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Measuring effectiveness and cost effectiveness: the QALY

With the rapid advances in modern medicine, most people accept that no publicly funded healthcare system, including the NHS, can possibly pay for every new medical treatment which becomes available. The enormous costs involved mean that choices have to be made.

It makes sense to focus on treatments that improve the quality and/or length of someone's life and, at the same time, are an effective use of NHS resources.

NICE takes all these factors into account when it carries out its technology appraisals (TAs) on new drugs. Our expert review groups (comprising both health professionals and patients) examine independently-verified evidence on how well a drug works and whether it provides good value for money.

To ensure our judgements are fair, we use a standard and internationally recognised method to compare different drugs and measure their clinical effectiveness: the quality-adjusted life years measurement (the ‘QALY').

How is this calculated?

Although one treatment might help someone live longer, it might also have serious side effects. (For example, it might make them feel sick, put them at risk of other illnesses or leave them permanently disabled.) Another treatment might not help someone to live as long, but it may improve their quality of life while they are alive (for example, by reducing their pain or disability).

The QALY method helps us measure these factors so that we can compare different treatments for the same and different conditions. A QALY gives an idea of how many extra months or years of life of a reasonable quality a person might gain as a result of treatment (particularly important when considering treatments for chronic conditions).

A number of factors are considered when measuring someone's quality of life, in terms of their health. They include, for example, the level of pain the person is in, their mobility and their general mood. The quality of life rating can range from negative values below 0 (worst possible health) to 1 (the best possible health). (See the box below for an example of how this works in practice.)

What about cost effectiveness?

Having used the QALY measurement to compare how much someone's life can be extended and improved, we then consider cost effectiveness - that is, how much the drug or treatment costs per QALY. This is the cost of using the drugs to provide a year of the best quality of life available - it could be one person receiving one QALY, but is more likely to be a number of people receiving a proportion of a QALY - for example 20 people receiving 0.05 of a QALY.

Cost effectiveness is expressed as ‘£ per QALY'.

Each drug is considered on a case-by-case basis. Generally, however, if a treatment costs more than £20,000-30,000 per QALY, then it would not be considered cost effective.

How a QALY is calculated

Patient x has a serious, life-threatening condition.

  • If he continues receiving standard treatment he will live for 1 year and his quality of life will be 0.4 (0 or below = worst possible health, 1= best possible health)
  • If he receives the new drug he will live for 1 year 3 months (1.25 years), with a quality of life of 0.6.

The new treatment is compared with standard care in terms of the QALYs gained:

  • Standard treatment: 1 (year's extra life) x 0.4 = 0.4 QALY
  • New treatment: 1.25 (1 year, 3 months extra life) x 0.6 = 0.75 QALY

Therefore, the new treatment leads to 0.35 additional QALYs (that is: 0.75 -0.4 QALY = 0.35 QALYs).

  • The cost of the new drug is assumed to be £10,000, standard treatment costs £3000.

The difference in treatment costs (£7000) is divided by the QALYs gained (0.35) to calculate the cost per QALY. So the new treatment would cost £20,000 per QALY.

This page was last updated: 20 April 2010

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Accessibility | Cymraeg | Freedom of information | Vision Impaired | Contact Us | Glossary | Data protection | Copyright | Disclaimer | Terms and conditions

Copyright 2014 National Institute for Health and Care Excellence. All rights reserved.

Accessibility | Cymraeg | Freedom of information | Vision Impaired | Contact Us | Glossary | Data protection | Copyright | Disclaimer | Terms and conditions

Copyright 2014 National Institute for Health and Care Excellence. All rights reserved.