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Getting a NICE deal out of value-based pricing

By Sarah Garner, PhD, MRPharmS

Health technology assessments vary globally. In the coming years the price the NHS pays for a drug could better reflect the value it offers


There is global stagnation in the pharmaceutical market with few “block busters” in the pipeline. This, coupled with increasing costs of bringing drugs to market, has led to low-risk strategies being adopted. The resulting high-cost “me-too” medicines generally offer small incremental benefits in a few clinical areas such as oncology. Constrained healthcare systems are being asked to pay increasing amounts for smaller improvements in health outcomes.

In 1999, concerns about local NHS variations in drug availability in England led to the creation of what became the National Institute for Health and Clinical Excellence. Consistent uptake of cost-effective new technologies was enabled by the requirement that the NHS fund approved technologies within three months.

NICE was asked to use the price set by manufacturers to examine incremental cost-effectiveness: compared with standard NHS care, how much extra benefit does the new treatment give the NHS and at what extra cost? NICE was not given the ability to negotiate on price, resulting in some medicines being deemed not cost-effective, causing much controversy.

In reality, very few medicines are “not recommended” by NICE and when this does happen it is usually because of a lack of evidence of additional clinical benefit.

In contrast to the UK, health technology assessments in some other countries are tied directly to pricing or reimbursement mechanisms, meaning that a price reflecting the value of the technology can be negotiated: both higher and lower. This is “value-based pricing” (VBP).

The concept of VBP is not new in the UK. Discussions first arose during the 2009 revision of the Pharmaceutical Price Regulation Scheme. Ultimately a half-way house approach was adopted that included patient access schemes and flexible pricing. The Government has signalled a clear intention to move towards VBP when the PPRS is renegotiated in 2013.

The ambition of health minister Andrew Lansley is to have “a system that encourages the development of breakthrough drugs, addressing areas of significant unmet need”. He has emphasised the need for a closer link between the price the NHS pays and the value a new medicine delivers.

VBP will mean the assessments NICE undertakes can be used to inform the final price of the technology. The assessment of relative clinical effectiveness and “value” of the technology will in principle remain the same; the only change will be in the ability of the NHS or its representatives to use the information to negotiate on price.

In future, rather than a “not recommended” decision, the NHS will be able to signal at what price a technology would be deemed cost-effective. Current discussions are focusing on the practicalities of who would be responsible for the final decision.

A VBP system, while potentially changing drug prices, will still not consider the impact on NHS budgets. Under the proposed new arrangements these considerations could become the responsibility of GP consortia, which will need pharmacists’ input into commissioning decisions. And pharmacists must be prepared to lend their skills to the evaluation of real-world effectiveness and value of medicines.

Sarah Garner is a 2010/11 Harkness Fellow in Healthcare Policy and Practice and associate director for R&D at the National Institute for Health and Clinical Excellence*

* Dr Garner’s opinions are her own and not those of NICE

Citation: Clinical Pharmacist URI: 11049255

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