Pharmacoeconomics - Willingness to Pay

1) Identify your research question
2) Select appropriate method
- Cost minimization analysis
- Cost benefit analysis
- Cost effectiveness analysis
- Cost utility analysis
3) Interpret results/policy recommendation

Cost effectiveness/Cost utility - Cost per unit of benefit

You get an ICER in cost effectiveness analysis and you plot it on your graph.
Top left = less effective and more costly
Top right = more effective and more costly
Bottom left = less effective and less costly
Bottom right = most effective and less costly

Should we Invest?

Cost-effective doesn't mean cost savings
Cost effective means that your willing to pay for the results.
The benefits are worth while given their costs

Represents the maximum amount of money a decision maker is willing to pay for a health effect
The more money you have, the more you are willing to pay
The are under the curve represents societies willingness to pay for this hypothetical threatment

Perfect = every day purchases
You go to buy a bottle of water. You have two dollars. The water costs one dollar. You are willing to pay the full two dollars. The difference between the actual price and the amount you are willing to pay is CONSUMER SURPLUS.

Contingent valuation is a survey based method to measure consumer demand and value non-market goods.

Open ended - several problems with this.
If they aren't familiar with for example a knee replacement their valuation may be all over the place.
Without providing someone with an initial value, it is difficult to understand what a fair question. People have moved away from this.

Payment scale - giving person a piece of paper with a menu of prices and asking them from the list what the most they are willing to pay is.
Bidding game - offer someone an initial bid ($500). Then you keep raising or lowering the bid until you arrive at their maximum willingness to pay.
Typically you will see a hybrid of these.

Yea - saying: Are you willing to pay 500 dollars for a hip replacement? A lot of people will say yes, but what they are really saying is that they support a program of hip replacements and not the dollar amount? You combat this by asking them inititially, do they support the program. THEN ask them the dollar amount.

Information bias - Respondents may not be familiar with the commodity being valued
Give respondents information

Blahhhhhhhh

An ICER is a point estimate
In Cost effectiveness analysis and other types of analyses, there is a lot of variability.
To account for variability, ideally we would like to create a confidence interval around our cost effectiveness ratio. There are statistical challenges with doing this.
They have devised a way of assessing variability with ICERs and helping decision makers.

At different willingness to pay levels, there are different probabilities that the intervention will be cost effective. Large willingness to pay --> Greater probability of cost-effectiveness

There is information bias with this question because you don't have a fair sense of what you are being asked to value.

However, the answer is supposed to be yes.
At 5 dollars you have an 80% chance that your ICER will be 5 dollars or less compared to the gold standard

Tailored Activity Program (TAP) turning point question based on graph: True or False - TAP is more likely to be cost effective when making a choice based on hours spent "on duty" versus "doing things".
True
Conclusion
-ICERs are a primary measure of cost effectiveness as you are looking at treatment vs gold standard.
-In willingness to pay you are setting how much you are willing to bear for that service and then you are plotting the probability that your ICER will fall in that Willingness to pay range.