Medical economists conduct these cost-benefit studies to determine if a new drug, medical device or surgical procedure is worth its pricetag. But how do they determine benefits? Over the years, the profession has developed a tool for measuring medical value known as the quality adjusted life year, or QALY. One year of perfect health gets a score of one QALY. If a patient is bedridden and in constant pain for that entire year, it might be considered a .3 (three-tenths of a year) QALY.

Let's use a hypothetical example to show how this works. If a medical intervention can, say, eliminate the pain, but not get that patient out of bed, it might raise the QALY for that year to .5 or a half-year. The economists then compare the improvement (.2 QALY) to the cost of the intervention and adjust it to show its price tag in terms of how much it would cost to achieve one QALY.

In this example, say the pain medication cost $12,000 a year. The cost per QALY would be $60,000. While it is by no means a hard and fast rule, most discussions about the value of achieving a QALY peg the acceptable cost threshold at $50,000 (based on the amount Medicare pays each year for dialysis patients on average). Below that and your technology gets paid for; above that and the insurers pull out the green eyeshades.

The problem with this approach is its inherent subjectivity. Who said reducing pain was only worth two-tenths of a year? Why not three-tenths? Though still in bed, the patient is enjoying a painfree existence, right? That’s got to be a .6 on the QALY scale. If the cost-benefit analyzer uses that measure, the cost per QALY for the pain medication drops to $40,000 per QALY, which just happens to be under the $50,000 threshold and likely to meet with the approval of the green eyeshade crowd.

But there's a little more to the story of QALYs. We've long known that regulated industry tends to overestimate the costs of compliance with a proposed rule. Now there's word that industry is distorting not just CBA but also CEAs:

The vast majority of the QALY studies that appear in the medical literature say the interventions are worth the price. And, according to the Tufts University study that appeared last week in the BMJ, only 18 percent of more than 500 studies evaluated by the researchers (most were conducted in the late 1990s) were funded by industry.

But sorting those studies by funding source showed a remarkable disparity in outcomes. “Studies sponsored by industry were more than twice as likely as studies sponsored by non-industry sources to report ratios below $20 000/QALY and over three times more likely to report ratios below $50 000/QALY,” the study’s authors said. “It is unclear whether publication bias occurs at a conscious or unconscious level. In any case, our results support concerns about the presence of significant and persistent bias in both the conduct and reporting of cost effectiveness analyses.”

Chaim Bell of St. Michael’s Hospital in Toronto, the lead author of the study, concluded that “more rigor and openness is needed in the discipline of health economics before decision makers and the public can be confident that cost effectiveness analyses are conducted and published in an unbiased manner."

He was too polite to ask, in the manner of Marcia Angell’s attack on academic medicine a few years ago, whether medical economics is for sale.