HP4E4E      Half Unit
Cost-effectiveness in Health Care

This information is for the 2019/20 session.

Teacher responsible

Dr Ranjeeta Thomas OLD.1.01


This course is compulsory on the Executive MSc in Health Economics and Policy (LSE and Chicago). This course is not available as an outside option.

Course content

This course will introduce students to the basic notions of economic evaluation including cost-benefit analysis, cost-utility analysis and cost-effectiveness analysis as applied to the health care sector. The course will discuss notions of welfare economics and extra-welfarism, the identification and measurement of resource costs when markets do not exist (shadow prices), the measurement of health outcomes (including life years gained and Quality Adjusted life-years gained (QALYs)), methods of discounting and the basic calculations involved in estimating the cost-effectiveness of new health care technologies, including Markov modelling. The definition of the incremental cost-effectiveness ratio (ICER) will be outlined, as will the treatment of uncertainty (including structural (model) uncertainty, sensitivity analysis, and multivariate, parameter uncertainty). The use of bootstrap elements to estimate standard errors for the ICER will be described. Presentation of results, including the use of Acceptability curves, will also be covered. Finally, the use of cost-effectiveness in pharmaceutical pricing and reimbursement will also be detailed.


10 hours of lectures and 15 hours of seminars in the MT.

The course will be supplemented by workshops, using Excel based programmes where students will learn how to build a cost-effectiveness model from scratch, detailing the type of data requirements and the choice (from basic decision tree to Markov models) of modelling framework.

Formative coursework

Students will be expected to produce 1 essay in the MT.

Indicative reading

Briggs,A. Claxton, K. and Schulpher, M, 2007, Decision Modelling for Economic Evaluation, Oxford, OUP

Drummond, M., Schulpher, M., Claxton, K., Stoddart, G. and Torrance, G., 2016, Methods for the Economic Evaluation of Health Care Programmes, Oxford, OUP,

Economic Evaluation in Health Care: Merging Theory with Practice, 2001, Edited by M. Drummond and A. McGuire, Oxford, OUP

Meltzer, D., 2013, Future costs in medical cost-effectiveness in Jones, A., editor The Elgar Companion to Health Economics, Cheltenham, Edward Elgar

Raikou, M and McGuire, A. Measuring costs for cost-effectiveness analysis in Jones, A., editor The Elgar Companion to Health Economics, Cheltenham, Edward Elgar


Essay (30%, 2500 words), take home exam (60%) and presentation (10%) in the MT.

Key facts

Department: Health Policy

Total students 2018/19: Unavailable

Average class size 2018/19: Unavailable

Controlled access 2018/19: No

Value: Half Unit

Guidelines for interpreting course guide information

Personal development skills

  • Team working
  • Problem solving
  • Communication
  • Application of numeracy skills
  • Commercial awareness