Intended for healthcare professionals

Education And Debate Economics notes

Economic evaluation: an introduction

BMJ 1998; 316 doi: (Published 28 March 1998) Cite this as: BMJ 1998;316:1013
  1. James Raftery, director
  1. Health Economics Facility, Health Services Management Centre, University of Birmingham, Birmingham B15 2RT

    This is the first in a series of occasional notes on economics

    Economic evaluation has increasingly become part of modern health care. Rising costs, often associated with new technologies, and spending limits have prompted a search for greater efficiency. This need to demonstrate the relative cost effectiveness of new health technologies has led some countries, specifically Australia,1 to make economic evaluation a requirement for public sector funding of new drugs. Furthermore, the American state of Oregon used economic evaluation in defining what services should be included in Medicare (although the rationing eventually implemented relied mainly on effectiveness rather than cost effectiveness2). This growing requirement to demonstrate the efficiency of new technologies means that economic evaluation is increasingly specified in research grants from both the NHS3 and pharmaceutical companies.

    Economic theory, which takes private markets and rational individual decision making as the norm, has developed techniques—primarily cost benefit analysis —to evaluate programmes funded by the public sector. As the earliest forms of cost benefit analysis measured both …

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