OBJECTIVES: To describe how US payers use heterogeneity of treatment effect (HTE) evidence when formulating coverage policies for oncology drugs. METHODS: A qualitative approach using semi-structured in-depth interviews with 15 payers was used in to answer our question. An interview guide was developed based on theory and pilot interviews. Themes that emerged from content analysis were summarized RESULTS: US payers understand the importance of using HTE evidence in oncology. However, the utility of such evidence to inform real-world coverage decision making is questionable. The Food and Drug Administration (FDA) label is the most overwhelming determinant of whether HTE evidence gets incorporated into a coverage policy. If not in the FDA label, payers find it difficult to use HTE evidence due to the inability to precisely differentiate responders from non-responders and the logistical difficulty to operationalize HTE. All payers reported that subgroup analyses on randomized clinical trial data are the most trusted source to establish HTE evidence. In addition to the FDA label, payers also consider treatment guidelines, quality/magnitude of HTE evidence, availability of effective alternative substitutes, treatment line, cancer aggressiveness, and politics. When a biomarker and a companion diagnostic is involved, the degree to which HTE evidence is incorporated into coverage policies will also depend on the clinical and analytic validity of the test and the ability to accurately and pragmatically distinguish responders from non-responders. Most payers indicated that if oncologists steer treatments to patients who are expected to benefit, there would not be a need for a policy; however, if a physician practice gap is evident, a coverage policy that incorporates HTE would be crucial. CONCLUSIONS: Payers’ oncology coverage decisions are impacted by a myriad of factors, especially the FDA label. Payers require more definitive HTE evidence in order to make more efficient coverage decisions.