By the end of this session

1. Explain what a QALY is, and where its weights come from
2. Say why a QALY is not a DALY, and why that matters for a league table
3. Justify discounting and apply India's 3%
4. Tell an average ratio from an incremental one
5. Rank several options and find simple and extended dominance
6. Compute an ICER, or use net monetary benefit instead

6 Measuring health outcomes

Cost per case detected cannot be set against cost per stroke prevented, so you cannot allocate a budget.

India's recommendation: use QALYs.

The QALY, in one sentence

A year of life in full health is worth 1. A year in a worse state is worth less. Add them up.

The weight, the utility, runs from 1 for full health to 0 for a state as good as being dead, and can go below zero for states judged worse than death.

Two years at a utility of 0.5 count the same as one year at 1.0.

That equivalence is the QALY's power and its controversy. It is what lets you compare a cancer programme with a mental health programme. It also makes people uneasy, because the arithmetic treats those two years and that one year as interchangeable.

A QALY is an area. Build one

Quality up, years across; the area is the QALYs. Produce the same gain three ways: more years, better quality, or fewer but much better years.

All three are identical to the QALY, which is its central limitation  ·  sph-aiimsbhopal.github.io/intro-economic-evaluation-health

Where do the utility weights come from?

The values come from the general public, not from patients.

Deliberately so. The public bear the opportunity cost and fund the system. Patients who have adapted to a condition rate it higher than the public do, which would systematically reduce the apparent value of treating it.

India has its own value set. Use it

The DEVINE study produced an EQ-5D-5L value set for India, so utilities no longer have to be borrowed.

Applying a UK tariff to Indian patients is now an avoidable flaw.

Jyani, Sharma, Prinja, Kar et al., Value in Health, 2022.

QALYs are not DALYs

"ICER per DALY averted is not directly equivalent to ICER per QALY gained."

Session 6 puts up an Indian league table that mixes 70% DALY studies with 30% QALY studies. Remember this slide when you see it: that is why the table cannot be read straight down the column.

8 Discounting

A rupee next year is worth less than a rupee today. So, the argument goes, is a QALY. Discounting converts future costs and health into present values, so programmes with different timing can be compared at all.

3% is chosen partly so Indian results can be compared with everyone else's.

What a discount rate does to prevention

A cost paid at 14, health arriving from 30. Move the rate 0% to 5% and read the two "retained" figures: the cost barely moves, the health falls away.

Which is why prevention looks worse at any given rate  ·  sph-aiimsbhopal.github.io/intro-economic-evaluation-health

Why discounting health is contested

Neither side has won. State your rate, test it, and report undiscounted results too.

The ICER, written out

ICER = C₁ − C₀E₁ − E₀ = ΔCΔE

1 is the new option, 0 the comparator. C and E are discounted totals per person.

Same formula. Only the denominator changes.

Three ways it goes wrong

A negative ICER is uninterpretable on its own. You have to go back and look at the signs of ΔC and ΔE separately.

Net monetary benefit fixes all three. We get to it shortly.

Average is not incremental

Screening with VIA every five years, over a lifetime, discounted at 3%:

₹204 per QALY is not a bargain. It is a meaningless number.

The average ratio divides the programme's cost by her entire remaining lifetime of quality-adjusted life, almost all of which she would have had anyway. Only the incremental ratio asks what we get for the extra money.

Illustrative figures, constructed for teaching.

Ranking five options

Per woman, lifetime, 3% discounting. Ranked by cost, where you always start.

Two of these should never be chosen at any threshold. Which two?

Illustrative figures, constructed for teaching.

Simple dominance

Cytology every 5 years costs ₹6,800 for 22.515 QALYs. VIA every 5 years costs ₹4,600 for 22.530.

More expensive and less effective. Strike it out. No threshold can rescue it.

This is the north-west quadrant of the cost-effectiveness plane, met again in a table. Once an option is dominated, remove it and recompute the ICERs below it, because the comparisons have changed.

Its ICER is not "very large". It is negative and meaningless, which is why the column shows a dash.

