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Statistical determination of cost‐effectiveness frontier based on net health benefits


  • Eugene M. Laska
  • Morris Meisner
  • Carole Siegel
  • Joseph Wanderling


Statistical methods are given for producing a cost‐effectiveness frontier for an arbitrary number of programs. In the deterministic case, the net health benefit (NHB) decision rule is optimal; the rule funds the program with the largest positive NHB at each λ, the amount a decision‐maker is willing to pay for an additional unit of effectiveness. For bivariate normally distributed cost and effectiveness variables and a specified λ, a statistical procedure is presented, based on the method of constrained multiple comparisons with the best (CMCB), for determining the program with the largest NHB. A one‐tailed t test is used to determine if the NHB is positive. To obtain a statistical frontier in the λ‐NHB plane, we develop a method to produce the region in which each program has the largest NHB, by pivoting a CMCB confidence interval. A one‐sided version of Fieller's theorem is used to determine the region where the NHB of each program is positive. At each λ, the pointwise error rate is bounded by a prespecified α. Upper bounds on the familywise error rate, the probability of an error at any value of λ, are given. The methods are applied to a hypothetical clinical trial of antipsychotic agents. Copyright © 2002 John Wiley & Sons, Ltd.

Suggested Citation

  • Eugene M. Laska & Morris Meisner & Carole Siegel & Joseph Wanderling, 2002. "Statistical determination of cost‐effectiveness frontier based on net health benefits," Health Economics, John Wiley & Sons, Ltd., vol. 11(3), pages 249-264, April.
  • Handle: RePEc:wly:hlthec:v:11:y:2002:i:3:p:249-264
    DOI: 10.1002/hec.659

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    References listed on IDEAS

    1. Tambour, Magnus & Zethraeus, Niklas & Johannesson, Magnus, 1997. "A Note on Confidence Intervals in Cost-Effectiveness Analysis," SSE/EFI Working Paper Series in Economics and Finance 181, Stockholm School of Economics.
    2. Eugene M. Laska & Morris Meisner & Carole Siegel & Aaron A. Stinnett, 1999. "Ratio‐based and net benefit‐based approaches to health care resource allocation: proofs of optimality and equivalence," Health Economics, John Wiley & Sons, Ltd., vol. 8(2), pages 171-174, March.
    3. Daniel F. Heitjan, 2000. "Fieller's method and net health benefits," Health Economics, John Wiley & Sons, Ltd., vol. 9(4), pages 327-335, June.
    4. Johannesson, Magnus & Weinstein, Milton C., 1993. "On the decision rules of cost-effectiveness analysis," Journal of Health Economics, Elsevier, vol. 12(4), pages 459-467, December.
    5. Eugene M. Laska & Morris Meisner & Carole Siegel, 1997. "Statistical Inference for Cost–Effectiveness Ratios," Health Economics, John Wiley & Sons, Ltd., vol. 6(3), pages 229-242, May.
    6. Aaron A. Stinnett & John Mullahy, 1998. "Net Health Benefits: A New Framework for the Analysis of Uncertainty in Cost-Effectiveness Analysis," NBER Technical Working Papers 0227, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Ernst, Richard, 2017. "Theories of Health Care Cost-Effectiveness Analysis," SocArXiv gjbcp, Center for Open Science.
    2. Daniel F. Heitjan & Huiling Li, 2004. "Bayesian estimation of cost‐effectiveness: an importance‐sampling approach," Health Economics, John Wiley & Sons, Ltd., vol. 13(2), pages 191-198, February.

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