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Cost-Effectiveness Analysis and the Consistency of Decision Making

Evidence from Pharmaceutical Reimbursement in Australia (1991 to 1996)

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Abstract

Objective: The principle aim of this study was to generate a league table of drugs considered by the Australian Pharmaceutical Benefits Advisory Committee (PBAC) for reimbursement. The table was used to test the hypothesis that decisions made by the PBAC are consistent with the maxim of economic efficiency. In addition, we explored whether the past decisions by the PBAC revealed a threshold incremental cost-effectiveness ratio beyond which the PBAC is not prepared to recommend reimbursement of a drug.

Methods: All 355 submissions made to the PBAC between January 1991 and June 1996 were reviewed. Submissions using cost per life-year gained (26 submissions) or the cost per quality adjusted life-year (QALY) gained (9 submissions) were ranked in a league table and compared with advice given by the PBAC about that drug. The confidentiality restrictions for the submissions require that the individual drug details cannot be revealed in this article.

Results: There was a statistically significant difference between the cost per life-year gained for drugs that were recommended for listing and those that were not, suggesting that the PBAC has been broadly consistent with the use of economic efficiency as a criterion for decision making. We did not find an explicit threshold beyond which the PBAC was unwilling to pay for additional life years gained. However, between 1992 and 1996 the PBAC appears to have been unlikely to recommend a drug for listing if the additional cost per life-year exceeded 76 000 Australian dollars [$AU] (1998/1999 values) and was unlikely to reject a drug for which the additional cost per life-year gained was less than $AU42 000. The cost-effectiveness ratio was not the only factor determining the reimbursement decision.

Conclusions: The results of this preliminary study indicate that decisions to recommend a drug for listing by the PBAC in the last few years have, by and large, been consistent with the notion of economic efficiency.

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Acknowledgements

We are grateful to Don Lewis, for his comments on the paper. This study was carried out at the Health Economics Unit, Centre for Health Program Evaluation, Monash University, Melbourne. An earlier version of this paper was presented at the Conference of the Australian Health Economists in Melbourne, July 1997. This study was conducted with the help of a grant from the Centre for Health Program Evaluation, Monash University, Melbourne.

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Authors and Affiliations

  1. Centre for Policy and Practice, University of London School of Pharmacy, Tower Hamlets PCG and Barts’ and the London NHS Trust, London, UK

    Bethan George

  2. Health Economics Unit, Monash University, Clayton, Victoria, Australia

    Anthony Harris

  3. Department of Health and Aged Care, Pharmaceutical Evaluation Section, Canberra, Australia

    Andrew Mitchell

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  1. Bethan George
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  2. Anthony Harris
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  3. Andrew Mitchell
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Correspondence to Bethan George.

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George, B., Harris, A. & Mitchell, A. Cost-Effectiveness Analysis and the Consistency of Decision Making. Pharmacoeconomics 19, 1103–1109 (2001). https://doi.org/10.2165/00019053-200119110-00004

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