James Raftery: Value based pricing—NICE to have key role

The response of the government to the House of Common’s health committee’s report on the National Institute for Health and Clinical Excellence (NICE) has provided clarification both on value based pricing and NICE.

The committee’s report, published in January 2013, expressed concern that arrangements for value based pricing due to be introduced in January 2014 had not been clarified, urging the Department of Health to clarify before end of March 2013.The Department of Health states in The Government’s Response to the Health Select Committee’s Eighth Report of Session 2012-13 on the National Institute for Health and Clinical Excellence:

‘We have already made it clear that NICE will have a central role in the value based pricing system, including undertaking an assessment of the costs and benefits of different medicines, drawing on its world-leading expertise. We can now go further, and confirm that NICE will be responsible for the full value assessment of medicines under the future system. Work to develop the new system builds on NICE’s existing technology appraisals processes, but it is also capable of incorporating a broader assessment of a medicine’s benefits and costs, taking into account factors such as burden of illness and wider societal benefits. Importantly, it imposes no requirements on companies to collect additional data.” (Paragraph 6)

However, it goes on to say that:

“Determining what represents value is a societal judgment, and it is therefore appropriate that the government sets the overall framework for VBP, including any key weightings that will be used in its operation to reflect the broader components of a new medicine’s value—for example, in treating a particularly severe condition, or reducing a patient’s care needs. However, some aspects of VBP, such as the management of any cases where the value assessment does not support the proposed list price, will be considered as part of the negotiations between the Department of Health and the branded pharmaceutical industry on new arrangements for the pricing of branded medicines.” (Paragraph 6)

This seems to mean that:
• NICE will be responsible for the full value assessment, going beyond the existing cost per QALY.
• Using a societal framework set by the government, which includes burden of illness and wider societal benefits (see previous blogs).
• This will include weightings to do with severity and unmet need (see previous blogs).
• However, the government will negotiate prices for those drugs that fail to be recommended.

The health committee was also critical of the lack of clarity about the cancer drugs fund, which was presented as a bridge to value based pricing and is due to end in January 2014. The government in response announced:

“The information generated through the cancer drugs fund provides an unprecedented opportunity to assess the benefits that these drugs deliver in real-world clinical practice, and to build the evidence base for the future. The chemotherapy intelligence unit in Oxford is carrying out a national audit of cancer drugs fund usage. Monthly data collection commenced in April 2012, with retrospective data also being collected for 2011/12. The analysis of these data will provide information on the treatment received and on patient outcomes. This information will become increasingly robust as greater numbers of patients are treated. The outcome data from the cancer drugs fund should offer valuable insights into the difference between outcomes observed in clinical trials and those realised in NHS practice.” (Paragraph 7)


“We will ensure that there are arrangements in place to protect individual patients who are receiving treatment with drugs funded by the cancer drugs fund as the planned end of the fund approaches.” (Paragraph 7)

What this means is not exactly clear. Although the information about the analysis of the effects of the drugs funded under this fund is clear, the future of the cancer drugs fund is less so. It seems to be continuing with “data will become increasingly robust as greater numbers of patients are treated” but the “planned end of the fund” is also mentioned.

Questions may be asked about the new chemotherapy intelligence unit in Oxford and the value of data collected retrospectively. The new chemotherapy unit was established in April 2012 to collect a dataset on systemic anti cancer therapy (SACT). It collects data on all NHS trusts providing cancer chemotherapy services in England. The dataset collects information on all drug treatments with an anticancer effect, in all treatment settings, including traditional cytotoxic chemotherapy and all newer agents. As the data collected does not include patients’ quality of life, it will be of limited use in assessing the value of new drugs. Although collection of data on chemotherapy has to be welcomed, the linking of it to the cancer drugs fund seems arbitrary. There is no mention of the fund on the webpage or in the first SACT bulletin.

Overall, what to make of this?

First, this marks a retreat back to the current system, with NICE responsible for the full cost-benefit analysis of new drugs and the Department of Health negotiating prices for those drugs too highly priced to be recommended by NICE. Since patient access schemes already play this part, little change is planned.

Second, the only modification to NICE’s methods will be inclusion of weightings to do with “wider social benefits” (which are well developed) and possibly QALYs linked to severity and unmet need (much less well developed). Cost per QALY will remain at the heart of the assessment of value.

Third, the wobble on the cancer drugs fund continues, with no clear statement of whether or not it will continue. While the cancer lobby will continue to press for its extension, the fact that it has underspent and that neither Scotland nor Wales have implemented such a fund raises queries as to its value. An attempt has been make to camouflage the policy wobble with the announcement of analysis of data on cancer fund usage. More remains to be written on the cancer drugs fund.

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.