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As noted above, the convention in health economics is to describe the extra health gain from the more beneficial treatment and then to define the cost of this extra benefit. In CUA, this leads to a measure known as the incremental cost‐effectiveness ratio (ICER), which is described in Figure 3.2.

Figure 3.2 Incremental cost‐effectiveness ratio.

From the outcome of the simple calculation in Figure 3.2, one can give a value for the ICER as the extra cost per QALY gained, commonly known as ‘cost per QALY’.

To help decide if a treatment is cost‐effective, the resulting ‘cost per QALY’ can be compared with ‘costs per QALY’ for other interventions already adopted by the health service or to the decision maker's stated ‘willingness‐to‐pay’ for an additional QALY. In the UK, for many of the medicines it appraises, NICE uses a rule of thumb or ‘threshold’ that a cost per QALY of less than £20 000 is generally considered to be cost‐effective while a cost per QALY greater than £30 000 is generally considered not to be cost‐effective; decision makers in other countries may adopt other willingness‐to‐pay thresholds. Table 3.2 shows the ICERs of some common healthcare interventions.

Table 3.2 Cost per QALY gained figures from selected published studies (references at end of chapter).

Treatment	Cost per QALY gained
Clopidogrel in acute coronary syndrome	£2 284
Carmustine wafers in glioma	£54 500
Natalizumab in multiple sclerosis	£18 700
SSRIs in mild to moderate depression	£14 854
Addition of a proton pump inhibitor to NSAID or COX 2 selective inhibitors	£1 000

SSRI, selective serotonin reuptake inhibitor; NSAID, non‐steroidal anti‐inflammatory drug.

A simple example showing how such QALYs are calculated is shown in Table 3.3.

Table 3.3 An example of how QALYs are calculated.

With treatment A	With treatment B
Estimated survival = 12 years	Estimated survival = 10 years
Estimated quality of life = 0.7	Estimated quality of life = 0.5
QALYs = 8.4 (12 × 0.7)	QALYs = 5 (10 × 0.5)
QALY gain from treatment QALYs (8.4 − 5) A over treatment B = 3.4

If treatment A costs £10 000 more than treatment B, then the cost per QALY gained with treatment A is £2 941 (£10 000/3.4). If the cost per QALY is less than a stated threshold value, it would be considered a cost‐effective treatment.