What is the incremental cost-effectiveness ratio (ICER)?
A practical explanation of additional costs per additional health benefit, with an example and common interpretation pitfalls.
Updated
The incremental cost-effectiveness ratio describes the additional cost of an intervention per additional unit of health benefit compared with an alternative.
ICER = additional costs ÷ additional health effects
When effects are expressed in QALYs, the result is a cost per QALY gained.
An illustrative example
Suppose an innovation costs €2,000 more per patient and generates 0.1 additional QALYs. Both estimates cover the same population, perspective and time horizon.
The ICER is €2,000 ÷ 0.1 = €20,000 per QALY gained. These numbers are illustrative, not results from a clinical study.
Interpreting the result
An ICER needs context. Compare it with the decision maker's relevant cost-effectiveness threshold, and examine uncertainty around costs and effects.
A lower ratio does not automatically identify the best option. If an intervention costs less and produces more health, it dominates its comparator. If it costs more and produces less health, it is dominated. Negative ICERs can arise in both situations and should not be interpreted on their sign alone.
When comparing several alternatives, use a fully incremental analysis. Remove dominated options and assess the remaining options in order of effectiveness. Net monetary benefit can make comparisons easier to interpret.
Questions to ask
- Is the comparator relevant to current care?
- Do costs and effects use the same time horizon?
- Which assumptions drive the result?
- Is the intervention affordable and feasible to implement?