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The net expected health system costs and the net expected health benefits are annualized and discounted to their present values. “Annualized” means that all benefits and costs are expressed as steady-state (constant) streams, beginning immediately and extending indefinitely into the future. The procedure of discounting converts any benefit and cost streams that are delayed for some years to their equivalent annualized values starting now. Fixed expenditures (e.g., for vaccine development) are “amortized” to produce a constant annual equivalent value.

Discounting enhances the relative importance of effects realized after a short as compared to a long delay. The discount rate (r) used in the committee’s calculations reflects the preference for present over future consumption of resources. In the central analysis, the discount rate is set at 0.05. The effect of discounting is evaluated in the sensitivity analyses described in Chapter 9.

The present value of the annualized equivalent of the net expected health system costs associated with a candidate vaccine includes the cost of development, the cost of the vaccination program, and the cost of adverse side effects, less the cost of medical treatment averted. It may be expressed as

where:

r=Discount rate

CDev=Cost of vaccine development

PDev=Probability of vaccine development

CVP=Annual cost of the vaccination program

TUse=Time until steady-state vaccine use, i.e., the time to licensure plus the time to adoption at the predicted use rate

CTr=Annual cost of medical treatment averted

TLag=Lag between administration of vaccine and realization of health benefits, i.e., the delay of vaccination benefits

CSE=Annual medical costs from side effects

Net expected health benefits, expressed as the annualized equivalent of the present value, consist of clinical benefits adjusted for adverse side effects of the vaccine, it may be expressed as



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