Evidence-based health economics

Health economics is an increasingly important field of study because health care resources are becoming more limited and because of the need to make choices among competing demands for them. The use of economic evaluation is a key tool that can guide decisions about the allocation of resources that are increasingly scarce. An economic evaluation is a comparative analysis between two or more alternatives in terms of both costs and effects [1].

Evidence-based medicine (EBM) plays an important role in health research and also in health economics. EBM is defined as: “the conscientious, explicit, and judicious use of current best evidence in making decisions about the care of individual patients [2].” In order to use the term EBM within the context of health economics, it is important to differentiate between a) evidence-base of health economic evaluation and b) evidence-base of the methods which health economists apply [3].

In regards to the evidence-base of economic evaluation, a distinction is being made between trial-based economic evaluation and model-based economic evaluation. Within a trial based economic evaluation, where additional data are collected alongside a clinical trial (piggy-back study) [4], effects and costs are measured in the same population. A model, on the other hand, allows us to combine multiple sources of evidence, to extrapolate outcomes to the longer term, to extend the analysis to the relevant comparators, and to generalize from specific trial populations to the full target group for an intervention and to other settings and countries [5]. Nevertheless, randomized controlled trials (RCTs) have a central role in the evaluation of health care interventions. Since 1994, approximately 30% of the published economic evaluations on the NHS Economic Evaluation Database have been based on a single RCT [6]. RCTs are, therefore, seen as the vehicle for analysis. But given the fact that economic evaluations should guide resource allocation decision, it is questionable whether the explicit use of a single RCT is appropriate. An RCT might be considered as a gold standard and is free of selection bias, but it has also some limitations. Within an RCT it is not possible to compare all relevant options, an RCT usually has a short follow-up time, and an RCT fails to incorporate all existing evidence [6].

Although economic evaluation is an important tool for health economists, there are many unresolved issues around the methods, which leads to the second aspect of EBM in health economics. These methodological issues are associated with 1) observed variations in the measurement of health benefits due to the different use of instruments 2) the fact that utility scores used for quality-adjusted life years (QALYs) are being influenced by the choice of respondents, 3) important theoretical problems around the welfarism framework and the extra-welfarism approach, and 4) issues around discounting costs and effects. These concerns have been identified as important barriers to the use of economic evaluation in decision making [7].

In the recent years, many countries have developed national Health Technology Assessment (HTA) agencies, such as the National Institute for Health and Clinical Excellence (NICE) in the UK or the Canadian Agency for Drugs and Technologies in Health (CADTH), to inform and guide reimbursement decisions. Although an important pillar of HTA, cost-effectiveness is not the only consideration in the health technology appraisal. The trend towards evidence-based decision-making reinforced the need to base resource allocation decisions on rational criteria and include also safety, clinical efficacy and effectiveness, social consequences, or legal and ethical considerations [8]. Within the UK context, a review and empirical investigation looked at the extent to which health economic information is used in health policy decision-making [9]. This analysis showed that cost-effectiveness analysis had a minor role in the local decision-making process as the primarily focus was on evidence of clinical benefit and cost implications. However, at the national policy level in the UK, cost-effectiveness analysis were highly integrated into NICE’s technology appraisal program. While NICE also considers other decision-making criteria besides cost-effectiveness, such as severity of underlying illness, stakeholder persuasion, or end-of life treatments etc., a recent analysis showed that cost-effectiveness alone predicted 82% of NICE decisions [10].

The aim of an economic evaluation is to guide resource allocation decisions. Although health economists would claim that economic evaluation is by nature evidence-based, it is in general acknowledged that more research is needed to address the methodological issues. Finally, it should be noted that an economic evaluation can never be comprehensive enough to capture all factors important for resource allocation decision-making.


1. Drummond M.F., Sculpher M.J., Torrance G.W., O’Brien B.J., Stoddart G.L. (2005): Methods for the Economic Evaluation of Healthcare Programmes. 3rd Ed. Oxford University Press.
2. Sackett D.L., Rosenberg W.M.C., Gray J.A.M., Haynes R.B., Richardson W.S. (1996): Evidence based medicine: what it is and what it isn’t. BMJ, 312(7023): 71-2.
3. Cairns J. (1998): Economic Evaluation and Health Care. Available from: http://www.nuffieldtrust.org.uk/sites/files/nuffield/publication/Economic-Evaluation-and-Health-Care.pdf Accessed on February 26th, 2014.
4. O’Brien B. (1996): Economic Evaluation of Pharmaceuticals. Frankenstein’s Monster or Vampire of Trials? Medical Care, 34(12): DS99-DS108 Supplement.
5. Brennan A. and Akehurst R. (2000): Modelling in Health Economic Evaluation. What is its Place? What is its Value? Pharmacoeconomics, 17(5): 445-459.
6. Sculpher M.J., Claxton K., Drummond M., McGabe C. (2006): Whither trial-based economic evaluation for health care decision making? Health Economics, 15(7): 677-687.
7. Brouselle A., Lessard C. (2011): Economic evaluation to inform health care decision-making: Promise, pitfalls and a proposal for an alternative path. Social Science & Medicine, 72(6):832-839.
8. Tylor R. and Tylor R. (2009): What is health technology assessment? Available from: http://www.medicine.ox.ac.uk/bandolier/painres/download/whatis/What_is_health_tech.pdf Accessed on February 26th, 2014.
9. Williams I., McIver S., Moore D., Bryan S. (2008): The use of economic evaluations in NHS decision-making: a review and empirical investigation. Health Technology Assessment, 12(7): iii, ix-x. 1-175.
10. Dakin H., Devlin N., Feng Y., Rice N., O’Neil P., Parkin D. (2013): The influence of cost-effectiveness and other factors on NICE decisions. Available from: http://www.herc.ox.ac.uk/downloads/nicethreshold Accessed on February 26th, 2014.


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