Reference no: EM132225192
The following treatments exist to reduce chronic back pain. In recent years extensive surveys of patients taking these treatments have revealed average paid reductions for the different treatments as shown in the table below. The Price for each treatment is also shown.
Option Yearly Price Percentage Reduction in Pain
No Treatment $0 0
Treatment A 1000 10
Treatment B 900 13
Treatment C 1700 27
Treatment D 1400 31
Treatment E 2400 62
Treatment F 2200 65
1. Graph the treatment options (as shown in the textbook and demonstrated in class). Remember that the Cost (price) goes on the x axis and E (Effect), which in this case is measured by percentage reduction in pain, goes on the Y axis. You can use the graph below or create your own.
2. Which treatments are on the Cost Effectiveness Frontier?
3. Which are the dominated treatments?
4. Calculate the Incremental Cost Effectiveness Ratio for Treatment D. Show your work
5. In your own words define precisely what your answer means in one sentence.
6. Now Treatment D is withdrawn from the market due to previously unknown safety issues. What is the effect on the treatment options as a result? Be specific.
7. Now, in addition Treatment E loses its patent protection. Generic drug producers begin to produce and sell the treatment at half its previous price. Explain what happens to the Cost Effectiveness Frontier as a result. Be specific.
8. Calculate the Incremental Cost Effectiveness Ratio for Treatment E at this low price. Show your work.
9. A new treatment (Treatment G) is developed. Treatment G costs $9000 and is shown to reduce paid by 67 percent. Is this treatment on or not on the Cost Effectiveness Frontier. Explain why or why not in one sentence.