In December 2008 the Department of Health in England published the Pharmaceutical Price Regulation Scheme. It describes how the scheme will operate for at least five years from 2009. The previous scheme was to run to 2010 but the UK government withdrew it in February 2008 following a critical report from the Office of Fair Trading (OFT).
The scheme was criticised as based on regulation of profits rather than prices: instead the prices of all drugs purchased by the NHS should be based on their value – termed “value based pricing”(or cost effectiveness).
To what extent does the new scheme solve the problems outlined in the OFT report?
I think the new scheme is notable for not doing what the OFT report recommended. Value based pricing is not going to be applied to all drugs. Instead, two mechanisms will aim at “better reflecting value:” flexible pricing and patient access schemes.
Both of these apply only to drugs subject to appraisal by the National Institute for Health and Clinical Excellence (NICE). Since NICE appraises only a selection of new drugs (and few older drugs) value based pricing will be restricted to a subset of drugs. NICE in its 10 years from 1999 has completed only around 165 technology appraisals, or less than 20 each year. The highest estimate I have seen of the proportion of new drugs appraised has been 40%, but no details have been published on this. Plans exist for NICE to expand but not to cover all new drugs let alone the large number of older drugs.
Flexible pricing seems a fairly minor adjustment to the rules, but patient access schemes indicate a way for the Department of Health to formalise a process for such deals which have become more common for drugs which NICE has not recommended. The multiple sclerosis risk sharing scheme was the forerunner but has yet to provide any progress report. It is not clear if any lessons have been learnt from that scheme. Patient access schemes will be the “exception rather than the rule” according to the report.
ALso, it is notable for the tone it takes about the pharmaceutical industry. It states “The government recognises the industry’s contribution to the economy of the UK and wishes to encourage its competitive efficiency.”
The report’s four objectives are to deliver value for money, encourage innovation, promote access and uptake for new medicines, and provide stability, sustainability and predictability. However, one has to read the report carefully to see how the interests of industry are being taken forward.
Helpfully (and inadvertently), the report has an odd structure. Chapter 5, “Uptake and Innovation” is accompanied by annex B which the report states (para 5.1) “has equal status with this chapter.”
Annex B appears to be a proposal from the ABPI. Headed “Uptake and Innovation package,” it repeatedly uses the term ‘we propose’ which is absent elsewhere in the report. The reader must ask who is the “we?”
It states: “ABPI strongly supports this and will play a full role…” (third para, p.66). I think this indicates that Annex B is essentially a proposal from ABPI. If so, I have never seen an important policy document so openly acknowledge that the source of its main proposals is industry. Does this matter?
Annex B outlines as proposals many of the developments outlined in the report to do with NICE. Some of these are less controversial such industry involvement in identifying topics that the Department of Health might refer to NICE by improved horizon scanning.
But some are novel and particularly important, notably the perspective NICE takes in its appraisals. The annex states: “Focus groups are being held with Government, industry, patient groups and other stakeholder involvement to look at the economic perspective that DH sets for NICE” (p.71).
Since NICE currently takes the perspective of the NHS, a change to include industry would be important. The policy (for that is what it is) that this be done by focus groups is alarming.
The annex continues: “The Department is holding focus groups on value, as agreed with industry and referenced in the Government’s response to the Health Select Committee, to explore the cost/benefit perspective that the Department sets for NICE. These groups will produce outputs and report to government. This is a complex area and the implications of adopting a broader perspective on costs and benefits could be substantial.”
It goes on to state that the focus groups are an attempt to start an informed debate and that any significant changes would need far broader consultation.
What is at stake here is whether or not NICE has to do with the NHS or UK plc. The current perspective is that of the NHS, with benefits defined in terms of the health of patients and costs borne by the NHS and social services. To change this to include the interests of the pharmaceutical industry would mark a major change. And to do it via focus groups seems is novel, to say the least.
The only mention of this in the main report is para 5.9 which states: “The Government is continuing to explore the key issue of the economic perspective that the Department sets for NICE. This is a complex issue which is of interest to key stakeholders, including industry and Government recognises the concerns the industry has raised.”
NICE has already had to change its use of cost per QALY to give a premium to end of life patients. My reading of the report is that NICE may next be obliged to add another premium, this time for pharmaceutical industry interests. Watch out for the reports of those focus groups!
Joe Collier: A stab at future UK Drug Pricing Policy
James Raftery is a health economist with several decades’ experience of the NHS. He is professor of health technology assessment at Southampton University. A keen “NICE watcher,” he has provided economic input to technical assessment reports for NICE but has never been a member of any of its committees. The opinions expressed here are his personal views. He welcomes comments to his blog.