15.1.2  Economics and economic evaluation

Economics is the study of the optimal allocation of limited resources for the production of benefit to society (Samuelson 2005). Resources are human time and skills, equipment, premises, energy and any other inputs required to implement and sustain a given course of action (e.g. referral of an individual patient to a programme of healthcare treatment, and subsequent management of sequelae and complications). Health economics studies are defined here as full economic evaluation studies, partial economic evaluation studies, and single effectiveness studies that include more limited information relating to the description, measurement or valuation of resource use associated with interventions.


Full economic evaluation is the comparative analysis of alternative courses of action in terms of both costs (resource use) and consequences (outcomes, effects) (Drummond 2005). This definition distinguishes full economic evaluation from economic analyses which focus solely on costs and resource use, or partial economic evaluations. Full economic evaluation is not a single research method; it is a framework for structuring specific decision problems. This means that the appropriate type of full economic evaluation, and thus the approach to data collection and analysis, is determined primarily by the decision problem, or economic question, at issue and the viewpoint of the decision maker (see also Section 15.2.1). Full economic evaluation studies aim to describe, measure and value all relevant alternative courses of action (e.g. intervention X versus comparator Y), their resource inputs and consequences. Cost-benefit analysis (CBA) falls into this category. Some approaches fall short of full valuation of all consequences, but are still considered full economic evaluations, including cost-effectiveness analysis (CEA) and cost-utility analysis (CUA). All types of full economic evaluation use a marginal approach to analysis. In other words, they aim to produce measures of incremental resource use, costs and/ or cost-effectiveness. Brief descriptions of CEA, CUA and CBA are provided in Box 15.1.b (see also Chapter 2 of Drummond (Drummond 2005)).


Other types of studies of the use of healthcare resources do not make explicit comparisons between alternative interventions in terms of both costs (resource use) and consequences (effects). Such studies are not considered to be full economic evaluations but are known instead as partial economic evaluations. Partial economic evaluations can contribute useful evidence to an understanding of economic aspects of interventions. Health economics studies considered to be partial economic evaluations include cost analyses, cost-description studies and cost-outcome descriptions. In addition to full and partial economic evaluations, randomized trials and other types of single effectiveness studies may include more limited information relating to the description, measurement or valuation of resource use associated with interventions. Whilst the inclusion of this type of information may not always constitute a full or partial economic evaluation approach, it may still nevertheless contribute useful evidence to an understanding of economic aspects of interventions.


Economic evaluation studies both use, and are used in, systematic reviews of the effects of interventions. First, systematic reviews may include an economic component that incorporates a critical review of published and unpublished health economics studies (see Section 15.1.3). Second, as well as the increasing numbers of full and partial economic evaluations conducted alongside (and incorporating) single effectiveness studies, such as randomized trials (Maynard 2000, Neumann 2005), full economic evaluations are also increasingly based upon evidence of effects compiled using systematic review methods. Indeed, all of the types of full economic evaluation described above (CEAs, CUAs, CBAs) can be conducted alongside, and incorporating, a systematic review of effects, including use of a decision-analysis approach for pooling or modelling the available evidence on intervention costs and effects (Briggs 2006). Economic evaluation can be seen in this context as a further layer of evidence synthesis building on the systematic review process.


Cochrane reviews and other systematic reviews can therefore provide a useful source of data to inform subsequent, or parallel, full economic evaluation modelling exercises whether or not the review incorporates further coverage of economic aspects of interventions. In particular, a well-conducted meta-analysis of data on effect-size, adverse effects and complications assembled using a systematic review of randomized trials has been proposed as the least-biased source of data to inform effect-size and adverse effects parameters in an economic model (Cooper 2005). This needs to be supplemented by additional systematic searches of appropriate data sources to inform ranges of values for the other key parameters in the cost-effectiveness formula or economic model (Weinstein 2003, Philips 2004, Cooper 2005)