Example of costing a service.rtf

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```					Example of costing a service

Example of Fixed and Variable Costs in A Pharmacy Based Cholesterol
Screening Service:

Fixed costs:          refurbishment of screening area:          £5000
screening machine                         £1200
training costs                            £1500
Variable costs:       pharmacist’s time spent screening         £2 per patient
reagents                                  £0.50 per patient
disposable equipment                      £0.50 per patient

     What are the fixed costs for setting up the screening service?

     What are the variable costs for screening 1000 patients over a year?

     What are the total costs to the pharmacist of setting up and running the service
for one year (assuming 1000 patients are screened)?

     What is the average cost of screening a patient over this first year?

     What is the marginal cost of screening the 1001th patient?
250 of the screened patients have a high cholesterol and are sent to the GP by
the pharmacist. 200 of these patients are prescribed lipid-lowering agents,
which costs the local health authority £100 per year per patient.

     If the health authority funds the service, what are the total costs to the health
authority of paying the pharmacist to set up and run the service for one year
(assuming 1000 patients are screened)?

£5,000 + £1,200 + £1,500 = £7,700

(£2 + £0.50 + £0.50)     1000 = £3,000/year

Total cost for 1 year = fixed cost + variable cost for 100 patients
£7,700 + £3,000 = £10,700

£10,700÷1000 = £10.70

Marginal cost = variable cost= cost of pharmacist’s time spent screening +cost of
reagents + cost of disposable equipments
£2 + £0.50 + £0.50= £3
Marginal cost < Average cost

250 of the screened patients have a high cholesterol and are sent to the GP by the
pharmacist. 200 of these patients are prescribed lipid-lowering agents, which costs the
local health authority £100 per year per patient.

If the health authority funds the service, what are the total costs to the health authority
of paying the pharmacist to set up and run the service for one year (assuming 1000
patients are screened)?
Total cost to health authority = total cost of screening service + total lipid-lowering drug
prescribing costs
£10,700 + (£100×200) = £30,700
PA 2130 Social Pharmacy: An Economic Perspective
nd
Recommended Reading 2005 (2 year Degree of B.Sc.)
TEXTBOOK
Elliott R, Payne K. Essentials of economic evaluation in healthcare. London: Pharmaceutical
Press, 2005.
PAPERS
Not available on the web:
1. Robinson R. Costs and cost-minimisation analysis. British Medical Journal 1993;
307(6906): 726-728.
2. Robinson R. Cost-effectiveness analysis. British Medical Journal 1993; 307(6907):
793-795.
3. Robinson R. Cost-utility analysis. British Medical Journal 1993; 307(6908): 859-862.
4. Robinson R. Cost-benefit analysis. British Medical Journal 1993; 307(6909): 924-926.
5. Robinson R. The policy context. British Medical Journal 1993; 307(6910): 994-996.
Available on the web:
1. National Prescribing Centre. An introduction to health economics (part 1). MeReC Briefing
Bulletin 2000;(13): 1-8. http://www.npc.co.uk/MeReC_Briefings/2000/briefing_no_13.pdf
2. National Prescribing Centre. An introduction to health economics (part 2)- applying health
economics. 3.      MeReC Briefing Bulletin 2000;(14): 1-8.
http://www.npc.co.uk/MeReC_Briefings/2000/briefing_no_14.pdf
3. Fleurence R. Pharmacoeconomics (1): An introduction to health economics. The
Pharmaceutical Journal, 2003(271): 679-681.
http://www.pjonline.com/pdf/cpd/pj_20031115_pharmacoeconomics1.pdf
4. Fleurence R. Pharmacoeconomics (2): Economic evaluations. The Pharmaceutical Journal,
2003(271): 716-718.
http://www.pjonline.com/pdf/cpd/pj_20031122_pharmacoeconomics2.pdf
5. Meltzer MI. Introduction to health economics for physicians. Lancet 2001; 358(9286):
993-998.
6. Palmer S, Raftery J. Economic Notes: opportunity cost. British Medical Journal 1999;
318(7197): 1551-1552.
7. Byford S, Raftery J. Perspectives in economic evaluation. British Medical Journal 1998;
316(7143): 1529-1530.
8. Torgerson DJ, Spencer A. Marginal costs and benefits. British Medical Journal 1996;
312(7022): 35-36.
9. Torgerson DJ, Raftery J. Economic notes. Discounting. British Medical Journal 1999;
319(7214): 914-915.
10. Torgerson D, Raftery J. Economics notes: measuring outcomes in economic evaluations.
British Medical Journal 1999; 318(7195): 1413.
11. Lilford RJ, Pauker SG, Braunholtz DA, Chard J. Decision analysis and the implementation
of research findings. British Medical Journal 1998; 317(7155): 405-409.
12. Drummond MF, Jefferson TO. Guidelines for authors and peer reviewers of economic
submissions to the BMJ. The BMJ Economic Evaluation Working Party. British Medical
Journal 1996; 313(7052): 275-283.
13. Doyal L. The rationing debate. Rationing within the NHS should be explicit. The case for.
British Medical Journal 1997; 314(7087): 1114-1118.
14. Coast J. The rationing debate. Rationing within the NHS should be explicit. The case
against. British Medical Journal 1997; 314(7087): 1118-1122.
15. Williams A, Evans JG. The rationing debate. Rationing health care by age. British Medical
Journal 1997; 314(7083): 820-825.
If you want to read a published economic evaluation:
1. Pharoah PD, Hollingworth W. Cost effectiveness of lowering cholesterol concentration with
statins in patients with and without pre-existing coronary heart disease: life table method
applied to health authority population. British Medical Journal 1996; 312(7044): 1443-1448.
2. Briggs AH, Sculpher MJ, Logan RP, Aldous J, Ramsay ME, Baron JH. Cost effectiveness
of screening for and eradication of Helicobacter pylori in management of dyspeptic patients
under 45 years of age. British Medical Journal 1996; 312(7042): 1321-1325.

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