MCQ Quiz: Cost-Benefit Analysis

Welcome, PharmD students, to this enlightening MCQ quiz on Cost-Benefit Analysis (CBA)! Unlike other pharmacoeconomic methods, CBA takes the unique approach of measuring both the costs and the benefits of healthcare interventions in monetary terms. This allows for the assessment of whether a program’s economic benefits outweigh its costs, and facilitates comparisons across diverse programs with different types of outcomes. This quiz will test your understanding of the principles of CBA, methods for monetizing health benefits, calculation of net benefits and benefit-to-cost ratios, and its applications and limitations in healthcare decision-making. Let’s explore this comprehensive economic evaluation tool!

1. Cost-Benefit Analysis (CBA) is a pharmacoeconomic method that values both the costs and the consequences (benefits) of healthcare interventions in:

• a) Natural health units (e.g., life-years gained).
• b) Quality-Adjusted Life Years (QALYs).
• c) Monetary units (e.g., dollars).
• d) Clinical success rates only.

Answer: c) Monetary units (e.g., dollars).

2. The primary objective of a Cost-Benefit Analysis is to:

• a) Determine the least costly intervention among therapeutically equivalent options.
• b) Calculate the cost per unit of clinical effect (e.g., cost per mmHg reduced).
• c) Determine if the monetary value of an intervention’s benefits exceeds its costs, or to compare the net monetary benefit of different interventions.
• d) Measure patient preferences for different health states.

Answer: c) Determine if the monetary value of an intervention’s benefits exceeds its costs, or to compare the net monetary benefit of different interventions.

3. A key distinguishing feature of Cost-Benefit Analysis compared to Cost-Effectiveness Analysis (CEA) or Cost-Utility Analysis (CUA) is that CBA:

• a) Does not consider the costs of interventions.
• b) Measures health outcomes only in natural units.
• c) Assigns a monetary value to all health outcomes and other benefits.
• d) Assumes all compared interventions have equivalent outcomes.

Answer: c) Assigns a monetary value to all health outcomes and other benefits.

4. The “Human Capital” approach to valuing health benefits in a CBA primarily estimates the monetary value of health improvements based on:

• a) An individual’s willingness to pay for the health improvement.
• b) Increased productivity, earnings, or output resulting from better health or avoided illness/death.
• c) The cost of medications avoided.
• d) Patient satisfaction scores converted to dollars.

Answer: b) Increased productivity, earnings, or output resulting from better health or avoided illness/death.

5. The “Willingness-To-Pay” (WTP) approach in CBA attempts to value health benefits by determining:

• a) The actual medical expenses incurred by patients.
• b) How much individuals are hypothetically willing to pay for a health improvement or to avoid a health risk.
• c) The lost wages due to sickness.
• d) The cost of developing a new drug.

Answer: b) How much individuals are hypothetically willing to pay for a health improvement or to avoid a health risk.

6. A result of a CBA can be expressed as a Net Benefit (or Net Present Value). A positive Net Benefit indicates that:

• a) The costs of the intervention exceed its monetary benefits.
• b) The monetary benefits of the intervention exceed its costs.
• c) The intervention is clinically ineffective.
• d) The intervention has no associated costs.

Answer: b) The monetary benefits of the intervention exceed its costs. (Net Benefit = Total Benefits – Total Costs)

7. Another common way to present the results of a CBA is the Benefit-to-Cost Ratio (BCR). An intervention is generally considered economically worthwhile if its BCR is:

• a) Less than 0.
• b) Equal to 0.
• c) Less than 1.
• d) Greater than 1.

Answer: d) Greater than 1. (BCR = Total Benefits / Total Costs)

8. Cost-Benefit Analysis is particularly useful for:

• a) Comparing interventions when outcomes are identical.
• b) Comparing programs with very different types of outcomes (e.g., a health program vs. an education program) because all outcomes are converted to monetary values.
• c) Only when quality of life is the primary outcome.
• d) When costs are impossible to measure.

Answer: b) Comparing programs with very different types of outcomes (e.g., a health program vs. an education program) because all outcomes are converted to monetary values.

