1

Quality Adjusted Life Years Quality Adjusted Life Years (QALY)(QALY)

Quality of life index– 1.0 = normal health– 0.0 = death (extremely bad health)

Example – Losing sense of sight– Quality of life index is 0.5– Life = 80 years– 0.5 x 80 = 40 QALYs

Most debate about the QoL estimates

2

Quality of life measurementQuality of life measurement

Typically done with questionnaires– Disease specific

• International Prostate Symptom Score– Generic

• SF-36, NHP– Utility

• HUI, EQ-5D, AQoL, 15D, Rosser index Utility assessment

– SG, TTO, PTO, VAS For QALY we need utility

3

EuroQol EQ-5D:EuroQol EQ-5D: oof the shelf f the shelf QALY valueQALY value

MOBILITY– I have no problems in walking about – I have some problems in walking about – I am confined to bed

SELF-CARE– I have no problems with self-care – I have some problems washing or dressing

myself – I am unable to wash or dress myself

USUAL ACTIVITIES (e.g. work, study, housework family or leisure activities)

– I have no problems with performing my usual activities

– I have some problems with performing my usual activities

– I am unable to perform my usual activities PAIN/DISCOMFORT

– I have no pain or discomfort – I have moderate pain or discomfort – I have extreme pain or discomfort

ANXIETY/DEPRESSION– I am not anxious or depressed – I am moderately anxious or depressed – I am extremely anxious or depressed

4

Calculate QALYCalculate QALY

Count life years Value (V) quality of life (Q)

– V(Q) = [0..1] • 1 = Healthy• 0 = Dead

Adjusted life years (Y) for value quality of life – QALY = Y * V(Q)

• Y: numbers of life years• Q: health state• V(Q): the quality of life value of health state

Q

5

A new wheelchair for elderly (iBOT)Special post natal care

Which health care program is the Which health care program is the most cost-effective? most cost-effective?

6

A new wheelchair for elderly (iBOT)– Increases quality of life = 0.1 – 10 years benefit– Extra costs: $ 3,000 per life year – QALY = Y x V(Q) = 10 x 0.1 = 1 QALY– Costs are 10 x $3,000 = $30,000– Cost/QALY = 30,000/QALY

Which health care program is the Which health care program is the most cost-effective? most cost-effective?

7

Special postnatal care– Quality of life = 0.8– 35 year– Costs are $250,000– QALY = 35 x 0.8 = 28 QALY– Cost/QALY = 8,929/QALY

8

QALY league tableQALY league tableIntervention $ / QALY

GM-CSF in elderly with leukemia 235,958

EPO in dialysis patients 139,623

Lung transplantation 100,957

End stage renal disease management 53,513

Heart transplantation 46,775

Didronel in osteoporosis 32,047

PTA with Stent 17,889

Breast cancer screening 5,147

Viagra 5,097

Treatment of congenital anorectal malformations 2,778

9

Disability Adjusted Life Years Disability Adjusted Life Years (DALYs)(DALYs)DALYs for a disease are the sum of

the years of life lost due to premature mortality (YLL) in the population and the years lost due to disability (YLD) for incident cases of the health condition. One DALY represents the loss of one year of equivalent full health.

10

Disability Adjusted Life Years Disability Adjusted Life Years (DALYs)(DALYs) Measures healthy time lost from specific

diseases and injuries in a population Comparable and additive across diseases

Ex: Broken scapula = .5 DALYs lost

Protein deficiency = 2 DALYs lost

Based on relatively accessible incidence data (ICD codes)

11

DALY Calculation DALY Calculation (the easiest way)(the easiest way)

Years lost to disability

Inputs Duration of

disease/injury Disability weight of

disease/injury % long-term cases

Years of lost life (YLLs)

InputsLife expectancy at age of deathAge at death

12

DALY Calculation: an exampleDALY Calculation: an example

1 family dies– 10 year old girl– 8 year old boy– 38 year old mother– 42 year old father

YLLs from deaths– 70 year life expectancy– 73 year life expectancy– 46 year life expectancy– 33 year life expectancy

