Quality-Adjusted Life Year
Outcome metric combining length and quality of life used in HTA.
Definition
A QALY equals one year of life in perfect health. HTA bodies use cost-per-QALY thresholds (NICE: £20–30K) to judge cost-effectiveness. The U.S. ICER applies similar methodology informally. QALYs combine length and quality of life using utility weights between 0 (death) and 1 (full health), often measured with the EQ-5D questionnaire. NICE updated its thresholds and methods in recent years, including a severity modifier. In the US, the Inflation Reduction Act bars Medicare from using QALYs in drug price negotiation, and critics argue they undervalue people with disabilities.What this means in practice
Widely used outside the U.S. The U.S. has restricted use of QALYs in Medicare coverage decisions for certain age and disability populations.Examples
- A pharmaceutical company submits a new cancer drug for HTA review, where its efficacy data is translated into increased life years and quality of life, which are then used to calculate its cost-per-QALY.
- A medical device manufacturer developing an innovative prosthetic limb must demonstrate not only its functional benefits but also its cost-effectiveness, often expressed in terms of QALYs, to secure favorable reimbursement from national health systems.
- A diagnostic company seeking to introduce a novel screening test needs to show that the health improvements and extended life years resulting from earlier diagnosis, relative to the test's cost, provide a favorable QALY outcome.
- •A common pitfall is misunderstanding that QALYs are a direct measure of MedTech quality or safety, rather than an economic metric for cost-effectiveness.
- •Failing to consider regional differences in QALY thresholds and their impact on market access strategies can lead to significant commercial challenges.
- •Misinterpreting the U.S. restrictions on QALY use for certain populations in Medicare decisions can result in ineffective reimbursement strategies.
- •Assuming that a product with clinical benefits will automatically achieve positive QALY assessment without considering its cost implications is a frequent mistake.
Frequently asked questions
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Sources
2 sourcesSources support the definition or relevant regulatory context, not necessarily every claim on this page. Each is graded against our source-tier hierarchy so you can see what rests on binding law versus commentary.
Official citation replacements checked: . Medicare documents support Medicare coding, coverage or payment context, not every payer policy or CPT editorial procedure. Citation replacement does not change the full term review date.
- 1NICE methods manualTier 3 VerifiedNICEnice.org.uk
- 2NICE health technology evaluation manual: economic evaluationTier 3 VerifiedNICEnice.org.uk
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