The pharmacoeconomic methods of evaluation are listed in Figure 1. These methods or tools can be separated into two distinct categories: economic and humanistic evaluation techniques.

Economic Evaluation

Figure 1 Components of pharmacoeconomics.


The basic task of economic evaluation is to identify, measure, value, and compare the costs and consequences of the alternatives being considered.

Basic concepts

Costs: Cost is defined as the value of the resources consumed by a program or drug therapy of interest. Example of healthcare cost include direct medical costs, direct nonmedical costs, indirect costs, intangible costs, opportunity costs, and incremental costs.

Consequence (or outcome): Consequence is defined as the effects, outputs, or outcomes of the program or drug therapy of interest.

Consequences can be categorized as positive or negative.

Consequences also can be discussed in terms of intermediate and final outcomes.

Outcomes can be separate into three categories: economic, clinical, and humanistic. Economic outcomes are the direct, indirect, and intangible costs compared with the consequences of medical treatment alternatives. Clinical outcomes are the medical events that occur as a result of disease or treatment. Humanistic outcomes are the consequences of disease or treatment on patient functional status or quality of life along several dimensions.

Economic Evaluation Methods

There are four types of economic evaluation methods shown in Table 1.

Table 1 Summary of Pharmacoeconomic Methodologies

Table 1-2 Summary of Pharmacoeconomic Methodologies
MethodDescriptionApplicationCost UnitOutcome Unit
COIEstimates the cost of a disease on a defined populationUse to provide baseline to compare prevention/treatment options against$$$NA
CMAFinds the least expensive cost alternativeUse when benefits are the same$$$Assume to be equivalent
CBAMeasures benefit in monetary units and computes a net gainCan compare programs with different objectives$$$$$$
CEACompares alternatives with therapeutic effects measured in physical units; computes a cost-effectiveness ratioCan compare drugs/programs that differ inclinical outcomes and use the same unit of benefit$$$Natural units
CUAMeasures therapeutic consequences in utility units rather than physical units; computes a cost-utility ratioUse to compare drugs/programs that are life extending with serious side effects or those producing reductions in morbidity$$$QALYs
QOLPhysical, social, and emotional aspects of patient’s well-being that are relevant and important to the patientExamines drug effects in areas not covered by laboratory or physiologic measurementsNAQOL score


Humanistic Evaluation

Methods for humanistic evaluation including the assessment for QoL (quality of life), patient preferences, and patient satisfaction.

Basic concepts

Humanistic Outcomes: Humanistic outcomes are the consequences of the disease and/or its treatment as perceived and reported by the patient.

Health-Related Quality of Life (HRQoL): HRQoL is defined as the subjective assessment of the impact of a disease and treatment across the physical, psychological, social, and somatic domains of functioning and well-being. HRQoL include three domains which are (1) physical health and functioning;(2) mental/emotional health and functioning;(3) social and role functioning.

Humanistic Evaluation Methods (Quality of Life)

Table 2 provides a taxonomy of the different types of instrument of HRQoL.

Table 2 Taxonomy of Health-Related Quality of Life Instruments

TABLE 2-1 Taxonomy of Health-Related Quality of Life Instruments
Generic instruments
Health profiles
Preference-based measures
Specific instruments
Disease specific (e.g., diabetes)
Population specific (e.g., frail older adults)
Function specific (e.g., sexual functioning)
Condition or problem specific (e.g., pain)


Here three methods are used to measure health state preferences directly. They are (1) Visual Analog Scales;(2) Standard Gamble;and (3) Time Trade-Off.

Visual Analog Scales (VAS)

The VAS is a line, typically 10 to 20 cm in length, with the end points well-defined (e.g., 0 = worst imaginable heath state and 100 = best imaginable heath state). The respondent is asked to mark the line where he or she would place a real or hypothetical health state in relation to the two end points. In addition, because death may not always be considered the worst possible health state, the subject’s placement of death on the scale in relation to the other health states must be explicitly elicited. If a subject has placed death at 0 and rates a health state at the midpoint between 0 and 100 on the scale, that subject’s preference for that health state is 0.5.

Standard Gamble

The standard gamble offers a choice between two alternatives: choice A, living in health state i with certainty, or choice B, taking a gamble on a new treatment for which the outcome is uncertain.

Figure 2 shows this gamble. The subject is told that hypothetical treatment will lead to perfect health, for a defined remaining lifetime, with a probability of P or immediate death with a probability of 1 – P. The subject can choose between remaining, for the same defined lifetime, in state i, which is intermediate between healthy and dead, or taking the gamble and trying the new treatment. The probability P is varied until the subject is indifferent between choices A and B. For example, if a subject is indifferent between the choices A and B when P = 0.75, the preference of state i is 0.75.

Figure 2 The Standard Gamble


Time Trade-Off

Figure 3 represents the time trade-off (TTO) technique for a chronic disease state. Here, the subject is offered a choice living for a variable amount of time x in perfect health or a defined amount of time t in a health state i that is less desirable. By reducing the time x of being healthy (at 1.0) and leaving the time t in the suboptimal health state fixed, an indifference point can be determined (hi = x/t). For example, a subject may indicate that undergoing chronic hemodialysis for 2 years is equivalent to perfect health for 1 year. Therefore, the value of that health state would be 0.5.

Figure 3 Time Trade-Off