Should the Lambda (λ) Remain Silent?

Abstract

When making decisions regarding the funding of new health technologies (e.g. pharmaceuticals), a key consideration should be the opportunity cost associated with a positive funding decision in terms of other patients’ health. Lambda (k) is a term that has been used to refer to a maximum acceptable value (cost-effectiveness threshold) for the incremental cost-effectiveness ratio (ICER) of a new technology, which should reflect the opportunity cost of funding decisions. In 2006, Gafni and Birch [1] discussed the ‘silence of the k’ with respect to the justification of its numerical value within the decision-making process. They noted that the use of threshold values, which do not represent the true opportunity cost of new and generally more expensive technologies, can lead to increased health expenditures with little evidence of increases in population health. In this commentary, we interpret the ‘silence of the k0 with respect to the lack of explicit recognition of the use of a cost-effectiveness threshold by national funding bodies that use the threshold in the decision-making process. We also discuss the potential impact of this silence on health systems. As an example, the Australian Pharmaceutical Benefits Advisory Committee (PBAC) makes recommendations regarding the public funding of pharmaceuticals, on the basis of clinical effectiveness, safety and cost effectiveness (value for money). No official statement has ever been made about the use of a cost-effectiveness threshold to determine whether a pharmaceutical provides value for money. Although our focus is on the Australian PBAC decisionmaking process, the discussion can be applied more widely—first, to many other national funding bodies that use economic evaluation to inform funding decisions but do not explicitly acknowledge the use of a threshold, e.g. the Medical Services Advisory Committee in Australia (MSAC) or the Canadian Agency for Drugs and Technologies in Health, and second, to any collectively funded health system that fails to consider the opportunity costs of its decisions.