James Raftery: NICE and value based pricing—is this the end?

Since Andrew Lansley announced in 2010 that the NHS would in future use “value based pricing” in its purchases of pharmaceuticals, civil servants and (more recently) the National Institute for Health and Care Excellence (NICE) have been struggling to develop an approach for how this could be implemented. For the twists and turns, see previous blogs on the topic.

At its September board meeting, NICE considered a document on “value based assessment.” This made recommendations based on the results of NICE’s recent consultation. The document provided greater detail than NICE’s press release of 18 September.

NICE consulted on six questions (listed below) and got 900 responses (summarised below) from industry, patient groups, academics, clinical organisations, and the English Department of Health.

Question one asked: “Does proportional QALY [quality adjusted life year] shortfall appropriately reflect burden of illness?” Responses: 28% said “no,” 33% said “yes,” and 39% “partial.”

Question two asked: “Does absolute QALY shortfall provide a reasonable proxy for wider societal impact of a condition?” Responses: 59% said “no,” 10% “yes,” and 31% “partial.”

Question three asked: “Does a maximum weight of 2.5 in circumstances when all modifiers apply function as a reasonable maximum?” Responses: 73% said “no,” 12% “yes,” and 13% “partial.” [The percentages here don’t add up to 100, presumably because of rounding.]

Question four asked: “Should separate weights apply to each modifier?” Responses: 79% said “no,” 5% “yes,” 16% of responses were “partial.”

Question five asked: “Would the proposals improve consistency, predictability, and transparency?” Responses: 72% said “no,” 2% “yes,” and 26% “partial.”

Question six asked: “Would risks result?” Responses: 100% yes.

The DH’s response was that, in general, the maximum weight should be 1.5 times the current lower boundary for cost effectiveness, with a maximum of 2.5 for technologies that meet the end of life criteria, which it considered should be retained.

The paper concluded that:
a) Although support was expressed for the incorporation of burden of illness as one of the criteria to be considered, agreement was lacking on how this criterion should be measured and valued.
b) The DH has advised in its response to the consultation that it now wants to retain the current approach in which a QALY weighting is applied to drugs designed to extend life at the end of life.

The board was recommended to make no changes to the technology appraisal methodology in the short term, and advised that further consideration should be given to the use of QALY shortfall as a means of quantifying burden of illness and wider societal benefits.

The NICE press statement put this in positive terms, announcing a new office for innovation within NICE, and more productive sharing of risks between companies and the NHS by means of NHS England’s “commissioning through evaluation.”

What to make of this?

Firstly, despite the statement in the document that no consistent pattern emerged, most of the proposals were soundly rejected. All but one had a majority of 59% or more answering “no.” Four had more than 70% voting “no.” I know of no other set of consultation questions that have been so heavily rejected. Whether this was owing to careful or careless drafting is moot.

Secondly, the DH view trumped all others in relation to the maximum weights that might be applied to QALY, and to retaining the current end of life criteria. This is the same department that consulted on its preferred approach, but failed to win support for its proposed way forward. After which, it passed the problem to NICE. It has now vetoed NICE’s alternative approach.

Thirdly, no change is to be made in the short term. Value based pricing is dead. Rest in Peace (RIP). Like most of the reforms introduced by Andrew Lansley, this policy proved an unworkable distraction. Finally, the specific extension of cost benefit analysis practised by NICE (cost per QALY from an NHS perspective) has proved resilient. This has implications for how other countries practise economic evaluation of healthcare.

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.

Competing interests: The author has no further interests to declare.