Signature
ICER = C_0 * r / (q * (1 - (1 + r)^(-T)))
| Inputs | Definition | Unit |
|---|---|---|
C_0 | Incremental cost paid in year 0, compared with usual care | pounds |
r | Annual rate applied to costs and QALYs alike, written as a decimal | a proportion per year, above zero |
q | Incremental QALYs gained in each year after treatment, the same every year | QALYs per year |
T | Number of years over which the gain lasts, counted at the end of each year | years |
ICER | Incremental cost per QALY gained after discounting the QALY stream | pounds per QALY |
|---|
Function
Discounting of yearly cost and QALY streams to present-value totals
Maps a stream of yearly costs or QALYs, an annual discount rate, a time horizon and a timing convention to one discounted total, by multiplying each year's amount by its discount factor and adding the results. Totals for costs and for QALYs are formed separately and then compared across options, for example as an incremental cost per QALY. The present value of a single amount, the general sum over a stream and separate rates for costs and health are on the Discount Rate page (HE-FM-DR-001 to HE-FM-DR-003), and unequal rates on the Differential Discounting page (HE-FN-DDIS-001). This package adds the totals of a level yearly stream counted at the end of each year, at the start of each year and continuously, and the discounted cost per QALY of a one-off treatment with a lasting gain, as in the article's worked example.
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Implementations
Excel
Discounted cost per QALY of a one-off treatment in one cell
With the cost in OneOffCost, the yearly gain in YearlyQALYs, the rate in DiscRate and the years in Years, the cell divides the undiscounted cost by the discounted QALYs from PV.
=OneOffCost/PV(DiscRate,Years,-YearlyQALYs)
Assumptions
Whole incremental cost of the one-off treatment in year 0
All extra cost falls at the start, so its factor is 1. Later costs, such as monitoring, would need their own discounted total in the numerator.
Same rate for the cost and the QALYs of a one-off treatment
Costs and QALYs share one rate, 3.5% a year in the NICE reference case. A 1.5% rate is a non-reference-case analysis that the committee may consider only when all the criteria in section 4.5.3 of PMG36 are met.
Worked examples
Article's one-off treatment discounted at 3.5 per cent
GBP 300,000 at the start and 0.8 QALYs a year for 30 years give about GBP 20,389 per QALY at 3.5%, GBP 20,400 to the nearest GBP 100 in the article, against GBP 12,500 undiscounted.
C_0 = 300000; q = 0.8; r = 0.035; T = 30; ICER = 20389.25
Article's one-off treatment discounted at 1.5 per cent
At 1.5% the same treatment costs about GBP 15,615 per QALY, GBP 15,600 to the nearest GBP 100 in the article.
C_0 = 300000; q = 0.8; r = 0.015; T = 30; ICER = 15614.70
Common errors
Reading the 1.5 per cent ratio as the reference-case result
Lowering the rate from 3.5% to 1.5% cuts the article's ratio from about GBP 20,389 to GBP 15,615. The 1.5% result is a non-reference-case analysis, and NICE also asks for a highly plausible case that the benefit is maintained.
Expecting discounting to leave a one-off treatment ratio unchanged
A common rate leaves the ratio unchanged only when costs and QALYs fall in the same years in the same proportions, as for a lifelong drug. With the whole cost in year 0 the ratio rises by about 63% at 3.5% over 30 years.
Sources
NICE discount rates for the reference case and the 1.5 per cent exception
National Institute for Health and Care Excellence. NICE technology appraisal and highly specialised technologies guidance, the manual (PMG36). Chapter 4, economic evaluation. Published 31 January 2022, last updated 13 October 2026. Sections 4.5.1 (costs and health effects discounted at the same rate of 3.5% a year), 4.5.3 (1.5% a year for both when all the criteria are met) and 4.5.4 (a highly plausible case for the maintenance of benefits).
Discounting health effects at the same rate as costs
Attema AE, Brouwer WBF, Claxton K. Discounting in economic evaluations. PharmacoEconomics. 2018;36(7) 745-758. Section on discounting health, where healthcare resources are ultimately transformed into health, so that if they are discounted health effects should be discounted at the same rate.
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