Resource Allocation Decisions and the Use of Willingness-to-Pay as a Valuation Technique Within Economic Evaluation: Recommendations from a Review of the Literature

The Commonwealth Department of Health and Family Services is considering options for the update of its guidelines for the preparation of economic analyses which must accompany submissions to the Pharmaceutical Benefits Advisory Committee for the inclusion of new pharmaceuticals on the Pharmaceutical Benefit Schedule. As part of this process, the Health Economics Unit of Monash University was commissioned to conduct a review of monetary estimates of benefits as used in cost-benefit analysis, principally WTP, and assess the `validity' of measuring benefits in monetary terms, at both a conceptual and a methodological level. The results of this review in these areas have been reported in previous Working Papers by the authors. This paper draws together the recommendations made within the review, providing a brief rationale for each, and concluding that: 1. individual preferences, reflecting utility, are not necessarily the desired outcome of health care interventions; and 2. WTP is not sufficiently advanced as a measurement technology to be confident that the values provided are valid and reliable estimates of the monetary equivalent of that utility.