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The Irish Cost-Effectiveness Threshold: Does it Support Rational Rationing or Might it Lead to Unintended Harm to Ireland’s Health System?

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  • James O’Mahony

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  • Diarmuid Coughlan

Abstract

Ireland is one of the few countries worldwide to have an explicit cost-effectiveness threshold. In 2012, an agreement between government and the pharmaceutical industry that provided substantial savings on existing medications set the threshold at €45,000/quality-adjusted life-year (QALY). This replaced a previously unofficial threshold of €20,000/QALY. According to the agreement, drugs within the threshold will be granted reimbursement, whereas those exceeding it may still be approved following further negotiation. A number of drugs far exceeding the threshold have been approved recently. The agreement only applies to pharmaceuticals. There are four reasons for concern regarding Ireland’s threshold. The absence of an explicit threshold for non-drug interventions leaves it unclear if there is parity in willingness to pay across all interventions. As the threshold resembles a price floor rather than a ceiling, in principle it only offers a weak barrier to cost-ineffective interventions. It has no empirical basis. Finally, it is probably too high given recent estimates of a threshold for the UK based on the cost effectiveness of services forgone of approximately £13,000/QALY. An excessive threshold risks causing the Irish health system unintended harm. The lack of an empirically informed threshold means the policy recommendations of cost-effectiveness analysis cannot be considered as fully evidence-based rational rationing. Policy makers should consider these issues and recent Irish legislation that defined cost effectiveness in terms of the opportunity cost of services forgone when choosing what threshold to apply once the current industry agreement expires at the end of 2015. Copyright Springer International Publishing Switzerland 2016

Suggested Citation

  • 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.
  • Handle: RePEc:spr:pharme:v:34:y:2016:i:1:p:5-11
    DOI: 10.1007/s40273-015-0336-1
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    References listed on IDEAS

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    1. Brick, Aoife & Gorecki, Paul K. & Nolan, Anne, 2013. "Ireland: Pharmaceutical Prices, Prescribing Practices and Usage of Generics in a Comparative Context," Research Series, Economic and Social Research Institute (ESRI), number RS32, January.
    2. 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, May.
    3. Alan Haycox, 2013. "How Much Should the NHS Pay for a QALY?," PharmacoEconomics, Springer, vol. 31(5), pages 357-359, May.
    4. Burke, Sara & Thomas, Steve & Barry, Sarah & Keegan, Conor, 2014. "Indicators of health system coverage and activity in Ireland during the economic crisis 2008–2014 – From ‘more with less’ to ‘less with less’," Health Policy, Elsevier, vol. 117(3), pages 275-278.
    5. Barnsley, P. & Towse, A. & Karlsberg Schaffer, S. & Sussex, J., 2013. "Critique of CHE Research Paper 81: Methods for the Estimation of the NICE Cost Effectiveness Threshold," Occasional Papers 000106, Office of Health Economics.
    6. 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.
    7. Aaron A. Stinnett & John Mullahy, 1998. "Net Health Benefits: A New Framework for the Analysis of Uncertainty in Cost-Effectiveness Analysis," NBER Technical Working Papers 0227, National Bureau of Economic Research, Inc.
    8. 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.
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    Cited by:

    1. Gorecki, Paul, 2017. "The savings from the 2016-2020 Framework Agreement on the Supply and Pricing of Medicines in Ireland: which counterfactual?," MPRA Paper 79481, University Library of Munich, Germany.

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