OBJECTIVES: This presentation will examine how well the quality-adjusted life year (QALY) captures the health gains generated by cancer treatments, with particular focus on the methods for constructing QALYs preferred by the National Institute for Health and Clinical Excellence (NICE), the organisation responsible for providing advice on the cost-effective use of healthcare resources in England and Wales. METHODS: Comprehensive literature review; The published literature relating to QALYs and cancer will be reviewed, with data obtained using a keyword search of the MEDLINE database and a hand search of articles written by leading researchers in the subject area. RESULTS: Three key issues are identified and will be discussed. First, the EQ-5D, a widely used measure of health-related quality of life in adults, has been found to be relatively insensitive to changes in health status of cancer patients. Second, the time trade-off, a widely used technique for estimating the values of health states, involves making assumptions that are likely to be violated in end-of-life scenarios. Third, the practice of using valuations of members of the general population, as recommended both by NICE and the US Public Health Service Panel, is problematic because such individuals typically display a misunderstanding of what it is really like for patients to live with cancer. Thus, it is clear that because of the way in which it is constructed, the QALY shows important limitations in terms of its ability to accurately capture the value of the health gains deemed important by cancer patients. CONCLUSIONS: The presentation will conclude by proposing a research agenda for addressing these limitations.