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BACKGROUND AND AIM: To assess the cost-effectiveness of hepatitis C virus (HCV) treatment with pegylated interferon alfa-2a and ribavirin (PEG-IFN/RBV) in current and former people who inject drugs (PWID). METHODS: A decision analytic model simulated the lifetime costs and outcomes of four treatment options: early treatment with mild fibrosis, standard treatment with moderate fibrosis, late treatment with compensated cirrhosis, and no treatment. Treatment modalities were simulated across current, former, and never-injector cohorts of 1000 hypothetical patients with chronic HCV. The main outcome measures were incremental costs ($AUD) per quality-adjusted life years (QALYs) gained, and incremental cost-effectiveness ratios (ICERs) were calculated for each cohort. RESULTS: Treatment of current PWID during mild fibrosis resulted in a discounted average gain of 1.60 QALYs (95% confidence interval 0.93-2.26) for an added cost of $12,723 ($11,153-$14,396) compared to no treatment, yielding an ICER of $7,941 per QALY gained ($6,347-$12,017). Former PWID gained 1.80 QALYs (1.29-2.33) for $10,441 ($8,843-$12,074) for early treatment compared to no treatment, resulting in an ICER of $5,808 per QALY gained ($5,189-$6,849). Never injectors gained 2.33 QALYs (1.87-2.80) for $9,290 ($7,642-$10,912) compared to no treatment - an ICER of $3,985 per QALY gained ($3,896-$4,080). Early treatment was more cost-effective than late treatment in all cohorts. CONCLUSIONS: Despite co-morbidities, increased mortality, and reduced adherence, treatment of both current and former PWID is cost-effective. Our estimates fall below the unofficial Australian cost-effectiveness threshold of $AUD 50,000 per QALY for public subsidies. Scaling-up treatment for PWID can be justified on purely economic grounds.