Injecting Drug Use and the Projected Costs Of Hepatitis C

Research Report Commissioned by NZ Drug Foundation: Released 8 September 2002

Keywords Health

Executive Summary [1]

The hepatitis C virus (HCV) usually causes chronic liver disease and other morbidities in most of those infected, and death in a minority of cases. The most common means of transmission today is from injecting drug use (IDU) through the sharing needles or other injecting equipment.

Every year about 1300 New Zealanders are newly infected with HCV. Later, after a period of at least ten years – over four-fifths of them will show symptoms of chronic hepatitis C.

This study estimates that infection reduces the life expectation of those infected by about eight months, and in addition they will average almost 25 years of symptoms as a result of the infection.

The paper provides preliminary cost figures, based on synthetic data (there being little epidemiological data, and in any case much of the estimation involves projections into the distant future).

It estimates that the additional costs to the health system of treating the 1300 infected each year amount to $33m (in year 2002 prices) over the lifetime of the cohort (although this estimate is subject to a wide margin of error). This figure could rise dramatically as new technologies and treatment become available in the future. (A very rough estimate suggests that there may be a greater social loss from reduced production due to illness.)

The medical costs figures quoted in the previous paragraph do not include the costs of interferon-α and related treatments. Published studies tend to suggest that they are cost effective, and will reduce the outlays of the health system over the lifetime of the cohort by about 10 percent to around $31m (in year 2002 prices) over a lifetime, together with gains of up to 3 quality-adjusted life years.

The paper estimates that medical outlays – that is the costs to the public and private health systems of HCV amount to around $13.7m in 2002. This includes an allowance for 200 people who are believed to be in receipt of interferon treatment. This amount is likely to increase – more than double – in the next ten years, in part from the rising numbers of those infected, but also as new treatments become more widespread.

The study was not asked to make any recommendations. However it has implications for a couple of salient matters.

First, there appears to be a strong case for taking action to prevent infection in order to increase substantially the quality of life of those involved, and also to reduce healthcare costs (and production losses). It is not possible to evaluate directly the return of a prevention program from these figures, in part because there could well be other benefits.

Second, there is the issue for treatment of those with HCV. The treatment regime is expensive, but it not only increases the quality of life of those successfully treated, but reduces further health outlays (and production losses). The overseas literature tends to suggest that interferon and related treatments are largely cost effective. Sheerin et al comes to a similar, but preliminary, conclusion for New Zealand. Further evaluation work needs to be encouraged, but first a better data base needs to be constructed.

Note: The original valuations were based on estimates of 2001 prices and are given in the main text in these prices. The estimates in the executive summary have been converted to 2002 prices by increasing them by 3 percent (which is a fraction higher than consumer prices to allow for the higher price movements of services and imports).


Note: The prices in the main text are the best estimates for the 2001 year.

Infection by HCV – the hepatitis C virus – usually causes chronic liver disease and other morbidities, of varying degrees in most of those infected and death in a minority of cases. The most common means of transmission is from injecting drug use (IDU) through the sharing needles or other injecting equipment. Today the most common source of new infections – around 80 percent – is from the use of injecting drugs. (MoH 2001:5) Other sources are sexual transmission, sporadic cutaneous transmission, transmission in hospital settings, and vertical transmission (from mother to baby). Until the introduction of screening for donated blood in 1992 there was also transmission via blood transfusions.

An ESR study estimated the current numbers of infected New Zealanders was 25,200 in 2000, and projected that the numbers will increase 50 percent in the next decade. (Nesdale et al, 2000) This epidemic will add to the costs to the health system, reduce economic productivity, and decrease the wellbeing of those infected and their families and friends.


This paper calculates the medical, health and some of the other costs of the HCV, using a synthetic method.

There are two broad methods of calculating the costs of an illness. The epidemiological (prevalence) approach involves surveying the community, as to the prevalence of the disease, and the effects it has on the sick (and their associates).[2] As far as is known this has not been done in the case of HCV in New Zealand. Although disease prevalence has been measured in a number of sub-populations (Nesdale et al, 2000) and in a community study (Chapman et al, 2000), comprehensive data on the economic effects is lacking. However the HCV burden is largely prospective. The burden of the disease tends to appear only after 10 or more years. The ESR estimated the infected population was only 15,000 in 1990, of whom 7000 were infected before 1980. It is these people who are currently becoming a burden on the health (and other) systems. (Nesdale et al, 2000)

Alternatively, the synthetic (incidence) approach uses known and estimated epidemiological parameters (often derived from overseas studies) to construct the life history of a cohort. Known or projected health (and other) costs are then applied to these life stages. This gives the life-time social costs of the cohort. This is the only practical method to estimate economic costs in New Zealand until better data becomes available.

