Economic evaluation: what are we looking for and how do we get there?

The interest in economic evaluation of alternative strategies for haemophilia treatment has increased through the years. Few studies have actually been undertaken, however, and most of them have been simple cost-minimization or cost-effectiveness analyses. From the perspective of the binational project 'Treatment strategies for severe haemophilia - prophylaxis vs. on-demand', the present paper discusses the pros and cons of different methods for economic evaluation and their data requirements. Severe haemophilia is a rare disease that requires lifelong treatment. In addition, treatment has both short- and long-term effects which are likely to differ between strategies. Accordingly, regardless of the chosen evaluation method, data requirements are non-trivial. Hence, the various problems connected to the generation of data, as well as how they may be addressed, are also discussed

Willingness to pay for on-demand and prophylactic treatment for severe haemophilia in Sweden.

The objective of the present paper was to provide an estimate of the benefits of on-demand and prophylaxis treatment strategies for severe haemophilia in monetary terms. Using the contingent-valuation method, which simulates a missing market by asking people about their willingness to pay (WTP), we asked a representative sample (n = 609) of the Swedish population if they would be willing to pay a specific amount (bid) so that patients with severe haemophilia could receive on-demand treatment and another bid for prophylactic treatment. Different respondents were offered different bids and the bid vector ranged from 71 Euro cents to EUR 130. The order of the bid questions was randomized so that half of the respondents were asked first about their WTP for on-demand treatment, and then about their WTP for prophylaxis, while the order was reversed for the other half of the respondents. The mean estimated WTP (year 2002) was EUR 39 (95% CI 31-47) for on-demand and EUR 65 (95% CI 55-73) for prophylaxis. Our sensitivity analysis showed that the ranking of the two treatment alternatives was robust in that the WTP was greater for prophylaxis in all possible subsets. The point estimates of WTP varied somewhat in subsets defined by individual characteristics, but confidence intervals always overlapped that of the main results. The WTP for on-demand and prophylaxis exceeded the calculated cost of treatment per taxpayer of providing on-demand and prophylactic treatment, respectively, based on our previous result

On-demand vs. prophylactic treatment for severe haemophilia in Norway and Sweden: differences in treatment characteristics and outcome.

Using an 11-year panel of 156 Norwegian and Swedish patients with severe haemophilia, and including retrospective case-book data from birth, we compared the differences in the haemophilia-related resource use between on-demand and prophylactic treatment. Patients treated on-demand had more surgery (arthrodeses, prostheses implantations and synovectomies) and more days lost from work. Median annual factor-concentrate consumption among adults (18+) was 211 000 IU [interquartile range (IQR) 154 000-268 000] or 3 024 IU kg-1 year-1 for patients on prophylactic treatment and 55 000 IU (IQR 28 000-91 000) for on-demand patients (780 IU kg-1 year-1). This was partly explained by the fact that the median dose per kg body weight was twice as great 28, (IQR 24-32) for prophylaxis compared with 14 (IQR 12-16) for on-demand. Prescribed dose per kg body weight was found to be an important factor explaining the variation in total annual factor-concentrate consumption per patient for both types of treatment. Other variables included in the panel-data regression analysis were the number of weeks on secondary prophylaxis for on-demand patients and age, body weight and type of haemophilia for children (0-17 years) on prophylaxis. Differences were consistently substantial and will affect both costs and benefits of the two treatment strategies

Costs of on-demand and prophylactic treatment for severe haemophilia in Norway and Sweden.

The expected annual cost (in the year 2000 prices) for a 30-year-old patient with average individual and treatment characteristics for on-demand EUR 51 832 (95% CI: 44 324-59 341) and for prophylaxis EUR 146 118 (95% CI: 129 965-162 271), was obtained from panel-data analysis of an 11-year retrospective panel of 156 patients with severe haemophilia in Norway and Sweden. Costs included haemophilia-related treatment costs within the health-care sector (factor concentrate, doctors' visits, diagnostic procedures, hospitalisation, invasive procedures, etc.) and cost for haemophilia-related resource use in other sectors (lost production, use of special equipment, adaptation of workplace and domicile, etc). Although costs of lost production, reconstructive surgery and hospitalisation were higher for on-demand, they did not balance out the higher costs of factor-concentrate consumption in prophylaxis. The cut-off risk of premature death, where on-demand and prophylaxis would have been equally costly, was 3.7 percentage units higher for on-demand than for prophylaxis. Such a great risk difference has not been reported elsewhere to our knowledge. Estimated cost-elasticities indicated that annual costs of prophylaxis would increase by approximately the same proportion as a potential increase in the price of factor concentrate and decrease less than proportionately with a reduction in prescribed dose kg-1. For on-demand, the annual costs would increase by approximately the same proportion as an increase in the prescribed dose kg-1

Impacts of direct payments – lessons for CAP post-2020 from a quantitative analysis

