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Year : 2009  |  Volume : 46  |  Issue : 3  |  Page : 184--189

Economic cost analysis in cancer management and its relevance today

K Sharma1, S Das2, A Mukhopadhyay2, GK Rath1, BK Mohanti1,  
1 Department of Radiotherapy, Dr. B. R. Ambedkar Institute Rotary Cancer Hospital (IRCH), All India Institute of Medical Sciences, New Delhi, India
2 Planning Unit, Indian Statistical Institute, New Delhi, India

Correspondence Address:
K Sharma
Department of Radiotherapy, Dr. B. R. Ambedkar Institute Rotary Cancer Hospital (IRCH), All India Institute of Medical Sciences, New Delhi


The global cancer burden has shown a distinct shift in the last two decades and its financial impact can be large, even among patients living in high resource countries, with comprehensive health insurance policies. It is hard to imagine its impact on patients of developing countries where insurance policies exist infrequently and often cost becomes the greatest barrier in availing cancer treatment. It is recognized that these costs include the direct cost of disease treatment and care, indirect costs accrued by the patient and the family, and economic losses to the society as a whole. Economic cost analysis or cost-effectiveness analysis has emerged as a basic tool in the evaluation of health-care practices. To date, these cost data have been collected only sporadically, even in the most developed countries, and there is a great need for incorporating economic cost assessment practices in developing countries, so that patients and their families can access the care adequately. The current review has been done using pubmed and medline search with keywords like cancer, cost-analysis, cost-effectiveness, economic burden, medical cost, etc.

How to cite this article:
Sharma K, Das S, Mukhopadhyay A, Rath G K, Mohanti B K. Economic cost analysis in cancer management and its relevance today.Indian J Cancer 2009;46:184-189

How to cite this URL:
Sharma K, Das S, Mukhopadhyay A, Rath G K, Mohanti B K. Economic cost analysis in cancer management and its relevance today. Indian J Cancer [serial online] 2009 [cited 2020 Apr 4 ];46:184-189
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The incidence of cancer is increasing worldwide and hence the economic costs associated with its management. It is estimated that in 2000, about 11 million cases of cancer were diagnosed worldwide, 7 million people died of cancer and 25 million were living with it. By 2030, it could be expected that there will be 27 million incident cases, 17 million cancer deaths annually and 75 million persons alive with cancer. [1] The greatest effect of this increase will fall on low-resource and medium-resource countries like India. A major challenge for these countries is to find strategies in which their limited resources can be properly utilized in managing this disease; else cancer could become a major impediment to the socioeconomic development of these economically emerging nations.

In recent years, market forces and political processes have generated growing interest with regard to the economic costs of diseases to the individual, family, institution, and society. [2] With the increasing use of novel diagnostic modalities and multimodality treatment approaches the overall treatment cost for cancer is increasing day by day. Apart from these factors, the increasing influence of market forces in day-to-day practice, lack of proper treatment guidelines among physicians, awareness among patients regarding themselves as consumers, and lack of political willpower among the governing agencies, adds to these cost inflations. Hence, there is a growing need in health sector to live within budgets, more so in a country like India. In time to come, cost analyses will be an important component in policy making, for effective health care delivery.

Cancer interventions have outcomes that affect several parties: patients and their families who pay out-of-pocket costs and time, people without cancer (not yet " patients " ) who are falsely screened positive and thus must devote time and money for follow-up testing, providers of care, third party payers who cover costs of health care, the employer, the government, and the society as a whole. [3] The current topic has been chosen keeping in mind the general oncology practice in India and other developing countries. A pubmed and medline search was performed for identifying articles published in English, till 2007, related to the topic. Keywords that were used to identify such articles were a combination of cancer, cost-analysis, cost-effectiveness, economic burden, medical costs, etc. Abstracts obtained from this search were evaluated. The references of the articles found in the literature search were also examined to find additional articles.

 What is Economic Cost Analysis?