9. A major challenge and ethical concern associated with Cost-Benefit Analysis is:

• a) Its inability to compare interventions with different outcomes.
• b) The difficulty and controversy of placing an explicit monetary value on human life, health, pain, and suffering.
• c) Its failure to incorporate costs into the analysis.
• d) Its over-reliance on QALYs.

Answer: b) The difficulty and controversy of placing an explicit monetary value on human life, health, pain, and suffering.

10. If a vaccination program costs $1,000,000 and is estimated to provide healthcare cost savings and productivity gains valued at $1,500,000, the Net Benefit is:

• a) -$500,000
• b) $500,000
• c) $1,500,000
• d) $2,500,000

Answer: b) $500,000 ($1,500,000 – $1,000,000)

11. Using the scenario from Q10 (Costs=$1M, Benefits=$1.5M), the Benefit-to-Cost Ratio is:

• a) 0.67
• b) 1.0
• c) 1.5
• d) 2.5

Answer: c) 1.5 ($1,500,000 / $1,000,000)

12. The perspective from which a CBA is conducted (e.g., societal, employer, government) will significantly influence:

• a) Only the types of benefits included.
• b) Only the types of costs included.
• c) Both the types of costs and benefits included in the analysis.
• d) The discount rate used, but not costs or benefits.

Answer: c) Both the types of costs and benefits included in the analysis.

13. Which of the following would be considered a “benefit” (expressed in monetary terms) in a CBA of a smoking cessation program from a societal perspective?

• a) The cost of nicotine replacement therapy.
• b) Reduced future healthcare expenditures for smoking-related diseases.
• c) Increased lifespan valued monetarily.
• d) Both b and c.

Answer: d) Both b and c.

14. One limitation of the Human Capital approach for valuing life and health is that it may:

• a) Overvalue the health of individuals who are not in the paid workforce (e.g., children, elderly, homemakers).
• b) Undervalue the health of individuals who are not in the paid workforce or those in lower-paying jobs.
• c) Be too easy to calculate accurately.
• d) Only be applicable to direct medical costs.

Answer: b) Undervalue the health of individuals who are not in the paid workforce or those in lower-paying jobs.

15. Contingent Valuation is a survey-based method used in the _______ approach to elicit monetary values for health benefits.

• a) Human Capital
• b) Cost-of-Illness
• c) Willingness-To-Pay (WTP)
• d) Cost-Minimization

Answer: c) Willingness-To-Pay (WTP)

16. If a CBA results in a Benefit-to-Cost Ratio of 0.8 for a public health program, this suggests that:

• a) The program’s monetary benefits are greater than its costs.
• b) The program’s monetary costs are greater than its benefits, and it may not be economically justifiable on these grounds alone.
• c) The program is highly cost-effective.
• d) The program has no costs associated with it.

Answer: b) The program’s monetary costs are greater than its benefits, and it may not be economically justifiable on these grounds alone.

17. Unlike CEA or CUA where the outcome is a ratio (e.g., cost per LYG or cost per QALY), CBA can provide an absolute measure of:

• a) Clinical efficacy.
• b) Net monetary gain or loss.
• c) Patient preference.
• d) The number of people who will benefit.

Answer: b) Net monetary gain or loss.

18. When critiquing a CBA, it’s important to scrutinize the methods used for:

• a) Only identifying direct medical costs.
• b) Valuing health benefits in monetary terms, as these methods can be controversial and results sensitive to assumptions.
• c) Measuring QALYs.
• d) Calculating the ICER.

Answer: b) Valuing health benefits in monetary terms, as these methods can be controversial and results sensitive to assumptions.

19. Discounting is applied in CBA to future costs and benefits for the same reason as in other PE analyses: to account for time preference and:

• a) Make future benefits seem larger.
• b) The opportunity cost of capital.
• c) Only inflation.
• d) The number of patients in the study.

Answer: b) The opportunity cost of capital.

