The purpose of this paper is to argue that the emphasis in the pharmacoeconomic literature on cost-outcomes ratios as key decision variables in determining drug choice is misplaced.

Unless strict assumptions are made (and believed) as to the relationship between numbers of patients treated and the marginal costs and outcomes of therapy, the only basis on which an evaluation of alternative therapy options can be made is an equilibrium-to-equilibrium modeling framework.

This specifically refers to the assumption that costs and outcomes functions exhibit constant returns to scale.

In this framework, given the expected changes of distribution of patients between therapy options, estimates can be made of net changes in overall treatment costs and outcomes.