National Institute for Health and Clinical Excellence - Health Committee Contents

3  Health Technology Appraisals: cost effectiveness and other issues

Cost effectiveness and value-based pricing

19.  Technology appraisals are the function for which NICE is best known. As NICE put it in its memorandum to the Committee:

In this programme we assess the clinical and cost effectiveness of (mainly new) health technologies. These are primarily new pharmaceutical and biopharmaceutical products but have also included procedures, devices and diagnostic agents. This programme is intended to ensure that all NHS patients have equitable access to the most clinically- and cost-effective treatments that are available. In doing so we work openly and transparently with the life sciences industry. We have, to date, published 264 technology appraisals with 34 planned or already published in 2012-2013.[14]

20.  One of the issues that was extensively discussed in written and oral evidence was the issue of cost effectiveness. The Association of the British Pharmaceutical Industry (ABPI) expressed concern that NICE gave too much weight to cost effectiveness in examining new drug therapies:

The focus of NICE in HTA [health technology appraisal] decision making is we believe disproportionately on cost effectiveness. Although NICE considers a range of factors, the ultimate decision-making metric remains as the Incremental Cost Effectiveness Ratio. Appraisal Committee deliberations are therefore focused primarily on the perspective of health economists rather than that of clinicians and patients. A more balanced view of the various elements of value is required and a full account should be given by Appraisal Committees of what factors were taken into consideration and, importantly, the impact of those factors on the final decision, so that stakeholders properly understand how conclusions were reached.[15]

21.  Professor Johnson of Cancer Research UK was sympathetic to that analysis:

There is a very tight focus a lot of the time in the way that NICE considers health technologies on the immediate costs and benefits and not the rather broader consideration of what effect it might have in other parts of the patient pathway. A failure to take into account the broader value of particular healthcare interventions does restrict their vision of what constitutes "worthwhile" for the NHS.[16]

22.  Professor Smith, on behalf of the Nuffield Trust, argued that

The principle of cost­effectiveness is one that has proved very hard to challenge. It arises from the desire to spend a limited budget as effectively as possible. That gives rise to the decision rule of cost­effectiveness. The work of NICE, which is internationally recognised, has embedded that within our health system.[17]

23.  Laura Weir, of Patients Involved in NICE, thought, however, that the issue of cost effectiveness had been over-played: is a common misconception about NICE, probably fuelled by the media, that it weights cost­effectiveness more heavily than clinical-effectiveness. The truth is it has to see them both together; those calculations have to be done together, and that is why we have the QALY—the quality adjusted life year. It will weigh the cost of a medicine against the quality and length of life that a treatment will give. Where medicines only offer a marginal clinical benefit but they cost a lot, that is when patient access schemes will often come to the fore and where patient groups will lobby companies to reduce their price, because, after all, if the price is lower, there is a higher chance that patients will be able to get that medicine on the NHS.[18]

24.  Although the high reputation of NICE, both in the UK and abroad, is largely based on respect for its work on assessment of the cost effectiveness of new drugs, it is the broader concern about the implications of this focus on health economics which lies behind much of the recent rhetoric about value-based pricing.

25.  A move to value-based pricing was included in the Coalition's Programme for Government:

We will reform NICE and move to a system of value-based pricing, so that all patients can access the drugs and treatments their doctors think they need.[19]

In the Foreword to a consultation on moving to value-based pricing issues in December 2010, the then Secretary of State wrote;

The current system of pricing medicines has tried to achieve a balance between reasonable prices for the NHS and a fair return for the industry to develop new medicines. However, it does not promote innovation or access in the way this Government is looking for. Also, too often, the NHS has been in the position of either having to pay high prices that are not always justified by the benefits of a new medicine, or having to restrict access.

We are determined to create a system that gives patients access to the most effective medicines. There must be a much closer link between the price the NHS pays and the value that a medicine delivers. Pharmaceutical companies need a pricing system that is more stable and transparent, and that gives clear signals about priority areas, so that research efforts are directed to greatest effect...This consultation document outlines a new system which aims to recognise and reward innovation, in particular by encouraging a focus towards genuine breakthrough drugs which address areas of significant unmet need.[20]

26.  Chapter 4 of the consultation document set out the current state of plans for value-based pricing:

The key principle of value-based pricing is to ensure NHS funds are used to gain the greatest possible value for patients. So the Government would set a range of thresholds or maximum prices reflecting the different values that medicines offer.

