Because economic analyses compare clinical effects and costs of alternative strategies for treating patients, a number of possible combinations of results can occur. The ideal situation is that a pharmaceutical product is both better for patients and results in lower cost. An analysis producing such a result would therefore deem this product "dominant" (i.e., clinically better and less expensive). For many products there will be an improvement in clinical outcomes which can be achieved only by accepting incremental costs. In these circumstances the incremental cost per unit of incremental clinical outcome defines the relative economic attractiveness of the new product. A high incremental cost-effectiveness ratio implies that a large expenditure will be required to achieve the extra benefit and is less economically attractive than a low incremental cost-effectiveness ratio.

The incremental cost-effectiveness ratios associated with healthcare technologies, together with the total aggregate expenditures required to apply those interventions to the people who might benefit from them, can be used to set priorities for funding programs that compete for resources in a fixed budget (Detsky & Naglie 1990). In principle, the net benefits to the target population derived from a fixed budget will be maximized. However, an allocation exercise that starts from the premise of allocating the entire health care budget (or indeed all public service expenditures) at a single point in time never takes place. Even within portions of the healthcare budget, such as the Ontario Drug Benefit Program, this exercise does not take place.

Instead, those who produce and interpret cost-effectiveness studies often do so by comparing the incremental cost-effectiveness ratio for a particular intervention with that for other programs, to determine its relative economic attractiveness. Although this does not result in meeting the objective of maximizing net benefits derived from a fixed budget, for a variety of reasons (Birch & Gafni 1992), comparison of incremental ratios does give a measure of the economic consequences of investing in those programs.

This, however, does not directly address the issue of what constitutes low (economically attractive) or high (economically unattractive) ratios. This is a qualitative and subjective judgement, that will vary according to the resources available to the jurisdiction making that decision. Laupacis and associates (1992) have suggested a number of quantitative thresholds (in 1990 Canadian dollars per QALYs) for cost-effectiveness ratios to describe relative economic attractiveness in their discussion of the application of economic analyses to technology assessments. At the present time, no explicit threshold values are being suggested. In the future, those responsible for making allocation decisions will have to determine how much they are willing to pay for the health effects achieved by a variety of interventions competing for resources. Future research may help elicit measurements of society's willingness to pay.

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