BACKGROUND: Ireland is one of few countries worldwide to have an explicit cost-effectiveness threshold. It was agreed in a 2012 agreement between government and the pharmaceutical industry. In conjunction with substantial cost-savings on existing medications the agreement established a threshold of €45,000/QALY. Prior to this there had been an unofficial threshold of €20,000/QALY. The agreement only applies to pharmaceuticals, so there remains no official threshold for non-drug interventions. According to the agreement, drugs with cost-effectiveness ratios within the threshold will be granted reimbursement, whereas those exceeding the threshold may still be approved following further negotiation. A number of drugs far exceeding the threshold have been approved recently. ANALYSIS: There are four reasons for concern regarding Ireland’s threshold. Firstly, that it only applies to drugs creates potential inconsistencies and inefficiencies whereby relatively cost-effective non-drug interventions are not approved while expensive drugs are. Secondly, as a price floor rather than ceiling it offers only a weak constraint on the introduction of cost-ineffective interventions. Thirdly, it has no apparent empirical basis. Finally, a recent threshold estimate based on the cost-effectiveness of services forgone for the UK was approximately £13,000/QALY. Assuming Ireland’s threshold should be broadly comparable, the current threshold is probably too high. CONCLUSION: An excessive threshold risks causing the Irish health system unintended harm, as newly adopted interventions may produce less health than alternative interventions foregone. The lack of an empirically-informed threshold means the policy recommendations of cost-effectiveness analysis cannot be considered fully evidence-based rational rationing. Finally, it also means that the current threshold does not accord with recent legislation on the pricing of medical goods, which defines cost-effectiveness in terms of the opportunity cost of other services foregone. Policy makers should consider these issues when choosing what threshold to apply once the current industry agreement expires at the end of 2015.