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Statistical Inference for Cost–Effectiveness Ratios


  • Eugene M. Laska
  • Morris Meisner
  • Carole Siegel


Methods for statistical inference for cost–effectiveness (C/E) ratios for individual treatments and for incremental cost–effectiveness (ΔC/ΔE) ratios when two treatments are compared are presented. In a lemma, we relate the relative magnitude of two C/E ratios to the ΔC/ΔE ratio. We describe a statistical procedure to test for dominance, or admissibility, that can be used to eliminate an inferior treatment. The one‐sided Bonferroni's confidence interval procedure is generalized to the two‐ sided case. The method requires only that two confidence intervals be available, one for cost and one for effectiveness. We describe Fieller‐based confidence intervals and show them to be shorter than Bonferroni intervals. When distribution assumptions hold and variance and covariance estimates are available, Fieller intervals are preferable. However, Bonferroni intervals can be applied in more diverse situations and are easier to calculate. A simple Bonferroni based technique, and a likelihood ratio statistic given by Siegel, Laska and Meisner, for testing the null hypothesis that the C/E ratios of two treatments are equal is presented. The approaches are applied to the data from a phase II clinical trial of a new treatment for sepsis considered previously by others. © 1997 by John Wiley & Sons, Ltd.

Suggested Citation

  • 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.
  • Handle: RePEc:wly:hlthec:v:6:y:1997:i:3:p:229-242
    DOI: 10.1002/(SICI)1099-1050(199705)6:3<229::AID-HEC268>3.0.CO;2-M

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    Cited by:

    1. Pieter H. M. van Baal & Talitha L. Feenstra & Rudolf T. Hoogenveen & G. Ardine de Wit & Werner B. F. Brouwer, 2007. "Unrelated medical care in life years gained and the cost utility of primary prevention: in search of a ‘perfect’ cost–utility ratio," Health Economics, John Wiley & Sons, Ltd., vol. 16(4), pages 421-433, April.
    2. Maiwenn J. Al & Talitha L. Feenstra & Ben A. van Hout, 2005. "Optimal allocation of resources over health care programmes: dealing with decreasing marginal utility and uncertainty," Health Economics, John Wiley & Sons, Ltd., vol. 14(7), pages 655-667, July.
    3. Joseph C. Gardiner & Marianne Huebner & James Jetton & Cathy J. Bradley, 2000. "Power and sample assessments for tests of hypotheses on cost‐effectiveness ratios," Health Economics, John Wiley & Sons, Ltd., vol. 9(3), pages 227-234, April.
    4. Ernst, Richard, 2017. "Theories of Health Care Cost-Effectiveness Analysis," SocArXiv gjbcp, Center for Open Science.
    5. 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.
    6. Etzioni, Ruth D. & Feuer, Eric J. & Sullivan, Sean D. & Lin, Danyu & Hu, Chengcheng & Ramsey, Scott D., 1999. "On the use of survival analysis techniques to estimate medical care costs," Journal of Health Economics, Elsevier, vol. 18(3), pages 365-380, June.
    7. Phillip Dinh & Xiao-Hua Zhou, 2006. "Nonparametric Statistical Methods for Cost-Effectiveness Analyses," Biometrics, The International Biometric Society, vol. 62(2), pages 576-588, June.
    8. F. J. Vázquez‐Polo & M. A. Negrín Hernández & B. González López‐Valcárcel, 2005. "Using covariates to reduce uncertainty in the economic evaluation of clinical trial data," Health Economics, John Wiley & Sons, Ltd., vol. 14(6), pages 545-557, June.
    9. 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.
    10. Daniel F. Heitjan & Alan J. Moskowitz & William Whang, 1999. "Bayesian estimation of cost‐effectiveness ratios from clinical trials," Health Economics, John Wiley & Sons, Ltd., vol. 8(3), pages 191-201, May.
    11. Martin W. McIntosh & Scott D. Ramsey & Kristin Berry & Nicole Urban, 2001. "Parameter solicitation for planning cost effectiveness studies with dichotomous outcomes," Health Economics, John Wiley & Sons, Ltd., vol. 10(1), pages 53-66, January.
    12. Morris Meisner & Eugene M. Laska & Carole Siegel & Joseph Wanderling, 2002. "The familywise error rate of a simultaneous confidence band for the incremental net health benefit," Health Economics, John Wiley & Sons, Ltd., vol. 11(3), pages 275-280, April.
    13. Andrew H. Briggs & Bernie J. O'Brien, 2001. "The death of cost‐minimization analysis?," Health Economics, John Wiley & Sons, Ltd., vol. 10(2), pages 179-184, March.
    14. Daniel F. Heitjan, 2000. "Fieller's method and net health benefits," Health Economics, John Wiley & Sons, Ltd., vol. 9(4), pages 327-335, June.
    15. Demissie Alemayehu, 2014. "Methodological Considerations in Cost-Effectiveness Analysis," Proceedings of Economics and Finance Conferences 0401651, International Institute of Social and Economic Sciences.
    16. Anthony O’Hagan & John Stevens & Jacques Montmartin, 2000. "Inference for the Cost-Effectiveness Acceptability Curve and Cost-Effectiveness Ratio," PharmacoEconomics, Springer, vol. 17(4), pages 339-349, April.
    17. Anthony O'Hagan & John W. Stevens, 2001. "A framework for cost‐effectiveness analysis from clinical trial data," Health Economics, John Wiley & Sons, Ltd., vol. 10(4), pages 303-315, June.

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