It should be noted that this study looks at the costs of the disease using the ‘counter-factual’ scenario of what would be the case were there to be no infection by HCV. This is the relevant scenario if the main interest is the economic effectiveness of prevention. Another common approach is to assume the disease exists, and evaluate the effectiveness of various treatments. The two approaches use a common methodology but, of course, are being applied to very different questions.[3]

Because we have calculated the individual health costs it is possible to estimate future health costs, given a set of projections for the population. This method is not particularly accurate.[4] Even so it gives an order of magnitude and so it has been included in the report.

The Life History of a Cohort.

In a recent paper suggests the following estimates of the natural history of HCV infection. (Seef, 1999, see Figure 1).

– Of 1000 who are infected 850 will experience chronic ill health from symptomatic hepatitis, and 150 will not.

– Of the 850 who experience chronic hepatitis, 170 will go on to develop cirrhosis of the liver, and 680 will remain stable.

– Of the 170 with cirrhosis of the liver, 40 will die, and 130 will remain stable.

– In addition, it is assumed that 25 percent of those with cirrhosis of the liver (i.e. 42) will experience liver failure and another 10 percent (17) will experience heptocelluar carcinoma. (Brown & Crofts, 1998)

( The New Zealand Ministry of Health gives the following estimates (where the infected population has been scaled to 1000, to be comparable with these figures).
– 533 to 800 will develop some liver damage and experience liver damage (on average after 15 years)
– 107 to 266 will develop cirrhosis (on average after 20-40 years)
– 27 to 133 who developed cirrhosis will develop liver failure or liver cancer (five to 10 years after the onset of cirrhosis). (MoH 2002:6)
The Australian National Hepatitis C Strategy gives the following estimates (where the infected population has been scaled to 1000, to be comparable with these figures):
‘if 1000 are affected with the virus the outcome will be as follows:
– about 150 to 350 will clear the virus spontaneously within two to six months of the infection and will neither develop a chronic infection nor risk developing advanced liver disease. These people can, however, be re-infected with hepatitis C if they are re-exposed.
– about 650 to 850 people will develop chronic hepatitis C infection.
– about 50 to 100 people with chronic hepatitis C infection will have progressed to cirrhosis after 20 years of infection (rising to 200 people after 40 years of infection). Among the factors associated with an increased risk of cirrhosis are alcohol consumption, HIV or hepatitis B co-infection, older age at the time of the infection, and being male.
– about 30 to 50 people with Hepatitis C related cirrhosis will be at risk of liver failure or hepatocellular carcinoma after 30 to 40 years of infection. Among people with cirrhosis the risk of liver cancer is 1 to 3 percent a year.
– the majority of people with chronic hepatitis C will probably not progress to advanced liver disease but their quality of life may be diminished.’ (p.6-7))

It is clear from the literature that these are but tentative estimates, and they will also be changed by treatment. ‘The natural history of untreated chronic hepatitis C is controversial.’ (Koff, 1997)

Allowing that it takes time for the infected to move between the different categories, we can model the life experience of a cohort all of whom are infected at the age of 20, as shown in Figure 2. The estimates include mortality from ordinary causes and also elevate mortality in the first decade from other causes related injecting drug use. (Dukes et al, 1992) Note that given only 4 percent are thought to die from HCV (at maximum, because other causes of death overtake many) the main effect on the life experience are of a chronic but stable illness (and, to a lesser extent, cirrhosis of the liver).


As noted earlier, only a small proportion (about 4 percent) of a cohort of those infected by HCV are expected to die as a result of the infections. While the non-infected IDUs would have a life expectation of another 51.1 years at the age of 20, those who are infected have an expectation of another 50.4, or 8 months shorter on average.(On the same basis an non-IDU has a life expectancy of another 57.6 years at the age of 20.) [5]


As well as the possibility of dying earlier, those infected with HCV also have a period of illness (morbidity). The model indicates that those who are 20 years old when they are infected will experience an average of 24.7 years of illness before they die (of whatever cause), which amounts to just under half of their life after infection. There is considerable variation. Some 15 percent will experience no HCV related illness; the remaining 85 percent experience just on 29 years of illness.

