Cost per QALY as a measure of value for money
Cost per QALY (quality-adjusted life year, combining length and quality of life) is the extra cost divided by the extra QALYs gained compared with an alternative.
Remember
What counts is the extra health that the extra money buys, set against the alternative, not the price on its own, the total bill or popularity. The figure informs funding decisions rather than dictating them.
Memory aid
pounds per QALY: extra pounds on top, extra QALYs underneath
Say the cost per QALY as pounds per QALY, with the extra pounds on top and the extra QALYs underneath.
Demand for healthcare outstrips the money, staff and beds available, so choices have to be made. Prioritisation means ranking choices when you cannot afford all of them. In the UK, NICE makes many of these choices using the cost per QALY gained.
A QALY (quality-adjusted life year) combines how long someone lives with how good their health is during that time. One year in perfect health equals 1 QALY, and so do 10 years lived at 10% of perfect health. A year in less than perfect health is worth a fraction.
The cost per QALY is a ratio: the extra cost of a treatment divided by the extra QALYs it gives compared with the alternative, usually current care. In technical language this is the incremental cost-effectiveness ratio (ICER), where incremental simply means the extra cost and extra benefit compared with an alternative.
Turning each treatment's benefit into QALYs lets NICE compare a cancer drug, a surgical procedure and an antibiotic on one scale. A lower cost per QALY means more health for the money, which is why treatments with a lower figure are favoured. A cheap drug that adds almost no QALYs can still have a poor cost per QALY, while a more expensive one that adds many can be good value.
The figure is an aid to decision-making, not a calculator that makes the decision: uncertainty in the evidence and other factors are weighed too.
Key facts
- Calculation
- the extra cost of a treatment divided by the extra QALYs gained, compared with an alternative.
- Worked example
- 1 QALY is one year in perfect health, or 10 years lived at 10% of perfect health.
- Technical name
- the incremental cost-effectiveness ratio (ICER), where incremental means the extra cost and extra benefit compared with an alternative.
- Lower is better
- a lower cost per QALY means more health gained per pound spent.
- One scale
- QALYs let NICE compare very different treatments, such as a cancer drug and an antibiotic, on one scale.
- Use in the UK
- NICE weighs cost per QALY with uncertainty and other evidence, and it is not an automatic funding rule.
Exam traps
- A drug's purchase price on its own does not show its value, because an expensive drug that adds many healthy years can be better value than a cheap one that adds almost nothing.
- The total budget impact of a treatment, which is the overall bill, shows whether the NHS can afford it, not how much health each pound buys, so a drug with a large total cost can still be good value.
- A cost per life year gained is not a cost per QALY, because it counts only survival and treats a year in poor health like a year in perfect health.
Read the full notes
Tested in 6 SimpleMed+ questions
Practice it in Population and Social Science, with the answer and a full explanation after every question.
Practice these questions