Drug A costs $50,000 more than Drug B per patient and produces 0.5 additional life-years. The ICER is $100,000 per life-year gained. If the willingness-to-pay threshold is $50,000 per life-year, is Drug A cost-effective?
AYes — $100,000 per life-year is a reasonable price for saving lives
BNo — the ICER of $100,000 exceeds the willingness-to-pay threshold of $50,000, so Drug A does not provide sufficient health benefit relative to its additional cost
CIt depends on whether Drug A is for cancer or heart disease
DThe ICER is meaningless without knowing the total budget
At an ICER of $100,000 per life-year and a threshold of $50,000, Drug A costs twice as much per life-year as society is willing to pay. The same $50,000 spent elsewhere in the health system could produce one full life-year, whereas spending it on Drug A produces only half a life-year. Drug A is not cost-effective at this threshold — which does not mean it is ineffective, only that its incremental benefit does not justify its incremental cost relative to other uses of healthcare resources.
Question 2 True / False
An intervention that is both cheaper and more effective than the comparator is said to 'dominate' the comparator. In this case, no ICER calculation is needed.
TTrue
FFalse
Answer: True
Dominance means the new intervention is better on both dimensions — it costs less AND produces better outcomes. There is no tradeoff to evaluate: the dominant intervention is unambiguously preferred. The ICER is only meaningful when there is a tradeoff — more effective but more costly (the usual case) or less effective but cheaper. When dominance exists, the dominated strategy should be eliminated from consideration.
Question 3 Short Answer
A public health official must choose between three programs: a vaccination campaign (ICER = $5,000/QALY), a screening program (ICER = $25,000/QALY), and a drug treatment (ICER = $150,000/QALY). With a fixed budget, what is the economically efficient allocation strategy?
Think about your answer, then reveal below.
Model answer: Fund programs in order of their cost-effectiveness ratio, starting with the lowest ICER. First fund the vaccination campaign ($5,000/QALY), then the screening program ($25,000/QALY), and finally the drug treatment ($150,000/QALY) only if budget remains. This maximizes total health produced from the fixed budget. However, cost-effectiveness is one input to the decision — equity considerations (who benefits), severity of illness, and political feasibility also matter and may justify funding a less cost-effective program that serves a disadvantaged population.
This is the league table approach to priority setting. By ranking all interventions by ICER and funding from the top down until the budget is exhausted, the health system maximizes QALYs (or whatever outcome metric is used). The threshold willingness-to-pay is implicitly defined by where the budget runs out — the ICER of the last funded intervention. In practice, most countries use explicit thresholds (£20,000-30,000/QALY in the UK, roughly $50,000-150,000/QALY in the US) rather than strict league-table rationing.