222 YLLs

2 people injured– 45 y/o woman – SCI– 55 y/o man – fractured

rib

YLDs from injuries- Duration (36 year LE) *

Disability Wt (.725) = 26 YLDs

- Duration (.115 years) * Disability Wt (.199) = 0.02 YLDs

A Two-Car Collision

26.02 YLDs+ = 248.02 DALYs

Cost of Illness (COI) AnalysisCost of Illness (COI) Analysis

Estimate the impact of a disease / condition on the overall costs

Include direct as well as indirect costs– Example:The overall costs for cancer in 2002

in the US was $171.6 billion (ACS, 2003), including

• $60.9 billion in direct medical costs• $15.5 billion in indirect morbidity costs• $95.2 billion in indirect mortality costs

Budget Impact Analysis (BIA)Budget Impact Analysis (BIA)

Estimate the financial effect of an intervention on a health plan or program

BIA is often requested by managed care organizations in the US or national health insurance programs (e.g., Canada, UK)– Example: Treating all stage IV NSCLC patients

in Canada with paclitaxel and cisplatin as outpatients would cost $155 million, an additional $15 million per annum compared to best supportive care.

BIA (cont.)BIA (cont.)

Most BIA analysis has a one year time frame.

BIA taking a longer time frame need to consider the impact of new interventions on the underlying disease prevalence and make appropriate adjustments in analyses.

What are the DIFFERENCES What are the DIFFERENCES between each type of analysis?between each type of analysis?

Economic Evaluation MethodologiesEconomic Evaluation MethodologiesMethod Cost Outcome Focus CMA

Dollars Equivalent outcomes

Efficiency

CBA Dollars Dollars Most beneficial use of limited resources

CEA Dollars Natural units (Life-years gained)

Least costly way to achieve an objective

CUA

Dollars Natural units (QALYs)

Least costly way to achieve an QALY gain

CBA vs. CEACBA vs. CEA

Uses dollar values for outcome measurements

Maximizes benefit of investment/intervention

Assumes limited resources

Compares programs with different objectives

Uses nonmonetary outcome measurements

Minimizes cost of program

Assumes adequate resources

Compares programs with the same objectives

More Concepts in Economic More Concepts in Economic Evaluation …Evaluation …

Cost CategoriesCost Categories

Direct medical: medical care services Direct non-medical:

– Patient time cost for treatment or intervention– Formal and informal caregiver time– Transportation

Productivity (morbidity and mortality)– absenteeism– Presenteeism

Inclusion and measurement will depend on the study’s perspective and its time frame.

InflationInflation

Inflation is a sustained increase in the average level of prices. The rate of inflation is the percentage change in average prices from one year to the next

For prices that tend to increase at the rate of general prices (e.g., consumer goods), use the Consumer Price Index (CPI)

For items whose prices rise faster than the general rate of inflation, use a component of the CPI, such as the Medical Care component of CPI

For wages, use either an index of hourly wages or earnings

ExampleExample

Suppose you want to use information from a published manuscript that listed the cost of a severe adverse event of febrile neutropenia in 1983 dollars to be $1,531. How would you adjust that figure to current dollars?

Index: – 1983 (base year)=100– 1998 = 242.7

C(1998) = $1,531 * 242.7 / 100 = $3,716

DiscountingDiscounting

Many decisions made today will have repercussions next year and in the years thereafter.

We need a method for comparing the desirability of outcomes that include consequences occurring at different times in the future.

The Theory of DiscountingThe Theory of Discounting

The theoretical justification for discounting is based on two facts:– time preference: most people would

accept less money to receive it sooner; and

– opportunity cost: less money can be invested by society and allowed to grow at a compound rate of interest to yield the money required for future costs.

Discounting ProcessDiscounting Process

Given a stream of costs C1, C2, …, CT,

the present value is calculated as:

, where 1/(1+r) t is called the discount factor

T

tt

t

r

CPV

1 )1(

Issues in DiscountingIssues in Discounting

While there is universal acceptance of the need to discount, there is much controversy over – the appropriate discount rate to use, – whether to discount health benefits as

well as costs, and– whether to use the same rate to

discount costs and benefits.

ExampleExample

Year Curative Program (A)

Preventive Program (B)

1 5 15

2 10 10

3 15 4

ExampleExample

A comparison of Programs A and B, adjusted for the differential timing of costs would yield:– PVA = 5/(1.05) + 10/(1.05)2 + 15/(1.05)3 =

26.79

– PVB = 15/(1.05) + 10/(1.05)2 + 4/(1.05)3 = 26.81

What is the Theoretical What is the Theoretical Foundation of CEA?Foundation of CEA?

