Comparative Effectiveness

What is the value of a QALY?

Many new treatments deliver significant benefits to patients.  In many cases, however, the new treatments may be more expensive.  How do we know if a treatment is worth the cost?

Cost effectiveness analysis helps us answer this question.  Cost is fairly easy to calculate but benefits are more complicated.  A treatment could extend a person’s life with no change in morbidity while alive, another treatment could improve morbidity but not mortality, or a third treatment could do both.  The concept of quality-adjusted life years (QALY) is often used to summarize a treatment’s overall benefits.  Cost effectiveness research often measures the incremental cost effectiveness ratio (ICER) relative to the standard of care.

A separate question is, what happens once you know the value of an ICER?  Some payers–particularly public payers in Europe–use the ICER to determine coverage decisions.  In the US, some organizations–of particular note, an organization named the Instituted for Clinical and Economic Review (aka ICER)–use cost effectiveness thresholds to argue for increased price discounts.

But what is the right cost effectiveness threshold?  A paper by Nanavaty et al. (2015) aims to discuss some of the limitations of the current ICER thresholds used. They claim that:

  • Some ICER threshold are out of date. They claim that some cost effectiveness thresholds are out of date, as some ICER threshold were established as long ago as 1982.  Some countries do use a “dynamic” ICER threshold (e.g., Australia, Canada, Netherlands, and New Zealand) that may be updated over time but others (United Kingdom, United States) do not.
  • ICERs thresholds may not account for non-monetary benefits.  Some components include “…the extent to which the treatment is addressing previously unmet needs, the severity of disease treated by the treatment, and the population size to be impacted by the new treatment.”
  • ICER thresholds vary widely across countries.  Looking at a number of developed countries, ICER thresholds ranged from $13,000 (New Zealand) to $104,000 (Canada) after converting to USD.
  • Within country, there is variation in the ICER threshold.  For instance, in the UK there is an  initiative to evaluate life-extending technologies through an elaborate set of “end-of-life” criteria.  For these end-of-life treatments, NICE says it will consider treatments with ICERs above £30,000.

So what do we make of this variability.  Nanvaty et al. summarizes their findings as follows:

The £20,000-30,000 per QALY threshold currently used in the UK was established in 1999 and has no reported basis.27,28 The absence of a justification for the arbitrarily set thresholds likely stemmed from the lack of policy related decision-making context or precedent at that time. Currently, adjustments to account for inflation, innovation, increasing cost of research and development, satisfying unmet needs, or for severe diseases, may not be adequately addressed. Our findings were comparable to those by Claxton and associates, who used a similar targeted literature review approach, although they focused on NICE and implications for the National Health Service.

The authors state that there is some evidence that an ICER threshold of more than $200,000 per QALY is supported.  Regardless, if coverage decisions are being made on this threshold, additional research is needed to better hone in on that right threshold for a given society.


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