At the 2021 GACD Annual Scientific Meeting, researchers, implementing partners, and funders met in communities of practice to explore cross-cutting issues.
A community of practice shares knowledge and experience, so that everyone taking part can advance their own and each other’s knowledge. By exchanging stories, problems, and solutions, the community of practice brings collective knowledge to key issues.
During Day 2’s community of practice session, our expert co-leads, Helen Weatherly, Kavita Singh, and Guillermo Paraje, introduced participants to the principles and utility of health economics.
In Part 1 of our blog series on the ‘science of scarcity’, we highlight the knowledge exchanged after asking, ‘what is health economics?’.
What is health economics? And why is it useful for implementation science?
Whenever we introduce a new intervention, we make decisions about what is implemented but also what is not implemented – whether those decisions are explicit or not. The choice to allocate resources to one activity over another leads to an opportunity cost – the chosen activity will displace another, and the displaced activity will have its own benefits and costs.
Helen introduced the audience to economics – the ‘science of scarcity’ – and how it helps us to quantify such issues and inform decision makers. In a perfectly competitive market, there are:
Many buyers and many sellers
Freedom of entry and exit from producers
Homogenous products are well-known and easily reproducible
Perfect information between the providers and the users
Perfectly flexible use of resources, with no costs incurred in using them in different ways
No externalities
So, is healthcare an ‘imperfect’ market?
In his seminal 1963 article, Kenneth Arrow identified key conceptual issues facing economists in the market for health care. In particular, he understood that there must be adaptations to the market and the existence of uncertainty, particularly in relation to the incidence of disease and the efficacy of the treatments that we might use to overcome the disease.
Health economics emerged as a discipline to help understand these uncertainties and to develop constructive solutions.
By the late 1980s, Alan Williams had developed a schema of eight ways in which health economics might be used. Economic evaluation is one such way, and it aims to understand if a new intervention has additional benefits and costs, and if there are additional costs, whether it is still worth implementing. This is quantified in an ICER (incremental cost-effectiveness ratio), which numerically compares the costs and benefits of the two interventions.
An ICER on its own is unlikely to sufficiently inform a decision maker, so a ceiling threshold value is applied; although this differs between healthcare systems, within one system the threshold value can be used as a common rubric by which to compare the relative benefits and costs of different interventions.
Quantitative approaches can be used alongside qualitative enquiries to open up the ‘black box’ of what is happening; a mixed methods approach gives a richer picture.
Helen leads the Global Health Economics Forum, an online, open access resource for people who are interested in health economics, with access to webinars, teaching materials, and further resources.
Discussion prompts
How is health economics different to ‘regular’ economics?
What economic evaluation activities have you conducted in your GACD project or other work?
What economic evaluation activities would you like to conduct as part of your GACD project or other work?
Read Part 2 and Part 3 of this blog series.
More resources
Visit the Global Health Economics Forum.
Explore the GACD Implementation Science e-Hub.