Theoretical Foundation of CEATheoretical Foundation of CEA

Theoretical foundation of CEA was established by a landmark article by Garber & Phelps (1997).

Derive ICER in terms of 3-period U function

E(U) = U1(Y1-C1) + P2(C1)*U2(Y2-C2) + P2(C1)P3(C2)U3(Y3)

, where Yi = income;

Ci = medical care expenditure

Pi = probability of surviving into period i

CEA and Welfare EconomicsCEA and Welfare Economics

Use prob. of surviving as “effectiveness” measure Incremental cost-effectiveness ratio can be

derived from the F.O.C.:– Max. E(U) w.r.t. C1

Decision criteria based on CEA is justified in welfare economics achieve optimal resource allocation

...2

1

dP

dC

E

CICER

What are the Decision What are the Decision Criteria under CEA?Criteria under CEA?

CEA FrameworkCEA Framework

Two treatments (trx): new (A) vs. old (B) Costs:

– Pts in the new trx group: Ca1, Ca2, ….CaK – Pts in the old trx group: Cb1, Cb2, ….CbJ

Effectiveness:– Examples of effectiveness measures:

• Quality-adjusted life years (QALYs)• Life year saved

– Pts in the new tx group: Ea1, Ea2, ….EaK – Pts in the old tx group: Eb1, Eb2, ….EbJ

AC

BC

AE

BE

Incremental Cost-Effectiveness Ratio Incremental Cost-Effectiveness Ratio (ICER)(ICER)

Decision Rule: If IĈER < , then the new treatment is cost-effective

E

C

EBEA

CBCAICER

E

C

EE

CCERCI

ba

ba

ˆ

Making inference about the true (but unobservable) population ICER

Making Decisions Using ICERMaking Decisions Using ICER

If the ICER doesn’t fall into the quadrant of dominating or dominating strategy, then decision makings based on CE-ratio become a bit tricky.

Rule 1: value judgement specified by an organization– $20,000 per QALY used in Ontario guidelines

Problems?

Making Decisions Using ICER Making Decisions Using ICER (cont.)(cont.)Rule 2: comparison with the

commonly used medical procedures.Rationale: Society should be willing

to pay as much for new procedures/technologies as it does for procedures that are currently in common use.

League tables

League Table ExampleLeague Table ExampleTreatment $/QALY

Coronary artery bypass surgeryfor left main coronary artery

$4,200

Treatment of severehypertension in males age 40

$9,400

Treatment of mild hypertensionin males age 40

$19,100

Estrogen therapy forpostmenopausal symptoms

$27,000

Hospital dialysis $54,000

Statistical Consideration of Statistical Consideration of CEA?CEA?

Recent Advances in CEA - 1Recent Advances in CEA - 1

Estimate confidence interval of ICERStatistical Methods:

– Box method– Delta Method (Taylor Series Method)– Fieller Theorem Method– Nonparametric Bootstrap Method– ….

Problems with Inferences Based Problems with Inferences Based on ICER on ICER Negative ratios are difficult to interpretC.I. derived from CE ellipses only make

sense when E > 0

Solution: Net Health Benefit approach

Recent Advances in CEARecent Advances in CEA

Net Health Benefit Approach– NB() = E - C

Decision rule: Choose the new technology if NB()>0

Methods developed from NHB:– Cost-Effectiveness Acceptability Curve – Bayesian Approach– Regression-based Approach

Ten Steps of Performing An Ten Steps of Performing An Economic Evaluation StudyEconomic Evaluation Study

Establish the perspective Describe or specify the alternatives For each alternative, specify the

possible outcomes and the probability of their occurrence

Specify and monitor the health-care resource consumed in each alternative

Assign dollar values to each resource consumed

Ten Steps of Performing An Ten Steps of Performing An Economic Evaluation Study (cont.)Economic Evaluation Study (cont.)

