title: Quality-adjusted cost of care: a meaningful way to measure growth in innovation cost versus the value of health gains.
abstract: Technology drives both health care spending and health improvement. Yet policy makers rarely see measures of cost growth that account for both effects. To fill this gap, we present the quality-adjusted cost of care, which illustrates cost growth net of growth in the value of health improvements, measured as survival gains multiplied by the value of survival. We applied the quality-adjusted cost of care to two cases. For colorectal cancer, drug cost per patient increased by $34,493 between 1998 and 2005 as a result of new drug launches, but value from offsetting health improvements netted a modest $1,377 increase in quality-adjusted cost of care. For multiple myeloma, new therapies increased treatment cost by $72,937 between 2004 and 2009, but offsetting health benefits lowered overall quality-adjusted cost of care by $67,863. However, patients with multiple myeloma on established first-line therapies saw costs rise without corresponding benefits. All three examples document rapid cost growth, but they provide starkly different answers to the question of whether society got what it paid for.
authors.affiliation: Darius Lakdawalla (dlakdawa@usc.edu) is the Quintiles Professor of Pharmaceutical Development and Regulatory Innovation at the Schaeffer Center for Health Policy and Economics, University of Southern California, in Los Angeles.
authors.forename: Darius
authors.initials: D
authors.lastname: Lakdawalla
authors.affiliation: Jason Shafrin is a senior research economist at Precision Health Economics, in Los Angeles.
authors.forename: Jason
authors.initials: J
authors.lastname: Shafrin
authors.affiliation: Claudio Lucarelli is a professor of economics at Universidad de los Andes, in Santiago, Chile.
authors.forename: Claudio
authors.initials: C
authors.lastname: Lucarelli
authors.affiliation: Sean Nicholson is a professor in the Department of Policy Analysis and Management at Cornell University, in Ithaca, New York.
authors.forename: Sean
authors.initials: S
authors.lastname: Nicholson
authors.affiliation: Zeba M. Khan is vice president of Corporate Responsibility at Celgene Corporation, in Summit, New Jersey.
authors.forename: Zeba M
authors.initials: ZM
authors.lastname: Khan
authors.affiliation: Tomas J. Philipson is the Daniel Levin Professor of Public Policy at the Irving B. Harris Graduate School for Public Policy Studies, University of Chicago, in Illinois.
authors.forename: Tomas J
authors.initials: TJ
authors.lastname: Philipson
mesh_terms: D015179:Colorectal Neoplasms / Q000188:drug therapy / Q000191:economics; D003362:Cost-Benefit Analysis; D016527:Drug Costs / Q000639:trends; D017048:Health Care Costs; D006801:Humans; D009101:Multiple Myeloma / Q000188:drug therapy / Q000191:economics; D019057:Quality-Adjusted Life Years; D035703:Therapies, Investigational / Q000191:economics*
keywords: Cost of Health Care; Health Economics; Health Spending
references.citation: Lancet. 2009 Jul 25;374(9686):324-39
references.pmid: 19541364
references.citation: Health Econ. 2014 Jul 28;:null
references.pmid: 25070495
references.citation: J Clin Psychiatry. 2006 Aug;67(8):1194-203
references.pmid: 16965196
references.citation: Eur J Health Econ. 2013 Jun;14(3):507-14
references.pmid: 22572968
references.citation: J Natl Cancer Inst. 2008 May 7;100(9):630-41
references.pmid: 18445825
references.citation: Leuk Lymphoma. 2013 Aug;54(8):1658-64
references.pmid: 23194056
references.citation: J Med Econ. 2013;16(5):614-22
references.pmid: 23281721