Cost-Effectiveness Threshold

Cost-Effectiveness Threshold (λ), Opportunity Cost and the NICE GBP 25,000 to GBP 35,000 Range

The cost-effectiveness threshold, written λ, is the value per unit of health that turns an ICER or a net benefit calculation into a decision. It is used with ICERs, net monetary benefit and net health benefit, and its value differs between health systems. A supply-side threshold, which reflects the health displaced elsewhere by extra spending, is a different quantity from a demand-side willingness-to-pay value. NICE applies a range under its PMG36 manual, which changed to £25,000 to £35,000 per QALY in 2026. The WHO GDP-based benchmarks used outside high-income HTA systems have been widely criticised. A threshold is neither an approval rule nor an affordability test.

What a threshold represents

A cost-effectiveness threshold provides a benchmark for comparing additional costs with additional health outcomes. It is commonly expressed as an amount per QALY, although another outcome unit, such as the DALY averted, may be used when appropriate.

A threshold does not describe the cost, price or total budget impact of an intervention. It states how incremental costs and outcomes will be valued within a particular economic decision rule.

How a threshold is used with an ICER

When an intervention is more effective and more costly than its comparator, its ICER can be compared with the applicable threshold. An ICER below the threshold generally supports the intervention on cost-effectiveness grounds, while an ICER above it generally favours the comparator.

This comparison is only appropriate after the cost-effectiveness-plane position and dominance status have been checked. A negative ICER should not be interpreted by comparing its numerical value directly with a threshold.

How a threshold is used with net benefit

A threshold converts incremental health outcomes into a monetary value. Incremental net monetary benefit then subtracts incremental cost from that value.

INMB = (λ × ΔE) − ΔC

• Positive INMB favours the intervention at the stated threshold.
• Zero INMB means the alternatives are tied under the stated rule.
• Negative INMB favours the comparator at the stated threshold.

The same threshold can instead convert incremental cost into health units. Net health benefit is ΔE − ΔC / λ, where ΔC / λ is the health expected to be given up elsewhere when the threshold reflects opportunity cost. Both measures give the same decision at the same λ.

Worked example of one treatment judged at three values of λ

The following figures are illustrative. A treatment costs £6,000 more than current care and produces 0.40 additional QALYs, so its ICER is £6,000 / 0.40 = £15,000 per QALY.

At λ = £20,000 per QALY, INMB is (£20,000 × 0.40) − £6,000 = £2,000, and net health benefit is 0.40 − 0.30 = 0.10 QALYs. Both support the treatment on cost-effectiveness grounds. At λ = £10,000 per QALY, INMB is £4,000 − £6,000, a loss of £2,000, and the comparator is preferred under the same rule.

At λ = £12,936 per QALY, the central empirical estimate of NHS opportunity cost described below, the £6,000 would be expected to displace about 0.46 QALYs elsewhere (£6,000 / £12,936). Net health benefit is then about 0.40 − 0.46 = −0.06 QALYs, so the treatment would reduce population health overall even though its ICER sits below NICE's range. The example shows that the verdict depends on which threshold is used, and why the basis of λ has to be stated.

Why thresholds can differ

Thresholds can differ because health systems have different budgets, opportunity costs, objectives, evidence requirements and decision processes. The meaning of a published threshold also depends on how the institution says it should be used.

A threshold may be a single value, range, empirical estimate, policy benchmark or implicit decision rule. These forms should not be treated as interchangeable.

Supply-side thresholds and the opportunity cost of health spending

A supply-side threshold is intended to represent the health lost elsewhere when a fixed budget funds a new intervention. It rests on opportunity cost, because accepting an intervention that costs more per health unit than this threshold is expected to reduce total population health.

Estimating opportunity cost requires evidence about spending, outcomes and displaced services. For the English NHS, a study using programme budgeting data estimated a central threshold of £12,936 per QALY at 2008 expenditure levels with 2008 to 2010 mortality data, well below the range NICE was then using. Such estimates are uncertain, depend on modelling choices, and vary across health systems and over time.

Demand-side thresholds and the value placed on health

A demand-side threshold represents the value that individuals or society place on an additional unit of health, usually estimated from willingness-to-pay studies. How such values are elicited and used is discussed under the willingness-to-pay threshold. As a decision parameter, the threshold is mainly discussed here from the supply side.

A systematic review of empirical threshold studies found that thresholds based on society's valuation of a QALY are generally larger than thresholds estimated from health-system opportunity cost. Under a fixed budget, funding an intervention that passes a demand-side test but fails a supply-side test can therefore reduce population health. The terms should not be used as though they describe the same evidence or policy objective.

Threshold ranges and modifiers

Some institutions use a range rather than one fixed threshold. Position within that range may depend on uncertainty, unmet need, severity, innovation or other explicitly stated considerations.

A modifier does not necessarily create a new threshold. Current guidance should establish whether it changes the threshold, evidence weighting or another part of appraisal.

