On the welfare theoretic foundation of cost-effectiveness analysis-the case when survival is not affected

This paper develops a welfare theoretic foundation for cost-effectiveness analysis (CEA) when survival is not affected. With this foundation, all costs and their corresponding utility-terms should be included. A key question, though, is whether these utility-terms are consistent with quality-adjusted life year (QALY) (utility) theory or not. The results show that health care costs and changes in the utility of health should be included. However, as QALYs do not capture the utility of changes in consumption (as this utility must be independent of health, according to QALY theory), the corresponding changes in consumption costs should be excluded. Regarding the costs for changes in absence from work, these should only be included if the utility of changes in the amount of leisure is included. As no QALY theory has been developed that includes this utility, it is unclear how to handle these costs (even if there are arguments for excluding them). For changes in productivity at work, though, there are robust arguments for the inclusion of these costs. Overall, it seems difficult to provide a clear basis for CEA in economic welfare theory when also including non-medical goods such as consumption and leisure

The Demand for Health and the Contingent Valuation Method

The theoretical part develops Michael Grossman’s dynamic demand-for-health model by (a) letting the depreciation rate depend upon the level of health, (b) allowing a continuous set of health states, (c) introducing uncertainty (by letting health be a stochastic variable), (d) introducing social and private insurance and (e) releasing the assumption of an isoperimetric budget constraint. Beside the theoretical results, there are also results with important policy implications. When conducting empirical willingness-to-pay (WTP) studies, one must acknowledge whether the individual regards the hypothetical scenario as uncertain or not and whether insurance exists for the relevant good. The empirical part first investigates whether it is possible to apply the contingent valuation (CV) method to operation queues and waiting lists. Due to the exploratory nature and to the poor significance of the statistical model, the results are tentative at most. The dichotomous-choice (DC) WTP questions worked better than the open-ended questions and choosing the bid-vector and not having a too small population are important issues. The impact of ‘objective’ risk information on patients’ WTP for autologous blood donation (ABD) was then estimated. This information reduced the variance and magnitude of the WTP, which showed that the patients initially overestimated the risks. The WTP was significantly related to dread, perceived transfusion risk and income, indicating that ABD provides substantial benefits in the form of ‘peace of mind’. The experimental part presents the results of two experiments comparing the DC CV approach with ‘real’ purchase decisions for a consumer good. In addition, the hypothesis that a more conservative interpretation of the DC CV approach (where only absolutely sure yes-responses are counted as yes-responses) correctly predicted real purchase decisions was tested. Both experiments showed that the hypothetical yes-responses overestimated the real yes-responses. In the first experiment, the hypothetical absolutely sure yes-responses underestimated the real yes-responses, but in the second experiment the null hypothesis that the conservative DC CV approach corresponded to the real yes-responses could not be rejected. This suggests that it may be possible to sort out the real yes-responses from the false yes-responses by adding a question about the certainty of the yes-response

Individual technologies for health - the implications of distinguishing between the ability to produce health investments and the capacity to benefit from those investments

People differ in their ability to produce health investments and in their capacity to benefit from such efforts. In this paper, we assume (1) that the individual’s health-investment production function exhibits diminishing returns to scale and (2) that the individual’s capacity to benefit from the investments is diminishing in the stock of health. Previous research has only shown the importance of the first assumption for the health-capital adjustment process. The simultaneous effects go well beyond those results, however. Thus, this paper provides an extended demand-for-health framework that distinguishes between individuals both by their capacities to benefit and by their abilities to produce, when transforming health efforts into health increments. The potential usefulness of this framework for health-policy purposes is demonstrated by solving a numerically specified version of the model, and computing individual welfare effects of medical-care goods changes.JEL: I10, I12, J2

How to Calculate Indirect Costs in Economic Evaluations

Clinical-trial-design-commentary, Cost-analysis, Quality-adjusted-life-years, Pharmacoeconomics

How to Calculate Indirect Costs in Economic Evaluations

This article describes the components that should be included as indirect costs to be consistent with economic theory in studies conducted from a societal perspective. The recently proposed method of how to estimate indirect costs, the friction-cost approach, is shown to exclude many aspects of these indirect cost components. Furthermore, it is demonstrated that this approach rests on very strong assumptions about the individual's valuation of leisure and about the labour market. This approach does not, in most realistic circumstances, have a foundation in economic theory. It also shows that all indirect costs cannot be assumed to be included in the individual's reported utility weight for a health state [used to determine quality-adjusted life-year (QALY) values], as recently suggested by the US Panel for Cost-Effectiveness Analysis of Health and Medicine. Therefore, to be consistent with economic theory, neither the friction-cost approach nor the QALY approach can be recommended over the more commonly used human capital-cost approach for estimating the indirect costs of a disease in economic evaluations from a societal perspective.Pharmacoeconomics, Clinical-trial-design-commentary, Cost-analysis, Quality-adjusted-life-years, Cost-utility

Perspectives on the Classical Enzyme Carbonic Anhydrase and the Search for Inhibitors

Carbonic anhydrase (CA) is a thoroughly studied enzyme. Its primary role is the rapid interconversion of carbon dioxide and bicarbonate in the cells, where carbon dioxide is produced, and in the lungs, where it is released from the blood. At the same time, it regulates pH homeostasis. The inhibitory function of sulfonamides on CA was discovered some 80 years ago. There are numerous physiological-therapeutic conditions in which inhibitors of carbonic anhydrase have a positive effect, such as glaucoma, or act as diuretics. With the realization that several isoenzymes of carbonic anhydrase are associated with the development of several types of cancer, such as brain and breast cancer, the development of inhibitor drugs specific to those enzyme forms has exploded. We would like to highlight the breadth of research on the enzyme as well as draw the attention to some problems in recent published work on inhibitor discovery