The decision rules of cost-effectiveness analysis

Pharmacoeconomics. 1996 Feb;9(2):113-20. doi: 10.2165/00019053-199609020-00003.


It has become increasingly popular to carry out cost-effectiveness analyses in economic evaluations of healthcare programmes. Cost-effectiveness analysis is based on the maximisation of the health effects for a given amount of resources. However, many published studies fail to report the results of cost-effectiveness analysis in a way that is consistent with this underlying aim. The aim of this article is to demonstrate the decision rules of cost-effectiveness analysis in an easily accessible way for practitioners in the field. A hypothetical example is used to demonstrate the decision rules of cost-effectiveness analysis, and we also show how to estimate the appropriate incremental cost-effectiveness ratios and how to exclude dominated alternatives. It is then shown how fixed budgets or predetermined prices per effectiveness unit can be used as decision rules to maximise health effects and to determine which programmes to implement on the basis of incremental cost-effectiveness ratios. We hope that the article will contribute towards an increased understanding and application of the appropriate decision rules of cost-effectiveness analysis, so that the results of cost-effectiveness analyses can be interpreted meaningfully by decision makers.

MeSH terms

  • Budgets
  • Cost-Benefit Analysis / methods*
  • Cost-Benefit Analysis / statistics & numerical data
  • Decision Support Techniques*
  • Drug Costs
  • Economics, Pharmaceutical*