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Can decisions be driven by cost alone?


As an accountant, it is too easy to condition yourself to only think about costs when making decisions. Of course many business decisions must consider things other than cost, such as market share, customer satisfaction, quality and so on.  I am often looking for examples of how decisions are made in organisations, which seem to be on the basis of cost alone and ignore important qualitative factors.

In May of this year, what seems like a great example of a tough decision which was influenced by cost came to light. The Irish government made a decision on at least re-opening talks with drug companies on whether or not to make a skin cancer drug called Ipilimumab – better known as “Ipi” – available through the public health system.  The re-opening followed public pressure. It is what happened before this which provides the example of the tough decision. In September of 2011,  it was recommended to the government that the drug should not be made available as it was not cost-effective. The drug costs approximately €80,000-90,000 per patient and according to reports at the time, might prolong life by 3-4 months.  Now, I would not like to be the person making that decision I must say. But, from my external view,  it would seem the decision was based on cost alone. What about the benefits? Three or four months may be invaluable to a family. And to put my accountants hat on, what would the cost be of not treating the patient. I’d have a wild guess that a three or four-month hospital stay costs way more than €90,000, so there are bound to be some cost savings if a patient is healthier. As I said, I would hate to be making these kinds of decisions, but it does show how cost information can be used in complex decisions where many other factors are at play.

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About martinjquinn

I am an accounting academic, accountant and author based near Dublin, Ireland.

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