Incremental cost-effectiveness ratio (ICER)

The incremental cost-effectiveness ratio (ICER) is a summary measure that represents the economic value of a healthcare intervention when compared with an alternative (comparator). It is usually the main output of an economic evaluation. An ICER is calculated by dividing the difference in total costs (incremental cost) by the difference in the chosen measure of health outcome or effect (incremental effect). This yields a ratio of ‘extra cost per extra unit of health effort’ – for the more expensive therapy vs the alternative. For example, in the UK, the quality-adjuted life year (QALY) is most frequently used as the measure of health effect, which allows for ICERs to be compared across different disease areas. However, other healthcare systems may utilise different health effect measures.
In healthcare decision making, ICERs are particularly useful when a new intervention is more costly but also generates improved health outcomes. ICERs reported by economic evaluations are then compared with a pre-determined cost-effectiveness threshold to assess whether adopting the new intervention represents an efficient use of healthcare resources.
It is generally recommended that negative ICERs are not explicitly reported as they can be difficult to determine. Instead, the terms dominant (used when an intervention is less costly and more effective) and dominated (used when an intervention is more costly and less effective) should be used to describe these scenarios.