Abstract

With the rapid growth in the development of new health care technologies, including both drugs and devices, health care decision makers worldwide are facing the challenge of making technology coverage decisions. Decisions have to be made concerning which technologies to fund, and these decisions have to be made in both public and private insurance settings. In order to ensure that health care resources are used in the most appropriate manner health care decision makers need to adopt robust processes for setting priorities. Recent developments in the UK, such as the launch of the National Institute for Health and Clinical Excellence (NICE), have encouraged a more open debate about the principles and issues concerned in health care resource allocation decisions (Entwistle et al., 1996; New, 1996; Rawlins, 1999). However, the appropriate criteria that should be used in setting priorities in a publicly funded health care system are far from clear. From a health economics perspective, one criterion that might be considered as part of the decision-making process when setting health care priorities is the maximisation of quality-adjusted life years (QALYs). A QALY-maximisation approach would then involve the targeting of resources towards health care interventions and services that were expected to deliver the largest gain in QALYs, for every dollar (or pound, euro, etc.) spent. The QALY combines two forms of outcome of health care interventions, namely health-related quality of life and survival (Williams, 1985). Survival is adjusted to reflect the fact that it may not be experienced at full health, using weightings or utilities assigned to health states. If an individual lives 4 years at full health, he or she will experience four QALYs, whilst an individual who lives for 4 years in a health state considered to be 50% of full health will enjoy only two QALYs, assuming no discounting. This allows the two outcomes (survival and quality of life) to be combined into a

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