MCQ Quiz: Cost-Effective Analysis

In an era of escalating healthcare expenses and finite resources, clinical decisions can no longer be based on efficacy alone. This is where Cost-Effective Analysis (CEA) becomes an indispensable tool for the modern pharmacist. CEA is a type of pharmacoeconomic evaluation that compares the costs and health outcomes of two or more interventions. As future medication experts and healthcare leaders, PharmD students must master the principles of CEA to advocate for value-based improvements that benefit both patients and the healthcare system. This quiz, drawing from concepts in the Principles of Pharmacoeconomics curriculum, will test your understanding of CEA, from calculating incremental cost-effectiveness ratios (ICERs) to interpreting results to inform formulary decisions and clinical guidelines.

1. Cost-Effectiveness Analysis (CEA) is the most appropriate pharmacoeconomic method when the interventions being compared have:

• a) Identical costs and identical outcomes
• b) Different costs and outcomes measured in different units
• c) Different costs and a common health outcome measured in natural units
• d) Different costs and outcomes that are both converted to monetary values Answer: c) Different costs and a common health outcome measured in natural units

2. What is the primary outcome unit used in a Cost-Effectiveness Analysis?

• a) Quality-Adjusted Life Years (QALYs)
• b) Monetary units (dollars)
• c) Natural units (e.g., life-years gained, mmHg reduced, symptom-free days)
• d) An assumption of equivalent efficacy Answer: c) Natural units (e.g., life-years gained, mmHg reduced, symptom-free days)

3. The Incremental Cost-Effectiveness Ratio (ICER) is calculated using which formula?

• a) (Cost A / Effect A) – (Cost B / Effect B)
• b) (Cost A – Cost B) / (Effect A – Effect B)
• c) (Effect A – Effect B) / (Cost A – Cost B)
• d) (Cost A + Cost B) / (Effect A + Effect B) Answer: b) (Cost A – Cost B) / (Effect A – Effect B)

4. A new drug costs $10,000 and is found to be equally effective as the standard drug, which costs $8,000. Which type of pharmacoeconomic analysis should have been used?

• a) Cost-Benefit Analysis (CBA)
• b) Cost-Effectiveness Analysis (CEA)
• c) Cost-Minimization Analysis (CMA)
• d) Cost-Utility Analysis (CUA) Answer: c) Cost-Minimization Analysis (CMA)

5. On a cost-effectiveness plane, an intervention that is both less expensive and more effective than the comparator is said to be:

• a) Dominated
• b) Dominant
• c) In the trade-off zone
• d) Cost-neutral Answer: b) Dominant

6. The “perspective” of a CEA determines which costs are included in the analysis. A “societal perspective” would include which of the following costs?

• a) Only the acquisition cost of the drug
• b) Hospital administration costs only
• c) Direct medical costs, direct non-medical costs, and indirect costs (e.g., lost productivity)
• d) Only the patient’s out-of-pocket costs Answer: c) Direct medical costs, direct non-medical costs, and indirect costs (e.g., lost productivity)

7. An ICER represents the:

• a) Average cost of one intervention.
• b) Total benefit of an intervention in dollars.
• c) Additional cost for each additional unit of health effect gained.
• d) Overall effectiveness of a drug. Answer: c) Additional cost for each additional unit of health effect gained.

8. An intervention is generally considered “cost-effective” if its ICER is:

• a) Greater than the willingness-to-pay (WTP) threshold.
• b) Equal to zero.
• c) A negative value.
• d) Less than the willingness-to-pay (WTP) threshold. Answer: d) Less than the willingness-to-pay (WTP) threshold.

9. A drug for hypertension costs $500 more per year than the alternative and lowers systolic blood pressure by an additional 10 mmHg. What is the ICER?

• a) $50 per mmHg reduced
• b) $500 per mmHg reduced
• c) $10 per mmHg reduced
• d) $5 per mmHg reduced Answer: a) $50 per mmHg reduced

10. On a cost-effectiveness plane, an intervention that is more expensive and less effective than the comparator would be found in which quadrant?

