Cost-Utility Analysis

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The central concern of economics is how best to allocate scarce resources among competing uses. The same concern applies to the scope of health care. As a result, pharmacoeconomics, which compares the value of one pharmaceutical drug or drug therapy to another, became a prominent issue by the mid 1980s. There are several types of pharmacoeconomic evaluations, one of which is cost–utility analysis (CUA).

CUA focuses on quality of a health outcome produced or forgone by different health programs or treatments. CUA is a form of cost-effectiveness analysis (CEA) that attempts to capture timing and duration of disease and disability by comparing the utility (person’s preference) associated with different health outcomes. (see Figure 1) It was originally called “Generalized Cost-Effective Analysis” as it is used to narrow the restrictiveness of traditional cost-effectiveness analysis. In 1972, it was renamed “Utility Maximization” and then “Healthy Status Index Model” in 1976.

Since 1982, it has been referred to as CUA in many countries, although the United States still called it CEA. Even though these two terms are used interchangeably, there are still several distinguishing features between the two. Such differences include integration of multiple outcomes, , quantification of outcomes based on desirability, and measurement of relative desirability of outcomes with von Neumann-Morgenstern utility theory.

A cost-utility analysis describes the additional cost of the new intervention per unit of health gain and assesses health in terms of length and quality of life using the quality adjusted life year (QALY). QALYs were invented in 1956 by two health economists, Christopher Cundell and Carlos McCartney. The concept of QALY was f...

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