Cost categorization: direct, indirect and intangible costs MCQs With Answer

Introduction: This quiz set on cost categorization — direct, indirect and intangible costs — is designed for M.Pharm students specializing in Pharmacoepidemiology & Pharmacoeconomics. It clarifies how different cost types are defined, measured and applied in economic evaluations of health interventions. Questions explore classification (direct medical, direct non‑medical, indirect), valuation methods (human capital, friction cost, willingness‑to‑pay), measurement instruments for intangible effects (utilities, QALYs, EQ‑5D), and practical calculation/interpretation scenarios. Completing these MCQs will strengthen your ability to identify relevant costs by perspective (societal, payer, provider), select appropriate valuation approaches, and apply concepts to real‑world pharmacoeconomic analyses.

Q1. Which of the following best describes an indirect cost in pharmacoeconomic analysis?

• Out‑of‑pocket payment for a drug purchased at a pharmacy
• Wages lost by a patient because of illness‑related absence from work
• Cost of diagnostic tests performed in hospital
• Travel expenses to attend clinic visits

Correct Answer: Wages lost by a patient because of illness‑related absence from work

Q2. Which item is an example of an intangible cost?

• Hospital bed charges
• Transportation to the hospital
• Pain, suffering and loss of quality of life
• Cost of laboratory reagents

Correct Answer: Pain, suffering and loss of quality of life

Q3. How would you classify informal caregiver time (family member providing unpaid care) in most societal cost analyses?

• Direct medical cost
• Direct non‑medical cost
• Indirect cost (productivity loss)
• Intangible cost

Correct Answer: Indirect cost (productivity loss)

Q4. Which statement correctly contrasts the human capital and friction cost approaches to valuing productivity losses?

• Human capital values only short unemployment spells; friction cost values lifetime earnings lost
• Human capital values full future earnings lost until retirement; friction cost counts losses only until a replacement is productive
• Both approaches always produce identical monetary estimates
• Friction cost assumes zero replacement costs while human capital assumes immediate replacement

Correct Answer: Human capital values full future earnings lost until retirement; friction cost counts losses only until a replacement is productive

Q5. Which valuation method is most commonly used to monetize intangible costs like pain and suffering?

• Contingent valuation / willingness‑to‑pay (WTP)
• Counting direct medical bills
• Depreciation schedules for capital equipment
• Market price of drugs

Correct Answer: Contingent valuation / willingness‑to‑pay (WTP)

Q6. From which analytic perspective are indirect and intangible costs typically included comprehensively?

• Payer perspective that includes only insurer payments
• Hospital perspective limited to departmental budgets
• Societal perspective that captures all costs regardless of payer
• Manufacturer perspective focused on production costs

Correct Answer: Societal perspective that captures all costs regardless of payer

Q7. A patient misses 15 workdays due to illness. Average daily wage is Rs. 500. Using the human capital approach, what is the indirect cost of lost productivity for that episode?

• Rs. 1,500
• Rs. 7,500
• Rs. 15,000
• Rs. 500

Correct Answer: Rs. 7,500

Q8. Which of the following is classified as a direct non‑medical cost?

• Cost of the antihypertensive drug
• Wages lost by employer due to employee absence
• Transport fare to clinic appointments
• Pain and emotional distress from disease

Correct Answer: Transport fare to clinic appointments

Q9. In a cost‑utility analysis that uses QALYs, how are intangible effects (pain, discomfort) typically incorporated?

• They are included as separate monetary costs in the cost column
• They are reflected in utility weights used to calculate QALYs (outcome side)
• They are ignored because CUA only uses direct costs
• They are captured through hospital billing codes

Correct Answer: They are reflected in utility weights used to calculate QALYs (outcome side)

Q10. What does presenteeism refer to in productivity loss measurement?

• Employee absence from work due to illness
• Reduced work performance while at work because of illness
• Permanent disability leading to workforce exit
• Unrelated voluntary overtime work

Correct Answer: Reduced work performance while at work because of illness

Q11. Should future costs and future health outcomes (including intangible effects) be discounted in economic evaluations?

• No — only past costs are discounted
• Yes — future costs and outcomes are typically discounted to present value
• No — discounting applies only to capital items
• Yes, but only for intangible costs, not for direct costs

Correct Answer: Yes — future costs and outcomes are typically discounted to present value

Q12. Which of the following is an example of a sunk cost that should generally be excluded from incremental cost analysis?

• Cost of additional drug doses required for the new intervention
• Past R&D expenditures already incurred to develop a drug
• Staff time specifically required to deliver the new program
• Consumables used during treatment visits

Correct Answer: Past R&D expenditures already incurred to develop a drug

Q13. Which cost is an example of a capital cost in a healthcare provider’s budget?

• Annual salary of nurses
• Monthly purchase of disposable syringes
• Purchase of an MRI scanner
• Electricity bill for the clinic

Correct Answer: Purchase of an MRI scanner

Q14. When valuing informal caregiver time by the opportunity cost method, how is the caregiver’s time usually monetized?

• At the market price of the medical device they use
• Using the caregiver’s forgone wages or the value of alternative activities
• By the hospital’s billing rate for nursing time
• By depreciating household assets

Correct Answer: Using the caregiver’s forgone wages or the value of alternative activities

Q15. Which of the following would most likely be captured as an intangible cost rather than a direct cost?

• Cost of chemotherapy drug
• Physiotherapy session fee
• Emotional distress and reduced life satisfaction due to chronic illness
• Ambulance charges

Correct Answer: Emotional distress and reduced life satisfaction due to chronic illness

Q16. If you perform an economic evaluation from the hospital’s perspective, which categories of cost are routinely included?

• Only direct medical costs borne by the hospital (e.g., beds, staff, consumables)
• All societal costs including patient productivity losses
• Only intangible costs such as pain and suffering
• Only indirect costs such as national productivity losses

Correct Answer: Only direct medical costs borne by the hospital (e.g., beds, staff, consumables)

Q17. Which approach typically yields a lower estimate of productivity loss in economic evaluations?

• Human capital approach
• Friction cost approach
• Value of statistical life approach
• Gross national product adjustment

Correct Answer: Friction cost approach

Q18. Which standardized instrument is commonly used to generate utility weights (used to quantify intangible health effects) for QALY calculations?

• EQ‑5D
• WHO drug formulary
• Hospital accounting ledger
• Pharmacy refill database

Correct Answer: EQ‑5D

Q19. In incremental cost analysis, what does “incremental cost” mean?

• Total cost of an intervention regardless of comparator
• Difference in costs between two competing interventions
• Average cost per patient in the treatment arm
• Cost of medication only

Correct Answer: Difference in costs between two competing interventions

Q20. Which statement is true regarding direct costs in pharmacoeconomic studies?

• Direct costs refer exclusively to intangible outcomes like pain
• Direct costs include both direct medical (e.g., drugs, procedures) and direct non‑medical (e.g., transport) expenditures
• Direct costs are the same as societal productivity losses
• Direct costs are always excluded from payer perspective analyses

Correct Answer: Direct costs include both direct medical (e.g., drugs, procedures) and direct non‑medical (e.g., transport) expenditures

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