Issue Brief: Problems With The Institute of Clinical and Economic Review (ICER) and the QALY Methodology

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This article by Chris Rochester appeared in The MacIver Institute on April 23, 2019.

“What’s a year of life worth?”

That compelling question was posed by Dr. William S. Smith, a visiting fellow at the Boston-based Pioneer Institute in a recent op-ed questioning the merits of a metric that is increasingly used to make life-and-death decisions about the value of certain drugs – and whether a sick person deserves to receive a new, potentially effective medicine.

The metric is called the quality-adjusted life year (QALY) and it is being pushed by an organization called the Institute of Clinical and Economic Review (ICER). Essentially, the quality-adjusted life year attempts to calculate how much an additional year of life for a sick person seeking a particular treatment is worth to society. 

The quality-adjusted life year methodology assigns a dollar value to each additional year of a person’s life if it was lived at 100 percent health. It’s a highly subjective determination that values each year of remaining life of those living at less than optimum health to be worth less than the remaining life of other people. Under this approach, the lives of people living with cancer or with disabilities are quite literally devalued.

The American firm advocating such socialist price controls, ICER, uses reviews that value a quality-adjusted life year to be between $100,000 to $150,000. 

In other words, ICER’s cost-versus-benefit analysis of potentially life-saving drugs is dependent on whether the cost to cover a certain drug would exceed the value to society of a patient living one more year, according to ICER’s quality-adjusted life year calculation. Giving a non-elected, unaccountable entity such divine and absolute power over the lives of Americans is unnerving and raises all sorts of moral questions.

The United Kingdom employs a similar socialist treatment rationing regime. In 2015, a similar price control mechanism led to the withdrawal of funding for 25 oncology treatments. That likely cut short the lives of eight thousand cancer patients.

As the United Kingdom’s experience with the QALY methodology shows us, this approach to life-and-death decisions about which drugs a patient qualifies for have caused great controversy and the delay or denial of life-saving treatments. It’s not dissimilar to what critics of socialized medicine in the United States have termed “death panels.”

As policymakers continue looking for ways to lower the cost of drugs, particularly the costs of drugs to taxpayer-funded programs, some may unfortunately find the quality-adjusted life year approach and ICER methodologies attractive.

In 2018, Wisconsinites spent more than $8.2 billion on prescription drugs filled at pharmacies alone. Medicaid paid for 18 percent of that, according to the Kaiser Family Foundation. Nationally, the cost of oral and injectable brand-name drugs increased 9.2 percent and 15.1 percent respectively each year between 2008 and 2016, according to Health Affairs.

In his proposed 2019-21 budget, Gov. Tony Evers put some emphasis on lowering the cost of drugs. He proposes requiring drug companies to justify price increases and disclose production and marketing costs. The budget also requires pharmacy benefit managers to register with the state and “disclose price concessions they receive from drug companies” and calls for importing generic drugs from abroad to Wisconsin.

Clearly, the increasing cost of drugs is on the the Evers administration’s radar. But as they consider approaches to controlling the cost of drugs, lawmakers should be wary of efforts to implement an ICER-type approach in Wisconsin.

QALY Origins

QALY has its origins in a similar, and controversial, drug value methodology used in the United Kingdom. Developed in the 1970s and employed by the National Institute for Health Care Excellence (NICE), the UK’s socialist quality-adjusted life year methodology has drawn significant criticism for delaying necessary treatments pending NICE reviews and, at times, denying potentially life-saving treatments as ‘not worth it.’ The controversy is especially intense in oncology, where NICE reviews have quite literally caused patient deaths while awaiting a determination about whether they qualified for certain drugs and had life-saving treatments withdrawn from coverage.

While the United States and Germany, among other nations, have largely rejected the use of such QALY methodologies in federal programs, ICER here in the United States has nonetheless adopted a cost effectiveness evaluation very similar to that used by NICE in the UK.

