Introduction

This is an assignment worksheet for adjusting of costs to time, sensitivity analysis and critical
appraisal of a published article. You are expected to work in groups and complete the exercise.
Completing the exercise is an important part for the program. Referring to class material will help to
do the exercise and apply the knowledge acquired. Group discussion is encouraged

Acknowledgment

This is a teaching material that have been organized mainly and developed by Dr Eman A
Hammad; e.hammad@ju.edu.jo.
Exercise: Bringing Future Costs (Benefits) to the Present: Discounting
Remember: If costs are estimated based on dollars spent or saved in future years, another type of modification, called discounting, is needed. There is a time value

associated with money. People (and businesses) prefer to receive money today rather than at a later time. Therefore, money received today is worth more than the same

amount of money received next year. For example, if I asked to borrow $1,000 from you today and assured you I would pay you back the $1,000 in 3 years, you would not

agree to lend me the money unless I paid you more than $1,000 in 3 years, even if I could guarantee there would be no inflation in the next 3 years. Money promised in the

future, similar to health care savings promised in the future, is valued at a lower rate than money (savings) received today.

Hint: The discount rate generally accepted for health care interventions is between 3% and 5%, but it is recommended that a comparison of results be conducted using high
and low estimates of various discount rates. Varying these discount rates is an example of a sensitivity analysis
The discount factor is equal to 1/(1 + r)t, where r is the discount rate and t is the number of years in the future that the cost or savings occur.-

review the following example:

year Cost of program A Cost of program
(Thousans) B(Thousans)

1 5 15
2 10 10
3 15 4
Both programs are for heart condition; A is expansion of coverage for CABG and B is education
campaign to influence life and diet.
Compare the cost of both option with consideration of which might look more attractive knowing the
benefit will be received earlier for CABG compared to education campaign. (hint: discounting rate
5%)
………………………………………………………………………….

Program A
DIC FAC = 1\(1+r)\t
year 1 = 5\(1+0.05)^1 = 4.76
Year 2 = 10\(1+0.05) ^2 = 8.91
Year 3 = 12.92
Total = 26.5

Program B
Year 1 = 15 \ (1+0.05) \1 = 14.29
year 2 = 8.91
year 3=3.35
Total= 26.73
so, program B more attractive than program A
Exercise: standardize past costs inflation
Remember: If retrospective data are used to assess resources used over a number of years back, these costs should be adjusted, or valued at one point in time. If you

compared costs for patients who received treatment in 2005 with those for patients who received treatment in 2010, the comparison of resources used would not be a fair

comparison because treatment costs tend to go up each year; so patients who received the same treatment in 2005 would have lower costs than those who received the

treatment in 2010.

Please review this table and adjust past cost to 2005.

Office visit

2003-2005 Rate = 4.4 + 4.5 = 8.9 %

Cost = 115 + (115 + 0.089) = 125.23

125.462

Lab service in 2004 = 50

Cost = 50+ (50 + 0.045) = 52.2

Antibiotic medication

Cost = 28.84

In 2005

Office visit = 125.462

Lab service = 52.2

Antibiotic med = 28.84

Total cost = 125.462 + 52.2 + 28.84 = 206.55

Exercise: Sensitivity analysis

Now we will be performing a sensitivity analysis, challenging whether the conclusion will be
changing with the change of the probability of having an adverse event when taking
antibiotics A was 10% and for antibiotics B was 15%.

The range of probability to experience adverse effect is 7%-15% for TNF A and TNF B 10-
25%

Have a careful look on the table below:

Comments on the following statements:

 For the entire range (7-15%) the cost of TNF A was higher, so the results are insensitive
to the range of % of adverse effects.
True

 The total cost of TNF A- TNG B at a probability of 10-25% was 100 $ if the % of adverse
event was close to 10%. There was cost saving of 50$ when the % of adverse event was
close to 25%.
False

Exercise: Critical appraisal published cost effectiveness analysis from SA

Attached to this exercise a pdf for a published article titled “Cost- effectiveness analysis of low
versus high dose colistin in the treatment of multi- drug resistant pneumonia in Saudi Arabia
available at https://link.springer.com/content/pdf/10.1007/s11096-018-0713-x.pdf
Background: Gram negative pathogens are increasingly resistant to commonly used first line antibiotics and colistin is in most cases the only medicine available. There is

very limited information available comparing the effectiveness and costs of low versus high dose colistin with studies showing efficacy with both doses and with variable

levels of adverse effect. The objective This study was designed to evaluate the cost effectiveness of low versus high dose colistin in the treatment of Pneumonia caused by

colistin-only sensitive gram negative bacteria from.

Please read the article carefully and answer the following questions:

o Was the correct type of analysis conducted?

---------Yes ------------------------------------------
o Is the comparison Justified and appropriate?
-----------Yes ------------------------------------------
o What is the perspective and is it appropriate?
from the payer's perspective, specifically King Abdelaziz Hospital (KAH)
o Were the costs and outcomes measured appropriately?
Yes It estimate cost and outcome
o Did the authors account for differences in costs across time? (discounting)
No
Discounting was not done since the time span was too insufficient to demonstrate
any meaningful impact.
o Were sensitivity analyses conducted when needed?
Yes
For each parameter in the model, the study ran a number of multivariate (one-way)
sensitivity assessments. These sensitivity analyses sought to determine how
changing some factors by 25% would impact the additional costs.
o Were limitations addressed? reasonable assumptions?
Yes
Small sample size
Because it is a retrospective single-center study, the findings cannot be applied to
other healthcare settings.
o What is your thoughts on the conclusions, are they unbiased?
o Do you believe these finding is applicable or relevant to Jordan? On what consideration?

Yes
Exercise : CR vs ICER
Let's say drug X, at £100 per course, cures 10 out of every 20 patients. Its new competitor,
drug Y, costs £120 per course and cures 11 out of 20 patients. A pharmaceutical
representative visited your pharmacy and tried to persuade you that his or her product is
"more effective and only marginally more expensive." What do you think? Hint: think of ICER
rather than CE ratio

The cost per case cured with drug X is 200

And the cost per case cured with drug Y is 218.1

The incremental cost of drug Y—the extra cost of curing the extra patient—is not £18 but
£400.

Drug x

Total cost = 100 * 20 = 2000

Drug y

Total cost = 120 * 20= 2400

ICER = 2400 – 2000 \ 11- 10

= 400

Drug Y more expensive and effective

400 higher than 18 so not acceptable .