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Cost-effectiveness thresholds in health care: a bookshelf guide to their meaning and use


  • Culyer, Anthony J.


There is misunderstanding about both the meaning and the role of cost-effectiveness thresholds in policy decision making. This article dissects the main issues by use of a bookshelf metaphor. Its main conclusions are as follows: it must be possible to compare interventions in terms of their impact on a common measure of health; mere effectiveness is not a persuasive case for inclusion in public insurance plans; public health advocates need to address issues of relative effectiveness; a ‘first best’ benchmark or threshold ratio of health gain to expenditure identifies the least effective intervention that should be included in a public insurance plan; the reciprocal of this ratio – the ‘first best’ cost-effectiveness threshold – will rise or fall as the health budget rises or falls (ceteris paribus); setting thresholds too high or too low costs lives; failure to set any cost-effectiveness threshold at all also involves avertable deaths and morbidity; the threshold cannot be set independently of the health budget; the threshold can be approached from either the demand side or the supply side – the two are equivalent only in a health-maximising equilibrium; the supply-side approach generates an estimate of a ‘second best’ cost-effectiveness threshold that is higher than the ‘first best’; the second best threshold is the one generally to be preferred in decisions about adding or subtracting interventions in an established public insurance package; multiple thresholds are implied by systems having distinct and separable health budgets; disinvestment involves eliminating effective technologies from the insured bundle; differential weighting of beneficiaries’ health gains may affect the threshold; anonymity and identity are factors that may affect the interpretation of the threshold; the true opportunity cost of health care in a community, where the effectiveness of interventions is determined by their impact on health, is not to be measured in money – but in health itself.

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  • Culyer, Anthony J., 2016. "Cost-effectiveness thresholds in health care: a bookshelf guide to their meaning and use," Health Economics, Policy and Law, Cambridge University Press, vol. 11(4), pages 415-432, October.
  • Handle: RePEc:cup:hecopl:v:11:y:2016:i:04:p:415-432_00

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    References listed on IDEAS

    1. Simon Eckermann & Brita Pekarsky, 2014. "Can the Real Opportunity Cost Stand Up: Displaced Services, the Straw Man Outside the Room," PharmacoEconomics, Springer, vol. 32(4), pages 319-325, April.
    2. Weinstein, Milton & Zeckhauser, Richard, 1973. "Critical ratios and efficient allocation," Journal of Public Economics, Elsevier, vol. 2(2), pages 147-157, April.
    3. Karl Claxton & Mark Sculpher & Stephen Palmer & Anthony J Culyer, 2015. "Causes For Concern: Is Nice Failing To Uphold Its Responsibilities To All Nhs Patients?," Health Economics, John Wiley & Sons, Ltd., vol. 24(1), pages 1-7, January.
    4. R. G. Lipsey & Kelvin Lancaster, 1956. "The General Theory of Second Best," Review of Economic Studies, Oxford University Press, vol. 24(1), pages 11-32.
    5. Birch, Stephen & Gafni, Amiram, 1992. "Cost effectiveness/utility analyses : Do current decision rules lead us to where we want to be?," Journal of Health Economics, Elsevier, vol. 11(3), pages 279-296, October.
    6. Patricia Danzon & Adrian Towse & Jorge Mestre‐Ferrandiz, 2015. "Value‐Based Differential Pricing: Efficient Prices for Drugs in a Global Context," Health Economics, John Wiley & Sons, Ltd., vol. 24(3), pages 294-301, March.
    7. Nancy Devlin & David Parkin, 2004. "Does NICE have a cost-effectiveness threshold and what other factors influence its decisions? A binary choice analysis," Health Economics, John Wiley & Sons, Ltd., vol. 13(5), pages 437-452.
    8. Paul Revill & Simon Walker & Jason Madan & Andrea Ciaranello & Takondwa Mwase & Diana M Gibb & Karl Claxton & Mark J Sculpher, 2014. "Using cost-effectiveness thresholds to determine value for money in low- and middle-income country healthcare systems: Are current international norms fit for purpose?," Working Papers 098cherp, Centre for Health Economics, University of York.
    9. Beth Woods & Paul Revill & Mark Sculpher & Karl Claxton, 2015. "Country-level cost-effectiveness thresholds: initial estimates and the need for further research," Working Papers 109cherp, Centre for Health Economics, University of York.
    10. Mike Paulden & James O’Mahony & Anthony Culyer & Christopher McCabe, 2014. "Some Inconsistencies in NICE’s Consideration of Social Values," PharmacoEconomics, Springer, vol. 32(11), pages 1043-1053, November.
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    Cited by:

    1. Brassel, S. & Rozanova, O. & Towse, A., 2019. "The WHO Technical Report on the Pricing of Cancer Medicines: Missing a central role for HTA and value assessment," Research Papers 002154, Office of Health Economics.
    2. Mattias Neyt, 2018. "Value-Based Pricing: Do Not Throw Away the Baby with the Bath Water," PharmacoEconomics, Springer, vol. 36(1), pages 1-3, January.
    3. Jessica Ochalek & Karl Claxton & Paul Revill & Mark Sculpher & Alexandra Rollinger, 2016. "Supporting the development of an essential health package: principles and initial assessment for Malawi," Working Papers 136cherp, Centre for Health Economics, University of York.
    4. Jessica Ochalek & Miqdad Asaria & Pei Fen Chuar & James Lomas & Sumit Mazumdar & Karl Claxton, 2019. "Assessing health opportunity costs for the Indian health care systems," Working Papers 161cherp, Centre for Health Economics, University of York.
    5. Sabrina Storgaard Sørensen & Kjeld Møller Pedersen & Ulla Møller Weinreich & Lars Ehlers, 2017. "Economic Evaluation of Community-Based Case Management of Patients Suffering From Chronic Obstructive Pulmonary Disease," Applied Health Economics and Health Policy, Springer, vol. 15(3), pages 413-424, June.
    6. James Love-Koh & Susan Griffin & Edward Kataika & Paul Revill & Sibusiso Sibandze & Simon Walker & Jessica Ochalek & Mark Sculpher & Matthias Arnold, 2019. "Economic analysis for health benefits package design," Working Papers 165cherp, Centre for Health Economics, University of York.
    7. Daniel Howdon & James Lomas, 2017. "Pricing implications of non-marginal budgetary impacts in health technology assessment: a conceptual model," Working Papers 148cherp, Centre for Health Economics, University of York.

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