# Incidence Rate: Definition, Calculation, and Examples

![Incidence Rate](https://www.investopedia.com/thmb/c3Th3Ox3iRJPsjg12ossT_HWKMA=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/incidence-rate.asp-805cdda31e7b466db10b39210885d70c.png)

*— Investopedia / Julie Bang*

> **Definition**
>
> An incidence rate is the rate at which new events occur in a given period.

## What Is the Incidence Rate?

The term "incidence rate" refers to the rate at which new, impactful events occur over a specific period. This measure is commonly used in epidemiology as a way to denote the occurrence of disease, illness, or accident. This rate only uses new cases rather than previously diagnosed or reported ones. It can also be used to determine the probability of other events, such as financial phenomena like foreclosures. Incidence rates help experts anticipate future incidents and plan accordingly.

### Key Takeaways

*   This rate allows entities to anticipate future incidents and plan accordingly.
*   Pharmaceutical and biotech companies measure incidence rates of adverse drug reactions when they seek approval from the FDA to bring their drugs to market.
*   Companies that report favorable incidence rates are good picks for investors, while those with unfavorable results often see losses in their stocks.
*   Incidence is different from prevalence, which measures the total accumulation of cases.

## How Incidence Rates Work

Scientists and analysts commonly use incidence rates to determine the probability of an outbreak of disease, illness, or accidents in a given population. As such, it is commonly used among health experts, who often also refer to it as incidence.

In order to determine the incidence rate of a particular event, experts use the number of new cases as a proportion of the population at risk. They may also study the progress of selected individuals. For instance, health experts generally conduct studies involving disease in individuals until they either develop the condition, die, opt out of the group, or complete the entire study. As mentioned above, only new cases are considered, which means earlier cases don't apply in the calculation.

The incidence rate provides experts with a snapshot of changes in the event's progression within a population over time. Therefore, it becomes a very important [metric](https://www.investopedia.com/terms/m/metrics.asp) for tracking chronic infectious diseases. Experts can make comparisons on the probability of disease across different populations. Leaders can take action to remedy policies or increase options available to address negative findings, such as healthcare needs.

In economics, incidence rates may cover other topics, such as foreclosures or loan [defaults](https://www.investopedia.com/terms/d/default2.asp). In these contexts, the incidence rate can estimate the likelihood of a financial phenomenon occurring.

> **Important**
>
> When the denominator is the sum of the person-time of the at-risk population, it is also known as the incidence density rate or person-time incidence rate.

## How to Calculate Incidence Rates

In order to calculate the incidence rate of a particular event, take the number of new instances of the event in question—disease, illness, accident, financial event—during a specific period of time and divide that by the total population at risk during that period of time. Experts must determine the length of time, and this time period must be long enough to allow a detailed study.

The result is generally presented as a number of cases in a certain population. It's important to make sure that no information is duplicated in order to get as much of an accurate determination of the rate.

Let's say someone wants to determine the incidence rate of [foreclosure](https://www.investopedia.com/financial-edge/0510/the-6-phases-of-a-foreclosure.aspx) in Anytown, U.S. The total number of homeowners in town is 10,000. Experts undertake the study for a full year and learn that the number of new foreclosures is 200. Using the formula above, they determine that the incidence rate of foreclosure in Anytown is 0.02, or 2%.

## Examples of Incidence Rate

Let's say a county in the U.S. with a population of 500,000 may have had 20 new cases of tuberculosis in 2023. This translates to an incidence rate of four cases per 100,000 persons. This is higher than the incidence rate of TB for the entire U.S.—9,615 new TB cases in 2023, for an incidence rate of 2.9 cases per 100,000 persons.

## Incidence vs. Prevalence

Incidence should not be confused with prevalence. Remember that incidence measures the likelihood of a new occurrence during a specific time period. Prevalence, on the other hand, is a measure of the actual number of cases of a condition or illness in a population at a certain point in time. Therefore, it is the total [accumulation](https://www.investopedia.com/terms/a/accumulation.asp) of incidents over a period of time.

While incidence enables an assessment to be made of the risk of contracting a disease, prevalence shows whether the disease is widespread or not.

> **Fast Fact**
>
> The incidence rate can be further categorized by different characteristics such as race, gender, or age.

## Incidence Rates and Market Research

Incidence rates are commonly used by the Food and Drug Administration (FDA) to determine if and when pharmaceutical companies are allowed to take their drugs to market. In order to do so, these companies are required to conduct [clinical trials](https://www.investopedia.com/terms/c/clinical-trials.asp) (over a series of phases) and apply for FDA clearance to determine the efficacy of their drugs.

Companies enlist individuals to take part in studies. These people are given the drug or a placebo during each phase. According to the FDA, "the reviewer should identify the subset of trials in phase 2 and 3 databases that will provide the best estimate of rates and develop tables of event rates based on that judgment" in order to determine the incidence rate of any adverse (side) effects. These findings are presented in tables that are reported to the FDA. Incidence rates show the rate at which reactions take place, along with the severity of each one.

Companies rely on successful trial results to obtain approval in order to get their drugs to market, which is usually a long, drawn-out process. Meeting these goals means good news for investors, especially if the results are really positive. But those who aren't able to achieve these milestones often see their stocks drop. These losses can be offset if drug companies are undertaking other, positive trials or if they have products on the market.

## How Do You Interpret an Incidence Rate Ratio?

The incidence rate ratio refers to the ratio of two different incidence rates. Both are required to have the same time period when calculating them individually.

## What Is the Difference Between an Incidence Rate and a Prevalence Rate?

*   The **prevalence rate** is the relative proportion of _total_ cases observed in a population over some period of time.
*   The **incidence rate** is the rate of _new_ cases observed in a population over some period of time.

## How Do You Calculate Incidence Rates in Market Research?

In market research, incidence rate refers to the proportion of people from the defined target population who qualify for the study.

## How Do You Calculate Person-Time Incidence Rates?

Person-time incidence rates, also known as incidence density rates, are calculated by dividing the total number of new cases of an event by the sum of the person-time of the at-risk population.

## What Is the Incidence Rate of HIV in the U.S.?

Experts indicate that the incidence rate of HIV in the U.S. remains stable. In 2022 (the latest available data), it was reported to be 11.3 per 100,000 people.

## The Bottom Line

Incidence rates are commonly used by experts in various fields, including healthcare and the financial industry. By studying the probability of occurrences of things like disease and foreclosure in a given population, experts can make sound decisions about the needs of people in the future. This includes areas like healthcare services and medication, or changes in regulation and financial practice standards.

> **Article Sources**
>
> 1.  Centers for Disease Control and Prevention. "[Tuberculosis — United States, 2023](https://www.cdc.gov/mmwr/volumes/73/wr/pdfs/mm7312a4-H.pdf)." Page 265.
>     
> 2.  Food and Drug Administration. "[Conducting a Clinical Safety Review of a New Product Application and Preparing a Report on the Review](https://fda.report/media/71665/Conducting-a-Clinical-Safety-Review-of-a-New-Product-Application-and-Preparing-a-Report-on-the-Review.pdf)." Page 22.
>     
> 3.  HIV.gov. "[U.S. Statistics](https://www.hiv.gov/hiv-basics/overview/data-and-trends/statistics)."