How NICE applies its threshold range under PMG36

NICE sets out its approach in section 6.3 of the PMG36 manual, "NICE technology appraisal and highly specialised technologies guidance: the manual". Section 6.3.1 states that the committee does not use a precise maximum acceptable ICER, that the appropriate maximum is the opportunity cost of programmes displaced by new, more costly technologies, and that NICE lacks the information to define it precisely and so uses a range.

Since the update of 31 March 2026, the range is £25,000 to £35,000 per QALY gained. Below a most plausible ICER of £25,000 the decision is normally based on the cost-effectiveness estimate. Between £25,000 and £35,000 the committee makes explicit reference to factors such as uncertainty, uncaptured benefits and health inequalities, and above £35,000 it needs an increasingly stronger case. The previous range was £20,000 to £30,000 per QALY; the government announced the increase on 1 December 2025 for application from April 2026. When decision-making modifiers are applied, net health benefit is to be presented at £25,000 and £35,000 per QALY, with and without the QALY weighting.

The PMG36 modifiers weight QALYs rather than move the threshold. For severity, QALYs may be weighted by 1.2 or 1.7 depending on the absolute or proportional QALY shortfall of the condition. For highly specialised technologies the reference level is £100,000 per QALY, and a weight of between 1 and 3 may be applied when the lifetime incremental gain exceeds 10 QALYs per patient, reaching 3 at 30 QALYs or more. A weight of 3 means that an unweighted ICER of £300,000 per QALY would sit at the £100,000 level.

The WHO GDP per capita benchmarks and their critique

Outside high-income HTA systems, thresholds have often been expressed as multiples of gross domestic product per capita. In 2001 the WHO Commission on Macroeconomics and Health suggested thresholds based on such multiples, and the WHO-CHOICE project treated an intervention as cost-effective below three times GDP per capita per DALY averted and very cost-effective below GDP per capita.

These benchmarks have been widely criticised. Critics argue that they have little theoretical basis, set a bar so low that few interventions with evidence of efficacy are ruled out, and take no account of what a health system can afford. WHO authors have since stated that no fixed threshold should be used alone as a decision rule for funding or as a measure of affordability, noting that GDP-based thresholds lack country specificity. They recommend weighing cost-effectiveness evidence alongside budget impact and feasibility in a transparent, context-specific process.

A threshold is not an automatic approval rule

An ICER below a threshold or positive INMB supports a cost-effectiveness conclusion under stated assumptions. It does not require an institution to approve, reimburse or adopt the intervention.

Health technology assessment may also consider clinical evidence, uncertainty, severity, equity, feasibility and implementation. The authority and process for the final decision should be identified.

A threshold is not an affordability test

A threshold evaluates incremental value, not the total financial effect of adoption. A cost-effective intervention can still create an unaffordable budget impact when population, uptake or per-person expenditure is large.

Budget impact analysis estimates financial consequences for a defined budget holder. It complements threshold-based cost-effectiveness analysis but answers a different question.

Why the threshold must be stated

Calling an intervention cost-effective without identifying the threshold leaves the decision rule incomplete. Readers cannot reproduce the conclusion unless they know how outcomes were valued.

A report should state the value or range, currency, price year, health-outcome unit, jurisdiction, decision context and source. Alternative threshold scenarios should be labelled clearly.

How uncertainty affects threshold decisions

Costs, outcomes and the threshold itself may be uncertain. Sensitivity analysis can show whether the preferred alternative changes across plausible threshold values.

A cost-effectiveness acceptability curve shows the probability each alternative is cost-effective at different thresholds. It describes uncertainty and does not replace the greatest-expected-net-benefit rule.

Common misreadings of cost-effectiveness thresholds

These errors can turn a threshold calculation into a misleading policy claim. Each should be checked before a conclusion is reported.

• A threshold is not the market price of a QALY.
• A threshold from one jurisdiction should not be transferred automatically.
• A negative ICER should not be compared mechanically with a positive threshold.
• A threshold range should not be reported as one fixed cutoff.
• A modifier should not be described as changing the threshold unless the institution says it does.
• A demand-side willingness-to-pay value should not be presented as an estimate of health-system opportunity cost.
• Being below the threshold does not automatically mean approval or affordability.

Sources

• Drummond MF, Sculpher MJ, Claxton K, Stoddart GL, Torrance GW. Methods for the Economic Evaluation of Health Care Programmes, 4th edition. Oxford: Oxford University Press; 2015.
• National Institute for Health and Care Excellence. NICE technology appraisal and highly specialised technologies guidance: the manual (PMG36). London: NICE; published 31 January 2022, last updated 13 October 2026. Sections 6.2.15 to 6.2.24 and 6.3.1 to 6.3.8.
• National Institute for Health and Care Excellence. Changes to NICE's cost-effectiveness thresholds confirmed. News article, 1 December 2025.
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