Cost-effectiveness analysis (CEA) is a form of
economic analysis that compares the relative costs and outcomes (effects) of two or more courses of action. Cost-effectiveness analysis is distinct from
cost-benefit analysis, which assigns a monetary value to the measure of effect.
[1] Cost-effectiveness analysis is often used in the field of health services, where it may be inappropriate to monetize health effect. Typically the CEA is expressed in terms of a ratio where the denominator is a gain in health from a measure (years of life, premature births averted, sight-years gained) and the numerator is the cost associated with the health gain.
[2] The most commonly used outcome measure is
quality-adjusted life years (QALY).
[1] Cost-utility analysis is similar to cost-effectiveness analysis.
In the context of pharmacoeconomics, the cost-effectiveness of a therapeutic or preventive intervention is the ratio of the cost of the intervention to a relevant measure of its effect. Cost refers to the resource expended for the intervention, usually measured in monetary terms such as dollars or pounds. The measure of effects depends on the intervention being considered. Examples include the number of people cured of a disease, the mm Hg reduction in diastolic blood pressure and the number of symptom-free days experienced by a patient. The selection of the appropriate effect measure should be based on clinical judgement in the context of the intervention being considered.
A special case of CEA is cost-utility analysis, where the effects are measured in terms of years of full health lived, using a measure such as quality-adjusted life years or disability-adjusted life years.
Cost-effectiveness is typically expressed as an incremental cost-effectiveness ratio (ICER), the ratio of change in costs to the change in effects.
