or disability
23

24. Concepts of Utility Measurement
A. Disability Adjusted Life Years (DALY)
Includes
• potential years of life lost due to premature death (YLL) and
• equivalent years of health life lost by virtue of being in state other
than good health (equivalent healthy years lost due to non fatal
condition)
DALY = YLL + YLD
The non fatal health outcomes
• are difficult to define
• contain various domain like mobility, anxiety, pain etc.
24

25. DALYs measure the loss of life years in full health starting from a
standardized life expectancy (E.g. of 80 years for men and 82.5 years for
women).
Different weights apply to years lived in different ages.
• The top weight is assigned a year spent at the age of 25 years.
• The utility of an intervention is measured by the number of DALYs
prevented.
• DALYs are used, e.g., by the WHO to compare population health in
different countries.
25

26. DALY calculation
• Calculate years of life lost due to each disease
• Calculate loss of quality of life of those living with each disease
• Apply weights to reflect social value of people at different ages
• Apply discount rate
26

27. WHO age weights
27

28. 2. Quality of life and Quality-Adjusted Life Years (QALYs)
• Number of years at full health that would be valued equivalently
to the number of life years as experienced.
• QALY = Utility x # years in health state
• One year at full health QALY = 1.0
• Death QALY = 0.0
• 3 years disabled (U =0.5) = 1.5 QALYs
28

29. Two basic outcomes of health care QALY
1. Mortality
• Mortality benefit expressed as life-years gained
2. HRQL
• described in terms of the ‘health state’
• single value
• 0 (death) - 1 (good health) scale
29

30. • The utility of an intervention is given by the number of QALYs gained.
• Respondent characteristics such as disease experience and
adaptation, age, nationality and even income have all been shown to
influence the valuation of a given health state.
30

31. 3. Healthy-Years Equivalents (HYEs)
• Is based on ‘health profiles’.
• Individuals are asked how they evaluate the likely sequence of
health states caused by an intervention.
• In particular, they are asked how many years in perfect health
they would find equally attractive as the profile in question.
31

32. How to measure QALY
Nottingham health profile
• Measures health status – yes / No – 36 statements on energy, pain
, emotion, social isolation and physical morbidity
• Seven areas of performance : employment , looking home, social
home and sex life, hobbies and holidays
Rossers Index
Others: SF-36, Quality of well being (eg. Asthma Quality of Life
Questionnaire), Euro Qol (EQ-5D), Health Utilities Index (HUI)
33

33. EQ-5D
MOBILITY
1. I have no problems in walking about
2. I have some problems in walking about
3. am confined to bed
SELF-CARE
1. have no problems with self-care
2. have some problems washing or dressing myself
3. I am unable to wash or dress myself
USUAL ACTIVITIES (e.g. work, study, housework family or leisure activities)
1. I have no problems with performing my usual activities
2. I have some problems with performing my usual activities
3. I am unable to perform my usual activities
34

34. PAIN / DISCOMFORT
1. I have no pain or discomfort
2. I have moderate pain or discomfort
3. I have extreme pain or discomfort
ANXIETY / DEPRESSION
1. I am not anxious or depressed
2. I am moderately anxious or depressed
3. I am extremely anxious or depressed
35

35. 36

36. QALY Procedure
• Identify possible health states - cover all important and
relevant dimensions of QoL.
• Derive ‘weights’ for each state.
• Multiply life years (spent in each state) by ‘weight’ for that
state
37

37. QALYs
38

38. Example 1:
39
Total
cost
Years of
life (LYs)
Utility QALY CU ratio
Drug A $20000 3.5 0.75 2.6 $7619/QALY
Drug B $16000 2.5 0.80 2.0 $8000/ QALY

39. Example: Incremental CU ratio
= Cost drug A - Cost drug B
QALY drug A - QALY drug B
= $20,000 - $16,000
2.6 QALYs - 2.0 QALYs
= $6,400 / QALY
40

40. +
Advantage over CEA:
 it can combine more than one measure of effectiveness or
 both measures of mortality and morbidity into a single measure
Disadvantage:
 absence of agreement in measuring utilities,
 lack of standards for comparing QALY and
 problems with the quantification of patient problems.
• Reserved for comparing programs and treatment alternatives whose
basic goal is improving QOL.
41

41. 42

42. 43

43. • QALYs-example:
For example, a patient with a rare cancer will live for only 2 years
without treatment. A new treatment increases life expectancy by 2
years however; it is associated with adverse effects which decrease the
quality of life by 25%.
QALY??
44

44. The QALYs is calculated thus;
• Life expectancy = 2 (survival without treatment) + 2 (gain in life
years due to treatment) = 4 years.
• Adverse drug reactions due to treatment = 0.25%
• Hence decrease in quality of life = 2 x 0.25 = 0.5 years.
• Thus net gain is 2 - 0.5 = 1.5 or 1.5 QALYS.
• Thus the net gain with the new treatment is 1.5 QALYs rather than 2
years.
45

45. Another example…….
• Assume Life Expectancy=50
• Utility with mumps disease=0.8
• What’s the outcome measure ?
– QALY??=40!
• That is, U=0.8--->> 10 years with mumps infection = 8 years in
good health
46

46. Issues Measuring Utilities
• Different methods Different results
• Cognitive burden
• Emotional / religious objections
• Biases in measurement
47