Germany’s decision rule for setting ceiling prices of drugs

In Germany, the Institute for Quality and Efficiency in Health Care (IQWiG) makes recommendations for ceiling prices of drugs based on an evaluation of the relationship between costs and effectiveness. To set ceiling prices, IQWiG uses the following decision rule: the incremental cost-effectiveness ratio (ICER) of a new drug compared with the next effective intervention should not be higher than that of the next effective intervention compared with its comparator. The purpose of this article is to analyse ethical implications of IQWiG’s rule and compare them with those of two alternative decision rules, one that is based on an absolute cost-effectiveness threshold and one that falls in between. To this end, constrained optimization problems are defined that yield each decision rule. This article shows that IQWiG’s rule accounts for severity of disease and past resource consumption. Potential problems and pitfalls are discussed.