The value of new products would be assessed and their benefits compared with the benefits that could be gained if the funds required were used to help patients elsewhere in the NHS. This comparison is normally expressed with a cost-effectiveness threshold. It requires the use of a "common currency" for quantifying benefits in a consistent and comparable way across the full range of health-related conditions.

One (but not the only) option would be to use Quality Adjusted Life Years (QALYs), the 'currency' currently used by NICE in its technology appraisals. A QALY is the amount of health represented by a year of life at full health. It gives an idea of how much extra length of life and the quality of life a person might gain as a result of treatment - and health gains from different treatments can be expressed in terms of the number of QALYs to which they are equivalent. If we used the QALY in value-based pricing, the threshold would be expressed as a cost per QALY gained.

In the existing system, a standard cost effectiveness threshold is applied to all new products, with some flexibility to take account of additional relevant factors, including societal preferences. However, the mechanism for taking wider factors into account is not completely transparent, and this may lead to perceptions that important factors are not adequately reflected in the assessment process.

By contrast, under the new system of value-based pricing, the Government would apply weightings to the benefits provided by new medicines, which would imply a range of price thresholds reflecting the maximum we are prepared to pay for medicines. These thresholds or maximum prices would be explicitly adjusted to reflect a broader range of relevant factors so they could be used to calculate the full value of a new product.

The Government proposes that the price threshold structure is determined as follows:

i.  there would be a basic threshold, reflecting the benefits displaced elsewhere in the NHS when funds are allocated to new medicines;

ii.  there would be higher thresholds for medicines that tackle diseases where there is greater "burden of illness": the more the medicine is focused on diseases with unmet need or which are particularly severe, the higher the threshold;

iii.  there would be higher thresholds for medicines that can demonstrate greater therapeutic innovation and improvements compared with other products;

iv.  there would be higher thresholds for medicines that can demonstrate wider societal benefits.

Designing the new system to be both stable and transparent would allow companies to predict well in advance how prospective products may fare, and to focus their research efforts on the treatments that society values most. Companies would be informed of these weightings - allowing them to orient their research and development investments appropriately.

In introducing this system, the Government would move away from a system of negotiations once every five years under the PPRS [Pharmaceutical Price Regulation Scheme] to a more stable framework. This greater predictability and transparency will give companies greater certainty for making long term investment decisions.[21]

27.  It is notable that, despite the fact that the Coalition Government has now been in office for over two and half years there remains very little detail about how an alternative "value-based" pricing system might work.[22]

28.  We asked Sir Michael Rawlins, the current chair of NICE, how he thought value-based pricing would work. He told us:

In the past we have looked at cost­effectiveness in relationship to the incremental cost­effectiveness ratio—the increased amount of money you get in terms of the increased numbers of quality adjusted life years gained. We have had a threshold, but we have always encouraged our advisory committees to be flexible about the use of the threshold, and there may be circumstances when they feel they ought to be giving a positive recommendation even when things are above our threshold range. End­of­life care is an example.

This has all been subjective and it has not been objective. Maybe you could reasonably criticise us for not having tried to create an objective approach rather than a subjective approach, but I think part of value­based pricing is to produce some objectivity into it. One would weight the QALY. One might weight double the value of the QALY for end­of­life treatments, for example. That is one component to it and that is how I see value­based pricing at that end.

The second component is what they call the economic perspective. When we are looking at costs and benefits, we look at it for the health service... There could be a case for going wider. One could take into account the benefits to carers more or time off work or unemployment. The perspective can be very wide. I am agnostic about this whole perspective business, because there are difficulties about how far you will want to go and when you have a lot of unemployment what is the sense of compensating that in a macro scale. So I am more neutral about the perspective.[23]

29.  In the current system, NICE makes its assessment based on the manufacturer's suggested price. As it says in the consultation document:

NICE does not have a role in relation to the pricing of medicines, though the scrutiny of its appraisal process may encourage drug companies to set prices which satisfy its cost-effectiveness criteria. However, if NICE concludes that a drug may offer some benefits but that these are not sufficient to justify the price at which the drug is available, NICE's only option is to recommend that the NHS restricts its use of that drug. There is no scope for NICE in England, or its parallel bodies in the rest of the UK, to enter into pricing negotiations or to recommend an NHS price.[24]

30.  Although this is the theoretical position, the Committee understands that, in practice, discussions take place between the sponsors of a new drug and NICE about the price at which the drug would satisfy cost effectiveness criteria and the Committee agrees with NICE that this flexibility is desirable. Against that background it is even less clear what substantive change is implied by the concept of value-based pricing. Under the proposed system, NICE will no longer make that recommendation. It will still be asked for its expert advice, and it may run a process more or less the same as the one it uses now. The recommendations, and discussions about price with manufacturers, will be the job of Government, that is (it appears) the Department of Health.

