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Methodological Considerations in Cost-Effectiveness Analysis


  • Demissie Alemayehu

    () (Columbia University and Pfizer Inc)


In decision making regarding optimal resource allocation to safeguard public health, policymakers and healthcare providers rely on the availability and reliability of data about the relative costs and benefits of competing treatment options. One such an approach is based on cost effectiveness analysis (CEA) which is intended to be used as a combined metric of both the costs and health outcomes of alternative intervention strategies. However, the usual measures used in CEA are not readily analyzable based on standard statistical paradigms for inference. Further, reliable data may not always be available to estimate relevant parameters. Accordingly, it is essential to employ nonstandard procedures to compensate for information gaps and to address inferential difficulties. In this paper, we outline the issues associated with some of the commonly used techniques, with particular emphasis on the so-called network meta-analysis and indirect comparisons. Additional reference is made to the complexities introduced when data are used from observational studies. It is concluded that effective use of CEA in healthcare policy presupposes a careful appreciation of the underlying issues, and implementation of robust remedial measures to mitigate their impacts.

Suggested Citation

  • Demissie Alemayehu, 2014. "Methodological Considerations in Cost-Effectiveness Analysis," Proceedings of Economics and Finance Conferences 0401651, International Institute of Social and Economic Sciences.
  • Handle: RePEc:sek:iefpro:0401651

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    References listed on IDEAS

    1. Daniel Polsky & Henry A. Glick & Richard Willke & Kevin Schulman, 1997. "Confidence Intervals for Cost–Effectiveness Ratios: A Comparison of Four Methods," Health Economics, John Wiley & Sons, Ltd., vol. 6(3), pages 243-252, May.
    2. Peter Wakker & Marc P. Klaassen, 1995. "Confidence intervals for cost/effectiveness ratios," Health Economics, John Wiley & Sons, Ltd., vol. 4(5), pages 373-381, September.
    3. J.Jaime Caro & K. Ishak, 2010. "No Head-to-Head Trial? Simulate the Missing Arms," PharmacoEconomics, Springer, vol. 28(10), pages 957-967, October.
    4. Andrew H. Briggs & David E. Wonderling & Christopher Z. Mooney, 1997. "Pulling cost‐effectiveness analysis up by its bootstraps: A non‐parametric approach to confidence interval estimation," Health Economics, John Wiley & Sons, Ltd., vol. 6(4), pages 327-340, July.
    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.
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    Cited by:

    1. Radka MacGregor Pelikanova, 2015. "European Quartet of Missed Opportunities for Internet Governance," Proceedings of International Academic Conferences 2604525, International Institute of Social and Economic Sciences.

    More about this item


    Cost-Effectiveness Analysis; Network Meta-analysis; Indirect Comparisons; Health Economics;

    JEL classification:

    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General


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