Table 2

Definitions of CEA, ICER and QALY8

NICE is charged with considering both the effectiveness and cost effectiveness of treatments, and then with making recommendations as to their provision within the National Health Service (NHS).
QALY: the QALY is based on the number of years of life that may be added by an intervention. Each year in ‘full or perfect health’ is assigned the value of 1.0, and this can go down to a value of 0.0 for death. If the extra years cannot be lived in full health, for instance, if a patient were to be restricted in their mobility or in severe pain, then the extra life years are given a value between 0 and 1 to take this debility into account.
CEA: assesses two or more alternative courses of action in terms of their costs and benefits. The comparison is summarised using the expected ICER.
ICER: this is a measure of the additional cost per additional unit of health gain produced by one intervention compared with another. The Institute's preferred form of cost effectiveness analysis uses the QALY to describe the outcome of each intervention. By extension, the Institute's preferred form of ICER is the cost per QALY gained. The cost-effectiveness threshold is often referred to as society's willingness to pay for an additional unit of health gain (QALY); that is, if the ICER for a specific intervention is less than the cost-effectiveness threshold, then society, or its agents, will be willing to fund it, and conversely, if the ICER is greater than the threshold, society will not be willing to fund it.
CEA, cost-effectiveness analysis; ICER, incremental cost-effectiveness ratio; NICE, National Institute for Health and Clinical Excellence; QALY, quality adjusted life year.