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CHAPTER 9

DECISION ANALYSIS

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Decision Analysis

- The application of an analytical method for systemically

comparing different decision options

- Graphically displays choices and facilitates calculations of

values needed to compare options

- Assists in selecting the most cost effective alternative

- Assists in making decisions when the decision is complex and

there is uncertainty about some info

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Steps in Decision Analysis1. Identify the specific decision

2. Specify alternatives

3. Draw the decision analysis structure

4. Specify possible costs, outcomes & probabilities

5. Perform calculations

6. Conduct a sensitivity analysis

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1. Identify the specific decision- Specific decision to be evaluated should be clearly defined by

answering the following questions:

What’s the objective of the study?

Over what period of time will the analysis be conducted?

What perspective will be stated? (patient, organization, society…)

- For our example:

The objective is whether to add a new antibiotic to an institution

formulary (essential drugs basket)

The perspective is that of institution

Time period: 2 weeks

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2. Specify alternatives- Ideally, the most effective alternative should be compared

- New products may be compared against a standard (older, well

established) therapy

- Decision analysis may compare more than 2 treatment options

(comparison of 5 statins)

- May compare intervention with no intervention

- For our example Antibiotic A (new medication) to be compared

with standard Antibiotic B

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3. Draw the decision analysis structure- Branches (arms) of decision tree :

• Choice nodes

• Chance nodes

• Terminal (final outcome nodes)

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4. Specify possible costs, outcomes &

probabilities

- For each option, information should be obtained for the

probability of occurrence & consequences of occurrence

- Probabilities are assigned for each branch of chance nodes

- The some of probabilities for each branch must be 1

- Consequences are reported as monetary outcomes, health

related outcomes or both

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5. Perform calculations- The probability at the terminal node is calculated by multiplying

the probability of each arm from choice node to terminal node

- Total costs are calculated by adding all the costs over all the

branches from choice node to terminal node

- Multiply (C x P) for each node

- Sum all results for each choice to get the average cost per

patient

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- Antibiotic B is less expensive even when including the costs of

treating adverse effects

- Antibiotic A is better clinical option (higher probability of

success and lower probability of adverse effects)

- Decision maker may use ICER or INB to determine whether to

add A to the formulary.

ICER= $700-$650 = $500 per extra success

0.9-0.8

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- Using INB: if the suggested range is between 1000 & 2000 $:

- INB λ=1000 = +$50

- INB λ=2000 = +$150 then A is cost effective

6. Conduct a sensitivity analysis