Pursuing the 'Real' Cost Effectiveness Threshold in England

The Incremental Cost Effectiveness Ratio (ICER) thresholds used by agencies such as the UK’s National Institute for Health and Care Excellence (NICE), the Scottish Medicines Consortium (SMC), and as far afield as Australia by the Pharmaceutical Benefits Advisory Committee (PBAC) are often controversial. This is mostly because it means analysts saying that a new medicine above a certain threshold it’s not a good use of limited public sector money. And that means denying access.

Pursuit of a ‘real’ threshold for cost effectiveness in England
In England, there has been a huge effort to work out the ‘real’ cost effectiveness ratio. Instead of looking at what society might be willing to pay for a Quality Adjusted Life Year (QALY) - although this has been looked at too, suggesting that the public might pay anywhere from £18,000 to over £40,000 for a QALY - researchers from the Centre for Health Economics, Office for Health Economics and Imperial College, London, looked at what local health agencies actually spent by disease and what this buys them in terms of QALYs.

This is to get to grips with the opportunity cost of spending, which is important because when NICE recommends a technology that increases NHS costs, the NHS has to stop spending on something else. And that’s only worthwhile if we get more benefits from the new medicine than from what we would have otherwise have spent the money on.

The data and techniques involved are complex and hard to understand (at least to me), whereas the results are easy to report.  The group found that the cost per QALY actually in use varies, but a central estimate of £18,317 was useful for policy. A later update said it was even lower, at £12,936.

But that’s not the whole story. The Office of Health Economics point out some concerns in their critique. They say that

• accounting differs across the country which could affect the underpinning data that has been used;
• past spending decisions might not be a good proxy for future spending decisions;
• there’s no model for how spending decisions are actually made and much of what local managers/clinicians do are not easy to observe in terms of their impact - are they trying to buy mortality improvements, quality of life, or something else (or a bit of all of these)?
• the lack of complete data means the team had to use some big assumptions.

But there are many ratios in use across England
The estimates of the real ICER threshold in England sit alongside others used in practice. Conveniently for the Department of Health, when considering a policy change a QALY is worth £60,000. Whereas the PPRS (agreed between Department of Health and the Association of the British Pharmaceutical Industry [ABPI]) requires NICE to keep to £20,000 to £30,000 cost per QALY.  So a QALY is worth more in policy debate than it is in deciding access to new medicines.

But it gets further complicated because in reality, many NICE decisions don’t always have have clear ICERs to support them, so it’s hard too to know exactly where the line is drawn for the threshold.

That’s all before considering the impact on the threshold under the 2014 PPRS, which includes payments from companies in order to manage the NHS branded medicines budget within pre-agreed growth rates. So just what is the real threshold when the NHS could, at some point, pay nothing for the next prescribed branded medicine?

Leela Barham is an independent health economist. You can find out more about on her website and contact her at leels@btinternet.com