Value Based Pricing in the UK

Every country around the globe struggles with attaining an appropriate balance between providing affordable health care and ensuring access to medical advances. In a recent article in the British Journal of Clinical Pharmacology, Prof Adrian Towse examines the issues from a UK perspective. Managing and containing costs in the NHS is a perennial challenge. Far less clear is how to accomplish this while still ensuring sufficient incentives for timely access to new medical therapies, particularly new medicines.

Every country around the globe struggles with attaining an appropriate balance between providing affordable health care and ensuring access to medical advances.  In a recent article in the British Journal of Clinical Pharmacology, Prof Adrian Towse examines the issues from a UK perspective.  Managing and containing costs in the NHS is a perennial challenge.  Far less clear is how to accomplish this while still ensuring sufficient incentives for timely access to new medical therapies, particularly new medicines.  Health technology assessment, he believes, is an important tool, but only if used appropriately and within its limits.

In the UK, prices for medicines are guided by a voluntary agreement, renewed and revised periodically, between the government and the pharmaceutical industry, the Pharmaceutical Price Regulation Scheme (PPRS).  Prior to the last round of negotiations, the Office of Fair Trading (OFT) published a report proposing that the PPRS profit-control approach be replaced by a ‘value based pricing’ (VBP) approach. The National Institute for Health and Clinical Excellence (NICE) would indicate prices at which a product would be cost effective in different patient subgroups; the Department of Health (DH) would then negotiate a price with the company.  In a second phase, NICE would be merged with its Scottish and Welsh equivalents and be given DH’s power to set prices for medicines when used by the NHS.  An explicit cost per quality adjusted life year (QALY) threshold (not a range) would be negotiated periodically with the pharmaceutical industry under a VBP-PPRS agreement.

According to Prof Towse, ‘combining price setting with the scientific task of assessing cost and effects risks biasing NICE’s judgments’ and introducing political opportunism. From a short-term NHS perspective, a low price and the use of a new technology could be achieved by ensuring that NICE’s assessments are ‘”rigged” to justify demanding a lower price than the drug is worth to the NHS’.  Introducing such potential bias would substantially increase uncertainty for pharmaceutical companies.  Prof Towse provides a comprehensive overview in the article of the numerous uncertainties that companies face already.

The 2009 PPRS agreement maintained the separation between scientific review and price decision making, stating that ‘NICE does not negotiate, set or publicly indicate prices’.  Two new value-focused measures, both to be reviewed within two years, were agreed.  The first,  ‘Flexible Pricing’, provides for minimal DH involvement and an ‘automatic’ adjustment in UK list prices based on new evidence of clinical and cost effectiveness.  NICE’s review can veto a UK price increase for an existing indication, but not for a new one.  The second, Patient Access Schemes, entail the company and the DH agreeing on an arrangement for making available a medicine initially turned down by NICE — essentially a ‘fast track’ re-review. In the article, Prof Towse explores how any of the parties might seek to ‘game’ the new measures and the counters for such attempts. Prof Towse also notes that, in discussions through the Office of Life Sciences since the PPRS agreement, a NICE-administered ‘innovation pass’ mechanism has been established.  In essence a form of conditional approval, this allows early access to a small number of new drugs with limited but highly positive initial evidence of efficacy.  These would be available for up to three years while additional evidence is collected, with a pre-agreed ‘exit strategy’ in the event of NICE non-approval.

Although it is far too early to draw conclusions about the value of these new approaches, Prof Towse notes that they can ‘lead to forms of “coverage with evidence development” in the UK that will enable patients to access medicines whilst underlying uncertainty about value is reduced’.  Getting ‘value based pricing’ right, he argues, is essential to timely access to new medicines for patients in the UK and to ensuring that the UK market remains part of companies’ R&D and portfolio management decisions.  ‘Getting it wrong, by resisting coverage with evidence development and introducing government price-setting, risks side-lining the UK’.  If the UK ceases to be an early launch market, access will be delayed, the NHS will become irrelevant in companies’ R&D decision making, and the UK’s biomedical science base will erode.

Towse, A. (2010) Value based pricing, research and development, and patient access schemes.  Will the United Kingdom get it right or wrong? British Journal of Clinical Pharmacology. 70(3), 360-366.