A new (more expensive) drug called Staphbegone has been released to treat staph infections. Prior to...

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A new (more expensive) drug called Staphbegone has been released to treat staph infections. Prior to the introduction of this new drug, Staphbeilln was the standard of care. A complete course of treatment of Staphbegone costs $12,000. A complete course of treatment of Staphbeilln costs only $4,000. Patients given Staphbegone have an average length of hospitalization of 5 days. The average length of hospitalization for patients taking Staphbeilln is 10 days. Assume that the average cost of hospitalization is $1,000/day. Staphbegone is associated with a higher survival rate. On average, patients on Staphbegone have a life expectancy of 35 QALYs while those given Staphbeilln have, on average, a life expectancy of 34.5 QALYs.
First, using the table I’ve given you below, calculate the costs of Staphbeilln, the treatment that is currently the gold standard and Staphbegone, the new treatment for which you are conducting the CEA:

Staphbeilln Costs	Staphbegone Costs
Drug cost	$	Drug cost	$
Hospital cost	$	Hospital cost	$
Total Costs	Total Costs

Second, fill in the table below using the costs you just calculated and the effectiveness of the two drugs which I’ve given you. You can now calculate incremental costs and incremental effectiveness. This is similar to the marginal concept we used in the economics unit. Incremental cost is the additional cost i.e., how much more expensive is Staphbegone than Staphbeilln? Incremental effectiveness is calculated similarly. Finally, calculate the ICER which is the incremental cost divided by the incremental effectiveness. The ICER allows us to answer the question “How much more do we have to pay for 1 extra quality-adjusted life year?”

*Treatment*	*Cost*	*Incr. Cost*	*Effectiveness*	*Incr. Effectiveness*	*ICER*
Staphbeilln	--	--	--
Staphbegone

005_syufajo-uvwxbi0s.docx

David · Accepted Answer

How to do cost-effectiveness calculations in a nutshell:
How to do cost-effectiveness calculations in a nutshell:
Noncompeting choice
Noncompeting choice cost effectiveness is when you have many possible options to choose from that are NOT mutually exclusive. Noncompeting choice cost effectiveness uses the average cost effectiveness.  This means you simply divide the cost of the intervention by the benefit of the intervention.
For example:
	Intervention
	QALY Gained (~DALY eliminated)
	Net Cost
	A
	50
	 $1000 
	B
	3
	 $300
	C
	40
	 $1200
The average cost effectiveness = Net Cost/ Net Health Benefit = $/QALY (gained) or $/DALY (eliminated)
The average cost effectiveness of intervention A = Net Cost/ Net Health Benefit = $1000/50 QALYs = $20/QALY
Using this same means of calculation, the average cost effectiveness for intervention B is $100/QALY and the average cost effectiveness for intervention C is $30/QALY.
If we only have $2500 to spend on health interventions, which one of these health interventions which you fund first? 
First, let's put them in order of average cost effectiveness:
	Intervention
	QALY Gained (~DALY eliminated)
	Net Cost
	 Average CE ($/QALY)
	A
	50
	 $1000 
	$20/QALY
	C
	40
	 $1200
	$30/QALY
	B
	3
	 $300
	$100/QALY
It looks like A should be covered first because it has the best (lowest) cost-effectiveness ratio compared to the other interventions (i.e. $20/QALY vs $30/QALY or $100/QALY). This would be a more efficient way of spending your money rather than starting with one of the other interventions that has a higher average cost-effectiveness ratio. What would come next if we still have money left over? C would be the next best intervention to cover followed by B if we still had any money left over.
Competing choice
However, in many instances, noncompeting choice is not the right way to compare interventions.

A new (more expensive) drug called Staphbegone has been released to treat staph infections. Prior to the introduction of this new drug, Staphbeilln was the standard of care. A complete course of...

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