On its own, clinical effectiveness is insufficient for maintaining or introducing any clinical procedure or process. Cost must also be taken into account. When good evidence exists of the therapeutic equivalence between two or more clinical management strategies, the cheaper option is preferred (box 1).
Incremental cost effectiveness ratio
However, in most instances NICE is confronted with a clinical management strategy that is better than current standard practice but which costs more. NICE must then decide what increase in health (compared with standard practice) is likely to accrue from the increase in expenditure. This is the incremental cost effectiveness ratio. Such ratios can be expressed in many ways. NICE's preferred measure is the cost per quality adjusted life year (QALY), but if appropriate data on quality of life are not available, it uses alternatives such as the cost per life year gained.
Box 1: Cost minimisation
Oral and intravenous fludarabine are equivalent as second line treatments for chronic lymphatic leukaemia.3
The total (acquisition plus administration) costs over four cycles are £3000 (£2700+£300) for oral administration and £5300 (£2700+£2600) for intravenous administration. Thus using oral fludarabine rather than intravenous saves £2300 over four cycles and the oral formulation is preferred.
NICE rejects the use of an absolute threshold for judging the level of acceptability of a technology in the NHS for four reasons:
- There is no empirical basis for deciding at what value a threshold should be set
- There may be circumstances in which NICE would want to ignore a threshold
- To set a threshold would imply that efficiency has absolute priority over other objectives (particularly fairness)
- Many of the technology supply industries are monopolies, and a threshold would discourage price competition.
Rather than apply an arbitrary threshold, NICE makes its decisions on a case by case basis, as shown stylistically in the . As the incremental cost effectiveness ratio increases, the likelihood of rejection on grounds of cost ineffectiveness rises. The critical issues are the values of incremental cost effectiveness ratios at inflexions A and B.4-6
Clinical management pathways with ratios to the left of A would generally be regarded as cost effective. Those with ratios to the right of B would, if adopted, be likely to deny other patients (with different conditions) access to more cost effective treatments.
Relation between likelihood of a technology being considered as cost ineffective plotted against the log of the incremental cost effectiveness ratio
Box 2: Cost ineffectiveness
Anakinra for rheumatoid arthritis
Anakinra seems to be less effective than etanercept or infliximab for rheumatoid arthritis.8
It costs £7450/year for each patient. The incremental cost effectiveness ratio for anakinra is estimated to be £69 000/QALY for rheumatoid arthritis, which is an unacceptable opportunity cost.
Interferon beta and glatiramer acetate for multiple sclerosis
Interferon beta and glatiramer acetate reduce the frequency and severity of relapse in relapsing-remitting multiple sclerosis.9
The mid-range estimates of the incremental cost effectiveness ratios (£/QALY) depend on the time horizon examined:
- 5 years = £580 000
- 10 years = £308 000
- 20 years = £70 000
The opportunity costs for each of these scenarios are unacceptable.
There is no empirical basis for assigning particular values to A or B,7
but NICE and its advisory bodies have taken the view that inflexion A occurs at around £5000-£15 000/QALY and inflexion B at around £25 000-£35 000/QALY. NICE would be unlikely to reject a technology with a ratio in the range of £5000-£15 000/QALY solely on the grounds of cost ineffectiveness but would need special reasons for accepting technologies with ratios over £25 000-£35 000/QALY as cost effective. The main considerations in making judgments about cost effectiveness for ratios of £25 000-£35 000/QALY are:
- The degree of uncertainty surrounding the estimate
- The particular features of the condition and population using the technology
- The innovative nature of the technology
- When appropriate, the wider societal costs and benefits
- When appropriate, reference to previous appraisals.
The phrase “particular features of the condition and the population using the technology” incorporates matters that include the availability and clinical effectiveness of other interventions for the condition, particular public health issues (such as communicable diseases), and special considerations of equity. Boxes 2 and 3 show examples of the application of some of these principles.
Judgments about whether incremental cost effectiveness ratios can be considered “reasonable” are made by the independent members of NICE's advisory committees (particularly the appraisal committee) and the guideline development groups. Membership is drawn from clinicians and health managers working in the NHS, technical experts (statisticians and health economists), and patients or patient advocates.
Box 3: Cost effectiveness
Imatinib is licensed for the treatment of chronic myeloid leukaemia in the chronic phase (after failure of interferon alfa)10
and in the accelerated and blast crisis phases (for those not treated earlier with imatinib).
The mid range estimates of the incremental cost effectiveness ratios (£/QALY) are:
- 37 000 for the chronic phase
- 38 400 for the accelerated phase
- 49 000 for the blast crisis phase.
In the absence of any effective alternative treatment (apart from bone marrow transplantation) imatinib was considered to be cost effective in the chronic phase after interferon alfa. Denial of imatinib in the accelerated phase was considered to be inconsistent because the ratio was similar to that for the chronic phase
Denial of imatinib to patients in the blast cell phase was considered unfair. Patients at this advanced stage could reasonably have expected, in view of the decisions made already, to have had the opportunity of treatment with imatinib at an earlier stage of their condition. The fact that they were not given this chance would have been due to failings in the healthcare system. On grounds of equity, therefore, it was considered that imatinib should be available to patients in the blast cell phase of chronic myeloid leukaemia who had not previously been treated with the drug.
NICE does not take affordability into account when making judgments about cost effectiveness. The term is not a technical one, but we use it to mean that a particular activity should be funded by increasing the total funds available for health care rather than from existing resources. This would imply increasing taxation, borrowing on the markets, or diversion of funds from another publicly funded activity. Affordability, in this sense, is a matter for the government when deciding the annual budget for the NHS. It is NICE's job to judge whether something ought to be purchased from within the resources made available to the NHS.
The government could therefore judge a particular intervention unaffordable for the NHS (because of the large numbers who would be eligible for treatment) even though NICE had judged it cost effective. In such circumstances the government could respond in one of two ways: the Department of Health and the Welsh Assembly Government might formally advise the NHS to ignore NICE's advice; alternatively, ministers might invoke one of the clauses in its directions to NICE stating that (in this particular case) it is required to take account of “advice from ministers on available resources.” So far, neither of these potential government responses have been proposed or threatened.