Some states and companies in the U.S. have eyed this quality-adjusted life year approach favorably. For example, New York’s Medicaid program used an ICER review to determine whether the state should pay for Orkambi, a new cystic fibrosis treatment. As of mid-2018, the state was denying access to the treatment because its cost outweighed its social value according to a QALY calculation, at the expense of those who could benefit from the treatment.

In addition, CVS Caremark prescription benefit management company also announced it will begin using ICER data and a hard $100,000 quality-adjusted life year cap to manage which drugs its prescription drug plan will cover, also known as its formulary. That means if a drug’s quality-adjusted life year value is less than $100,000, it will not be covered by CVS Caremark’s drug plan.

If you look at this public policy question from the perspective of health outcomes, potential public backlash, and simple ethics, there are many questions to be asked before taking seriously an ICER-type, quality-adjusted life year approach.

Problems With ICER’s Methodology

In its January 2019 white paper, “Key Questions for Legislators about the Institute of Clinical and Economic Review (ICER),” by Dr. William Smith, the Pioneer Institute raises a number of questions for those faced with a decision over whether to embrace ICER reviews and the quality-adjusted life year approach.

The questions focus on concerns from an ethical standpoint, problems with the methodology these socialist-style price controls use to evaluate drugs, and specific diseases and treatments that this approach might fail to properly evaluate.


Should the government have the power to make life or death decisions about your health care? When government bureaucrats coldly and clinically assign a dollar value to precious human life, such crass calculations risk undervaluing a person’s life by removing the worth of the person whose very life is at stake. This raises serious ethical considerations.

  • In the UK, certain oncology drugs have been denied to patients pending a review by the National Institute for Health Care Excellence to determine if the treatment was cost-effective.
  • Individual patient reporting on their own experiences with particular medications is increasingly important with the rise of customized therapies. ICER does not incorporate individual patient data into its reviews.
  • Standards based on the QALY methodology value the lives of people with disabilities lesser than someone in perfect health. That is because most therapies will not restore people with a disability back to perfect health, which is penalized by the QALY methodology. Should the value of an extra year of life for a person in a wheelchair be worth less than value of an extra year of life for a person who can walk? The person in the wheelchair would argue adamantly that their life is worth just as much as the other.
  • Will elderly Americans be denied care because their quality of life is assigned a lower dollar value and they have fewer life years ahead of them than a younger person? The quality-adjusted life year standard evaluates therapies based on quality of life and longevity, making this a particularly poignant question.
  • NICE was created in the UK to help health care bureaucrats and politicians avoid the blame when needed therapies are denied. Such an approach is designed to, “provide political cover, for denying drugs to patients under the guise of an ‘independent review,’” Pioneer’s Smith notes in his paper.
  • The use of ICER reviews could also fail to reduce the price of prescription drugs. CVS Caremark instituted a ICER review that, instead of lowering the “sticker price” of drugs, only increased the rebate amount from drug manufacturers, increasing health plan and pharmacy benefit manager (PBM) profitability. In other words, the discount is intercepted before it reaches the payer, whether that’s the patient or a Medicaid program.
  • Assigning what is essentially an arbitrary monetary value to human life—like the $100,000-$150,000 QALY used by ICER—might be useful in economics, but in health care, where lives are at stake, it is of very dubious ethics and could actually be deadly.
  • An ICER cost effectiveness review takes the final decision about the use of a drug out of the hands of the doctor and the patient.
  • Such a methodology could stifle the discovery of groundbreaking future treatments, which Smith calls a form of “generational discrimination.”


The method by which ICER reaches conclusions about specific drugs has also drawn criticism, potentially compromising its ability to evaluate the worth of drugs that could mean the difference between life and death.

