OBJECTIVES: In contrast to the National Institute for Health and Clinical Excellence (NICE), the German Institute for Quality and Efficiency in Health Care (IQWiG) does not use quality-adjusted life years (QALYs) in its efficiency frontier approach to pharmacoeconomic evaluation. The lack of a global measure of effectiveness across indications is subject to criticism by international experts. In response, IQWiG refers to German legal restrictions. The objective of this analysis is to examine whether German legislation allows the use of QALYs in pharmacoeconomic evaluation. METHODS: We employ a legal analysis of German legislation concerning the provisions relevant to pharmacoeconomic analysis by IQWiG. Our analysis includes specific pharmacoeconomic provisions, constitutional restrictions and jurisdiction. RESULTS: According to German Social Code Book V, IQWiG’s pharmacoeconomic evaluation is to be based on international standards. This could hint at the NICE’s use of QALYs if the existence of an international standard is assumed in the first place. The Federal Constitutional Court of Germany, however, has consistently stressed life and health as most important fundamental rights in the German constitution. German jurisdiction has interpreted the German constitution as prohibiting putting a monetary value on life or health. However, the global use of QALYs would imply putting an explicit or implicit threshold value on a QALY, i.e. a value on life and health. Therefore, IQWiG’s reluctance to use QALYs in its method is justified by legal restrictions as imposed by the German constitution. CONCLUSIONS: Our analysis shows that English standards cannot be adopted without considering legal restrictions in the German context. These restrictions prohibit the use of QALYs. The use of QALYs is motivated by the assumption of a fixed health care budget. The German legislator confirmed its rejection of this assumption by increasing Statutory Health Insurance contributions from 14.9 % to 15.5 %, effective January 2011.