Pre conference workshop Economic Evaluations of Public Health Interventions Amsterdam, EUPHA 2010 Public health economics was one of the themes of a pre conference at the 3rd European Public Health Conference in Amsterdam that took place from 10-13 November of 2010. Around 40 people participated at this pre conference. In four presentations the main topics in Public Health economics were introduced and illustrated. Economics is concerned with allocation of scarce resources in society over alternative uses. Some different types of evaluations were shown. The preference (utility) based health measure QALY (Quality Adjusted Life Years) was explained and discussed. In general methods for economic evaluations can be applied for evaluation of Public Health interventions. This was illustrated by a presentations on the economic impact of prevention strategies in tackling obesity. This study showed some good results in improving population health and decreasing health expenditure. However in many Public Health areas the effectiveness of public health interventions is still limited and should be assessed carefully concerning assumptions, costs calculated and models used. More attention should be paid to inter-sectoral effects, equity considerations and a societal perspective in performing economic evaluations. Finally the involvement of relevant stakeholders is key to the success of Prevention. The chair of this meeting concluded that Public Health and Economics could make a good couple. However for a longstanding relationship, we should put more effort in the evidence base of Public Health interventions. It is important that Public Health interventions demonstrate value for money!

1. Economic evaluation in public health
A brief introduction of concepts, methods and decision rules
Werner Brouwer
Professor of Health Economics
Institute for Medical Technology Assessment &
Institute of Health Policy & Management
Erasmus University Rotterdam

2. Economics
Why are you here?

3. Economics
• Economics is concerned with the efficiency (and equity) implications of the
allocation of scarce resources in society over alternative uses
• Equity and efficiency issues cannot be solved independently (Arrow, 1963)
• Core assumption: desires of individuals are infinite, yet are resources
limited.
• Scarcity: never enough resources to satisfy all human wants and needs
• Choices required to spent scarce resources ‘optimally’
• Optimal defined by the goal function: maximization of welfare / utility /
happiness (individuals), profit (firms), social utility (society) given constraints
• Here also scarcity of time: focus on economic evaluation!

4. Welfare economics is normative science
• Welfare economics is concerned with normatively judging a change (like
implementing some intervention), moving us from ‘state of the world’ A to B
• ‘In order to make statements about the consequences for economic welfare of
an event we must go beyond the study of positive economics, which is
concerned with the effects of an event on objectively measurable economic
variables, such as price and quantity. That is, the welfare economist wishes to
determine the desirability of a particular policy – not in terms of his or her own
values, but in terms of some explicitly stated ethical criteria’
(Boadway and Bruce, 1984, p.1).
• Social welfare normally deemed to be some aggregation of individual welfares
only (welfarism) - if social welfare increases a change is deemed desirable
• Measuring individual welfare difficult…

5. From Pareto to CBA
• Non comparability of utility gave rise to quite strict rules for optimality
• Pareto optimal allocation of goods and services in a society: no reallocation
possible in such a way that at least one person is better off and none is worse off.
• Very restrictive – avoided by expressing gains and losses in monetary terms
• Potential Pareto-optimality occurs when the (monetary) gains of the winners are
sufficient to compensate the loss of the losers (Kaldor & Hicks)
• That is nothing else than the foundation of economic evaluation in its purest form:
Cost Benefit Analysis
• (Compromise: we assume the utility value of all euros to be equal!)
• CBA: see whether the losses (costs) are outweighed by the gains (benefits) of
some change:
• vi * (Qi
B
– Qi
A
) – (CB
– CA
) > 0  vi*Δ Qi – ΔC > 0  vi*Δ Qi > ΔC
 ΔC / Δ Qi < vi (don’t pay more per unit than the unit is worth)

6. Economic Evaluation in Health
new
health care
intervention
old
health care
intervention
Difference in
(value of) health
status after
intervention
Difference in
resources
consumed
Do the benefits, here defined as health (value) exceed the costs?

7. Economic Evaluation in Health
• Aim to aid decision makers in health care by providing them information on
the relative efficiency of programs in producing health (value)
• Provides information on all relevant costs and (value of) health gains of
different alternatives health care technologies (e.g. pharmaceuticals,
operating procedures, public health, etc)
• Main types of evaluations are:
– Cost-benefit analysis ($/$)
– Cost-effectiveness analysis ($/E) and the preferred
– Cost-utility analysis ($/QALY)
• Latter types are not full economic evaluations: they indicate only the
amount of health gained, not the value of health, i.e., such economic
evaluations focus on left-hand side only: ΔC / Δ Qi
• Broader framework: cost-consequence analysis

8. Perspective
• Given welfare economic roots of economic evaluation, it is often advocated to
adopt a societal perspective in performing them
• Indeed, only then one can assert that benefits outweigh costs
• “When a CEA is conducted from the societal perspective, the analyst considers
everyone affected by the intervention and counts all significant health outcomes
and costs that flow from it, regardless of who experiences the outcomes or costs’.
(Gold et al., 1996)
• E.g.: Quick discharge from hospital – may save costs for the hospital, or even
health care sector, but may require more informal care ; Cheap rest vs. expensive
drug – more absence from work makes rest less cheap…!
• Still, many countries take narrower perspective (often health care)
• Health care decision maker may work with some budget aimed to ‘optimize’ health
• Especially in field of public health broad perspective crucial