  • Does ICER use the right data? Since it uses meta-analysis, or the pooling of the results of many different and potentially incompatible studies, critics argue ICER uses an unsound methodology that fails to include patient-specific data and could compromise its conclusions about certain drug therapies.
  • ICER conducts its reviews of drugs shortly after or even before a drug is approved by the Food and Drug Administration (FDA). That means the data is based on a much smaller pool of patients and patient outcomes over much less time.
  • Delivering medical treatments is complex and highly personal. No two cases are the same. But ICER’s methodology attempts to reduce the many factors that go into a medical decision into a highly sterile and quantitative model.
  • ICER reviews don’t collect adequate data from specific patient populations, instead relying on the general population. Therefore, patient input from a specific individual may not be adequately reflected in ICER reviews.
  • Some aspects of the ICER model aren’t publicly available. If ICER is going to be adopted by a public program (like Medicaid), then its entire methodology should be made public.
  • Rapidly evolving and improving drug therapies, especially the interaction of drug therapies to the patient’s benefit, may not be fully captured by the ICER model.
  • The failure of the ICER model to take into account concerns over the increasing prevalence of payments from drug manufactures to retailers (mentioned earlier)—instead, using just the “sticker price” of drugs—means their reviews don’t capture the true price of the drug.
  • Using quality-adjusted life years fails to capture a wide variety of other benefits that a successful drug therapy can have, including a person’s return to economic productivity, their performance in school, ability to function as a caregiver for others, and so on.
  • ICER’s model only evaluates the cost of a drug while it is still patent-protected (and most expensive). But when a patent expires, the cost of a drug plummets, it becomes much more widely available, and its benefit to society drastically increases. The wider benefits created by a drug that is off patent is not considered in the ICER model.
  • The ICER model could discourage innovation by limiting the use of more expensive, patent-protected drugs.


Lastly, there are concerns about the limitations of ICER’s methodology when it comes to treatment areas and specific diseases. 

  • ICER reviews rely on large-scale quantitative data, which means that these reviews may not be up to the task of evaluating treatments for rare diseases, which are better evaluated using real-world observations.
  • The ICER model fails to capture the true value of mental health treatments.
  • The ICER model also fails to capture the value of preventative health care because it’s impossible to put a value on preventing a disease from occurring in the first place.
  • Genetic testing and custom-tailored treatments could make one-size-fits-all evaluations like ICER reviews obsolete.
  • ICER’s approach likely discriminates against cancer patients, particularly those facing extremely aggressive cancers. For example, if a therapy extends a person’s life by several months over an alternative therapy, the benefit to that individual patient isn’t adequately considered.
  • Not all treatments are intended to extend a person’s life—for example, therapies for rheumatoid arthritis are intended instead to improve a person’s quality of life. On the other hand, cancer treatments are almost exclusively intended to increase longevity. By applying the same one-size-fits-all formula to evaluating differing treatments like these, the ICER approach ignores what a patient values most in different disease treatments.

Potential Public Backlash

As the Pioneer paper notes, American political culture is far less accepting of the kinds of approaches used in countries with socialized medicine, like the UK. Those countries are accustomed to rationing of drug therapies and medical treatments—and even in the UK, backlash against the NICE review process was so great, an alternative was created for cancer patients.

Americans are far less likely to simply shrug off stories of elderly people being denied care, disabled people being refused life-altering treatments, or children on Medicaid being denied treatments pending an ICER review.

The American people are also used to having access to the latest innovations in the biopharmaceutical industry. While a Deloitte report found returns on investments in the industry are at a low point, ICER reviews are “quite likely to accelerate some of the adverse trends in the biopharma industry” by squashing innovation, Smith notes.

Simply put, there might be a high political price to pay for states that implement ICER reviews.


The most vulnerable among us are often cited in debates over public health policy—the elderly, the disabled, those with pre-existing medical conditions. Also cited more and more frequently is the growing cost of drugs, often in the context of its impact on those very populations.

While the rising costs of drugs is a concern, determining eligibility for certain drugs using a data-centric, one-size-fits-all model that minimizes the human element and hampers the ability of doctors and patients to make critical decisions about life-altering and life-saving treatments raises many serious concerns.

Statistical formulas that attempt to measure quality of life fail to recognize the individual value of life, removing humanity from the final equation. ICER is an appropriate name for a group pushing this cold approach in ultimately determining who lives or dies.

“What’s a year of life worth?” Ask the people who are fighting to live. ICER will not.


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