Cost Effectiveness and the Allocation of Therapies in a Treating Population

Summary

The purpose of this paper is to challenge the uncritical use of incremental cost-outcomes ratios as decision variables. A scenario is presented which describes conditions under which increasing costs per unit of outcome prevail. Marginal costs increase as the proportion of patients treated under a given therapy increases. If the health system’s objective is to maximise health benefits then patients will be switched until the marginal benefits per dollar expended are equal between the 2 therapies. In an example where the costs of the new therapy are greater, for a given proportion of patients treated, patients are switched from the existing to the new therapy until an equilibrium is achieved in the allocation of therapies among the treating population. At this point, the overall costs of treatment are at a minimum. This outcome could only be predicted if the underlying cost-outcomes functions are known and the consequent patterns of therapy substitution and cost impacts assessed. The paper concludes by raising concerns as to the role of incremental cost-outcomes ratios as decision variables where increasing costs may be expected to prevail and there is failure to consider the implications of these increasing costs in formulary decision making. If increasing costs are present then conventional cost-outcomes and incremental cost-outcomes ratios are of limited utility as decision variables in the choice of therapy options.