An Issues Panel: Developing Cost Effectiveness for Decision Making: What can be Learnt from “Value Based Pricing”?

This post reports on an Issues Panel which was held at the Spanish Health Economics Association Annual Conference which took place in Granada, Spain 17-19 June 2015. The title of the panel was: Developing cost effectiveness for decision making: what can be learnt from “Value Based Pricing”?

OHE members presented in several sessions at the Spanish Health Economics Association Annual Conference which took place in Granada, Spain 17-19 June 2015. This post focuses on an Issues Panel entitled “Developing cost effectiveness for decision making: what can be learnt from “Value Based Pricing”?” which included a contribution from Adrian Towse, Director of the OHE.

The panel was organised and chaired by Allan Wailoo, Professor of Health Economics and Director of the NICE Decision Support Unit, University of Sheffield. It included the following contributions:

Adrian Towse presented “Reflections on Value Based Pricing/Assessment” with an overview of the main elements of the Value Based Pricing (VBP) proposals. These included: 

• The impact of the 2007 Office of Fair Trading Report’s arguments for the introduction of risk-sharing/coverage with evidence development arrangements as part of VBP, which led to the introduction of Patient Access Schemes in the 2009 PPRS. 
• The question of whether NICE and/or the Department of Health (DH) should be a price taker or a price setter. 
• A review of the survey evidence collected by the Policy Research Unit in Economic Evaluation of Health and Care Interventions (EEPRU) as part of the DH VBP exercise on public preferences for elements of value including innovation and “end of life” adjustments. 

He concluded that: 

• Work on the broader definition of value needs to continue. It requires better understanding of the preferences of the public and of patients. There was a need to invest in preference elicitation.
• Price flexibility by indication/subgroup and outcomes-based CED/PBRSA schemes are important for getting dynamic and static efficiency from the use of drugs. Reform of the CDF offers a way forward to try more of these approaches 
• A deliberative process is necessary in value assessment. Introducing structure to this process (MCDA) is a challenge.

He described a methodology, developed as part of the VBP process, which was designed to provide substantially complete estimates of the value of “wider” economic impacts for any condition, treatment or programme, using routinely available data. Whilst the impacts of health interventions on the wellbeing of patients can be estimated with instruments such as the quality adjusted life year (QALY).  Changes in an individual’s health state can, however, also have consequential economic impacts on others.  For example, patients who receive treatment may return to work, contributing more in taxation, requiring less welfare benefit or improving family finances – or they may contribute more to looking after family members or providing domestic work.  Changes in health may also mean patients need different amounts of formal or informal social care, as well as other resources of everyday life.

He presented estimates of the value of these impacts for representative treatments, and showed that these vary widely.  In combination with a set of reference estimates, the methodology can be used to calculate the value of economic impacts associated with activity at the margin in the UK NHS producing a figure of 93p per £, i.e. the marginal £1 of NHS expenditure delivers both health gain and wider economic impacts of 93p.

James Raftery, PhD, Professor of HTA at the University of Southampton, presented on “Value based pricing in UK: a personal view of strengths, weaknesses and risks. (Or why it went wrong.)”

He recapped the history of the development of VBP from the 2007 Office of Fair Trading report recommending the Prescription Pricing Regulation Scheme (PPRS) be replaced by VBP for all branded drugs, through to NICE consulting the public on a QALY shortfall (absolute & relative) proposal in 2014 with the decision, based on the consultation results, to implement no change for the time being. Key challenges included:

• Political change with a new Government, an ambitious but untested minister and keen interest from several pressure groups
• An ambiguous mission and title, presented in specialist language, including self-contradicting claims
• A clash of values between those of the market and the “National Health Service”
• Un-anticipated consequences, belatedly recognised. 

He noted that NICE’s Public Health Programme had quietly made changes to its methods which were similar to those proposed under VBP. These included a shift to a societal perspective. The lack of controversy with these indicated how the factors listed above affected VBP.