Does your health technology (e.g., drug, vaccine, diagnostic, device) provide additional health benefits compared to competing alternatives (e.g., standard of care)? How do you measure and quantify the “value” associated with the added benefits?
Value can be measured in many ways (e.g., economic, clinical, and humanistic outcomes). You could, for example, simply compare how many more years of life a technology provides over another. You could also compare improvements in the quality of life. Fortunately, a very common metric used in health economics incorporates both quantity and quality of life in a single number, called a quality-adjusted life year (QALY). QALYs are often used in healthcare decision making, particularly by organizations in single-payer healthcare systems, like the UK’s National Institute for Health and Care Excellence (NICE), to help consider the adoption of new technologies. QALYs are also used in the US by an influential independent non-profit organization, the Institute for Clinical and Economic Review (ICER), to help inform pricing/reimbursement decisions.
HOW QALYS ARE CALCULATED
One QALY represents one year of perfect health. This single numeric value is calculated simply by multiplying the number of life years gained by the quality of those life years that a health technology provides. The quality of life, also called a utility, ranges from 0 (death) to 1 (perfect health), with negative utility values sometimes also possible (i.e., quality of life considered worse than death). For example, let’s say a new treatment lengthens patients’ lives by an average of 9 years, but the quality of those years, or utility, is relatively low at 0.41. This equates to a QALY of 3.69 (=9*0.41), also shown in Figure 1. So instead of getting “credit” for adding 9 life years, the new treatment essentially provides less than 4 years of perfect health because of the treatment’s effect on quality of life.
Figure 1. Example of calculating a quality-adjusted life year (QALY).
Adapted from This Photo by Unknown Author is licensed under CC BY
Before going further, you might be wondering where utility values come from. Published utility values are available for hundreds of different health states, largely from studies that survey how people rate specific health conditions. Utility values for the same health state, like ulcerative colitis in remission, often vary depending on the study respondents (e.g., people experiencing the health state, general population, care givers, or demographics [age, sex, severity, etc.]), country, measures (e.g., standard gamble, time trade-off), and publication date. Tufts’ Cost-Effectiveness Analysis (CEA) Registry is an excellent repository of utility data culled from over 10,000 studies published since 1976. A quick search in the registry, for example, yielded 13 utility estimates for ulcerative colitis in remission (non-surgical) over the past five years, ranging from 0.79 to .93 (average = 0.86, standard deviation = 0.04). Thus, you can use the average and variability of several utility values, or further identify which of those studies is most relevant to your work. Table 1 provides other examples from the literature cited in the registry.
Table 1. Examples of utility values cited in the literature.
HOW QALYS ARE USED
When costs and QALYs are included in cost-effectiveness studies, decision makers can then evaluate the cost per QALY gained between two technologies against a predefined cost per QALY threshold representing a payer’s maximum willingness to pay for one additional QALY (i.e., one additional year of perfect health). The lower the cost per QALY, the more cost-effective the technology, indicating better value for money. Because QALY is a standard unit of analysis, it can also be used to compare different health technologies and conditions.
In the US, a widely adopted threshold advocated by the ICER organization and others is to consider any technology under $150,000/QALY cost-effective, and further, that any technologies over this amount should lower their pricing. Professional/clinical practice organizations may also recommend cost/QALY thresholds in specific therapeutic areas. For example, the recent 2022 AHA/ACC/HFSA Guideline for the Management of Heart Failure by the American College of Cardiology/American Heart Association Joint Committee on Clinical Practice Guidelines considers treatments over $180,000/QALY to be low value.
LIMITATIONS OF QALYS
A QALY represents both quantity and quality of life in a single generic metric that can be used in the comparative evaluation of health technologies and conditions. Despite these key advantages of a QALY, there are also several technical, ethical, and practical limitations of its use.
As mentioned above, utilities for the same health condition can vary depending on how they are measured (who, when, where, and what instruments) raising concerns about the validity of a QALY.
Ethical concerns center on how QALYs limit gains for, and therefore discriminate against, (a) the elderly who have fewer life years to accrue QALYs, and (b) people with disabilities or chronic conditions whose utility can never reach perfect health.
In practice, cost per QALY thresholds help determine value, but should not be used alone for decisions to adopt, afford, or access new technologies. And while established cost per QALY thresholds are sometimes perceived as another advantage, based often as a function of per capita gross domestic product (GDP), these thresholds are largely arbitrary.
Finally, a QALY may be less relevant than outcomes based on “natural” units of clinical effectiveness for some therapeutic areas or decision makers (e.g., amount of reduction in blood pressure, migraine episodes, depression symptoms, tumor size).
Figure 2. Pros and cons of using QALYs.
Researchers and policymakers have been exploring alternatives to QALYs and their use in the decision-making process for decades. Examples include disability-adjusted life years (DALYs), with a long history in the literature, and a relatively new metric that the ICER organization now reports alongside QALYs, Equal Value of Life Years Gained (evLYG). In the meantime, QALYs continue to play an important and influential role in assessing the value of new healthcare technologies.
Disclosure: Jason Hurwitz is not affiliated with any organizations mentioned in this article.
Jason T. Hurwitz, MS, PhD
Jason T. Hurwitz is Assistant Director of the Center for Health Outcomes & Pharmacoeconomic Research (HOPE Center) at the University of Arizona. Dr. Hurwitz develops and teaches several HOPE Center training programs for healthcare industry professionals each year. He also conducts numerous industry, foundation, and federally funded studies in health economics and outcomes research (HEOR). His recent research includes cost-effectiveness analyses of immunosuppressants for kidney transplant recipients and of PD-L1 testing for non-small cell lung (NSCLC) cancer, and the development of a shared decision-making (SDM) tool to help patients and providers reduce the risk of drug-drug interactions. Follow Dr. Hurwitz on LinkedIn or visit https://www.pharmacy.arizona.edu/hope for upcoming HEOR training programs.