20. A key advantage of CBA that allows it to be used for broader resource allocation decisions (even outside of healthcare) is its ability to:

• a) Measure outcomes in QALYs.
• b) Express both costs and all types of benefits in a common unit (money), facilitating direct comparison of net benefit.
• c) Avoid the need to consider patient perspectives.
• d) Be the simplest type of pharmacoeconomic analysis to conduct.

Answer: b) Express both costs and all types of benefits in a common unit (money), facilitating direct comparison of net benefit.

21. Which of the following is an example of monetizing an “indirect benefit” in a CBA of a new asthma medication?

• a) Cost of the new asthma inhaler.
• b) Reduced number of hospitalizations, valued at the cost of those hospitalizations.
• c) Value of increased days able to work (reduced absenteeism) due to better asthma control.
• d) Improved lung function measured as FEV1.

Answer: c) Value of increased days able to work (reduced absenteeism) due to better asthma control.

22. If a CBA is conducted from the perspective of a hospital, which benefit would be LEAST likely to be directly included in its monetary calculation?

• a) Reduced length of stay for surgical patients due to a new protocol.
• b) Increased patient productivity in the community after discharge.
• c) Cost savings from preventing a hospital-acquired infection.
• d) Revenue generated from a new outpatient clinic service.

Answer: b) Increased patient productivity in the community after discharge. (This is a societal benefit).

23. Sensitivity analysis in CBA is used to determine how the _______ changes when key assumptions or estimates (e.g., monetary valuation of a life-year, discount rate) are varied.

• a) Clinical efficacy rate
• b) Net benefit or benefit-to-cost ratio
• c) Number of QALYs gained
• d) Patient satisfaction score

Answer: b) Net benefit or benefit-to-cost ratio

24. Which statement best describes the difference in outcome valuation between CBA and CUA?

• a) CBA uses natural units, while CUA uses monetary units.
• b) CBA values outcomes in monetary units, while CUA values outcomes in QALYs (utility-weighted life years).
• c) Both use QALYs, but CBA also includes costs.
• d) CBA ignores outcomes, focusing only on costs.

Answer: b) CBA values outcomes in monetary units, while CUA values outcomes in QALYs (utility-weighted life years).

25. The “cost-of-illness” (COI) method can sometimes be used as a component in CBA to estimate:

• a) The utility of a health state.
• b) The monetary benefits of preventing or curing a disease (by summing the direct and indirect costs that would be averted).
• c) The ICER.
• d) The appropriate discount rate.

Answer: b) The monetary benefits of preventing or curing a disease (by summing the direct and indirect costs that would be averted).

26. When an intervention has a benefit-to-cost ratio of 3:1, it means that:

• a) For every $1 spent, $3 in benefits are lost.
• b) For every $1 spent, $3 in benefits are gained.
• c) The costs are three times higher than the benefits.
• d) The intervention is not economically viable.

Answer: b) For every $1 spent, $3 in benefits are gained.

27. A major ethical argument against the Human Capital approach in CBA is that it might imply:

• a) The lives of unemployed individuals or those with lower earning potential are less valuable.
• b) All lives have infinite monetary value.
• c) Only direct medical costs should be considered.
• d) WTP is the only valid valuation method.

Answer: a) The lives of unemployed individuals or those with lower earning potential are less valuable.

28. When reviewing a CBA, if the WTP values used to monetize benefits are derived from a very small or unrepresentative sample, this would affect the study’s:

• a) Discount rate.
• b) Internal validity and generalizability of the benefit valuation.
• c) Calculation of direct medical costs.
• d) Time horizon.

Answer: b) Internal validity and generalizability of the benefit valuation.

29. The choice to use CBA over other methods like CEA or CUA often depends on whether decision-makers need to:

• a) Only know the cost per clinical success.
• b) Compare programs with disparate outcomes (e.g., health vs. education) or determine if a specific program’s benefits justify its costs in absolute monetary terms.
• c) Only consider patient preferences for quality of life.
• d) Avoid all monetary valuations.

Answer: b) Compare programs with disparate outcomes (e.g., health vs. education) or determine if a specific program’s benefits justify its costs in absolute monetary terms.

