Skip to main content
Log in

The NICE Cost-Effectiveness Threshold

What it is and What that Means

  • Briefing Paper
  • Published:
PharmacoEconomics Aims and scope Submit manuscript

Abstract

The National Institute for Health and Clinical Excellence (NICE) has been using a cost-effectiveness threshold range between £20 000 and £30 000 for over 7 years. What the cost-effectiveness threshold represents, what the appropriate level is for NICE to use, and what the other factors are that NICE should consider have all been the subject of much discussion. In this article, we briefly review these questions, provide a critical assessment of NICE’s utilization of the incremental cost-effectiveness ratio (ICER) threshold to inform its guidance, and suggest ways in which NICE’s utilization of the ICER threshold could be developed to promote the efficient use of health service resources.

We conclude that it is feasible and probably desirable to operate an explicit single threshold rather than the current range; the threshold should be seen as a threshold at which ‘other’ criteria beyond the ICER itself are taken into account; interventions with a large budgetary impact may need to be subject to a lower threshold as they are likely to displace more than the marginal activities; reimbursement at the threshold transfers the full value of an innovation to the manufacturer.

Positive decisions above the threshold on the grounds of innovation reduce population health; the value of the threshold should be reconsidered regularly to ensure that it captures the impact of changes in efficiency and budget over time; the use of equity weights to sustain a positive recommendation when the ICER is above the threshold requires knowledge of the equity characteristics of those patients who bear the opportunity cost. Given the barriers to obtaining this knowledge and knowledge about the characteristics of typical beneficiaries of UK NHS care, caution is warranted before accepting claims from special pleaders; uncertainty in the evidence base should not be used to justify a positive recommendation when the ICER is above the threshold. The development of a programme of disinvestment guidance would enable NICE and the NHS to be more confident that the net health benefit of the Technology Appraisal Programme is positive.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3

Similar content being viewed by others

References

  1. NICE guide to the methods of health technology appraisal. London: NICE 2004

  2. The use of thresholds: discussion. In: Towse A, Pritchard C, Devlin N, editors. Cost effectiveness thresholds: economic and ethical issues. London: King’s Fund and Office of Health Economics, 2002: 38

  3. Dolan P, Shaw R, Tsuchiya A, et al. QALY maximisation and people’s preferences: a methodological review of the literature. Health Economics 2005 Feb; 14 (2): 197–208

    Article  PubMed  Google Scholar 

  4. Culyer AJ. Introduction. In: Towse A, Pritchard C, Devlin N, editors. Cost effectiveness thresholds: economic and ethical issues. London: King’s Fund and Office of Health Economics, 2002: 9–15

    Google Scholar 

  5. Rawlins MD, Culyer AJ. National Institute for Clinical Excellence and its value judgements. BMJ 2004; 329: 224–227

    Article  PubMed  Google Scholar 

  6. Devlin N, Parkin D. Does NICE have a cost effectiveness threshold and what other factors influence its decisions? A binary choice analysis. Health Econ 2004; 13: 437–452

    Article  PubMed  Google Scholar 

  7. Smith RD, Richardson J. Can we estimate the ‘social value’ of a QALY? Four core issues to resolve. Health Policy 2005; 74 (1): 77–84

    Article  PubMed  Google Scholar 

  8. Culyer AJ, McCabe CJ, Briggs AH, et al. Searching for a threshold not setting one: the role of the National Institute for Health and Clinical Excellence. J Health Serv Res Policy 2007 12; 1: 56–58

    Article  Google Scholar 

  9. Loomes G. Valuing life years and QALYs: transferability and convertibility of values across the UK public sector. In: Towse A, Pritchard C, Devlin N, editors. Cost effectiveness thresholds: economic and ethical issues. London: King’s Fund and Office of Health Economics, 2002: 46–55

    Google Scholar 

  10. Williams A. What could be nicer than NICE? London: Office of Health Economics, 2004

    Google Scholar 

  11. Hutton J, Maynard A. A NICE challenge for health economics. Health Econ 2000; 8: 89–93

    Article  Google Scholar 

  12. Devlin N. An introduction to the use of cost effectiveness issues in decision making: what are the issues? In: Towse A, Pritchard C, Devlin N, editors. Cost effectiveness thresholds: economic and ethical issues. London: King’s Fund and Office of Health Economics, 2002: 16–25

    Google Scholar 

  13. Birch S, Gafni A. Cost effectiveness/utility analyses: do current decision rules lead us to where we want to be? J Health Econ 1992; 11: 279–296

