Assume that the (status quo) rate of cardiovascular event is constant at 7% (ann

Question

Assume that the (status quo) rate of cardiovascular event is constant at 7% (annual chance of having cardiovascular event). When a cardiovascular event occurs, there is 60% chance that person dies (hence 40% chance that person will survive). The article cited the clinical evidence that the drug can reduce the rate of cardiovascular events by 50%.

A)Use the list price for the drug ($14,600), calculate the expected life-time cost of the therapy?

B) Assume that each saved life year worth $50,000 (for example https://en.wikipedia.org/wiki/Cost%E2%80%93utility_analysis). Is the drug cost effective compared with the status quo?

Explanation / Answer

(a ) List price of the drug = $14,600

Expected life-time cost of the therapy per year = $14,600 * 0.123 = $1795.8

(b) Saved life year worth = $50,000

List price of the drug per year = $14,600

Expected cost when no drug use = $50,000*0.6 = $30,000

Expected cost when drug use = $50,000*0.123 = $6150

Total cost when drug use = $14,600 + $6150 = $20,750

Since, total cost when drug use is less than expected cost when no drug use, the drug is cost effective compared with the status quo.

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