31.  It is also clear that there will need to be some extension or updating of the current PPRS in order to provide for payment for those drugs already approved for use in the NHS.

As it would not be feasible to carry out a value-based pricing assessment for each individual branded medicine that is already available, our intention is that branded medicines that are on the market prior to 1 January 2014 would be covered by new arrangements sitting alongside value-based pricing.

For branded medicines already covered by PPRS at the end of 2013, a successor scheme to the PPRS will be required. The details of this will be developed alongside value-based pricing. Following the outcome of this consultation and in line with longstanding practice in this area, the Department of Health will engage with relevant representatives of the pharmaceutical industry on the details of these arrangements.[25]

32.  There has been extensive discussion of the principle of value-based pricing, but it remains a source of concern to the Committee that so little progress has been made on defining this nebulous concept. The practical implications of the move to value-based pricing appear to be relatively modest: with a limited number of health technology appraisals taking place each year (around 30), the majority of drugs will for the foreseeable future continue to be procured under a variant of the current Pharmaceutical Price Regulation Scheme.

33.  The consultation document on value-based pricing was issued two years ago in December 2010, and the response to the consultation was published in July 2011. The Committee does not regard it as acceptable that the arrangements for value-based pricing have still not been settled and that those who will have to work with those arrangements are still unclear about what value-based pricing will mean in practice. Industry needs certainty about how it should bring its products to the NHS, and patient groups and clinicians need to understand what their role will be and how they can make their views heard. Given the length of time since the consultation began, the apparently modest implications of the proposed changes, and the fact that the new regime is due to be effective from January 2014, we recommend that the Department of Health should bring this uncertainty to an end no later than the end of March 2013.

Cancer Drugs Fund

34.  We discussed the operation of the Cancer Drugs Fund during our inquiry. The scheme, introduced in 2011 and due to run till 2014, was designed to help provide access to and funding for cancer drugs which have not been approved by NICE for use in the NHS. Cancer Research UK told us:

The Cancer Drugs Fund has enabled around 21,000 patients to access treatments they may not have otherwise had and has helped to reduce the perception that cancer patients are not able to access treatments. However, this is a finite amount of money for a limited period. This means that it is especially important that the new value based pricing system offers an authoritative solution to funding clinically- and cost-effective drugs on the NHS. The Cancer Drugs Fund is due to come to an end in 2014 and it is currently unclear what this will mean for drugs that are paid for via this route. It is essential that thought is given to how the removal of the fund will impact upon NICE's work and reputation going forward.[26]

Professor Johnson of Cancer Research UK said that "it has done a great deal of good in terms of patients' access to treatment, but at the moment we don't have the data on what the outcomes and the impact have been on quality and duration of life."[27]

35.  Sir Andrew Dillon, Chief Executive of NICE, told the Committee that:

The effect...of the Cancer Drugs Fund is that it has expanded the amount of money that the NHS has available to fund the exceptional treatment decisions that it makes all the time, both in relation to NICE guidance and circumstances where individual patients present and there is an argument put forward by the attending physician for access to a treatment that is not, on a straight reading of NICE guidance, indicated for that patient, and in other circumstances where, as a result of the local decision making, for some reason, particular treatments are not routinely made available. The Cancer Drugs Fund has expanded that and more patients are likely to have had access, through those exceptional treatment decisions, to treatments that either NICE has not actually made a recommendation on, either because we are still in the process of doing it or because it is not something that we have looked at anyway, or where we have made a recommendation but there is a strong case, in the view of the patient and their attending physician, to get access to the drug.[28]

36.  Laura Weir, of Patients Involved in NICE, said that:

In my role as Chair of Patients Involved in NICE I don't just represent the cancer charities but quite a number of conditions. I think the Cancer Drugs Fund was sold to us as something that would help speed up access to cancer medicines and make sure that people were able to access the medicines they needed. I would say that that is applicable across all condition areas... I think there are some lessons there for value­based pricing because, whatever our definition of "value" is, it must fairly and consistently apply across all conditions.[29]

