REAL OPTION APPROACH FOR COMPARING LIFETIME COSTS OF ALTERNATIVE DIABETES TYPE I TREATMENT METHODS

Tero Haahtela
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Tero Haahtela: Department of Industrial Engineering and Management, Aalto University. PO Box 15500, FI-00076, Aalto, Finland.

Fuzzy Economic Review, 2016, vol. 21, issue 2, 71-91

Abstract: This paper compares with cash flow simulation real option valuation method the costs of treating diabetes type 1 (T1D) with the commonly used multiple daily injection (MDI) method and the novel method of combining insulin pump and continuous glucose monitoring (CSII + CGM) into a hybrid closed-loop system. Both direct and indirect costs of T1D treatment are considered. Daily basic treatment costs are twice as high with CSII + CGM in comparison with the MDI method. However, overall lifetime costs with CSII + CGM are approximately only one third in comparison with the MDI method. This is due to expensive indirect complication costs related to insufficient therapeutic control of many diabetics using MDI, while advanced CSII+CGM users can avoid these complications nearly completely. At the same time, quality of life of type 1 diabetics improves significantly when using advanced CSII+CGM systems.

Keywords: real options; cash flow simulation; lifetime total cost estimation; uncertainty modelling; diabetes type 1 (search for similar items in EconPapers)
JEL-codes: C53 C63 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:fzy:fuzeco:v:21:y:2016:i:2:p:71-91

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