Informing a Cost-Effectiveness Threshold for Health Technology Assessment in China: A Marginal Productivity Approach

Health technology assessment has been increasingly used in China, having been legally mandated in 2019, to inform reimbursement decisions and price negotiations between the National Healthcare Security Administration and pharmaceutical companies around the price of new pharmaceuticals. The criteria currently used to judge cost effectiveness and inform pricing negotiations, 3 × GDP per capita, is based on the rule of thumb previously recommended by the World Health Organization rather than an estimate based on an empirical assessment of health opportunity costs. The objective of this study was to inform a cost-effectiveness threshold for health technology assessment in China that accounts for health opportunity cost. The elasticity of health outcomes with respect to health expenditure was estimated using variations across 30 provincial-level administrative divisions in 2017 controlling for a range of other factors and using an instrumental variable approach to account for endogeneity to assess robustness of results. The estimated elasticity was then used to calculate the cost per disability-adjusted life-year (DALY) averted by variations in Chinese health expenditure at the margin. The range estimated from this study, 27,923–52,247 (2017 RMB) (central estimate 37,446) per DALY averted or 47–88% of GDP per capita (central estimate 63%), shows that a cost per DALY averted cost-effectiveness threshold that reflects health opportunity costs is below 1 × GDP per capita. Our results suggest that the current cost-effectiveness threshold used in China is too high; continuing to use it risks decisions that reduce overall population health.