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TABLE 2.3 A Hypothetical Application of Cost-Effectiveness Analysis

Vaccine Candidate

Cost of Development (Ci) ($ million)

Total Expected Resource Costsa (Ci+PCi−MCi) ($ million)

Net Expected Utility (Ui)

Net Effectivenessb (Ei)

Ci/Ui (dollars)

(Ci+PCi−MCi)/Ei (dollars)

A

10

25

50

5,000

200,000

5,000

B

20

35

40

4,000

500,000

8,750

C

30

50

20

2,500

1,500,000

20,000

D

5

12

25

2,000

200,000

6,000

NOTE: See text for definitions.

aPresent value.

bExclusive of resource costs, expressed in quality-adjusted years of life.

measure of effectiveness or expected value be defined for each candidate project. If the resource cost for the ith candidate is Ci and the expected effectiveness is Ei, then the resources will be optimized if the candidate projects are ranked in increasing order by the cost-effectiveness ratio, Ci/Ei, and selected in that rank order as far down the list as resources permit.

There are at least two ways of applying cost-effectiveness analysis to the vaccine development problem. The first would treat the NIAID budget as the constrained resource, so the cost Ci would be the burden of developing the ith vaccine on that budget. The effectiveness, then, would be the net effectiveness, considering all other benefits and costs (excluding the cost of development). One possible effectiveness measure would be the score, or expected utility, resulting from the multiattribute scoring method or the decision-analytic method described above. For example, Ui might be the expected utility for the ith vaccine, as estimated by the procedure described in the preceding section. Then the cost-utility ratio, Ci/Ui, would become the basis for ranking. This is illustrated in Table 2.3. In the example, the ranking based on C/U would be as follows: candidates A and D (tied at $200,000), B ($500,000), and C ($1,500,000). Note that the lower the ratio, the higher the priority. Note also that vaccine D is given a high priority because of its low cost of development, even though its expected utility score is not as high as A or B.

Alternatively, the constrained resource might be all health-related expenditures. In that case, the numerator of the cost-effectiveness ratio would include three terms: the cost of development (Ci), plus the present value of future expected costs of production and administration (PCi), less the present value of expected savings in morbidity costs from the disease (MCi). The method of present value (the inverse of compound interest) is required to ensure that all costs and benefits are expressed in terms consistent with the same point in time.

The denominator of the cost-effectiveness ratio would be a measure of the expected health (noneconomic) benefits from the vaccine. It is also calculated as a present value. One measure used by several



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