Return on investment in needle and syringe programs in Australia: report

4.7 Return on investment

Page last updated: 2002

The calculation of the return on investment from NSPs takes into account the total investment by government and consumers in NSPs during the 1990s, together with anticipated savings resulting from treatment costs avoided for persons who would otherwise have contracted HIV and HCV over their lifetime, were it not for the availability of NSPs during the decade under study.

The calculation of return on investment discounts future cashflows associated with the investment in the NSP program and treatment costs avoided by an agreed discount rate. The discount rate most commonly used in government programs of this nature is 5% per annum. For the purposes of illustration, we have also applied discount rates of 3% and 0%.

When considering the return on investment, one of the questions to be considered is "Whose investment?" In this instance, expenditure on NSPs has been made by government and consumers. In our analysis, we have presented findings that illustrate both the return to government from its investment, as well as the return on total investment. We have also considered the return on investment over the lifetime costs of treatment of cases avoided, as well as the return achieved to the end of the investment period itself (Year 2000) ignoring any savings that accrue thereafter.

The impact of NSPs on both HIV and HCV has been considered in the analysis. Given the history of NSPs, their original purpose, and the stronger evidence base demonstrating their impact on the incidence of HIV among injecting drug users (see Section 3), our primary focus has been on HIV. Our initial analysis therefore considers the return on investment in NSPs from HIV avoidance alone. In the second part of the analysis, we consider what additional savings may have been derived from the avoidance of HCV among injecting drug users.

4.7.1 HIV impacts
4.7.2 HIV and HCV impacts combined

4.7.1 HIV impacts

The results of the analysis on return on investment in NSPs to government and in total, having regard to the impacts on HIV alone, are presented in Table 4.7.1. Detailed tables are provided in Table 4.4.3 (See Appendix D).

The table illustrates that the net savings to government from its investment in NSPs over the lifetime of cases of HIV avoided (after deducting the value of the initial government investment) before discounting are $6,896 million. Discounting these savings at 5% results in a Net Present Value (NPV) of their investment of $2,277 million ($3,415 million at 3% discount rate). When considering the total investment in NSPs (by including consumer expenditure), the equivalent returns are $6,876 million (undiscounted), $2,262 million (discount rate of 5%) and $3,398 million (discount rate of 3%).
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To put these outcomes in perspective, they represent the savings that accrue from a combination of the following:
  • A total investment of approximately $150 million (Year 2000 prices) in NSPs during the 1990s, that resulted in
  • approximately 25,000 cases of HIV avoided, who
  • live for an average of about 24 years after infection, and who
  • incur average treatment costs of nearly $14,000 each year of their life after diagnosis.
Under these circumstances, the analysis indicates that there have been significant savings accruing to government from the investment in NSPs to date, and that these savings will continue to accrue into the future.

This is further illustrated by considering the return achieved to the end of the investment period (i.e. to Year 2000) without taking into account any additional savings that accrue in the future. This is also demonstrated in Table 4.7.1 where the NPV of the savings to the Year 2000 are shown, both to government and as a whole. By the year 2000, government had achieved net savings of $373 million (after deducting the value of their investment), the NPV of which at a discount rate of 5% is $242 million ($287 million at a discount rate of 3%). The equivalent returns on the total investment in NSPs over the same period were $353 million (undiscounted), $227 million (discount rate of 5%) and $270 million (discount rate of 3%)

Table 4.7.1 Net Present Value, 1991 ($million, year 2000 prices) of investment in NSPs for HIV

Government expenditureAll expenditure
Lifetime costs of treatment (5% discount)
$2,277
$2,262
Lifetime costs of treatment (3% discount)
$3,415
$3,398
Lifetime costs of treatment (0% discount)
$6,896
$6,876
To year 2000 (5% discount)
$242
$227
To year 2000 (3% discount)
$287
$270
To year 2000 (0% discount)
$373
$353

4.7.2 HIV and HCV impacts combined

In the second stage of the analysis, we consider the effects of NSPs on HIV and HCV combined. The return on investment in NSPs to government and in total, having regard to the impacts on HIV and HCV combined, are presented in Table 4.7.2. Detailed tables are provided in Table 4.4.3 (See Appendix D).

The table illustrates that the net savings to government from its investment in NSPs over the lifetime of cases of HIV and HCV avoided (after deducting the value of the initial government investment) before discounting are $7,678 million. Discounting these savings at 5% results in a Net Present Value (NPV) of their investment of $2,402 million ($3,653 million at 3% discount rate). When considering the total investment in NSPs (by including consumer expenditure), the equivalent returns are $7,658 million (undiscounted), $2,386 million (discount rate of 5%) and $3,637 million (discount rate of 3%).

The analysis indicates that the incorporation of HCV into the NPV calculations has further increased the savings accruing to government and in total. This is to be expected, as no additional investment has been required, and some 21,000 cases of HCV are estimated to have been avoided. The impact on savings, however, is significantly lower than for HIV, due to the lower annual costs of treatment for the earlier stages of HCV, and the fact that the higher costs associated with the relatively small proportion of patients who progress to liver failure are deferred until much later and are considerably reduced by discounting.
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As noted in Section 4.5.1, we have not taken into account the costs of combination therapy for the treatment of HCV, due primarily to the small proportion of people with HCV receiving this treatment to date. Should this situation change and combination therapy become more widely prescribed, annual treatment costs are also expected to increase. Under these circumstances, the estimates of savings presented above are likely to underestimate the savings that would accrue under this treatment regime. This, of course, would also depend on the effect of combination therapy in slowing the rate of disease progression.

Table 4.7.2 Net Present Value, 1991 ($million, year 2000 prices) of investment in NSPs for HIV and HCV combined

Government expenditureTotal expenditure
Lifetime costs of treatment (5% discount)
$2,402
$2,386
Lifetime costs of treatment (3% discount)
$3,653
$3,637
Lifetime costs of treatment (0% discount)
$7,678
$7,658
To year 2000 (5% discount)
$255
$240
To year 2000 (3% discount)
$302
$285
To year 2000 (0% discount)
$391
$371
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