30. If a CBA concludes that a new drug program has a Net Benefit of -$10,000, it means:

• a) The program generates $10,000 more in benefits than costs.
• b) The program’s costs exceed its monetized benefits by $10,000.
• c) The drug is clinically ineffective.
• d) The discount rate was too high.

Answer: b) The program’s costs exceed its monetized benefits by $10,000.

31. One advantage of the WTP approach over the Human Capital approach for valuing health benefits is that WTP can potentially capture:

• a) Only lost wages.
• b) Both use-value (e.g., improved function) and non-use values (e.g., altruism, existence value) and can value benefits for non-working individuals.
• c) Only the cost of medications.
• d) The exact market price of health.

Answer: b) Both use-value (e.g., improved function) and non-use values (e.g., altruism, existence value) and can value benefits for non-working individuals.

32. When critiquing a CBA, it’s important that all assumptions made in monetizing benefits are:

• a) Hidden from the reader.
• b) Clearly stated, transparent, and justified with supporting evidence or rationale.
• c) Based on the highest possible estimates to favor the intervention.
• d) Identical across all CBA studies ever published.

Answer: b) Clearly stated, transparent, and justified with supporting evidence or rationale.

33. The “cost per benefit” is another way of expressing the result of a CBA, which is essentially the inverse of the:

• a) Net benefit.
• b) Benefit-to-cost ratio (if benefit is the denominator).
• c) Discount rate.
• d) QALY.

Answer: b) Benefit-to-cost ratio (if benefit is the denominator). (More commonly, cost-to-benefit ratio is used as C/B).

34. In CBA, “intangible benefits” like reduced pain and suffering, if monetized, are often derived using:

• a) Market prices for analgesics.
• b) Willingness-To-Pay (WTP) surveys.
• c) The human capital approach.
• d) The cost of hospital psychologists.

Answer: b) Willingness-To-Pay (WTP) surveys.

35. If a pharmacoeconomic analysis compares two drugs based on their cost and their ability to achieve a specific clinical target (e.g., target blood pressure), and all outcomes are valued in dollars, it is a:

• a) Cost-Minimization Analysis
• b) Cost-Effectiveness Analysis
• c) Cost-Benefit Analysis
• d) Cost-Utility Analysis

Answer: c) Cost-Benefit Analysis (If “achieving target blood pressure” is valued in dollars as a benefit).

36. One reason CBA is less frequently used in healthcare decision-making compared to CEA or CUA for evaluating specific drug therapies is:

• a) It is much easier to conduct accurately.
• b) The widespread ethical and methodological challenges in assigning monetary values to health and life.
• c) It never considers costs.
• d) It only applies to surgical interventions.

Answer: b) The widespread ethical and methodological challenges in assigning monetary values to health and life.

37. If a CBA is comparing building a new hospital wing versus implementing a community-wide vaccination program, the common unit for comparing their diverse benefits must be:

• a) QALYs
• b) Life-years gained
• c) Monetary value
• d) Number of patients served

Answer: c) Monetary value

38. The result of a CBA, such as a net positive benefit, suggests that the intervention is:

• a) Clinically superior to all alternatives.
• b) Economically efficient (i.e., benefits outweigh costs in monetary terms).
• c) Free of any adverse effects.
• d) The only option to consider.

Answer: b) Economically efficient (i.e., benefits outweigh costs in monetary terms).

39. When critiquing the “benefits” section of a CBA, it’s important to check if the study included:

• a) Only benefits to the pharmaceutical company.
• b) All relevant types of benefits (e.g., direct medical cost savings, indirect productivity gains, intangible benefits if valued) from the stated perspective.
• c) Only the easiest benefits to measure.
• d) Benefits that are not related to the intervention.

Answer: b) All relevant types of benefits (e.g., direct medical cost savings, indirect productivity gains, intangible benefits if valued) from the stated perspective.

40. The discount rate applied to benefits in a CBA should ideally be:

• a) Always higher than the discount rate for costs.
• b) Always lower than the discount rate for costs.
• c) The same as the discount rate applied to costs.
• d) Zero for all benefits.

Answer: c) The same as the discount rate applied to costs.

41. A CBA from a hospital perspective for a new infection control program might include which of the following as a monetized benefit?

