Chapter 5: Health Economics and Public Policy

This chapter explores how economic principles influence health policies and system-level decisions. It discusses how governments, hospitals, and organizations allocate resources, balance efficiency with equity, and make difficult trade-offs. By connecting theory to real-world examples, the chapter helps readers see how economics shapes policies that affect daily clinical practice.

5.1 The Link Between Health Economics and Public Policy

Public policy in health refers to the decisions, laws, and actions implemented by governments to achieve specific health objectives.
Health economics provides the evidence to guide these decisions — ensuring that limited resources are used in ways that maximize health benefits for the population.

5.2 How Economic Analysis Influences Policy

• Evidence-Based Decision-Making
  • Economic evaluations (CEA, CUA, CBA) guide policymakers in selecting interventions that provide the most benefit at the least cost.
• Prioritisation of Interventions
  • Resources are scarce, so policies must determine which services to fund first (e.g., vaccination programs before cosmetic surgeries).
• Equity Considerations
  • Policies must balance efficiency with fairness, ensuring vulnerable groups are not excluded.
• Budget Impact Assessment
  • Predicts the financial implications of adopting a new program or technology, aiding in sustainable policy planning.

5.3 Examples of Economic Analysis in Policy Decisions

• Pharmaceutical Policy

  • Promoting generic medicines to reduce drug costs while maintaining treatment outcomes.

• Vaccination Programs

  • Internationally, cost-effectiveness studies often prioritize vaccines that provide herd immunity.

  • In Malaysia, a PhD study on the cost-effectiveness of HPV vaccination against cervical cancer led to its incorporation into the National Immunization Program in 2011.

  • Cost-effectiveness research has also supported pneumococcal and influenza vaccination programs, influencing prioritisation in public health spending.

• Screening Initiatives

  • Economic evaluations assess cost-effectiveness before implementing national screening programs.

  • In Malaysia, colorectal cancer genetic testing was found to be cost-effective compared to current methods, leading to the recommendation for genetic clinics in each health zone. This has already resulted in the establishment of a genetic clinic at Hospital Pulau Pinang.

• Non-Communicable Disease (NCD) Prevention

  • CEA studies have influenced salt reduction interventions to lower hypertension and cardiovascular disease burden.

  • Economic evidence also supports early screening programs for NCDs, helping policymakers prioritise preventive measures.

• Other Applications in Malaysia

  • Cost-effectiveness research has extended to areas such as psoriasis treatment, tuberculosis (TB) management, and chronic kidney disease (CKD) interventions, directly informing public health and clinical practice.

• Role of MaHTAS (Malaysian Health Technology Assessment Section)

  • MaHTAS, under the Ministry of Health, plays a pivotal role in applying economic evaluations such as CEA and Budget Impact Analysis (BIA).

  • Its outputs, including Clinical Practice Guidelines (CPGs), shape both policy formulation and clinical decision-making, ensuring that health resources are used effectively and equitably.

5.4 Summary

Health economics equips policymakers with tools to make rational, evidence-based decisions that balance cost, effectiveness, and equity. The Malaysian experience from the adoption of HPV vaccination to the establishment of genetic clinics for colorectal cancer testing demonstrates how economic evaluation can act as a catalyst for real policy change. With institutions like MaHTAS supporting evidence generation, economic analysis ensures that public health resources are allocated where they achieve the greatest population impact.