• a) Northeast (more costly, more effective)
• b) Southeast (less costly, more effective)
• c) Southwest (less costly, less effective)
• d) Northwest (more costly, less effective) Answer: d) Northwest (more costly, less effective)

11. The process of adjusting future costs and health outcomes to their present-day value is known as:

• a) Inflation
• b) Sensitivity analysis
• c) Discounting
• d) Perspective analysis Answer: c) Discounting

12. A Cost-Utility Analysis (CUA) is a specific subset of CEA where the health outcome is always measured in:

• a) Life-years gained
• b) Symptom-free days
• c) Dollars
• d) Quality-Adjusted Life Years (QALYs) Answer: d) Quality-Adjusted Life Years (QALYs)

13. A key difference between Cost-Effectiveness Analysis (CEA) and Cost-Benefit Analysis (CBA) is that in CBA:

• a) Costs are ignored.
• b) Health outcomes are valued in monetary terms.
• c) Only new drugs can be analyzed.
• d) Outcomes are assumed to be equal. Answer: b) Health outcomes are valued in monetary terms.

14. A decision tree is a tool used in pharmacoeconomic analysis to:

• a) Map out the possible pathways and outcomes of a clinical decision.
• b) Ensure a study is double-blinded.
• c) Calculate the half-life of a drug.
• d) Display the chemical structure of a drug. Answer: a) Map out the possible pathways and outcomes of a clinical decision.

15. What is the purpose of conducting a sensitivity analysis in a CEA?

• a) To determine if the results are statistically significant.
• b) To test how the results change when key assumptions or variables are modified.
• c) To prove that the new intervention is always superior.
• d) To calculate the sample size needed for a clinical trial. Answer: b) To test how the results change when key assumptions or variables are modified.

16. The cost of a patient’s transportation to a clinic and a babysitter for their child are examples of:

• a) Direct medical costs
• b) Indirect costs
• c) Direct non-medical costs
• d) Intangible costs Answer: c) Direct non-medical costs

17. If Drug A costs $200 and prevents 5 cases of stroke, and Drug B costs $300 and prevents 6 cases, what is the incremental cost per case of stroke prevented?

• a) $40
• b) $50
• c) $100
• d) $200 Answer: c) $100

18. When critiquing a published CEA, it is most important for a pharmacist to first:

• a) Check the spelling and grammar.
• b) Determine the study’s perspective.
• c) Agree with the author’s conclusion.
• d) See if the journal is popular. Answer: b) Determine the study’s perspective.

19. A “dominated” treatment option is one that is:

• a) More effective and less costly than the alternative.
• b) Less effective and more costly than the alternative.
• c) More effective and more costly than the alternative.
• d) Less effective and less costly than the alternative. Answer: b) Less effective and more costly than the alternative.

20. The “number needed to treat” (NNT) can be used as an effectiveness measure in a CEA. It represents the number of patients who need to be treated to:

• a) Experience one adverse event.
• b) Prevent one additional bad outcome.
• c) Save $1000 in healthcare costs.
• d) Achieve a perfect cure. Answer: b) Prevent one additional bad outcome.

21. A one-way sensitivity analysis involves changing:

• a) All variables simultaneously.
• b) Only the cost variable.
• c) One variable at a time to see its impact on the results.
• d) Only the outcome variable. Answer: c) One variable at a time to see its impact on the results.

22. Which of the following is an example of an “indirect cost” from a societal perspective?

• a) The cost of a hospital stay.
• b) The cost of a prescription medication.
• c) The value of lost wages due to a patient being sick from work.
• d) The patient’s insurance co-payment. Answer: c) The value of lost wages due to a patient being sick from work.

23. If a new treatment is more effective and more expensive than the standard, a decision on its cost-effectiveness will depend on:

• a) Whether the ICER is below the willingness-to-pay threshold.
• b) The marketing budget for the new treatment.
• c) The number of patients who can afford it.
• d) The preference of the hospital CEO. Answer: a) Whether the ICER is below the willingness-to-pay threshold.

24. The results of a CEA are most useful for:

• a) Making decisions about a single, individual patient.
• b) Informing policy and formulary decisions for a population of patients.
• c) Determining the chemical mechanism of a drug.
• d) Marketing a new drug to the public. Answer: b) Informing policy and formulary decisions for a population of patients.

