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Finding the right threshold
Typically, in cost-effectiveness analyses which form integral part of Health Technology Assessments (HTAs), new treatments are assessed by comparing their costs and Quality-Adjusted Life Years (QALYs) against those related to (usually) standard practice. According to NICE guidelines, if the Incremental Cost-Effectiveness Ratio (ICER) of a new treatment falls below the £20,000 to £30,000 per QALY threshold, it may then be considered for wider implementation (NICE 2022). Despite this approach being simple and intuitive, it has some limitations, particularly in its failure to account for opportunity costs and budgetary constraints (Claxton et al., 2015; Claxton et al., 2013).

While the threshold is expected to represent the opportunity cost of the new interventions (e.g., the cost per QALY of the displaced services), some researchers argue that the threshold should be smaller because the displaced services are likely to have a cost per QALY lower than £20,000 (Claxton et al., 2013). This means that accepting a new treatment with a cost per QALY of £20,000 or more may cause more bad than good, by displacing services that are more cost-effective than the new treatments.

A thin budget calls for careful thought
Additionally, on a system where the budget is already stretched thin, implementing new treatments that, while very effective, are very costly may be impractical, since the costs of releasing too much budget in a short amount of time may prove to be too high (Lomas, 2019).

A good example is the case of the new treatment for hepatitis C implemented in 2015 (UK Health and Security Agency, 2022). The new drug treatment was highly effective, helping the cure of a disease associated with a significant societal burden. However, the new drug treatment was also very costly, making it unaffordable for the NHS to provide it to all eligible patients immediately. Allocating a large portion of the health budget to this costly intervention would inevitably mean diverting resources from other essential healthcare services which, in the short term, was expected to create costs that would be higher than the new treatment’s benefits. Consequently, the NHS decided to adopt a staggered intervention, where the investment was distributed across several years.

From fixed to moving thresholds?
The understanding that the health opportunity cost varies depending on whether the budget impact occurs primarily in the initial year or is spread out over an extended period necessitates adjustments to conventional HTAs.

Lomas (2019) emphasises this by proposing varying thresholds for economic evaluations based on the distribution of budgetary impacts over time. For instance, when an investment spans multiple time periods, the associated health opportunity costs should be lower, thereby implying lower cost-effectiveness thresholds. It’s worth noting, albeit a somewhat technical point, that employing different thresholds for different investment years would render the use of ICERs unfeasible, as ICERs require comparison against a single threshold. In this context, Lomas (2019) advocates for the utilisation of Net Health Benefits (NHB) which incorporate threshold values into their calculations (more about NHB in Paulden, 2020), facilitating such an extension.

Author of this blogpost:
Dr Luís Filipe, Lancaster University

What’s next
In the next blog, Luís will explore how political decision-making and societal preferences play a role in HTAs.

Some references:
• Claxton, K., Sculpher, M., Palmer, S. and Culyer, A.J., 2015. Causes for concern: is NICE failing to uphold its responsibilities to all NHS patients?. Health economics, 24(1), pp.1-7.
• Claxton, K., Martin, S., Soares, M., Rice, N., Spackman, E., Hinde, S., Devlin, N., Smith, P.C. and Sculpher, M., 2015. Methods for the estimation of the National Institute for Health and Care Excellence cost-effectiveness threshold. Health Technology Assessment (Winchester, England), 19(14), p.1.
• Lomas, J.R., 2019. Incorporating affordability concerns within cost-effectiveness analysis for health technology assessment. Value in Health, 22(8), pp.898-905.
• National Institute for Health and Care Excellence, 2022. NICE health technology evaluations: the manual. Process and methods [PMG36].
• Paulden, M., 2020. Calculating and interpreting ICERs and net benefit. Pharmacoeconomics, 38(8), pp.785-807.
• UK Health and Security Agency, 2022. Hepatitis C in England 2022. Working to eliminate hepatitis C as a public health problem. Short report.