Cost Effectiveness Analysis (CEA) MCQs With Answer

Introduction: Cost Effectiveness Analysis (CEA) MCQs With Answer is designed for M.Pharm students preparing for exams and practical applications in pharmacoepidemiology and pharmacoeconomics. This set reviews core principles of CEA including incremental cost-effectiveness ratios (ICERs), decision-making thresholds, perspectives, discounting, sensitivity analyses, modeling approaches (decision trees and Markov models), and interpretation of results like dominance and cost-effectiveness acceptability curves. Questions range from conceptual foundations to applied calculations and interpretation of uncertainty, enabling deeper understanding and exam readiness. Each MCQ includes clear options and the correct answer to help you assess strengths and identify areas for focused study.

Q1. What is the primary objective of cost-effectiveness analysis (CEA)?

• To compare costs and health effects of alternatives measured in natural units
• To express outcomes only as monetary values
• To calculate the net present value of healthcare investments
• To determine the cheapest available treatment regardless of outcomes

Correct Answer: To compare costs and health effects of alternatives measured in natural units

Q2. How does cost-utility analysis (CUA) differ from cost-effectiveness analysis (CEA)?

• CUA measures outcomes in natural clinical units while CEA uses QALYs
• CUA uses preference-based measures such as QALYs; CEA uses non-preference natural units
• CUA only compares costs, not outcomes
• CUA is limited to short-term interventions

Correct Answer: CUA uses preference-based measures such as QALYs; CEA uses non-preference natural units

Q3. What is the correct formula for the incremental cost-effectiveness ratio (ICER)?

• (Cost of comparator − Cost of intervention) × (Effect of comparator − Effect of intervention)
• (Cost of intervention − Cost of comparator) / (Effect of intervention − Effect of comparator)
• (Effect of intervention − Effect of comparator) / (Cost of intervention − Cost of comparator)
• (Cost of intervention + Cost of comparator) / (Effect of intervention + Effect of comparator)

Correct Answer: (Cost of intervention − Cost of comparator) / (Effect of intervention − Effect of comparator)

Q4. In economic evaluation, an intervention is described as “dominant” when it is:

• More costly and less effective than the comparator
• Less costly and less effective than the comparator
• More costly and more effective than the comparator
• Less costly and more effective than the comparator

Correct Answer: Less costly and more effective than the comparator

Q5. Which expression represents the Incremental Net Benefit (INB)?

• INB = (ΔC − λ × ΔE)
• INB = (λ × ΔE − ΔC)
• INB = (ΔE / ΔC)
• INB = (ΔC × ΔE)

Correct Answer: INB = (λ × ΔE − ΔC)

Q6. Which analytical perspective is most appropriate when including productivity losses and informal caregiver time?

• Healthcare payer perspective
• Provider perspective
• Societal perspective
• Patient perspective excluding indirect costs

Correct Answer: Societal perspective

Q7. Why are future costs and health outcomes typically discounted in CEA?

• To inflate future values to match nominal prices
• To reflect time preference and opportunity cost of resources
• To remove uncertainty in long-term projections
• Because discounting only applies to costs, not outcomes

Correct Answer: To reflect time preference and opportunity cost of resources

Q8. On the cost-effectiveness plane, which quadrant represents an intervention that is more effective and more costly?

• North-East (NE)
• South-East (SE)
• North-West (NW)
• South-West (SW)

Correct Answer: North-East (NE)

Q9. What does a cost-effectiveness acceptability curve (CEAC) illustrate?

• The average ICER across different patient subgroups
• The probability that an intervention is cost-effective across a range of willingness-to-pay thresholds
• The deterministic one-way sensitivity of ICER to a single parameter
• The distribution of utility weights in the population

Correct Answer: The probability that an intervention is cost-effective across a range of willingness-to-pay thresholds

Q10. Probabilistic sensitivity analysis (PSA) in CEA is primarily used to:

• Test a single parameter at two extreme values
• Estimate the impact of parameter uncertainty by sampling from probability distributions
• Eliminate uncertainty by using fixed point estimates
• Convert costs to a common currency

Correct Answer: Estimate the impact of parameter uncertainty by sampling from probability distributions

Q11. Which modeling approach is most suitable for chronic conditions with recurring events and time-dependent transitions?

• Simple decision tree with no cycles
• Markov model with defined health states and transition probabilities
• Cross-sectional observational analysis
• Basic cost-minimization table

Correct Answer: Markov model with defined health states and transition probabilities

Q12. When selecting a time horizon for a CEA, the most appropriate choice is:

• The shortest clinical trial follow-up available
• A fixed 1-year horizon for all analyses
• A time horizon long enough to capture all relevant costs and outcomes, often lifetime
• Until the intervention cost reaches breakeven

Correct Answer: A time horizon long enough to capture all relevant costs and outcomes, often lifetime

Q13. Cost-minimization analysis is appropriate when:

• Outcomes differ but costs are equal
• Effectiveness of the compared interventions is proven equivalent
• Utilities are the preferred outcome metric
• Indirect costs are the only consideration

Correct Answer: Effectiveness of the compared interventions is proven equivalent

Q14. A quality-adjusted life year (QALY) is best described as:

• A measure of cost per life saved only
• Utility weight multiplied by duration in that health state
• An economic measure of direct medical costs
• A measure of resource utilization per hospitalization

Correct Answer: Utility weight multiplied by duration in that health state

Q15. A negative ICER value always indicates that the new intervention is cost-saving and more effective. Is this statement correct?

• Yes — negative ICERs always mean the intervention is dominant
• No — a negative ICER can indicate either dominance or that the comparator is dominant depending on sign of differences
• Yes — negative ICERs mean the intervention is less effective and less costly
• No — negative ICERs are impossible in valid analyses

Correct Answer: No — a negative ICER can indicate either dominance or that the comparator is dominant depending on sign of differences

Q16. Bootstrapping in the context of CEA is used to:

• Derive analytic solutions for Markov transitions
• Estimate sampling distributions of cost and effect differences to quantify uncertainty
• Adjust discount rates over time
• Convert costs between currencies using exchange rates

Correct Answer: Estimate sampling distributions of cost and effect differences to quantify uncertainty

Q17. Which widely cited guideline suggested using a country’s GDP per capita as a threshold for cost-effectiveness (e.g., 1–3× GDP per capita per DALY)?

• Institute for Clinical and Economic Review (ICER)
• World Health Organization (WHO) Commission on Macroeconomics and Health
• Food and Drug Administration (FDA)
• European Medicines Agency (EMA)

Correct Answer: World Health Organization (WHO) Commission on Macroeconomics and Health

Q18. If an intervention has an ICER of $20,000 per QALY and the decision-maker’s willingness-to-pay threshold is $50,000 per QALY, the intervention is:

• Not cost-effective because ICER must be negative
• Considered cost-effective because ICER is below the threshold
• Dominated by the comparator
• Only cost-effective if costs are discounted at 0%

Correct Answer: Considered cost-effective because ICER is below the threshold

Q19. Which of the following is an example of a direct non-medical cost often included in CEA from a societal perspective?

• Hospital bed-day charges
• Medication acquisition costs
• Transportation costs to receive care
• Lost productivity due to illness

Correct Answer: Transportation costs to receive care

Q20. What is the purpose of a value of information (VOI) analysis in health economic evaluation?

• To compute the exact ICER without uncertainty
• To assess the value of collecting additional data to reduce decision uncertainty
• To replace probabilistic sensitivity analysis when data are limited
• To determine the price at which an intervention becomes cost-saving

Correct Answer: To assess the value of collecting additional data to reduce decision uncertainty

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