Reference no: EM133127285

Suppose the health department in a small country has been given a budget of $10 million to spend on new drugs. Its objective is to maximize health gains per dollar. The department's analysts have developed a list of drugs that could be covered by the insurance program, together with estimates of their costs and benefits (in QALYs gained):

Drug      Benefit (QALYs)         Cost ($)

A            500                              1,000,000

B            500                              2,000,000

C            250                              2,000,000

D            200                              1,200,000

E            150                               4,500,000

F            100                               1,200,000

G            100                               1,800,000

H            100                               2,000,000

I              100                               5,000,000

J               50                                  800,000

a.  Calculate the cost-effectiveness ratio for each drug.

b. List the drugs that could be reimbursed by the insurance plan, and the threshold value of your reimbursement decision.

c. If the budget of the health department is cut and only $3 million can be allocated to spending for new drugs, which drugs will be included in the reimbursement list, and what is the threshold value of your reimbursement decision?