25. A Cost-Minimization Analysis (CMA) requires strong evidence that the comparators have:

• a) Different safety profiles.
• b) Different mechanisms of action.
• c) Equivalent health outcomes.
• d) Different costs. Answer: c) Equivalent health outcomes.

26. Why are costs and outcomes typically discounted in a CEA that models results over many years?

• a) Because people generally prefer to receive benefits sooner and pay costs later.
• b) To make the final numbers smaller and easier to manage.
• c) To account for drug price increases over time.
• d) It is a regulatory requirement with no economic basis. Answer: a) Because people generally prefer to receive benefits sooner and pay costs later.

27. The typical discount rate used for costs and benefits in the U.S. is:

• a) 0%
• b) 3-5%
• c) 10-15%
• d) 25% Answer: b) 3-5%

28. A pharmacoeconomic analysis from the “hospital perspective” would be least likely to include which cost?

• a) Cost of the drug administered in the hospital.
• b) Cost of nursing time to administer the drug.
• c) Patient’s lost productivity from missing work.
• d) Cost of lab tests to monitor the drug. Answer: c) Patient’s lost productivity from missing work.

29. The main advantage of a Cost-Benefit Analysis (CBA) over a CEA is that it can:

• a) Compare interventions with different types of outcomes because all outcomes are converted to dollars.
• b) Be completed much more quickly.
• c) Avoid the controversy of placing a value on health.
• d) Be used when outcomes are identical. Answer: a) Compare interventions with different types of outcomes because all outcomes are converted to dollars.

30. What is a major challenge in conducting a Cost-Benefit Analysis (CBA)?

• a) Calculating the cost of the medications.
• b) Ethically and accurately placing a dollar value on a human life or quality of life.
• c) Finding interventions to compare.
• d) Measuring drug efficacy. Answer: b) Ethically and accurately placing a dollar value on a human life or quality of life.

31. The main output of a CEA is often presented as:

• a) A net monetary benefit.
• b) An Incremental Cost-Effectiveness Ratio (ICER).
• c) A return on investment (ROI).
• d) A clinical success rate. Answer: b) An Incremental Cost-Effectiveness Ratio (ICER).

32. The “cost of illness” is a type of analysis that:

• a) Compares two or more interventions.
• b) Determines the total economic burden of a specific disease on society.
• c) Proves that a new drug is cost-effective.
• d) Measures only the intangible costs of a disease. Answer: b) Determines the total economic burden of a specific disease on society.

33. In the context of the Patient Care VI syllabus, comparing the cost and clinical benefit of different biologic agents for rheumatoid arthritis is a direct application of:

• a) Cost-Benefit Analysis
• b) Cost-Minimization Analysis
• c) Cost-Effectiveness or Cost-Utility Analysis
• d) Cost of Illness analysis Answer: c) Cost-Effectiveness or Cost-Utility Analysis

34. A tornado diagram is a visual tool used in:

• a) Patient counseling
• b) One-way sensitivity analysis to show which variables have the most impact on the ICER.
• c) Sterile compounding
• d) Clinical trial enrollment Answer: b) One-way sensitivity analysis to show which variables have the most impact on the ICER.

35. If the ICER for a new cancer drug is $250,000 per QALY gained, and the commonly accepted WTP threshold is $100,000 per QALY, the drug would likely be considered:

• a) Dominant
• b) Cost-effective
• c) Not cost-effective
• d) Dominated Answer: c) Not cost-effective

36. A key role for pharmacists in CEA is:

• a) Ignoring the cost of medications.
• b) Helping to identify realistic clinical outcomes and probabilities for decision models.
• c) Deciding on the societal willingness-to-pay threshold.
• d) Only focusing on the acquisition cost of drugs. Answer: b) Helping to identify realistic clinical outcomes and probabilities for decision models.

37. When two treatments are being compared, and Treatment A is less costly and less effective than Treatment B, the decision to use A or B requires:

• a) Choosing Treatment A because it is cheaper.
• b) Calculating an ICER and comparing it to a WTP threshold.
• c) Choosing Treatment B because it is more effective.
• d) Concluding that no decision can be made. Answer: b) Calculating an ICER and comparing it to a WTP threshold.

