Defining the Cost-Effectiveness Threshold Locally: What Is the Most Appropriate Number for my Jurisdiction?

To examine the conceptual foundations of the cost-effectiveness threshold (CETs), estimation methodologies, international empirical evidence, and provide recommendations for different jurisdictions. This perspective also extends the discussion by examining the dynamic nature of thresholds over time, its role as a pricing signal to the pharmaceutical industry, and its implications for disinvestment.

Perspective based on the review of the health economics literature on CET estimation, categorizing approaches into demand-side, supply-side, efficiency-path, and implicit threshold methods. We analyzed the extent to which different methods consistently respond to the fundamental theoretical grounds and generate a set of recommendations for 3 types of jurisdictions.

Decision rules inform allocatively efficient choices only if the CET is a reliable estimate of the healthcare system's opportunity cost. Empirical estimates consistently suggest that thresholds commonly used in practice overestimate true opportunity costs in most settings. Empirical thresholds in high-income countries typically range from 0.25 to 0.8 of gross domestic product (GDP) per capita, whereas in low- and middle-income countries estimates average approximately 0.5 GDP per capita. Furthermore, its value has practical consequences for pharmaceutical pricing, disinvestment decisions, and the management of budget impact.

Jurisdictions with sufficient data should estimate empirical supply-side CETs and update them at regular intervals. Those with limited data should adopt conservative, evidence-informed values-below 1 GDP per capita-rather than aspirational benchmarks. We recommend that jurisdictions should also consider how the threshold interacts with severity modifiers, budget impact, disinvestment, and price negotiation to ensure it serves its full range of functions within a coherent decision-making framework.