Traditionally, the burden of illness caused by a disease is measured in terms of health outcomes like mortality and morbidity. In addition, there are concomitant economic outcomes or endpoints of diseases, defined as the measure of resources consumed for prevention, diagnosis, and treatment of the disease. [4]

Cost-effectiveness analysis (CEA) is a method for evaluating the outcomes and costs of interventions designed to improve health. Its results are summarized as cost-effectiveness (C/E) ratio, that is, the cost of achieving a unit of health effect (e.g., the cost per year of life gained). In a cost effectiveness ratio, changes in health due to an intervention, compared with a specific alternative, are captured in the denominator; and changes in resource use, compared with the same alternative and valued in monetary terms, are captured in the numerator. [5] A balance must be struck between the cost of intervention and its effectiveness for it to be adopted.

 What is the Purpose of Economic Cost Analysis?

A major purpose of economic analysis is 'to quantify the magnitude of improvement in cancer health outcome, relative to the magnitude of resources expended to secure those improvements.' [4] Its central function is to show the relative value of alternative interventions of improving health. These analyses allow us to compare the efficacy of alternative interventions when making choices, subject to resource constraints. For example, Pignone et al ., reviewed seven modeling studies for cost effectiveness of colorectal cancer screening, for the US Preventive Services Task Force to use, before developing public guidelines and recommendations for such a screening. [6]

Economic measures are important for cancer outcome research. Calculation of the total economic burden of a particular cancer or cancer in general, provides information to decision makers for mobilizing political and financial support for cancer care and research. [7] Since resources are not unlimited and costs do matter, CEA is required for making effective and efficient cancer care decisions.

 Conceptual Model for Economic Cost Analysis

Concept of cost: It includes the value of goods, services, time, and other resources consumed in the provision of an intervention or in dealing with its side effects or other current and future consequences linked to it. It is tempting to think that the cost of a medical intervention is its price but it is not so because it involves the use of a resource rather than a mere monetary exchange. [8]

Direct cost : It encompasses all type of resource use including the consumption of professional, family, volunteer, or patients' time and money. It also includes resources expended as downstream consequences of an intervention. For example, the cost of a screening intervention include not only the cost of the test itself but also the cost of further tests, follow-up services for both true and false-positive results, and the "downstream" costs from hospitalization and treatment ` . Direct costs also include patients' out-of- pocket costs as patients frequently make co-payments for some services not covered by their insurance, employer or the government, such as the cost for over-the-counter drugs and certain procedures. Direct non health care costs accrue as well which includes transport, lodging and food.

Studies have demonstrated that out-of-pocket non-medical cost were consuming upto 26% of the weekly budget and overall, they were found to be more than the medical cost of the treatment. [9] Patient has to pay for transportation and child-care especially in Indian scenario where patient has to travel great distance to the tertiary care facilities. Hospitalization may well require another adult to accompany the patient and that person's time is a direct cost. Family and friends provide informal assistance to the patient including child-care. If these were purchased services, this time would be apparent as a direct cost of care. In one study, when family labour was included in cost calculation, average home-care cost for three months ($4563) was found similar to nursing home care. The cost was found to be unrelated to the diagnosis, treatment and time since diagnosis and was seen to be driven by functional status of the patient and family living arrangements. [10]

Indirect cost or overhead cost: These costs share the property that they are difficult to allocate on a per-patient basis as these include the cost of the resources shared across patients of many types such as clerical salaries, sanitation and light in hospital, libraries etc. This component of cost is often handled in an aggregate ad hoc fashion, but some investigators use more systematic accounting methods. [4]

Productivity related cost: Due to premature mortality and morbidity, cancer can lead to significant productivity related costs for the patient, employer, and society as a whole. For the patient it involves substantial loss of earnings, as well as reduction in length and quality of productive life. From the employer's perspective, these are viewed as "friction costs" associated with the inefficiencies of temporary replacement workers or cost associated with recruiting and training a permanent replacement for a worker lost to illness. [4]

Total cost: It includes all medical costs attributed to a patient diagnosed with cancer, regardless of whether the particular procedure or service was directly related to cancer treatment or not. It is much easier to construct, but is not as useful as the net cost estimates.

Net cost: If estimated appropriately net cost is better reflections of the costs, as it also include the costs avoided as a result of an intervention that prevents the occurrence of cancer and its consequences. Net cost is commonly used in the CEA associated with screening procedures.

