ABSTRACT
A pharmacoeconomic problem is attacked using a formal process that begins with constructing a mathematical model. In this book a number of pharmacoeconomic constructs are presented, ranging from spreadsheets to sophisticated numerical approximations to continuous compartment models. For more than 40 years the decision tree has been the most common and simplest formalism, comprising choices, chances, and outcomes. As discussed in Chapter 2, the modeler crafts a tree that represents near-term events within a population or cohort as structure, and attempts to balance realism and attendant complexity with simplicity. In problems that lead to long-term differences in outcome, the decision model must have a definite time horizon, up to which the events are characterized explicitly. At the horizon, the future health of a cohort must be summed and averaged into “subsequent prognosis.” For problems involving quantity and quality of life, where the future natural history is well characterized, techniques such as the Declining Exponential Approximation of Life Expectancy1,2 or differential equations may be used to generate outcome measures. Life tables may be used directly, or the results from clinical trials may be adopted to generate relevant values. Costs in decision trees are generally aggregated, collapsing substantial intrinsic variation into single monetary estimates.
