Principles of Decision Analytic Model
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Author: Xuanqian Xie When we conduct the health economic studies? I do not discuss why we need health economic studies

Author: Xuanqian Xie


When we conduct the health economic studies?

I do not discuss why we need health economic studies, although the economic evaluation is not used/accepted widely enough in decision making in health care, particularly some fields, such as diagnostic imaging.

Economic evaluation can be used in any products/procedures, but it is likely to be more meaningful when comparing new technology with the classical one. “More meaningful” here refer to the impact on policy, not the merits in researches. If there are no comparators existed for an intervention, we can compare using this intervention or not.

Typical scenario of cost-effectiveness analysis is that the new technology shows better clinical outcomes with additional cost. It is important to evaluate whether health benefits is justified by the extra costs. Also, when costs in the long-term are not straightforward, it is helpful to use the economic model. For example,using insulin pump for diabetes, does the reduction of costs for diabetes complications are greater than the capital cost of purchasing insulin pump?    

 If the new technology is worse than the classical one, it is difficult to enter the market. So we do not discuss this scenario.

Usually, the economic analysis is performed when convincing scientific evidence was established. I show you a case of not conducting economic evaluation in HTA and explain why. Our research unit reviewed Lactobacillus probiotics in the prevention of Clostridium difficile associated diarrhea (CDAD) (Sinclair et al., 2011). Using regular meta-analysis methods, Lactobacillus probiotics significantly reduce the risks of CDAD.  But, when we applied the Bayesian credibility analysis with a moderate sceptical prior, the 95% CrI of risk ratio of posterior distribution included 1. (Critical sceptical prior: It reflects the belief that new treatments are unlikely to be associated with very strong effects.) Although there are some evidences of beneficial effects of Lactobacillus, the level of evidence is not strong enough, so we did not think it was the right time to do economic analysis.


Modelling questions in a normative approach

Many researchers recommended that the economic model should reflect the practice. Absolutely, it is correct. However, how about the new technology, which are not or seldom practiced? Also, the practice in different institutes can be different, and different doctors in the same institute may have their own preferences. Whose practices should be reflected in the model? The practices can be wrong or inappropriate. Do you plan to model the wrong practice? Usually, we say NO!

In principle, we trust or assume that the decision making is a rational process. Then, it is appropriate to construct the model in a normative approach, what ought to be. Instead of modeling a brilliant doctor’s practice, we use the standard procedure, such as following the clinical guidelines, and/or following the manual/instructions of manufactures. I suggested that you may have a close look of the scientific evidence of your interested topic before constructing the model. We can make some assumptions for the unavailable data inputs in modeling, but the primary parameter estimates, usually the efficacy of an intervention, must be reliable, robust and evidence-based.

Lazar et al. conducted a cost-effective analysis of Statin therapy for primary prevention of moderate risks peoples (Lazar et al., 2011). Authors applied the low cost Statin, 4 $ per month, in their model. They concluded that “low-cost statins are cost-effective for most persons with even modestly elevated cholesterol”. The low cost Statin, 4 $ per month, is not so common in practice until now, although it is accessible. If you check the price of stain drugs in a big online drug store (, you cannot find such low price statins. Consumers Union of U.S. reported that the prices of generic stain were about 70-80$ in average (Consumers Union of U.S., 2011). Although not in current practice, authors’ analysis of low price statins was very helpful to guide the future policy on blood lipid control.

Keep in mind: The economic model can address the hypothetical questions with explicit assumptions.  


A simple and powerful tool

Present discounted value (PDV), also known as present value (PV), is the current worth of a future sum of benefit minutes cost given the discount. It is a simple and powerful tool in many types of economic analyses, including health economic evaluation. With some assumptions, cost-effectiveness analysis (CEA) and cost-utility analysis (CUA), can be transformed to PDV analyses of all strategies.  


How much the economic evaluation can tell you?

The cost-effective analysis pursues the technical allocative efficiency, when the social marginal benefit is equal to social marginal cost, and most of those analyses are valid in a specific setting. You have to be very careful to apply/interpret an economic analysis results in your own setting. For example, the analyses show that compared with treatment B, treatment A is cost-effective. But, treatment A may be only accessible in tertiary hospitals in big cities. Patients in small towns are inaccessible for receive treatment A. ideally, they can be transferred to big cities for the “cost-effective strategy A”, but in reality it would be a long story to do so, and possibly the cost for treatment A have to be re-estimated for additional costs or hotel/transportations, too. It can be regarded as the generalizability issues.

The economic evaluation can show you the operational efficiency theoretically, and you must interpret the health economic results with considerations of social, ethical and legal consequences as well.



Sinclair A, Xie X, Dendukuri N. The Use of Lactobacillus probiotics in the Prevention of Antibiotic Associated Clostridium Difficile Diarrhea. Montreal (Canada): Technology Assessment Unit (TAU) of the McGill University Health Centre (MUHC); 2011 Dec 19. Report no. 54. 45 p. Available from:

Lazar LD, Pletcher MJ, Coxson PG, Bibbins-Domingo K, Goldman L. Cost-effectiveness of statin therapy for primary prevention in a low-cost statin era. Circulation. 2011 Jul 12;124(2):146-53.

Consumers Union of U.S., Inc. Evaluating statin drugs to treat: High Cholesterol and Heart Disease, Comparing Effectiveness, Safety, and Price, 2011, Available from:

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