The more serious disease stage identified here involves cirrhosis of the liver. The average period of experiencing this for the entire cohort is 2.9 years. But only 17 percent of the cohort are affected by the cirrhosis, and so they experience almost 17 years of the disease (including the quarter who die from it).

Economists use quality adjusted life years (QALYs) to evaluate the loss of life from mortality and morbidity. A QALY of 100 represents the quality of life for an average person in good health, while a value of zero represents the state of death. A person experiencing some loss of quality of life through morbidity (or handicap) has the 100 discounted by an amount based on surveys of people’s judgements and objective circumstances.

Dusheiko & Roberts (1995) used the following discounts:
Resolved infection: 10 percent (that is 90 percent of the quality of life of a person in average good health)
Chronic hepatitis : 20 percent
Status of cirrhosis: 50 percent
Severe stage of disease: 80 percent.
while Younossi et al (1999) used
Chronic infection: 10-40 percent ( baseline 18 percent)
Compensated cirrhosis: 10-50 percent ( baseline 22 percent)
Decompensated cirrhosis: 12-70 percent ( baseline 35 percent)
HCC: 50-90 percent ( baseline 75 percent)
Liver transplantation, first year: 30-89 percent ( base line 50 percent)
Liver transplantation, successive years: 13-76 percent ( baseline 30 percent).

The two sets of figures do not differ so much as overlap, indicating the high degree of uncertainty of these estimates.

The Dusheiko & Robers discounts give a morbidity reduction of between 3.6 and 6.6 QALYs, in addition to a reduction from mortality of .7 years. In total the reduction is between 4.3 and 7.3 years, or between 8.4 and 14.3 percent on an expected life of 51.1 years.

The Medical Costs of HCV for an Individual

The costs to the health system are based on a ‘base care’ scenario, with an ‘interferon treatment’ scenario added. Interferon treatment is added in separately.

All the figures are subject to a wide margin of error, but comparisons with overseas studies suggest they give reasonably robust indications of the orders of magnitude. A major problem is that there is no standard classification for costs yet in the literature, so that there is overlapping of categories between different papers, while some studies seem to leave some items out.[6]

It should be noted that sometimes a part or all the costs will be paid for by the patient (or their private medical insurance), with the remainder typically paid by the public sector. This distinction is not made here – that is the report looks at the resource usages in medical care, not the funding of the resource usage, which is virtually impossible to calculate without some community survey.

Basic Care for Chronic Hepatitis
It is assumed that those diagnosed with chronic hepatitis visit their general practitioner for consultations and tests, above that for the average numbers of attendance for the age group. . The recommended rate is three times a year, we have no data to actual practice.[7] An average cost of $250 a year is assumed.

Basic Care for Asymptomatic Cirrhosis
It is assumed that those diagnosed with asymptomatic cirrhosis, have a similar pattern of visiting their general practitioner, and in addition have one visit to a specialist a year. An average cost of $450 per year is assumed (i.e. $200 p.a. more than for primary care for chronic hepatitis). In addition it is assumed that the person averages ten days in hospital (at a cost of $7000), once every five years.

Basic Care for Liver Failure
It is assumed that 40 percent of those who experience liver failure have a transplant, and the remainder do not. (Brown & Crofts 1998). Australian and New Zealand estimates suggest the medical costs (from assessment to three months after) of each liver transplant is in the order of $120,000 to $140,000. (Brown & Crofts, 1998; Sheerin, 2001; Gane Pers.Com. 3 May 2002) The Australian estimate suggests a treatment cost of those who do not receive a transplant of about $200,000, but this needs to be reduced a little to reflect lower bed costs in New Zealand. Combining these figures we get an average cost of $145,000 per episode of liver failure.

Basic Care for Hepatocellular Carcinoma
It is assumed that a third of those who experience hepatocellular carcinoma have surgery, including liver surgery, and the remainder do not. (Brown & Crofts 1998:385) Surgery is considered here as basic treatment because it (substantially) reduces the costs to the health system. The Australian estimates suggest an average of $A88,000 per episode, which is converted to $100,000 for New Zealand, after allowing for lower bed costs but the higher exchange rate.