In this report we aim to analyse the economic and environmental impacts of Pillar I direct payments, and to demonstrate alternative instruments that are better suited to achieve CAP objectives. The instruments—a targeted payment to land at risk of abandonment and a tax on mineral fertilisers—were selected on the basis of the Polluter Pays and Provider Gets Principles. We do this using two state‐of‐the‐art agricultural economic simulation models. The first model, CAPRI, is used to quantify the large‐scale or aggregate impacts for individual countries, the EU and the world. The other model, AgriPoliS, is used to quantify the fine‐scale or farm and field level impacts in a selection of contrasting agricultural regions, to consider the potential influence of the large spatial variability in agricultural and environmental conditions across the EU. The results show that direct payments are keeping more farms in the sector and more land in agricultural use than would otherwise be the case, and thus avoiding land abandonment, principally in marginal regions. Particularly the area of grassland is substantially higher, because it is generally less productive than arable land and hence more dependent on direct payments for keeping it in agricultural use. The magnitudes of the impacts of direct payments on land use therefore vary strongly across regions due to spatial variability in productivity: marginal regions with large areas of less productive land are heavily influenced by direct payments, while regions with large areas of relatively productive land are hardly affected, because this land would be farmed in any case. By keeping more farmers in the sector longer, direct payments are slowing structural change, which can hamper agricultural development. However the potential benefits of faster structural change vary considerably among our study regions. In relatively productive regions direct payments are hindering development, because too many farmers are staying in the sector and preventing the consolidation of land in larger farms, which would improve their competitiveness and increase farm profits. On the contrary, the mass departure of farms that is currently avoided, will not lead to the same general benefits in marginal regions. Instead of freed land being absorbed by remaining farms, large areas of relatively unproductive land are abandoned without payments. This land is unprofitable to maintain in agricultural land use, even if integrated into larger farms, because current market prices are too low to motivate farming it. Consequently direct payments pose a serious goal conflict: the avoidance of land abandonment on the one hand, which can have negative impacts on public goods, and restricting agricultural development on the other hand. Once again this goal conflict is rooted in the spatial variability of agricultural conditions in the EU. Maintaining extensively managed farmland, particularly semi‐natural pastures, is central for conservation of biodiversity and preservation of the cultural landscape. Therefore direct payments are contributing to the provisioning of these public goods, but principally in marginal areas. Further, abandonment of land can reduce its agricultural productivity due to erosion or afforestation. Thus, direct payments are contributing to food security by preserving the productive potential of land for the future, but only marginal land since relatively productive land is farmed in any case. Production of agricultural commodities is affected to a lesser degree by direct payments than land use per se. Nevertheless, food exports from the EU are higher and imports lower as a consequence of direct payments. However, the additional supply generated by direct payments also lowers output prices, which reduces the profitability of commodity production; thereby partially offsetting the additional revenues from direct payments. The higher agricultural output brought about by direct payments causes higher levels of environmentally damaging greenhouse‐gas emissions, nutrient surpluses and pesticide use. The higher greenhouse‐gas emissions for the EU are, to some extent, moderated by lower emissions in the rest of the world. Nevertheless, the net effect of direct payments is higher global emissions of greenhouse gases. The environmental impacts of higher nutrient surpluses and pesticide inputs are less conclusive, since these depend also on spatial factors, i.e., where the emissions occur. Although EU‐scale and regional emissions are higher due to direct payments, agricultural production is less intensive generally, on account of the lower output prices. Analysing the net effects of these two opposing forces requires additional biophysical modelling at relevant spatial scales, such as watersheds or landscapes, which is beyond the scope of this study. Pillar I direct payments generate a significant transfer of income to farmers and land owners who are not necessarily farmers; 40 billion euro annually. Of this transfer a substantial proportion goes to farmers in relatively productive regions and, further, to a minority of farmers that need them least. In relatively productive regions payments are not needed for continued agricultural production and preservation of farmland, but instead rather fuel higher land and rental prices, which hampers structural change. On the contrary, the need for support is greatest in marginal regions, because some form of payment to marginal land is needed to avoid its abandonment and the loss of associated public goods. Finally, the direct payments even come at the cost of lower market returns for farmers due to slower structural change (smaller and less competitive farms) and lower output prices (due to greater EU output). On the other hand the lower output prices lead to somewhat lower food prices, but at the greater cost of financing the direct payments. Our main conclusion is that Pillar I direct payments are generating serious goal conflicts due to spatial variability in conditions across the EU. On the one hand these payments are contributing to the provisioning of public goods by preserving marginal agricultural land. On the other hand they are hampering agricultural development, primarily in relatively productive regions. Payments to relatively productive land that would be farmed any way not only inflate land values (capitalisation) but also slow structural change, which are both likely to hinder agricultural development and hence the competitiveness of the EU on the global market. The direct payments also increase environmental pressure; by subsidising land use generally and the associated production, they are incapable of controlling environmentally damaging emissions, which is also in conflict with broad CAP objectives. The goal conflict arises because direct payments are universal, a payment principal that does not consider spatial variability in the EU and the associated trade‐offs in regard to development and environmental effectiveness. Our analysis considered two alternative policy instruments that have the potential to curb the identified goal conflicts associated with direct payments, by applying the Polluter Pays and Provider (of public goods) Gets Principles at appropriate spatial scales. Replacing direct payments with a payment targeted on marginal land (and associated public goods) prevents land abandonment at a lower cost, by avoiding payments to relatively productive land that is farmed in any case. This also allows surviving farms in regions with relatively productive land to compensate for lost direct payments through expansion and associated scale economies, as well as higher output prices. This instrument therefore finances the provisioning of public goods without adverse effects on development and the efficiency of agricultural production. The EU‐wide tax on mineral fertiliser demonstrates that this instrument has the potential to reduce nutrient surpluses. Since direct payments cause higher levels of polluting emissions, policy instruments targeting emissions at relevant spatial scales are needed to achieve cost‐effective abatement. Overall we find that Pillar I direct payments are not addressing the diversity of challenges facing European agriculture. In fact our quantitative analysis indicates that the potential for the current system to meet these challenges is seriously impaired by goal conflicts and spatial variability across the EU. A better policy requires that instruments are targeted on desired outcomes and designed according to sound principles, specifically the Polluter Pays and Provider Gets Principles. These principles would ensure that farmers are provided with appropriate incentives to i) generate public goods that otherwise would be underprovided; ii) mitigate environmentally damaging emissions at the lowest possible cost to society; and iii) continually strive to improve environmental performance. Such instruments are also fairer and promote a more competitive or viable agricultural sector by not obstructing structural change and hence agricultural development