In a retrospective case control study involving lung cancer patients and controls, it was seen that the total costs (from diagnosis to death or a maximum of two years) were US$ 45,897 for the patients and US$ 2907 for the controls. The main cost drivers were hospitalization (49%) and treatment-related visits (35.2%). Monthly primary treatment phase costs (US$ 11,496) were higher than secondary treatment phase (US$ 3733) or terminal care phase (US$ 9399) costs. [11]

 What Should be Collected as Primary Data in Cost Analysis and How?

Ideally the primary study should collect and report "counts" of actual resources consumed as a direct result or further consequence of a cancer intervention. These counts should be collected and reported in as much detail as is feasible within the study constraints. [4]

Studies in cancer-related cost analyses have counted resources with varying degrees of refinements. One method is the actual 'counts' of resources. This is the most accurate and most transportable method, because resources may be assigned monetary values, to reflect costs at different locales or in different time frames from those in which they were originally collected. [8] On account of the labour intensity of this approach, researchers have sought alternative ways like using data from administrative sources such as hospital billing systems. However, administrative data are usually in the form of charges and, like prices, may not reflect the actual cost. Recognizing this deficiency, some researchers have attempted to use cost-to-charge ratios to adjust charge data, to better reflect costs.

Less satisfactory is the collection of 'aggregate costs only' for a service, set of services, or episode of care, for instance, recording only the total charges for an inpatient stay. These results are less transportable to other settings or time frames. For any cost data, methods for inflation adjustment, type of currency, and year of cost should be indicated.

Cost Data may be in the Form of

Hospital based cost: (e.g., radiotherapy planning, operating room charges, simulation) can be estimated by first allocating the local or institutional charges for these procedures or treatment courses and multiplying it with the appropriate cost-to-charge ratio.

Professional cost: (e.g., surgeon, anesthesiologist, oncologist) is calculated by multiplying relative value units (RVUs) of a relevant procedure by an institution-specific cost per RVU.

Patient's time cost: can be estimated by using the average hourly wage of the person based on his sex, age, and skill, and multiplying it with the number of hours expended for procuring an intervention or treatment.

Travel cost: can be calculated by estimating the average distance travelled by the patient, average cost per unit of distance travelled, number of accompanying persons, parking charges, etc.

There is a growing recognition that Quality of life (QOL) is an important outcome to consider in calculating cost effectiveness. This is especially true in situations wherein the intervention in question has no known impact on overall survival, but does alter the QOL.

Quality of life weightings, called "utilities" are used during analyses to account for these factors. Utilities measure one's state of health on a scale ranging from 0 to 1, where 0 is equivalent to death and 1 to perfect health status. By multiplying the length of time spent in each state by its utility value and summing the product, it is possible to calculate quality-adjusted life-years (QALY). [12] Thus, improvement in overall survival is not a prerequisite for cost-effectiveness.

 Real Examples of Cost Analyses

In the last few decades, economic cost analyses have been used in developed countries for formulating guidelines and have the potential to be used in the developing world, provided the data collection tools and guidelines are formulated keeping in mind the limitations and socio-cultural background of these countries. Some real examples where these analyses have been utilized in the past are:

Rizzo et al. , collected economic data in a nonrandomized prospective study of 132 cancer patients undergoing bone marrow transplantation (BMT) on inpatient versus outpatient basis. They interviewed survivors at their one-year BMT anniversary using self-administered questionnaires and observed similar out-of-pocket costs in both groups and concluded that outpatient BMT does not necessarily shift costs to patients, as has been previously hypothesized. [13] Sculpher et al ., in a prospective RCT collected cost data in patients undergoing colorectal cancer therapy with raltitrexed versus fluorouracil plus folinic acid (5-FU + FA). They asked the patient about travel time, mode of travel, number of visits, etc., and computed the implied costs of the time associated with treatment. Those randomized to 5FU + FA incurred a median of GBP 136 higher travel plus time costs per patient, as compared to the raltitrexed group. Thus, if costs are significantly different for one treatment versus another, they can perhaps affect compliance of the patient and hence effectiveness of the treatment. [14] Shireman et al. , reported time costs for women being screened for cervical cancer. A questionnaire asking for travel time to the clinic, waiting time, and time spent being screened was used to collect information. Assigning monetary costs by using a variety of wage rates to the average 1.75 hours women spent during a single screening resulted in finding that patients' time costs were up to 25% of the screening costs. [15]

 Shortcomings in Economic Analyses

Cost-Effectiveness Analysis has provoked criticism at times and has continued to be the subject of debate. The case of Oregon illustrates the problems that arise when policy makers attempt to use CEA. Faced with the problem of providing medical care to its low-income population within the constraints of its Medicaid budget, the Oregon Health Services Commission tried to set priorities for covered services. From 1990 to 1991, the commission generated a list of "condition-treatment" pairs ordered by their cost-effectiveness ratios. The list was withdrawn after its public criticism at that time, and has continued to be the subject of debate about the role of CEA.

