Q-1

Given this information, answer the following questions.

Cost Effectiveness

Current Treatment $100,000 4 life-years gained

New Treatment $250,000 10 life-years gained

A. Calculate the ICER for the new treatment, assuming that the new treatment would replace the old one.

B. In what quadrant is the ICER located in Figure 3-4? Is cost effectiveness analysis relevant?

C. How does the answer change if the cost of the new treatment equals $75,000?

Q- 2 According to Chase (1993), TPA, a heart drug produced by Genentech Inc., costs ten times more at $2,200 a dose than streptokinase, an alternative heart drug sold by Astra AB and Kabi Farmacia AB of Sweden and by Hoechst AG of Germany. A trial of 41,000 heart attack patients found that the TPA treatment saves 1 more life out of 100 than streptokinase does. Assume that a person pays full cost for either drug and chooses TPA over streptokinase. Another otherwise identical person makes the opposite choice. Use the willingness-to-pay approach to calculate the difference in the value of their lives (assume that dosage requirements are the same).