Question

Consider two treatments for lung cancer:

(1) radiation and chemotherapy and (2) immunotherapy.

Treatment 1 costs $30,000. Treatment 2 costs $75,000. With treatment 1, there is a 75% chance the patient will be alive in year 1 and a 50% chance in year 2, but the patient will die in year 3. The quality of life is poor with treatment 1, 50% of full health in both years. With treatment 2, there is 50% chance of being alive in year 1 and a 40% chance of being alive in year 2, and a 30% chance of being alive in year 3 and the patient will be dead in year 4. However, the quality of life is much better: 90% of full health in years 1, 2, and 3. The discount rate is 5%.

a. How many QALY’s will each treatment yield?

b. Use the given costs and your answer to part a) to calculate the Incremental Cost Effectiveness Ratio (ICER) for the two treatments.

c. Based on what you know about the value of statistical life (VSL), does the more expensive treatment seem reasonably cost-effective? Explain.

Answer 1

Page No ① Docution Given that Treatment i costs $30,000 Treatment L costs - $ 75,000 + Treatment 1 It gives 50% quality in year I with 75% Jarrives chance a 50%. Only year 2 with sol. Survival chanche. » year 3 is deth. Car CaLy Given by treatment. I D acy velded in year! by treatment 1 =456 x 50% 0.75X0.5 0.375@ALY year .2 by treatmenti - 50%.X50% 30.5X0.5 = 0.25 QALY

Page No Year 3 by treatment i= Oxo o @aly. Total Qaly yielded by treatment 1 - (0.37510:15-+0) Qay = 0.625 QALY Now - Treatment ③ Qoy yielded in yearlo 50%x20% =0.5X0.9 = 0.45 QALY In year © = 40% X90). =0.480.9 = 0:36 QALY * In yearl 3 = 30%90%. 20.3x0.9 = 0.27 Caly Total Qaty yhelded by treatment 0.45 +0.36 +0.27 31.08 Qniy Soz Toleddalydfielded by: treatment 0 - 10.685 Ønyl TO QALY yielded by treatment & 1 1.08 JALY

Pogenoa (B) - The net cost for treatment 1 after given. 5h discount is Treatment cos x 9516 = $ 30,000 x0.95 = $' 28,500 The nut cost for treatment @ after si discount = $4spoo Xas), 75,000 X0.95 = $ #1,250 The Icer for a treatments is defined as the ratio of the difference in CO of a treatments divided by the an in the effectiveness of the treatments. - above & for find the costs of Answer: Part ① ③ treatments. using the So ICER -Ne contreadmor Netcost treatment .. for two treatments - QAL4 Wierd in rethen n y yueld intrecthento

Pogeo @ GCER for the two threatments $71,250 $28,500 1.08 -0.625 EŚ 42,750 0.455 = $ 93, 956.04 for the two treatments $93,956 04 ICER (C) → More Expensive treatment counts +1,250 for 1:08 GALY → Leve Expensive --treatment cons §' 28,500 to 0.625 Then, netcon Cal 7 more Supensive treatment, i Daly Cost = = $71,250 1:08 -$65,972-22 Lest Expensive treatment. Only conf = $ 28,500 :7). "0.65 $45,600

Explanation: Pagino Hence, Using VALS, it can be said that the more Expensive treatment is not cost effektive compared to the less expensive treatment, as it gives lesser QALY per dovar spent compared to that essed Expensive treatment.