Some have observed that CEA ratios do not reflect issues outside healthcare like distributive justice or societal and cultural values. As an example, individuals' right to privacy has blocked compulsory testing for HIV except in special situations like military, although diagnosis and treatment can be delayed. Thus, it is seldom appropriate to apply CEA mechanically. Unlike other areas of cancer outcome measures (e.g., overall survival time, toxicities, failure pattern), standardized tools are lacking, leading to a wide variation in computation and interpretation of cost results across studies. Thus, results can often impede rather than facilitate the understanding of economic evaluation measures. Hence, studies of the same intervention can produce very different cost-effectiveness (C/E) ratios and it may be suspected that CEA can be manipulated to support almost any conclusion. Finally, although the CEA literature has grown enormously in recent years, many interventions have not been evaluated. The best CEA available suggests that the current healthcare resources fall short of providing the best health care possible.

 What we Need Now?

Standardization of methods is essential for valid comparisons of C/E ratios as comparability is essential if CEA is to help physicians and decision makers evaluate economic impact and choose among alternatives. Otherwise, it may complicate the users' ability to find, interpret, and adapt information. [16] Measuring tools are required to promote accuracy, comprehensiveness, and comparability in cost calculations.

Along with C/E ratios, the CEA should present the background information of elements that make up cost and effects; types and magnitude of costs, who is helped or harmed, and up to what extent. Analysis boundaries should be described, explaining the extent to which the relevant benefits and harms are included. Descriptors of target population (patients and their families) including demographic, socio-economic, behavioral, and clinical characteristics are desirable inclusions. The elements to include in a CEA report are discussed below:

 Checklist for Reporting Cost Effectiveness Analyses


Background of the problemGeneral framing and design of the problemTarget population for interventionDescription of comparator programsBoundaries of the analysisTime horizonStatement of perspective of the analysis

Data and methods

Description of event pathwayIdentification of outcomesDescription of model usedModeling assumptionsDiagram of event pathwaySoftware usedComplete description of estimates of effectiveness, resource use, unit costs, health states, and QOL weights and their sourcesCritique of data qualityStatement of year of costsStatement of methods used to adjust costs for inflationStatement of type of currencySource and methods for obtaining expert judgmentStatement of discount rates


Results of model validationReference case results: total costs and effectiveness, incremental costs, and effectivenessResults of sensitivity analysisOther estimates of uncertaintyGraphical representation of cost-effectiveness resultsAggregate cost and effectiveness information


Summary of reference case resultsDiscussion of analysis assumptions having important ethical implicationsLimitations of the studyRelevance of study results for specific policy questions and decisionsResults of related cost-effectiveness analysesDistributive implications of an intervention

In the Indian context, a majority of the cancer treatment costs fall upon the patient and family members. Hence, it is imperative to carry out economic cost analyses, since the financial impact is rarely addressed.


Economic measures are important for cancer outcome research. The heightened awareness in recent years to live within budgets in the health sector would seem to create the perfect climate for CEA. Increasingly, the costs of care will need to be balanced against the effectiveness of care, and to do this balancing we need to have accurate models of the cost of cancer interventions. In practice, however, little consensus exists regarding the best ways to define and collect such information, and this has led to wide variation in how costs are computed and interpreted across studies. As a consequence, development of standardized questionnaires and data collection forms should be the top agenda of cancer economic research. Perhaps one day cancer researchers will have validated and standardized data collection tools to gather patient cost data in the same way that standardized quality of life instruments are becoming available today. Until then, the cancer physicians should carry out cost analysis even as a small component of the treatment regimen response, toxicity, and survival data collection. Cancer patients in India are being increasingly taxed by high technology-based treatment and expensive drugs. The reporting of the economic burden on the patients and their families will make the cancer care process qualitative and transparent.


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