It Is Time to Reconsider the 3% Discount Rate

Area of Science:

• Health Economics
• Health Technology Assessment
• Pharmacoeconomics

Background:

• Health technology assessment (HTA) guidance commonly recommends a 3% real annual discount rate.
• The appropriateness of this standard discount rate has been inadequately examined.
• Discount rates significantly influence cost-effectiveness analyses and resource allocation decisions in healthcare.

Purpose of the Study:

• To identify an appropriate discount rate for health technology assessment in high-income countries.
• To evaluate the theoretical basis and practical application of discount rate recommendations in HTA.

Main Methods:

• Conducted two literature searches on PubMed.gov: one for discount rate theory and another for HTA guidance documents.
• Reviewed 21 articles on discount rate theory, identifying the Ramsey Equation and market interest rates as primary approaches.
• Analyzed HTA guidelines from 32 high-income countries to assess their recommended discount rates and rationales.

Main Results:

• The Ramsey Equation approach considers pure time preference, catastrophic risk, wealth effect, and macroeconomic risk, plus project-specific risk.
• Market interest rates serve as an alternative approach, reflecting opportunity costs.
• Most HTA guidelines (22/32) lacked explicit rationale; others cited market rates (8/32), consistency (3/32), or Ramsey Equation factors (3/32).

Conclusions:

• Declining economic indicators suggest a reduction in recommended HTA discount rates to 1.5-2+%.
• Lowering the discount rate will improve projected cost-effectiveness for interventions with long-term benefits.
• This adjustment will also better account for long-term drug pricing dynamics, such as price reductions after market exclusivity loss.