Interferon Treatment
A treatment for HCV is the administration of a six to twelve month course of interferon-α (IFN α2b). More recently ribavirin has been added to the treatment. (This is called ‘combination therapy’. It is licensed but not yet subsided in New Zealand.) It is thought that combination therapy may be useful to up to 60 percent of those with HCV, for its effectiveness is dependent on a range of clinical factors and disease stage. A recent innovation is peginterferon α2b plus ribaviran. While it is more efficacious, it is not known yet whether it is more cost effective. (Manns et al). These other therapies are currently only available usually in the context of clinical trials or on ‘compassionate use’ grounds.

There have been a number of (largely prospective) economic appraisals of treatment for hepatitis C. (Duisheiko & Roberts 1995; Koff 1997; Wong 1999; Wong et al 2000; Younossi et al 1999; Sheerin et al 2001).

At issue is not what is the current practices, but what is likely to be future practices. Until a better treatment regime arises interferon monotherapy (in combination with ribavirn) is likely to become increasingly widespread. Thus it seems likely that those being infected in recent times will be recipients of this treatment option (or its successors).

Drug treatment with interferon monotherapy for chronic HCV has three main economic effects:
1. There are the increased costs of the treatment regime;
2. Consequentially there is a reduction in other treatments (such as liver transplants), but these occur at a later date (so there is a timing effect).
3. In addition there is an improvement in the quality of life of the recipients. Improvements of up to 2.5 QALYs have been forecast. (Younossi et al, 1999)

The general conclusions of the economic appraisals is that interferon monotherapy reduces expenditure over a lifetime but because of the timing effect, there is still a question about the economic effectiveness. The best estimate suggests that there may be a cost saving of about 10 percent measured on a lifetime basis. (Younossi et al, 1999) This is used in the estimates below.

A caveat about future developments
The above figures project many decades ahead. It would be idle to assume that existing treatment regimes will not be replaced, probably with more expensive but more effective therapies. It is not obvious how to allow for this, other than to make the caveat in all projections, that they are based on known available treatment regimes.

The Lifetime Medical Costs of HCV for a Cohort

The above estimated costs can be combined to give an average lifetime cost per HCV infected person of $24,500 ($22,000 if they are in receipt of interferon type therapies) but subject to some margin of error.[8] The specific amount varies greatly from patient to patient. Those experiencing liver failure or hepatocellular carcinoma, involve far greater expense.

Applied across a population of 1300 infected persons (that is the numbers of new infections each year) that comes to a total of $32m. That means every year new infections generate an extra cost to the health system of $32m in the lifetimes of the people in the infected cohort. (These costs are in the year 2001 dollars.)

If there is extensive use of interferon and related treatments, the cost is reduced by 10 percent of the 60 percent of infected patients who are likely to be treated. This reduces the costs to $30m (but also brings the costs forward in time).

The above estimates are subject to a wide margin or error, probably in the order of plus or minus 20 percent. These are an inevitable consequence of the synthetic estimation approach, and the need to project into the future.

(As already discussed, the above assumes existing treatments. It is likely that as time goes by there will be treatments which are more effective, but also more expensive. Additionally, service sector costs rise faster than average (while goods costs more slowly). It would be extremely speculative to attempt to estimate these effects. Instead these figures should be taken as minima measured in 2001 dollars, and will also increase with general rises in prices.)

The Public Health Costs of Hepatitis C

Shiell (1998) also identifies the Commonwealth of Australia spending $A80,000 a year on epidemiology and surveillance. The New Zealand figure is likely to be much less, even on a per capita basis, because New Zealand has not been as vigorous as Australia in enhanced surveillance of hepatitis C.

The costs of blood screening of the disease is probably about $2-3m, but this is unavoidable, because the screening would continue as long as there was the possibility of infection.

Production Losses

It seems likely that there are other resource costs from HCV infection, most notably that the sick also cause a loss of production. It requires more data than is available here to estimate that loss. To obtain an order of magnitude, suppose those sick with the virus are 10 percent less productive, as reflected in their labour earnings and allowing that only about 70 percent will be working compared to the average worker with otherwise similar characteristics. In this case the loss of production for 1000 infected people comes to around $40m (in today’s prices) over a lifetime (ignoring productivity rises).[9] This is an order of magnitude, but it suggests that productivity losses could exceed health resource costs. The figure includes the loss to tax revenue so the government finances suffer from less revenue and more expenditure in the health budget.

