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Incremental cost-effectiveness ratios (ICERs): The silence of the lambda

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  • Gafni, Amiram
  • Birch, Stephen

Abstract

Despite the central role of the threshold incremental cost-effectiveness ratio (ICER), or lambda ([lambda]), in the methods and application of cost-effective analysis (CEA), little attention has been given to the determining the value of [lambda]. In this paper we consider 'what explains the silence of the [lambda]'? The concept of the threshold ICER is critically appraised. We show that there is 'silence of the [lambda]' with respect to justification of the value of ICER thresholds, their use in decision-making and their relationship to the opportunity cost of marginal resources. Moreover, the 'sound of silence' extends to both 'automatic cut-off' and more sophisticated approaches to the use of [lambda] in determining recommendations about health care programs. We argue that the threshold value provides no useful information for determining the efficiency of using available resources to support new health care programs. On the contrary, the threshold approach has lead to decisions that resulted in increased expenditures on health care programs and concerns about the sustainability of public funding for health care programs without any evidence of increases in total health gains. To improve efficiency in resource allocation, decision-makers need information about the opportunity costs of programs.

Suggested Citation

  • Gafni, Amiram & Birch, Stephen, 2006. "Incremental cost-effectiveness ratios (ICERs): The silence of the lambda," Social Science & Medicine, Elsevier, vol. 62(9), pages 2091-2100, May.
  • Handle: RePEc:eee:socmed:v:62:y:2006:i:9:p:2091-2100
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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Sofosbuvir: a fork in the road for NICE?
      by Chris Sampson in The Academic Health Economists' Blog on 2015-01-20 17:21:00

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    2. van der Star, Sanne M. & van den Berg, Bernard, 2011. "Individual responsibility and health-risk behaviour: A contingent valuation study from the ex ante societal perspective," Health Policy, Elsevier, vol. 101(3), pages 300-311, August.
    3. Gandjour, Afschin & Chernyak, Nadja, 2011. "A new prize system for drug innovation," Health Policy, Elsevier, vol. 102(2), pages 170-177.
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    7. Heather McDonald & Cathy Charles & Laurie Elit & Amiram Gafni, 2015. "The Silence in Hoch et al.’s Commentary about the Rationale for and Objective(s) of Canada’s Separate HTA Process for Cancer Drugs: The Importance of Transparency and Accountability when Allocating Ta," PharmacoEconomics, Springer, vol. 33(8), pages 883-886, August.
    8. Brousselle, Astrid & Lessard, Chantale, 2011. "Economic evaluation to inform health care decision-making: Promise, pitfalls and a proposal for an alternative path," Social Science & Medicine, Elsevier, vol. 72(6), pages 832-839, March.
    9. McKenna, Claire & Chalabi, Zaid & Epstein, David & Claxton, Karl, 2010. "Budgetary policies and available actions: A generalisation of decision rules for allocation and research decisions," Journal of Health Economics, Elsevier, vol. 29(1), pages 170-181, January.
    10. James O’Mahony & Diarmuid Coughlan, 2016. "The Irish Cost-Effectiveness Threshold: Does it Support Rational Rationing or Might it Lead to Unintended Harm to Ireland’s Health System?," PharmacoEconomics, Springer, vol. 34(1), pages 5-11, January.
    11. Peacock, Stuart J. & Richardson, Jeff R.J. & Carter, Rob & Edwards, Diana, 2007. "Priority setting in health care using multi-attribute utility theory and programme budgeting and marginal analysis (PBMA)," Social Science & Medicine, Elsevier, vol. 64(4), pages 897-910, February.
    12. Afschin Gandjour, 2015. "Drug pricing and control of health expenditures: a comparison between a proportional decision rule and a cost-per-QALY rule," International Journal of Health Planning and Management, Wiley Blackwell, vol. 30(4), pages 395-402, October.
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    14. Shavit, Oren, 2009. "Utilization of health technologies--Do not look where there is a light; shine your light where there is a need to look!: Relating national health goals with resource allocation decision-making; illust," Health Policy, Elsevier, vol. 92(2-3), pages 268-275, October.
    15. 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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