Relates to efficiency, effectiveness and value in the production/decision making of health and healthcare

Why is health economics needed?

• There are not enough health care resources to meet all of the health needs that people have, so we have to choose which needs are met and which are not met

Opportunity cost

• Refers to a benefit that a person could have received, but gave up, to take another course of action
• Example: prostate cancer screening might be a lost opportunity to fund mental health
• Perspective may be different for patient, society, GP, or NHS

Types of economic evaluation

Cost-effectiveness analysis

• Cost measured in monetary terms for drug under consideration vs comparator
• Health outcomes (effectiveness) are measured in 'natural units' e.g. mmHg for BP
• Identifies the lowest cost way of achieving the objective to see how both cost and choice of technique vary as the magnitude of the objective varies
• Assesses costs of alternative approaches to achieve specific objective

Strengths

• Ease of communication and specificity

Weaknesses

• Cannot compare across different diseases/sectors

Calculation

• Incremental cost-effectiveness ratio (ICER) = difference in cost between two drugs or interventions/difference in benefits → Δ costs/Δ benefits