When Numbers Start Making Decisions · Season Four, “Things That Cannot Be Priced Directly” · Article 2
1. Why can an effective medicine still go unsubsidised?
Imagine a new medicine that costs A$60,000 more per patient than current treatment and produces, on average, one additional quality-adjusted life year. It has met regulatory requirements for quality, safety and efficacy. To be listed on Australia’s Pharmaceutical Benefits Scheme, however, it must answer another question: is the additional health gain worth funding from a shared medicines budget?
The Pharmaceutical Benefits Advisory Committee compares effectiveness, safety, cost and cost-effectiveness with existing therapies. Government cannot list a medicine on the PBS without a positive PBAC recommendation. The committee can recommend restrictions on population, dose, repeats or continuation, after which price and financial arrangements may be negotiated. PBS: Pharmaceutical Benefits Advisory Committee
Dividing A$60,000 by one additional QALY produces an incremental cost-effectiveness ratio. That invites a search for a hidden price line: below what amount is a medicine accepted and above what amount is it refused?
Australia publishes no single maximum cost per QALY that automatically controls every medicine. That does not mean the number is powerless. It means its authority operates inside a broader judgement.
2. QALY compresses longevity and health state into one unit
One QALY conventionally represents one year lived in full health. If a health state receives a utility weight of 0.5, two years in that state contribute approximately one QALY. An intervention can add QALYs by extending life, improving its health-related quality or both.
Cost-utility analysis compares incremental cost with incremental QALYs between the proposed medicine and the relevant alternative. PBAC guidance prefers QALYs where health outcomes involve longevity and quality and asks sponsors to explain clinical data, utility weights, model structure, extrapolation and uncertainty. PBAC Guidelines: Overview and rationale of economic evaluation
The common unit permits comparison across diseases. Without it, one medicine may report strokes avoided, another symptom-free days and another survival. A shared budget could not easily compare them.
But a QALY is a modelled health outcome, not health itself. Utility instruments may not capture fatigue, episodic illness, rare symptoms, carer burden, dignity or the value of hope. Average trial gains do not reveal which patients benefit.
3. No fixed threshold does not mean no discipline
PBAC decision-making includes comparative health gain and cost-effectiveness, patient affordability without subsidy, predicted use, budget impact, confidence in evidence, equity, disease severity, alternatives and ability to target treatment. PBAC Guidelines: About the Guidelines
A rigid threshold would make decisions predictable but give false equality. A treatment for a severe rare disease with no alternative may warrant a different judgement from a modest convenience benefit. Evidence uncertainty, total population cost and negotiated price also matter. A fixed line could invite sponsors to price just below it and convert a decision aid into an entitlement price.
The absence of a public maximum nevertheless creates a transparency problem. Sponsors and patients may not know how much weight each factor receives. Historical observations about ICER ranges are not legal price lists, and should not be repeated as current thresholds.
The better alternative is an explainable judgement interval. Public summary documents can state the accepted clinical claim, ICER range, principal uncertainties, equity considerations and reasons for recommending, restricting or rejecting a medicine without pretending every case follows a single number.
Australia’s Health Technology Assessment Policy and Methods Review also examined how evaluation pathways, consumer participation and evidence methods could be improved. Department of Health: HTA Policy and Methods Review Final Report Method reform matters because new therapies increasingly involve small populations, genomic targeting and uncertain long-term outcomes. A flexible judgement can respond to those cases, but flexibility must be paired with comparable reasons and evidence standards. Otherwise, the lack of a threshold becomes unexplained variation rather than responsible discretion.
4. People on either side of a QALY comparison may differ in more than health gain
QALY analysis commonly uses average outcomes. Patients can experience different treatment effects, side effects and burdens. A one-QALY average can arise from a modest gain for many people or a large gain for a few. The cost per average QALY cannot identify the individual beneficiary.
Health-state utility weights can also raise distributive questions. If an instrument assigns a lower baseline weight to life with disability, life-extension benefits may be represented differently from those for people in full health. The method is intended to combine length and quality, not to declare that one person’s life is worth less, but careless interpretation can produce that message.
Age, socioeconomic status, geography and access to diagnosis influence whether people enter the treated population. A medicine can be cost-effective in a model while practical access remains unequal. Carer outcomes may appear only in supplementary analyses even when they are central to lived value.
Decision-makers should therefore show subgroup effects, disease severity and unmet need alongside the aggregate ICER. Equity should constrain the economic result, not be invoked only after the fact.
5. The number changes the medicine and the population
PBAC evaluation does not merely observe a fixed product. Sponsors may lower price, narrow the eligible population, propose continuation rules or collect more evidence to improve cost-effectiveness. A medicine can become more favourable because the institutional terms change.
Targeting patients most likely to benefit can improve the ICER, but it may also create complex access rules and exclude people whose benefit is harder to predict. Continuation criteria can reduce ineffective spending while imposing repeated evidence burdens on patients and clinicians.
Price negotiation is therefore part of value construction. The original list price is not a natural fact, and the initial ICER is not the final social value. Public policy changes the relationship among price, evidence, population and outcome.
That is one reason an automatic QALY threshold is too simple. The committee is deciding not only whether a number passes, but whether restrictions and agreements can make public funding defensible.
6. Explanation, review and resubmission
PBAC public summary documents disclose the committee’s reasons after decisions, including important clinical and economic issues. Sponsors can resubmit with new evidence, a different price or altered requested listing. PBS: Public Summary Documents
These mechanisms matter because models contain contestable choices: comparator, time horizon, utility source, extrapolation and treatment duration. Uncertainty analysis should show which assumption drives the ICER. A single base-case ratio should never conceal the range.
Patients and clinicians also need explanation in intelligible language. A negative recommendation is not a finding that the medicine has no value or that the disease is unimportant. It is a judgement that the submitted evidence, price and requested use did not establish sufficient comparative value for public listing at that time.
7. A QALY is an interface, not a unit of human worth
The QALY creates commensurability across health outcomes. It allows common resources to be discussed without converting health entirely into dollars. That is why PBAC guidance generally prefers cost-utility analysis to cost-benefit analysis for health: monetary willingness to pay does not capture the breadth of considerations in Australian healthcare.
The ethical task is to keep the interface bounded. QALYs may compare health gains, but rights, severity, evidence quality and distribution remain separate dimensions. A higher total should not automatically compensate for every excluded value.
Conclusion: use an explainable judgement range, not an automatic price line
QALYs give the PBS a common language for comparing additional health against additional cost. Without such a structure, allocation would be less consistent and more vulnerable to political visibility.
My judgement is that Australia is right not to publish one automatic price for every QALY. The alternative must not be opacity. PBAC should continue to expose ICER ranges, uncertainty, severity, equity, targeting and budget effects and explain how price or restrictions change the conclusion.
One QALY can measure a comparable dimension of health gain. It cannot state what a patient, a life or a medicine is worth in full.
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