9. Counting all health gains: QALYs
• CBA often difficult, distrusted and considered ‘unethical’
• CEA makes coherent and consistent decision making difficult, given
incomparability of outcome measures
• CUA makes different health states / health gains comparable and facilitates
decisions
• Quality-Adjusted Life-Years: preference (utility) based health measure
• One year of life is more valuable (i.e. preferred over) when it is lived in perfect
health rather than sub-optimal health states
• It also recognises that non life-prolonging interventions may be worthwhile or
that some life-prolonging interventions are, in fact, not worth while
• Thus, it tries to assess the health state of people with certain conditions
(describing, measuring) but it also tries to value them in non monetary ways

10. QALYs
• QALY assigns a weight to health states,
• 1 represents one year in perfect health
• 0 represents one year in state ‘dead’
• Most health states in between 0 and 1 (some below 0)
• Different ways of deriving weights: TTO, SG, VAS
• Say weight of state A is 0.6 then moving someone from A
to perfect health for one year yields 0.4 QALY
• Doing this for 5 years equals a gain of 2 QALYs
(undiscounted)
• Information on effects of intervention ideally through RCT’s
etc
Worst imaginable health
X
Best imaginable health

11. Counting all costs
Intervention resources,
directly needed for the
intervention
Non-intervention resources
needed for the intervention
(e.g. travel)
Patient time including
productivity changes
Time of informal caregivers
and other costs of informal
care
I
N
T
E
R
V
E
N
T
I
O
N
Outcomes:
Improved
health
Future costs that are a
consequence of the
intervention
... ???

12. Some general, basic rules
• Count costs and effects relative to some other RELEVANT situation or
treatment (i.e. incrementally)
• Calculate effectiveness in a reliable way and take a sufficiently long time
horizon (often requires modeling)
• Include all relevant costs (three steps: identification, measurement and
valuation)
• Adjust costs and effects for the timing at which they occur (discounting)
• Look at uncertainty around estimates and be explicit about this (e.g. cost-
effectiveness plane and acceptability curves)

13. New treatment
cost-effective
New treatment
cost-ineffective
C
New treatment
more costly
New treatment
more effective
New treatment
less effective
New treatment
less costly
NENW
SW SE
Maximum acceptable ICER
Cost-effectiveness plane

14. From CUA to decision: monetary value required
• The popularity of CUA stems partly from the fact that benefits are
expressed in terms of some health measure (like QALYs) and not in
money - but still one needs to decide whether some cost per QALY is
worthwhile (i.e. the v)
• Two possible approaches (all a bit simplified):
(1) take a fixed budget and implement programs with lowest cost per QALY
(2) add programs that have a cost per QALY below some threshold value
(threshold in theory should equal social value of a QALY): ΔC / Δ Qi < vi
• Opportunity costs either occur within the health care sector (fixed budget:
health for health) or outside the health care sector (flexible budget: wealth
for health)

15. Intervention $ / QALY
GM-CSF elderly with leukemia $235.958
EPO in dialysis patients $139.623
Lung transplantation $100.957
End stage renal disease $53.513
Heart transplantation $46.775
Didronel in osteoporosis $32.047
Statins in high cholesterol $18.151
PTA with Stent $17.889
terbinafine in onychomycosis $16.843
Breast cancer screening $5.147
Viagra $5.097
Congenital anorectal malformation $2.778
Some results

16. What’s the problem?
• Value of a QALY appears to vary with the characteristics of the disease and / or
beneficiary in health (and perhaps other) terms
• QALY maximization as a goal seems imprecise and attaching equal value to all
QALY gains may not be considered ‘equitable’
• Many factors may influence value (e.g. Dolan et al, 2005): normative vs. positive…
• Equity weights can be seen simply as relative social values (v1/ v2 = α), where α is
the relative weight of type 1 compared to 2
• There seems to be a broad range of vi’s attached to relevant QALYi’s
• A varying threshold is required? vi rather than v
• Normative choices regarding with what the threshold should vary!
• In the Netherlands: severity of illness (measured as proportion of health foregone)
• In UK: NICE uses range and allows ‘equity’ weights for end of life drugs

17. Flexible threshold – the Dutch case
0
20000
40000
60000
80000
0 20% 40% 60% 80% 100%
Severity of illness
CostsperQALY
Threshold

18. Some attention points in public health
• Demonstrating effectiveness can be difficult
• QALYs only or most relevant outcomes?
• Certain costs important (e.g. time costs) but difficult to value
• Costs in other sectors need to be captured
• How to weight future health effects (discounting)
• Inclusion equity may be difficult
• Perceived necessity sometimes low: statistical versus identifiable lives
• However, important that public health interventions demonstrate value for
money!