Question

The following information has been gathered on the costs and effectiveness of the two treatments, A and B. In this problem, costs and consequences are not discounted.

	Treatment A	Treatment B
Mortality rate	2%	5%
Life expectancy for survivors	30 years	20 years
Initial treatment cost	$20,000	$10,000
Follow up costs, year 1	$5,000	$1,000
Annual follow up costs, all subsequent years	$1,000	$500

1. Calculate the incremental cost and incremental benefit of the treatment alternatives.

DC =

DE =

2. What is the ICER?

ICER = DC/DE =

Answer 1

DC means the difference in the cost of the two treatments.

So we calculate the cost of treatment A first

Cost = 20000 + 5000 + 1000* 29 (because life expectancy is 30 years)

= 54000

Cost of treatment B = 10000+ 1000 + 500*19

= 20500

DC= 54000 - 20500 = 33500 $

DE stands for difference in effectiveness .

DE = 5-2 = 3

ICER = DC/DE = 33500/3 = 11166.7 $ per percent

So ICER is 11166.7 $ per percent mortality .

So it means treatment A decreases mortality by 1% for 11166.7$ extra cost.