Antimicrobial sensitivity-A natural resource to be protected by a Pigouvian tax?

Since their discovery more than 70 years ago antibiotic drugs have been efficient tools for treating bacterial infections, and their use has reduced the number of fatalities and the suffering from bacterial diseases. However, the use of antibiotics may lead to resistance to the same or other antibiotics. The risk of resistance appears to be larger in veterinary medicine, since antibiotics have been given as feed-additives in animal production, the amounts given are larger, and the risk of selecting the wrong antibiotic is higher due to lack of diagnostic facilities. Historically, as resistance developed, new classes of antibiotics were developed, but today however, the flow of new substances has slowed. The resistance that arises from antibiotic use is a negative externality or a cost that is not included in the price of antibiotics since it affects the public good of antibiotic sensitivity. The negative externality implies that antibiotic consumption becomes too high. Antibiotic use can be restricted by e.g., prohibiting the use in animal feeding stuffs, prescription only use, or banning the use for animals or by using economic incentives, but restrictions on antibiotic use could have negative effects on the development of new antimicrobials since restrictions might reduce the profitability of such efforts to the pharmaceutical industry. It is therefore of interest to see what economic theory can contribute towards a solution. The objective of this study is to examine if a Pigouvian tax is an option for balancing the externalities and incentives for veterinary drug use. However, as a practical solution, it is suggested to use the costs of developing new antibiotics for determining the tax. The magnitude the tax based on European Union numbers ranges between 29 and 287(sic) per kilogram active substance or between 9 and 86% of the average price of commonly used antibiotics depending on the foreseen period in years (1-10 years) between the development of a new antibiotic drug. Hence, the sensitivity of bacteria to antibiotics should be managed as a finite natural resource. A tax based on the expected costs of development new antibiotic substances may offer a practical option for balancing the incentives and externalities of antibiotic use and development. (C) 2010 Elsevier B.V. All rights reserved

Treatment of the critically ill patient with protein C: Is it worth the cost?

INTRODUCTION: We have shown that low protein C levels predict poor survival up to five years in a general intensive care unit patient material and hypothesize that treatment with protein C is beneficial. The objectives were to calculate costs of protein C treatment, at best-case scenario, per statistical life saved. MATERIALS AND METHODS: Ninety-two patients with deranged global haemostatic tests admitted to the mixed surgical medical intensive care unit, Malmö University Hospital. We hypothesized that increasing protein C levels in patients with low levels would enhance survival to the same rate as a cohort with higher protein C. Number of statistical lives saved were estimated using survival analysis. Costs per life saved at 30days were calculated. RESULTS: Total costs per life saved in 2007 prices (upper limit of 95% CI) were calculated at euro 50,200 (recombinant activated protein C, drotrecogin alfa (activated), Xigris((R))) and euro 46,000 (zymogen protein C, Ceprotin), which may be compared to the value of a statistical life (euro 937,000). CONCLUSIONS: Our theoretical model of converting a low protein C group to a higher protein C group by treating with activated protein C or the protein zymogen showed no major difference between the treatments in terms of costs, and that costs are lower than the value of a statistical life. Although our study has several caveats the results support the PROWESS study, in that patients with a very severe disease, having low protein C levels, may benefit from protein C treatment in a cost effective way

An evaluation of extension services in Sweden

This article analyzes the effects of extension services regarding the use of nutrients in Swedish agriculture on nutrient balances and farms’ finances. The key to our research design is that extension visits vary between agents (some agents give more consultation than others), which leads to random variation in “treatment.” We find that the service affects nutrient utilization, which possibly reduces leakages and eutrophication in the Baltic Sea. A large and positive impact on farms value added implies that the net benefit from the extension services is positive. The improvements are mainly due to better land management practices so that more efficient use of fertilizers increases crop production and thereby decreases the nitrogen balance