Health technology assessment: deciding what medicines are worth paying for

Health technology assessment, commonly abbreviated as HTA, is a multidisciplinary process used to evaluate the properties and effects of a health technology. In plain terms, it is the structured method that governments and health insurers use to decide whether a new medicine or medical device provides good value for money. When a new treatment becomes available, it is frequently much more expensive than older alternatives. Because healthcare budgets are strictly limited, paying a high price for a new drug generally means that funds must be diverted from somewhere else in the health system. HTA provides a transparent, evidence-based framework for making these difficult decisions, balancing clinical effectiveness, costs, and broader social impacts.

How cost-effectiveness works

At the heart of health technology assessment is the concept of cost-effectiveness. This involves comparing the price of a new medicine to the health benefits it provides, and then measuring that ratio against the current standard of care. Health economists typically calculate the incremental cost-effectiveness ratio (ICER), which looks at the additional cost of the new medicine over the current treatment, divided by the additional health benefit it delivers. If a new treatment offers only a marginal improvement in survival but costs significantly more than existing options, it is often judged as poor value.

It is also important to note that HTA looks beyond the pharmacy price tag. A more expensive medicine might reduce the need for lengthy hospital stays, complex surgeries, or long-term nursing care. When the entire healthcare journey is considered, a medicine with a high upfront cost can sometimes be the most cost-effective option overall because it saves the health system money elsewhere.

Understanding the QALY

To compare vastly different treatments—such as a new cancer drug versus a therapy for diabetes—assessors need a common metric. The most widely used measure is the Quality-Adjusted Life Year, commonly known as the QALY. A QALY combines both the length of a person's life and the quality of that life into a single number. One QALY represents exactly one year of life in perfect health.

If a medicine extends a patient's life by one year, but they spend that year in severe pain with a quality of life rated at half of perfect health, the treatment yields 0.5 QALYs. By calculating how many QALYs a new medicine adds compared to the standard treatment, decision-makers can put a concrete number on the health benefit. This allows them to compare treatments for entirely different diseases on a level playing field, ensuring that a heart medication is judged against the same fundamental metric as a mental health therapy.

How bodies like NICE use HTA

Many countries have established independent agencies to conduct these evaluations. The National Institute for Health and Care Excellence (NICE) in the United Kingdom is one of the most prominent examples. Similar organisations exist globally, such as the Pharmaceutical Benefits Advisory Committee (PBAC) in Australia and the Canadian Agency for Drugs and Technologies in Health (CADTH). These bodies review clinical trial data alongside economic models submitted by pharmaceutical manufacturers.

They typically apply a cost-effectiveness threshold; for example, if a medicine costs more than a certain amount per QALY gained, it is usually rejected for public funding unless there are exceptional circumstances. This process is not without controversy. Patient advocacy groups and pharmaceutical companies frequently argue that strict cost-effectiveness thresholds can deny patients access to life-saving new therapies, particularly for rare diseases where the development costs are exceptionally high and the patient population is very small.

HTA and the NHI in South Africa

In South Africa, the debate surrounding the National Health Insurance (NHI) has brought the concept of health technology assessment into sharp focus. A central goal of the NHI is to provide universal health coverage, which will require a carefully managed standard benefits package. To determine which medicines and treatments should be included in this package, South Africa will increasingly need robust HTA processes to ensure that public funds are spent efficiently and fairly.

Historically, the country has relied heavily on the WHO Essential Medicines List alongside local clinical guidelines to guide procurement, but the integration of formal economic evaluation is widely discussed by health policymakers. As these frameworks evolve, tools like HealthSA remain vital for patients and providers to check whether a medicine is registered with SAHPRA and to find its Single Exit Price, helping to demystify the real-world costs that HTA bodies must evaluate.