The Non-tangible (Quality of Life) Losses from HCV

In addition there are the non-material costs associated with poorer quality of life. Transit New Zealand currently uses a figure equivalent to $400,000 per QALY (in 2001 prices – it has just been updated). Given the above estimates of a reduction in QALYs from morbidity and mortality of between 4.3 and 7.3 years per person, then the non-material loss of life for a cohort of 1300 infected at the age of 20 is in the range of between $2.2b and $3.8b over the cohort’s life.

Some Projections on the Possible Future Spending on the Medical Treatment of HCV

Had we a census of actual spending on the medical treatment of HCV in a base year, we could project future years, given assumptions about the demographic course of the disease. We have no base year data, so any figures will be subject to a wide margin of error.

The ESR report estimated there were about 25,200 New Zealanders infected in 2000. From the above figures we can estimate that the average spending of the health system per year on someone infected with HCV (including those for whom it is latent) comes to $415. Applied to each of 25,200 people that comes to $10.3m. This is less than the lifetime cost of the cohort, because the numbers requiring treatment are building up.

Additionally it is believed that around 200 people per annum are currently in receipt of an interferon type treatment. This will add around an additional $3.0m to the health system spending (assuming a cost of $15,000 per treatment), to give a total outlay of about $13.3m.

The ESR report projects the total numbers will increase by 50 percent in the following ten years (even though the annual infection rate is expected to remain broadly the same). This means that total spending excluding interferon type treatments on the disease could be $15.5m in 2010 (in today’s prices) in comparison to the $10.3m in 2000. .

However, as explained earlier, the costs of treatment are likely to rise as new technologies and treatments come on stream, and the costs of services rise relative to the costs of goods and commodities. Assume that the proportion who are treated using interferon-treatments by 2010 builds up steadily to 60 percent of each cohort. Under this assumption, which may be conservative because new and probably more expensive treatments will be coming on stream, around 10 percent of the infected will have been treated. The total annual cost in 2010 will be around $27m. This is substantially higher than the figure without treatment, because the benefits from subsequent lower treatment costs take time to phase in. This is not in itself a case for not providing the treatment. Rather it is a warning that the new treatment regime and the rising numbers of infected are likely to result in a doubling (and more) of medical costs of treatment over the next decade.


This study shows that infection by the Hepatitis C virus causes both resource costs to the health sector and poor quality of life (and it also suggests that losses of production may be important too.) [10]

The study was not asked to make any recommendations. However it has implications for a couple of salient matters.

First, there appears to be a strong case for taking action to prevent infection in order to increase substantially the quality of life of those involved, and also to reduce healthcare costs (and production losses). It is not possible to evaluate directly the return of a prevention program from these figures, in part because there could well be other benefits.

Second, there is the issue for treatment of those with HCV. The treatment regime is expensive, but it not only increases the quality of life of those successfully treated, but reduces further health outlays (and, probably, production losses). The overseas literature tends to suggest that interferon and related treatments are largely cost effective. Sheerin et al comes to a similar, but preliminary, conclusion for New Zealand. Further evaluation work needs to be encouraged, but first a better data base needs to be constructed.[11]

