IDEAS home Printed from https://ideas.repec.org/a/spr/pharme/v38y2020i8d10.1007_s40273-020-00914-6.html
   My bibliography  Save this article

Calculating and Interpreting ICERs and Net Benefit

Author

Listed:
  • Mike Paulden

    (University of Alberta)

Abstract

For several decades, the incremental cost-effectiveness ratio has been routinely used by health technology assessment agencies around the world to summarise the results of economic evaluations of health interventions. Yet reporting and considering incremental cost-effectiveness ratios is unnecessary. Alternative summary measures exist, based on the concept of ‘net benefit’. The incremental cost-effectiveness ratio and measures of net benefit share several commonalities but some important distinctions. As a result, different methods are required to calculate and interpret incremental cost-effectiveness ratios compared to measures of net benefit. The aim of this practical application is to introduce readers to these methods, using a hypothetical example to illustrate key issues. First, the methods used to calculate each measure are described. Next, for each measure, consideration is made of whether and how each measure may be interpreted to perform the following tasks, each of which may be of interest to health technology assessment agencies: (1) identifying the single most cost-effective strategy; (2) ranking strategies from ‘most’ to ‘least’ cost-effective (on an ordinal scale); (3) determining the magnitude to which a strategy is more or less cost-effective than another strategy (on a cardinal scale); and (4) determining whether a strategy is more or less cost-effective following a sensitivity or scenario analysis. This practical application also introduces a novel approach for visually interpreting measures of net benefit using the cost-effectiveness plane, which addresses a number of limitations of the conventional cost-effectiveness ‘efficiency frontier’. By the end of this practical application, readers should have an understanding of how to calculate and interpret each measure, as well as the relative strengths and limitations of each.

Suggested Citation

  • Mike Paulden, 2020. "Calculating and Interpreting ICERs and Net Benefit," PharmacoEconomics, Springer, vol. 38(8), pages 785-807, August.
    • Handle: RePEc:spr:pharme:v:38:y:2020:i:8:d:10.1007_s40273-020-00914-6
    DOI: 10.1007/s40273-020-00914-6
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s40273-020-00914-6
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s40273-020-00914-6?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Daniel Polsky & Henry A. Glick & Richard Willke & Kevin Schulman, 1997. "Confidence Intervals for Cost–Effectiveness Ratios: A Comparison of Four Methods," Health Economics, John Wiley & Sons, Ltd., vol. 6(3), pages 243-252, May.
    2. Aaron A. Stinnett & John Mullahy, 1998. "Net Health Benefits: A New Framework for the Analysis of Uncertainty in Cost-Effectiveness Analysis," NBER Technical Working Papers 0227, National Bureau of Economic Research, Inc.
    3. Claxton, Karl, 1999. "The irrelevance of inference: a decision-making approach to the stochastic evaluation of health care technologies," Journal of Health Economics, Elsevier, vol. 18(3), pages 341-364, June.
    4. Jeffrey S. Hoch & Andrew H. Briggs & Andrew R. Willan, 2002. "Something old, something new, something borrowed, something blue: a framework for the marriage of health econometrics and cost‐effectiveness analysis," Health Economics, John Wiley & Sons, Ltd., vol. 11(5), pages 415-430, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Chris Sampson’s journal round-up for 3rd August 2020
      by Chris Sampson in The Academic Health Economists' Blog on 2020-08-03 11:00:00