Extended dominance, the subtle one

Read the ICER column downwards: ₹55,000 for VIA every 10 years, then ₹13,333 for VIA every 5 years.

The ICER falls as you move down. That cannot be right.

VIA every 10 years is extendedly dominated: at any threshold where you would accept it, you would already have accepted the better-value option below it.

Now the ICERs rise as cost rises.

So what do we fund?

Climb the frontier one step at a time, for as long as each step costs less than λ per QALY.

Borrow λ for now: ₹2 lakh per QALY, near a published Indian estimate. At ₹80,000 instead you would stop at VIA every five years. The question is not "which is best" but "how far up can we afford to go", and where that λ comes from is Session 6.

Illustrative figures. Threshold from Chugh et al., Value in Health, 2026.

The same logic, on the plane

The ranking you just did, drawn. The frontier is the set of points you would climb, and a dominant option sits below and to the right of another. Drag λ and the verdict changes.

On your phone: sph-aiimsbhopal.github.io/intro-economic-evaluation-health

Net monetary benefit, the cleaner form

NMB = (λ × ΔE) − ΔC

Value the health gained at the threshold, then subtract what it cost. Both terms in rupees.

Positive means adopt. That is the whole rule.

No division, so nothing explodes when ΔE is small, and the sign carries the meaning that an ICER loses.

VIA every 5 years, from the table: ΔE = 0.090 QALYs, ΔC = ₹1,200, at India's λ of ₹2,12,307.

(2,12,307 × 0.090) − 1,200 = +₹17,908 per woman

The same decision, three ways

NHB is NMB divided by λ, so it says the same thing in QALYs instead of rupees: the health you buy, minus the health displaced elsewhere to pay for it.

All three agree, but only the ICER needs a side condition.

Why NMB, and not the ratio

Which is why probabilistic analysis is counted on NMB, not on the ratio.

The same arithmetic, on a drug

One year of adjuvant trastuzumab against chemotherapy alone. Same model, same costs, same country. Only the source of the effectiveness estimate differs.

Nothing in the numerator moved. A bigger denominator made the ICER a third smaller.

Which is why the incremental ratio is a claim about two numbers, not one. Session 8 returns to this table and puts a probability on each row.

Gupta, Verma, Gupta, Prinja, JCO Global Oncology, 2020.

Recap

• A QALY is quality times time: an area, not a score. India has its own value set
• Utilities come from the general public, and that is deliberate
• QALYs and DALYs cannot share a league table
• Discount both at 3%, test 0 to 5%, report undiscounted too
• Average ratios are meaningless. Only incremental ones answer a decision
• Rank by cost, remove dominance, then look for a falling ICER

Sources

1. Drummond MF, Sculpher MJ, Claxton K, Stoddart GL, Torrance GW. Methods for the Economic Evaluation of Health Care Programmes. 4th ed. Oxford University Press; 2015. Chapter 4, pp. 77–123.
2. Sharma D, Prinja S, Aggarwal AK, Rajsekar K, Bahuguna P. Development of the Indian Reference Case for undertaking economic evaluation for health technology assessment. Lancet Reg Health Southeast Asia 2023;16:100241. PMID 37694178
3. Jyani G, Sharma A, Prinja S, Kar SS, et al. Development of an EQ-5D value set for India using an extended design (DEVINE) study. Value Health 2022;25(7):1218–26. PMID 35779943
4. Chugh Y, Jyani G, Kar SS, Rajsekar K, Prinja S, et al. Estimating the willingness-to-pay per quality-adjusted life-year to aid health technology assessment in India. Value Health 2026;29(3):457–66. PMID 41176029
5. Chauhan AS, Prinja S, Srinivasan R, et al. Cost effectiveness of strategies for cervical cancer prevention in India. PLoS One 2020;15(9):e0238291. PMID 32870941
6. The five-strategy ranking table is constructed for teaching, built so that simple dominance, extended dominance and a frontier all appear at once. No single published Indian paper shows all three cleanly.