DKFZ: What is the economic value of a life year?

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DKFZ: What is the economic value of a life year?

On June 5, 2018, Posted by , In News, By , With Comments Off on DKFZ: What is the economic value of a life year?

Whether or not a medical treatment is added to the catalogue of services covered by a national health care scheme, in many jurisdictions largely depends on the economic assessment of its cost benefit ratio. The so-called “value of a statistical life year” (VSLY) is an important point of reference for this assessment. Scientists at the German Cancer Research Center (DKFZ) have now conducted a comprehensive analysis of economic studies to deduce the willingness to pay for a statistical life year gained in an international comparative overview*. In Europe, the median value is €158,448 or approximately five times the gross domestic product per capita. The results obtained are substantially higher than international benchmarks currently used to determine the cost effectiveness of health care interventions. The new VSLY estimates may support the assessment of medical interventions.

In Germany, the decision whether or not to add a new medical technology to the catalogue of services covered by statutory health insurance (SHI) is normally based only on a systematic evaluation of its clinical benefits. However, numerous health economists as well as the German Health Economics Association believe that this practice should be changed and replaced by conducting an economic cost-benefit analysis.

For example, in order to set limits in the pricing of new drugs, a reference value is required. In international practice, benchmarks or thresholds for cost effectiveness are commonly used for this purpose. Ideally, setting these benchmarks should be informed by the economic value of a statistical life year (VSLY).

Health economists led by Michael Schlander at the German Cancer Research Center (Deutsches Krebsforschungszentrum, DKFZ) in Heidelberg share the view that, for ethical and social reasons, there can be no universal standard value of a statistical life year which would be the same for all conceivable situations. Nevertheless, they think that in view of the conventional evaluation methodology established in many countries, it should be useful to have an anchor value reflecting the observed and measurable preferences of the populations concerned.

But what could be the “right” value of a (statistical) life year – and does it differ between jurisdictions? There are established economic methods** to determine the willingness to pay for measures that prolong life. Schlander and his team now present a large-scale analysis of the pertinent economic literature in Asia, Europe and North America. They evaluated all 120 economic studies on willingness to pay that have been published over the past two decades (1995 – 2015) and that report estimates which have been calculated using an empirical method.

From these studies, the investigators deduced an international median value 164,409 Euros. As expected, there are substantial variations among the individual regions of the world. In Asia, the value was 43,000 Euros, in Europe – 158,448 Euros, in Germany – 173,868 Euros, and in North America it reached 271,179 Euros.

The values for the individual countries were converted into euros based on purchasing power parities. As the pure numerical values are not comparable, Schlander and colleagues converted them in relation to the respective gross domestic product (GDP) per capita. This standardization also revealed significant variations among the world regions: While in Asia and Europe, the willingness to pay for a life year gained was almost the same at 5.1 and 5.2 times GDP/capita, citizens of the USA and Canada were prepared to invest 6.9 times GDP/capita for a life year gained.

The values obtained in this way are a multiple of the standard values currently used in health economics: In the United Kingdom, for example, the VSLY regularly applied is no more than 20,000 to 30,000 British Pounds, and a much-cited recommendation by the World Health Organization (WHO) is 1-3 times GDP/capita.

“We have no compelling explanation why North Americans are prepared to pay more for a life year gained than the rest of the world,” says Schlander. However, according to Schlander, it is known from international comparative studies that acceptance for higher health costs increases disproportionately in countries with higher available incomes.

Now, what is the actual relevance of calculating the VSLY for decision-making in health care? “Ultimately, many health economists say that the incremental net cost of a medical intervention which yields one more life year for a patient must not exceed the willingness to pay for one life year gained,” said Schlander. To sum up, he added: “Even taking into account the numerous limitations of methods and the large variation of study results, our study strongly suggests that the thresholds currently used to determine cost effectiveness of medical interventions are considerably lower than the VSLY. Our study offers insights that should be taken into account by policy makers when setting such thresholds or benchmarks. At present, this pertains particularly to countries that evaluate medical treatments based on this logic.”

*Michael Schlander, Oliver Schwarz, Diego Hernández, Ramon Schaefer: The Search for a Cost Effectiveness Standard: 1-3 Times GDP/Capita? Scientific Presentation, HTAi 2018 Annual Meeting, Vancouver / BC, Canada, June 1-5, 2018;

**Direct and indirect measurement of willingness to pay

Original Press Release.

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