The ICER is calculated by assessing the difference in costs between two interventions (incremental cost C) and dividing it by the the difference in benefits / outcomes (incremental effectiveness E). ICER = C/E

So, if a new drug costs £1,000 per year more than an existing drug, and results in a gain of 0.2 QALYs per year in comparison, then the ICER is:
ICER = 1,000 / 0.2 = £5,000 per QALY

We can say that a treatment is cost-effective if its ICER is less than a pre-set threshold of what we consider to be "value-for-money".
This threshold value is known as Rc.