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. James F. O’Mahony, 2020. "Does Cost-Effectiveness Analysis Really Need to Abandon the Incremental Cost-Effectiveness Ratio to Embrace Net Benefit?," PharmacoEconomics, Springer, vol. 38(8), pages 777-779, August.
    2. Baines, Darrin & Disegna, Marta & Hartwell, Christopher A., 2021. "Portfolio frontier analysis: Applying mean-variance analysis to health technology assessment for health systems under pressure," Social Science & Medicine, Elsevier, vol. 276(C).
    3. Toni Bakhtiar & Ihza Rizkia Fitri & Farida Hanum & Ali Kusnanto, 2022. "Mathematical Model of Pest Control Using Different Release Rates of Sterile Insects and Natural Enemies," Mathematics, MDPI, vol. 10(6), pages 1-18, March.
    4. Mike Paulden, 2020. "Why it’s Time to Abandon the ICER," PharmacoEconomics, Springer, vol. 38(8), pages 781-784, August.
    5. Rick A. Vreman & Joost W. Geenen & Saskia Knies & Aukje K. Mantel-Teeuwisse & Hubert G. M. Leufkens & Wim G. Goettsch, 2021. "The Application and Implications of Novel Deterministic Sensitivity Analysis Methods," PharmacoEconomics, Springer, vol. 39(1), pages 1-17, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mike Paulden, 2020. "Why it’s Time to Abandon the ICER," PharmacoEconomics, Springer, vol. 38(8), pages 781-784, August.
    2. Elamin H. Elbasha, 2005. "Risk aversion and uncertainty in cost‐effectiveness analysis: the expected‐utility, moment‐generating function approach," Health Economics, John Wiley & Sons, Ltd., vol. 14(5), pages 457-470, May.
    3. Simon Eckermann & Andrew R. Willan, 2009. "Globally optimal trial design for local decision making," Health Economics, John Wiley & Sons, Ltd., vol. 18(2), pages 203-216, February.
    4. Sennen Hounton & David Newlands, 2012. "Applying the Net-Benefit Framework for Analyzing and Presenting Cost-Effectiveness Analysis of a Maternal and Newborn Health Intervention," PLOS ONE, Public Library of Science, vol. 7(7), pages 1-8, July.
    5. Qi Cao & Erik Buskens & Hans L. Hillege & Tiny Jaarsma & Maarten Postma & Douwe Postmus, 2019. "Stratified treatment recommendation or one-size-fits-all? A health economic insight based on graphical exploration," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 20(3), pages 475-482, April.
    6. Frank G. Sandmann & Julie V. Robotham & Sarah R. Deeny & W. John Edmunds & Mark Jit, 2018. "Estimating the opportunity costs of bed‐days," Health Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 592-605, March.
    7. Andrea Manca & Neil Hawkins & Mark J. Sculpher, 2005. "Estimating mean QALYs in trial‐based cost‐effectiveness analysis: the importance of controlling for baseline utility," Health Economics, John Wiley & Sons, Ltd., vol. 14(5), pages 487-496, May.
    8. Niklas Zethraeus & Magnus Johannesson & Bengt Jönsson & Mickael Löthgren & Magnus Tambour, 2003. "Advantages of Using the Net-Benefit Approach for Analysing Uncertainty in Economic Evaluation Studies," PharmacoEconomics, Springer, vol. 21(1), pages 39-48, January.
    9. Emma McIntosh, 2006. "Using Discrete Choice Experiments within a Cost-Benefit Analysis Framework," PharmacoEconomics, Springer, vol. 24(9), pages 855-868, September.
    10. Rachael L. Fleurence, 2007. "Setting priorities for research: a practical application of 'payback' and expected value of information," Health Economics, John Wiley & Sons, Ltd., vol. 16(12), pages 1345-1357.
    11. Helen Dakin & Sarah Wordsworth, 2013. "Cost‐Minimisation Analysis Versus Cost‐Effectiveness Analysis, Revisited," Health Economics, John Wiley & Sons, Ltd., vol. 22(1), pages 22-34, January.
    12. Claire McKenna & Karl Claxton, 2011. "Addressing Adoption and Research Design Decisions Simultaneously," Medical Decision Making, , vol. 31(6), pages 853-865, November.
    13. Stefano Conti & Karl Claxton, 2008. "Dimensions of design space: a decision-theoretic approach to optimal research design," Working Papers 038cherp, Centre for Health Economics, University of York.
    14. Klemen Naveršnik, 2015. "Output correlations in probabilistic models with multiple alternatives," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 16(2), pages 133-139, March.
    15. Lynch, Frances L. & Dickerson, John F. & Saldana, Lisa & Fisher, Phillip A., 2014. "Incremental net benefit of early intervention for preschool-aged children with emotional and behavioral problems in foster care," Children and Youth Services Review, Elsevier, vol. 36(C), pages 213-219.
    16. Richard M. Nixon & David Wonderling & Richard D. Grieve, 2010. "Non‐parametric methods for cost‐effectiveness analysis: the central limit theorem and the bootstrap compared," Health Economics, John Wiley & Sons, Ltd., vol. 19(3), pages 316-333, March.
    17. Andrea Manca & Nigel Rice & Mark J. Sculpher & Andrew H. Briggs, 2005. "Assessing generalisability by location in trial‐based cost‐effectiveness analysis: the use of multilevel models," Health Economics, John Wiley & Sons, Ltd., vol. 14(5), pages 471-485, May.
    18. Todd H. Wagner & Jean Yoon & Josephine C. Jacobs & Angela So & Amy M. Kilbourne & Wei Yu & David E. Goodrich, 2020. "Estimating Costs of an Implementation Intervention," Medical Decision Making, , vol. 40(8), pages 959-967, November.
    19. Andrew Briggs, 2012. "Statistical Methods for Cost-effectiveness Analysis Alongside Clinical Trials," Chapters, in: Andrew M. Jones (ed.), The Elgar Companion to Health Economics, Second Edition, chapter 50, Edward Elgar Publishing.
    20. Fleurence, Rachael L. & Torgerson, David J., 2004. "Setting priorities for research," Health Policy, Elsevier, vol. 69(1), pages 1-10, July.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:pharme:v:38:y:2020:i:8:d:10.1007_s40273-020-00914-6. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.