Specify and monitor nonmedical resources consumed by each alternative

Specify the unit of outcome measurement Specify other noneconomic attributes of

the alternatives, if appropriate Analyze the data Conduct a sensitivity analysis

CBA ExampleCBA Example

Cost per flu shot = $10 Treatment cost per flu = $250 Productivity loss from sick leave = $4,000 Employees = 1000 W/o vaccine: 50 have flu, 3 absence W/ vaccine: 30 have flu, 1 absence What should the manager do?

CBA Example (cont.)CBA Example (cont.)

Net Benefit

= benefit - cost

=(number of flu avoided)*$250

+ (number of absence avoided)*$4000

- $10*1000

=20*$250+2*$4000-$10000

=$3000 > 0

CBA Example (cont.)CBA Example (cont.)

New flu vaccine availableCost = $20W/ the new vaccine:

– 5 have flu, no absence from workWhich one should the manager

choose?

CBA Example (cont.)CBA Example (cont.)

NB(new) =45*$250+3*$4,000-$20*1,000

=$3,250 NB(new) > NB(old)

choose the new vaccine However, if productivity loss = $3000, then

NB(old)=$1000, and NB(new)=$250, then the old vaccine will be chosen

CEA ExampleCEA Example

C-E of two mumps vaccines Perspective:

– Several possibilities: state government, or other third party payers.

Describe alternatives: – Vaccine A (old): cheaper, not as effective– Vaccine B (new): more expensive, more

effective– Do nothing

CEA Example (cont.)CEA Example (cont.)

Possible outcomes and prob.– Outcomes: Mumps infection, death– probability of infections

• Vaccine A:3%, Vaccine B: 0.5%, do nothing: 5%

– probability of death:• vaccine A: 0.1%, vaccine B: 0%, do nothing: 0.3%

Health care resource consumed: – Vaccine A: vaccine cost + treatment cost– Vaccine B: vaccine cost + treatment cost– Do nothing: treatment cost

CEA Example (cont.)CEA Example (cont.)

Assign $ to each resource consumed – Vaccine A: $10 /shot, $250 per treatment– Vaccine B: $20 /shot, $250 per treatment– Do nothing: $250 per treatment

Nonmedical resources – Vaccine A: None – Vaccine B: None – Do thong: None

Unit of outcome measures – Death avoided from vaccination

CEA Example (cont.)CEA Example (cont.)

Analyze the data – Note: what we want to construct in CEA

is ICER– ICER for vaccine A (vs. do nothing)

C=(differences in cost between A and do nothing)=(vaccine cost+treatment cost) -(treating cost) = (10*1000+30*250)-(50*250)=5000

E=(death avoided)=(3-1)=2Therefore, ICER(A) = $5000/2 = $2500 (per life saved)

CEA Example (cont.)CEA Example (cont.)

Analyze the data (cont.)– ICER for vaccine B (vs. do nothing)

C=(differences in cost between B and do nothing) =(vaccine cost+treatment cost) -(treating cost) = (20*1000+5*250)-(50*250)=8750

E=(death avoided)=(3-0)=3

Therefore,

ICER(B) = $8750/3 = $2916 (per life saved)

CEA Example (cont.)CEA Example (cont.)

Results: (Compare ICER)– ICER(A) < ICER(B) – Choose vaccine A

Sensitivity Analysis – Used to test how robust the previous

conclusions are when assumptions vary.

– For example, discount rate, probability of infection, ... etc.

CUA Example (cont.)CUA Example (cont.)

Assume Life Expectancy=50Utility with mumps=0.8What’s the outcome measure ?

– QALYThat is, 10 years with mumps

infection = 8 years in good health

CUA Example (cont.)CUA Example (cont.)

Calculate ICER– ICER for vaccine A (vs. do nothing)

C=5000

E=(quality adjusted life years saved from death avoided)+(QALY saved from mumps avoided) =(2*50)+(50)*(50-30)*0.8=900

• Therefore,

ICER (A) = $5000/900 = $5.55 (per QALY saved)

CUA Example (cont.)CUA Example (cont.)

Calculate ICER (cont.)– ICER for vaccine B (vs. do nothing)

C=8750

E=(quality adjusted life years saved from death avoided)+(QALY saved from mumps avoided) =(3*50)+(50-5)*0.8*50=1950

• Therefore,

ICER (B) = $8750/1950 = $4.48 (per QALY saved)

ICER(A)=$5.55 > ICER(B)=$4.48

57

THANK YOU…THANK YOU…