Intended for healthcare professionals

Education And Debate

Cost effectiveness analysis in health care: contraindications

BMJ 2002; 325 doi: (Published 19 October 2002) Cite this as: BMJ 2002;325:891
  1. Cam Donaldson, PPP Foundation professor (,
  2. Gillian Currie, assistant professorb,
  3. Craig Mitton, postdoctoral fellowc
  1. aSchool of Population and Health Sciences and Business School, University of Newcastle upon Tyne, Newcastle upon Tyne NE1 7RU
  2. bDepartments of Community Health Sciences and Economics, University of Calgary, Calgary, AB, Canada 52N 4N1
  3. cCentre for Health and Policy Studies, University of Calgary
  1. Correspondence to: C Donaldson
  • Accepted 7 May 2002

In economic evaluation of healthcare interventions, the dominant practice is to calculate an incremental cost effectiveness ratio, usually based on the comparison of a new intervention against current practice. Canadian and UK health economists question the economic foundations of such an approach

Who could resist implementing the results of a study showing that using alteplase (tPA; tissue plasminogen activator) rather than streptokinase in treatment of acute myocardial infarction costs $32 678 (£21 340; €33 330) per life year gained, which the authors declare to be “cost effective by customary criteria”?1 Despite similar claims from several such studies, the impact of economic evaluation on setting of priorities remains unclear.24 Among the reasons given for this are that opportunities for reducing costs while maintaining quality still arise, and that cost effectiveness analyses do not take all factors into account.3

Achieving the same result more cheaply—a success for economics—represents a classic cost effectiveness approach. The possibility that not all factors have been considered suggests that other approaches may make economic evaluation more relevant. We contend that, beyond the classic approach, many studies labelled as cost effectiveness analyses of health care are not really that at all. At best, this mislabelling is confusing: at worst, conclusions drawn by the studies' authors could be harmful to patients' health. Thus, there are contraindications to the use of cost effectiveness analysis in health care, and an alternative economic approach is required.

In this paper we revisit the basic economic principles. Then we make the case that lack of adherence to such principles, through current practice of reducing everything to incremental cost effectiveness ratios, leads to contraindications.

Summary points

  • The theoretical basis of the use of incremental cost effectiveness ratios needs re-examination

  • These ratios have little to do with cost effectiveness, as they often imply …

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