Cost‐Effectiveness Analysis, Health‐Care Policy, and Operations Research Models

Abstract Cost‐effectiveness analysis is often used to formally investigate the trade‐offs between the economic costs and the health consequences of new medical technologies. Starting with Ontario and Australia in the early 1990s, many public sector drug plans began requiring cost‐effectiveness estimates for all new drugs prior to their approval for reimbursement. Owing to the difficulties in obtaining cost‐effectiveness estimates directly from clinical trials, many cost‐effectiveness estimates are obtained using decision‐analytic and Monte Carlo simulation models. In this article, we give a brief overview of cost‐effectiveness analysis in health care; we discuss some of the types of models that are commonly used and we give a description of how cost‐effectiveness analysis is used in health policy decision making in three different jurisdictions.