37.  Professor Haslam, the incoming Chair of NICE, expressed similar views:

...the Cancer Drugs Fund has led to more patients receiving more drugs. We don't know what the outcomes have been and we don't know what the impact of that has been on other sections in the health service...If [the Fund] is going to be reviewed, I would want to look at it across the board...there are other conditions that are as serious as cancer and we should not discriminate against those because they do not have as frightening a name.[30]

38.  The Cancer Drugs Fund was established to help provide cancer treatments which would not otherwise be available in the period up to January 2014, when it was considered that the introduction of the new value-based pricing system, with its perceived greater flexibility than the current NICE approach, would mean that it would no longer be required. From the evidence of our inquiry, the Committee considers that three things need to be done before the Fund ceases to operate:

  • There needs to be an assessment of the outcomes for those patients whose treatment has been paid for by the Fund, to see what impact it has had;
  • If there is clear evidence of beneficial outcomes, then that evidence needs to be built on in constructing the new value-based pricing scheme, and applied to treatments for conditions other than cancer;
  • A defined funding mechanism needs to be developed which will allow drugs which have been paid for by the Fund to continue to be available to individual patients.

Information about clinical drug trials

39.  Another issue that we discussed in the context of health technology appraisals was the availability to NICE of all the relevant information about a drug. It has recently been argued that some pharmaceutical companies keep information about drugs trials out of the public domain and thereby undermine the quality of information available to regulators, clinicians and patients about the efficacy and safety of drugs.[31]

40.  When we raised this with Sir Michael Rawlins, he acknowledged that pharmaceutical companies are not legally obliged to publish all the available data about drugs, and that "More importantly, they are not under a legal obligation to publish negative results".[32] He also acknowledged that NICE was not necessarily in a position to examine all the data about a new drug down to the level of individual patient data:

I am not sure, to be honest, whether we would ever have the resources to do individual patient meta­analyses on every single thing we looked at. It is a big task to do that. What we do want to know is the summary statistics, the summary findings, the details of how the study was done and so on and so forth. For our purposes, looking particularly at the new products, necessarily always requiring individual patient data might be over the top.[33]

41.  Sir Andrew Dillon, Chief Executive of NICE, told us that realistically there were few levers that NICE could use to ensure that it had all the information about drug trials that a pharmaceutical company held in its records:

We don't know what we don't know. We get the medical directors of pharmaceutical companies to sign a statement that indicates, to their knowledge, that they have supplied all the data that is relevant to the appraisal that we are undertaking. Once we have that, it is then very difficult for us to be able to make a judgment that that may not be the case. Clearly, if there is some indication from elsewhere that there is data that the company is not making available, then we already pursue the companies. We pursue it anyway. That is something that we would do as part of the normal course of the appraisal. In the end, if there was something that was absolutely fundamental to a robust and credible set of recommendations being formulated, based on data that was not being released that we had reasonable confidence existed, then we could halt the process until that data was made available and we could make the reason for halting the appraisal public.[34]

42.  The issue of transparency of research evidence about drugs goes much wider than just the effects on the NICE appraisal process. Much of what we discussed would be a matter for the MHRA as regulator, as Stephen Whitehead of the ABPI said,[35] and the legal framework is set by European law. In July 2012 the European Commission produced a proposal for a Regulation of the European Parliament and of the Council on Clinical trials on medicinal products for human use. The Commission envisages that this will repeal the 2004 Clinical Trials Directive, which set the framework within which present UK regulations on clinical trials are cast. We are pleased to note that our colleagues on the Science and Technology Committee have announced an inquiry which will examine these wider issues.[36]

43.  Professor Haslam, in his pre-appointment hearing, summed up the situation succinctly:

This whole complex issue of unavailable an extraordinarily important area. I find it impossible to come up with a good argument as to why all data should not be released. But at the same time I very much recognise that the pharmaceutical industry has done a huge amount of good. You only have to look at a condition like AIDS to see the remarkable changes there have been for HIV­positive patients in the last few years. Therefore, we mustn't demonise the pharmaceutical industry. But, following this particular discussion about open data, they are in a difficult position, where they have to rebuild trust with professionals and the public. One of the ways of doing that would be to be much more open with their data.[37]

44.  This issue also raises questions of professional obligation for those researchers who are members of regulated clinical professions. Sir Andrew Dillon told us that NICE requires the medical directors of pharmaceutical companies to sign a statement certifying that they have provided all information relevant to a particular appraisal. Beyond that, the guidance from the GMC for those doctors involved in drug trials is explicit:

You must report adverse findings as soon as possible to the affected participants, to those responsible for their medical care, to the research ethics committee, and to the research sponsor or primary funder where relevant. You must make sure that bodies responsible for protecting the public, for example, the Medicines and Healthcare products Regulatory Agency, are informed.[38]

45.  The Committee believes there should be both a professional and legal obligation to ensure that all regulators, including NICE, have access to all the available research data about the efficacy and safety of pharmaceutical products. All information arising from drug trials should be in the public domain in an accessible and properly anonymised form, including any negative information - as Stephen Whitehead of the ABPI said, "negative trials often give you as much information that is helpful as positive trials."[39]

46.  The Committee also recommends that the pharmaceutical industry should introduce a new code of practice covering research. This should include an obligation to make public all data about drugs which are in current clinical use once they have been through an appropriate peer review process. These are measures that pharmaceutical companies can take now without waiting for the new Clinical Trials Regulation to be approved.

47.  The Committee also recommends that the GMC reiterates its guidance on drug trials to its members, and reminds them that failure to abide by these principles could lead to fitness to practice proceedings being taken against them.

48.  The Committee does not believe it should be either legal or considered ethical to withhold research data about pharmaceutical products. It is therefore concerned that this simple principle is not universally applied in practice, and also concerned by the implication of Sir Andrew Dillon's evidence that NICE are making appraisals of drugs without having access to all relevant data. The Committee welcomes the current review of these issues by the House of Commons Science and Technology Committee and recommends that Committee should examine the nature of both the legal and ethical principles which should cover these issues and how to make those principles enforceable in practice.

Patient voice

49.  It is clearly very important that those who have particular conditions should have their views represented in any discussions within NICE on whether or not to approve drugs designed improve that condition. Laura Weir from Patients Involved in NICE told the Committee that:

...there is no clear role for patient groups. We are invited to give oral evidence when NICE are approving a medicine and we are also invited to give a written submission before then. It is not clear whether NICE want us to literally comment on the assumptions going into their model or if they want a case study. Do they want to know how this drug has impacted on someone's life? Do they want us to produce more qualitative or quantitative evidence? It is very unclear where we fit in in the grand scheme of things.[40]

50.  Sir Andrew Dillon, Chief Executive of NICE, disagreed with the suggestion that the role was not clear, but accepted that the experience could be improved:

It is almost certainly the case that the experience of engaging with NICE by individuals who might sit on our advisory bodies, or by organisations that work with us across more than one piece of work, is not necessarily always as good as they would want. That is partly influenced sometimes by the nature of the outcome, but it is also influenced by the challenge of individuals, and indeed organisations sometimes with very substantial resources, engaging with what is, I quite understand, in some circumstances a complex and quite an intimidating process... We talk to the [Patients Involved in NICE] group all the time about ways in which we can improve their engagements, but we are very willing to do more, if we can, within the resources that we have available to change our processes where engagement is not clear or is not adequate and to do our best to support individuals when they work with us.[41]

51.  NICE clearly does involve patients in its work, but Sir Andrew acknowledged that there is room for improvement. It is an area that needs to be kept under constant review. It is important for the credibility of NICE and for the decisions that it makes that the patient voice is effectively and openly represented in all its work.

14   Ev 41 Back

15   Ev 49 Back

16   Q 11 Back

17   Q 68 Back

18   Q 36 Back

19   The Coalition: our programme for Government, Cabinet Office, May 2010, page 25. Back

20   A new value-based approach to the pricing of branded medicines, Department of Health,16 December 2010. Back

21   Ibid, chapter 4 Back

22   See, for example, Qq 20 and 21 Back

23   Q 125 Back

24   Consultation document, paragraph 2.8 Back

25   Ibid, paragraphs 4.2 and 4.3. Back

26   Ev 61 Back

27   Q 35 Back

28   Q 130 Back

29   Q 35 Back

30   Evidence taken before the Health Committee on 11 December 2012, HC 831-i, Q 40. Back

31   See Ben Goldacre, Bad Pharma, Fourth Estate, September 2012.  Back

32   Q 103 Back

33   Q 94 Back

34   Q 111 Back

35   Qq 43-44  Back

36 Back

37   Evidence taken before the Health Committee on 11 December 2012, HC 831-i, Q8. Back

38   Good practice in research, General Medical Council, April 2010, paragraph 16. Back

39   Q 41 Back

40   Q 13 Back

41   Q 123 Back

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© Parliamentary copyright 2013
Prepared 16 January 2013