ESRI Research Seminar: “The use of cost-effectiveness thresholds as decision rules for the adoption of new health technologies: the experience in Ireland and abroad”

Venue: ESRI, Whitaker Square, Sir John Rogerson's Quay, Dublin 2

Speaker: James O’Mahony (TCD).

Abstract:
Cost-effectiveness analysis (CEA) is the standard method for appraising healthcare interventions in health economics. The primary decision rule in CEA uses a cost-effectiveness threshold, whereby only healthcare interventions with a cost-effectiveness ratio below a given threshold are acceptable for implementation. This presentation discusses the theoretical justification for thresholds, efforts to determine appropriate thresholds, and their use in practice in both Ireland and abroad.

Theoretical arguments against thresholds are well recognised. While thresholds can lead to the maximisation of health gain for a finite amount of resources in principle, the assumptions required for maximisation are unlikely to prevail in practice. Similarly, fixed thresholds have been criticised as offering insufficient protection against unsustainable healthcare budget growth. Despite these criticisms thresholds remain a useful way to think about resource allocation and are employed widely in CEA.

Previous efforts to determine appropriate thresholds have used historical precedents of existing services, willingness to pay studies and simple spending rules based on national income per capita. However, none of these methods offer a satisfactory basis for a threshold. Recent work undertaken in the UK has attempted to empirically estimate thresholds, based on the cost-effectiveness of care displaced by newly adopted interventions. This work is significant in that the estimated threshold of £13,000/quality-adjusted life-year (QALY) is much lower than the £20,000-30,000/QALY range applied in the UK to date.

The influence of thresholds on health resource allocation in practice appears modest. Thresholds are often not explicit; they are frequently exceeded; and, sometimes different thresholds are applied to different disease areas. This apparent weak influence in practice is likely to reflect both a general aversion to explicit rationing by electorates and elected decision makers and the tendency for considerations of affordability to dominate value in resource allocation choices.

The Irish cost-effectiveness threshold was not made explicit for a long time, but was frequently cited as €45,000/QALY. This notional threshold was revised downwards during the fiscal crisis, apparently due to affordability concerns, to €20,000/QALY. More recently, as part of an agreement between government and the pharmaceutical industry the threshold was made explicit and revised back to €45,000/QALY. However, this threshold only applies to pharmaceutical interventions, serves as a price floor rather than a ceiling and has no empirical basis. It is likely that this threshold greatly exceeds the cost-effectiveness of some services currently not provided in Ireland or rationed through waiting lists. Therefore, it is doubtful if CEA in Ireland can justifiably claim to support evidence based policy making. Furthermore, the current threshold may put industrial and political interests before the welfare of the Irish population.