• a) Improved national health statistics.
• b) Reduced costs associated with treating hospital-acquired infections (e.g., shorter stays, fewer antibiotics).
• c) Increased patient willingness to pay for parking.
• d) Lower community unemployment rates.

Answer: b) Reduced costs associated with treating hospital-acquired infections (e.g., shorter stays, fewer antibiotics).

42. A key assumption in the human capital approach is that an individual’s value to society is reflected by their:

• a) Quality of life.
• b) Earning capacity or productivity.
• c) Number of dependents.
• d) Healthcare utilization.

Answer: b) Earning capacity or productivity.

43. When using WTP to value benefits, the “hypothetical bias” refers to the potential that:

• a) Individuals state a higher willingness to pay in a survey than they would actually pay in a real situation.
• b) Individuals are unwilling to pay anything for health.
• c) The survey questions are too simple.
• d) Only wealthy individuals are surveyed.

Answer: a) Individuals state a higher willingness to pay in a survey than they would actually pay in a real situation.

44. If a CBA study clearly states its perspective, accurately measures all relevant costs and benefits in monetary terms from that perspective, and applies appropriate discounting and sensitivity analysis, it can be a valuable tool for:

• a) Determining the precise mechanism of action of a drug.
• b) Deciding whether the overall economic gains of a program justify its investment.
• c) Calculating QALYs.
• d) Only for academic exercises with no real-world application.

Answer: b) Deciding whether the overall economic gains of a program justify its investment.

45. Which statement is a potential advantage of CBA over CUA?

• a) CBA is ethically simpler because it avoids valuing life in QALYs.
• b) CBA can directly compare programs with entirely different kinds of benefits (e.g., health vs. environment) by using a common monetary metric.
• c) Utility values are easier to obtain than monetary values.
• d) CBA does not require discounting.

Answer: b) CBA can directly compare programs with entirely different kinds of benefits (e.g., health vs. environment) by using a common monetary metric.

46. When a pharmacist critiques a CBA of a new pharmacy service, they should consider if the “benefits” adequately capture:

• a) Only the reduction in medication dispensing time.
• b) Avoided hospitalizations, improved patient adherence leading to better outcomes, and potentially increased patient productivity, all valued monetarily.
• c) Only the increase in pharmacy revenue.
• d) The pharmacist’s job satisfaction.

Answer: b) Avoided hospitalizations, improved patient adherence leading to better outcomes, and potentially increased patient productivity, all valued monetarily.

47. “Shadow pricing” is a method sometimes used in CBA to estimate the monetary value of goods or benefits that:

• a) Have a clearly established market price.
• b) Do not have a direct market price (e.g., clean air, reduced suffering).
• c) Are always intangible.
• d) Are only direct medical costs.

Answer: b) Do not have a direct market price (e.g., clean air, reduced suffering).

48. If a CBA shows multiple interventions have a positive net benefit, decision-makers might choose the one with the:

• a) Lowest benefit-to-cost ratio.
• b) Highest net benefit or highest benefit-to-cost ratio, depending on budget constraints and other goals.
• c) Most complex calculations.
• d) Shortest study duration.

Answer: b) Highest net benefit or highest benefit-to-cost ratio, depending on budget constraints and other goals.

49. Understanding CBA helps pharmacists to:

• a) Compound all medications from scratch.
• b) Appreciate how economic value is assessed when health outcomes are monetized, and to critically evaluate such studies when they inform resource allocation or public health policy.
• c) Determine the chemical stability of drugs.
• d) Prescribe medications based on cost alone.

Answer: b) Appreciate how economic value is assessed when health outcomes are monetized, and to critically evaluate such studies when they inform resource allocation or public health policy.

50. The main reason a pharmacist might encounter or need to understand a CBA is if it’s used to justify funding for a new ________ that has broad societal or health system benefits beyond just clinical efficacy for individual patients.

• a) specific patient’s prescription
• b) public health program or large-scale health intervention
• c) pharmacy computer system upgrade
• d) brand of office supplies

Answer: b) public health program or large-scale health intervention