Brown & Crofts, N. (1998) ‘Health care costs of a continuing epidemic of hepatitis C virus infection among injecting drug users’, Australian and New Zeland Journal of Public Health, Vol 22, No 3, p.384-388.
Commonwealth Department of Health and Aged Care (2001) National Hepatitis Strategy, Canberra.
Chapman, B., M. Burt, C. Frampton et al (2000) ‘The prevalence of viral hepatitis (HAVNew Zealand Medical Journal, 113:394-6.
Duisheko, G.M. & J.A. Roberts (1995) ‘Treatment of Chronic Type B and C Hepatitis with Interferon Alfa: An economic appraisal’, Hepatology, December 1995, p.1863-1873.
Dukes, P.D., G.M. Robinson & B.J. Robinson (1992) ‘Mortality of intravenous drug users: attenders of the Wellington Drug Clinic, 1972-89′, Drug and Alcohol Review, 11, 197-201.
Koff, R. (1997) ‘Therapy of Hepatitis C: Cost-effectiveness analysis’, Hepatology, December 1997, p.152S-155S.
Manns, M.P., J.G. McHutchison, S.C. Gordon, V.K. Rustgi, M. Shiffman, R. Reindollar, Z.D. Goodman, K. Koury, M. Ling, J.K. Albrecht, and the International Hepatitis Therapy Group (2001) ‘Peginterferon alfa-2b plus ribavirin compared with Interferon alfa-2b plus ribavirin for initial treatment of chronic Hepatitis C: a randomised trial’, The Lancet, Vol 358, Sept 22, 2001, p.958-965.
Ministry of Health (2002) Action on Hepatitis C Prevention: A Discussion Document, Wellington.
Nesdale, A., M. Baker, E. Gane, R. Kemp, C. Brunton, M. Law, & N. Garrett (2000) Hepatitis C infection in New Zealand: Estimating the Current and Future Prevalence and Impact, IESR, June 2000.
Seef, L. (1999) ‘Natural history of Hepatitis C’, The American Journal of Medicine, Vol 107 (6B) December 27, 1999, p.10S-15S.
Sheerin, I.G., F.T. Green & J.D. Sellman (2001) Future costs of Hepatitis C among injecting drug users in New Zealand, Draft – not for quotation, Christchurch Medical School.
Shiell, A. (1998) Economic Analyses for Hepatitis C: A Review of Australia’s Response, A Report for the Commonwealth Department of Health and Family Services .
Wong, J.B. (1999) ‘Cost-Effectiveness of treatments for chronic Hepatitis C’, American Journal of Medicine, Vol 107 (6B), December 27, 1999, p.74S-78S.
Wong, J.B., G. McQuillan, J.G. Hutchinson & T. Poynard (2000) ‘Estimating future Hepatitis C morbidity, mortality, and costs in the United States’, American Journal of Public Health, Vol 90, No 10, October 2000, p. 1562-1569.
Younossi, Z.M., M.E. Singer, J.G. McHutchinson & K.M. Shermock (1999) ‘Cost Effectiveness of Interferon α2b combined with Ribavirin for the treatment of Chronic Hepatitis C’, Heapatology , Vol 30, No 5, p.1318-1324.

1. I am grateful for assistance from Cheryl Brunton, Bruce Chapman, Ed Gane, Sally Jackman, David Phillips, Geoff Robinson, and Ian Sheeri. Sheerin et al (2001) is not available for quotation, but its preliminary findings have been used to cross check the estimates in this paper.
2. For an example of the prevalence method in Australia see Schiell (1998)
3. A limitation to the prevention evaluation is that it may not include other benefits from a successful program. For instance it is likely to also reduce the prevalence of other diseases IDU transmitted through injecting drug use.
4. Its accuracy could be improved enormously by having an actual estimate of spending in a base year.
5. The longevity estimates do not include the effect of other IDU related diseases such as HIV-AIDS. IDUs are also more likely to be smokers and die from smoking generated diseases. No allowance has been made for this. Gane (Pers. Com. 3 May 2002) suggests that the mortality rate (additional to the normal rate from other causes) may be affected by the age when the diseases was contracted (and hence when it was most virulent). Unfortunately there are no data to be able to allow for this.
6. The approach here follows Brown & Crofts 1998, with interferon treatment added, and some variations to reflect New Zealand circumstances. For US data see Younossie et al 1999.
7. It is likely that actual treatment is less than recommended treatment. On the other hand some will go to specialists, which will compound the costs of the GP visits.
8. The figure is slightly lower than (by about 6 percent) the comparable figure in Sheerin et al (2001).
9. Double that if the annual average productivity increase is 1.5% p.a.(the long term average up to the mid 1980s).
10. Calculation on the effectiveness of a prevention program needs to take into account that preventing infection in one cohort reduces the reservoir of the infected, which further reduces the likelihood of future cohorts being infected.
11. Gane says that because New Zealand has a different proportion of ‘genotype 3 (45% New Zealand to less than 5 % European or North American)’ the progress of the disease and its treatment costs may differ from those assumed here which are based on overseas studies. (Pers. Com. 3 May, 2002) This emphasizes the need for the development of a local data base.