38. The results of pharmacoeconomic analyses are often used by which type of committees in a hospital or insurance company?

• a) The social events committee
• b) The Pharmacy and Therapeutics (P&T) Committee
• c) The infection control committee
• d) The employee benefits committee Answer: b) The Pharmacy and Therapeutics (P&T) Committee

39. Direct medical costs include all of the following EXCEPT:

• a) Hospitalization costs
• b) Physician visit fees
• c) Patient’s travel costs to the hospital
• d) Prescription drug costs Answer: c) Patient’s travel costs to the hospital

40. A CEA that models the long-term consequences of a treatment for a chronic disease like diabetes would have a time horizon of:

• a) One week
• b) One year
• c) A patient’s lifetime
• d) The duration of the clinical trial Answer: c) A patient’s lifetime

41. The use of Patient-Reported Outcomes (PROs) in a CEA can help measure effectiveness in terms of:

• a) Lowering cholesterol levels.
• b) Reducing tumor size.
• c) Improving a patient’s quality of life or functional status.
• d) Changing a patient’s genetic code. Answer: c) Improving a patient’s quality of life or functional status.

42. Which pharmacoeconomic method would be most suitable to compare two generic statins that are considered therapeutically equivalent?

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

43. A negative ICER can occur when an intervention is:

• a) More expensive and more effective.
• b) Less expensive and more effective (dominant).
• c) More expensive and less effective (dominated).
• d) Either B or C can result in a negative ICER, requiring careful interpretation. Answer: d) Either B or C can result in a negative ICER, requiring careful interpretation.

44. What is a primary criticism of using CEA in healthcare decision-making?

• a) It is too simple and does not require much data.
• b) The results are always certain and leave no room for debate.
• c) It can lead to the rationing of care that is effective but deemed “not cost-effective.”
• d) It only considers the benefits of a drug and ignores the costs. Answer: c) It can lead to the rationing of care that is effective but deemed “not cost-effective.”

45. Probabilistic sensitivity analysis (PSA) differs from one-way sensitivity analysis in that PSA:

• a) Changes only one variable at a time.
• b) Simultaneously varies all uncertain parameters over their probability distributions.
• c) Is easier and quicker to perform.
• d) Produces a tornado diagram. Answer: b) Simultaneously varies all uncertain parameters over their probability distributions.

46. A “cost-effectiveness acceptability curve” (CEAC) shows:

• a) The probability that an intervention is cost-effective at different willingness-to-pay thresholds.
• b) The total cost of the intervention over time.
• c) The clinical efficacy of a drug.
• d) The adverse event profile of a drug. Answer: a) The probability that an intervention is cost-effective at different willingness-to-pay thresholds.

47. If an analysis is conducted from the “payer perspective” (e.g., an insurance company), which cost is most important?

• a) The patient’s lost wages.
• b) The costs the insurance company has to pay.
• c) The patient’s transportation costs.
• d) The value of the patient’s pain and suffering. Answer: b) The costs the insurance company has to pay.

48. Why is it important that the outcomes in a CEA are common to both interventions being compared?

• a) It is a regulatory requirement by the FDA.
• b) To ensure the denominator of the ICER is a meaningful measure of health gain.
• c) To make the calculation of costs easier.
• d) It is not important; the outcomes can be different. Answer: b) To ensure the denominator of the ICER is a meaningful measure of health gain.

49. An analysis that compares a new drug to “no treatment” or “placebo” is establishing:

• a) The cost-minimization of the drug.
• b) The cost-effectiveness of the drug compared to the current standard of care.
• c) The fundamental cost-effectiveness of the drug itself.
• d) The drug’s side effect profile. Answer: c) The fundamental cost-effectiveness of the drug itself.

50. For a pharmacist, understanding CEA is critical for participating in:

• a) Drug compounding.
• b) Patient counseling on over-the-counter products.
• c) Formulary management and health policy discussions.
• d) Dispensing controlled substances. Answer: c) Formulary management and health policy discussions.