    Article  PubMed  CAS  Google Scholar 

  14. Gafni A, Birch S. Guidelines for the adoption of new technologies: a prescription for uncontrolled growth in expenditures and how to avoid the problem. CMAJ 1993; 148: 913–917

    PubMed  CAS  Google Scholar 

  15. Birch S, Gafni A. On being NICE in the UK: guidelines for technology appraisal for the NHS in England and Wales. Health Econ 2002; 11 (3): 185–191

    Article  PubMed  Google Scholar 

  16. Sendi P, Gafni A, Birch S. Opportunity costs and uncertainty in the economic evaluation of health care interventions. Health Econ 2002; 11: 23–31

    Article  PubMed  CAS  Google Scholar 

  17. Claxton K, Culyer AJ, Sculpher M, et al. Discounting and cost effectiveness in NICE: stepping back to sort out a confusion [editorial]. Health Econ 2006; 15 (1): 1–4

    Article  PubMed  Google Scholar 

  18. National Institute for Health and Clinical Excellence. Framework document [online]. Available from URL: http://www.nice.org.uk/NICEmedia/pdf/appendixB_framework.pdf [Accessed 2008 Jul 18]

  19. Claxton K, Briggs A, Buxton MJ, et al. Value based pricing for NHS drugs: an opportunity not to be missed? BMJ 2008 Feb; 336: 251–254

    Article  PubMed  Google Scholar 

  20. Friedman M. Lectures in price theory. Chicago (IL): Aldine, 1971

    Google Scholar 

  21. Culyer AJ. The bogus conflict between efficiency and equity. Health Econ 2006; 15: 1155–1158

    Article  PubMed  Google Scholar 

  22. Appleby J, Devlin N, Parkin D, et al. Searching for local NHS cost effectiveness thresholds: a feasibility study. NICE conference; Manchester; 2007 Dec 5–6 [online]. Available from URL: http://www.nice2007.co.uk/ApplebyDevlin.pdf [Accessed 2008 Jul 17]

    Google Scholar 

  23. Martin S, Rice N, Smith P. Further evidence on the link between health care spending and health outcomes in England [CHE discussion paper 32]. York: University of York, 2007

    Google Scholar 

  24. National Institute for Health and Clinical Excellence. NICE launches commissioning guides as part of an initiative to help NHS reduce spend on ineffective treatments [online]. Available from URL: http://www.nice.org.uk/newsevents/infocus/nice_launches_cornmissioning_guides_as_part_of_an_initiat ive_to_help_nhs_reduce_spending_on_ineffective_treatments.jsp [Accessed 2008 Jul 17]

  25. Association of Directors of Public Health. Letter from the President: patient charges for treatment. ADPH 2007 Jan [online]. Available from URL: http://www.adph.org.uk/press_releases/20070131.php?PHPSESSID=Ijftq9htaji5qglme2i3a01nlh5 [Accessed 2008 Jul 17]

    Google Scholar 

  26. House of Commons Health Committee. National Institute for Health and Clinical Excellence: first report of session 2007–08. Vol. 1. London: The Stationary Office, 2008 Jan

  27. Rawlins M. The future for NICE (National Institute for Health and Clinical Excellence). Pharm J 2007; 278 (7452): 589

    Google Scholar 

  28. National Institute for Health and Clinical Excellence. NICE response to the committee’s first report of the session 2007–2008 HSC 550. London: The Stationary Office, 2008 Jun

    Google Scholar 

Download references

Acknowledgements

This paper was initially prepared as a briefing paper for NICE as part of the process of updating the Institute’s 2004 Guide to the Methods of Technology Appraisal. The work was funded by NICE through its Decision Support Unit (DSU), which is based at the universities of Sheffield, Leicester, York, Leeds and at the London School of Hygiene and Tropical Medicine.

C. McCabe has worked with and for many stakeholders in the NICE appraisal process, including pharmaceutical companies, patient groups and NHS organizations.

The authors thank Louise Longworth, Carole Longson, David Barnett and members of the DSU for constructive comments on earlier versions of this paper.

Author information

Authors and Affiliations

Authors

Corresponding author

Correspondence to Christopher McCabe.

Rights and permissions

Reprints and permissions

About this article

Cite this article

McCabe, C., Claxton, K. & Culyer, A.J. The NICE Cost-Effectiveness Threshold. Pharmacoeconomics 26, 733–744 (2008). https://doi.org/10.2165/00019053-200826090-00004

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.2165/00019053-200826090-00004

Keywords

Navigation