UK NICEs Looming Value Based Pricing Challenges

The National Institute for Health and Care Excellence (NICE) will have a vital role in the post 2014 value-based pricing (VBP) world.  The Department of Health (DH), which still acts as the sponsor organization for the agency, has set out in more detail just what value assessment by NICE will need to do.  Now NICE has to determine the methods and set up the governance and workable processes to deliver it.

Value Assessment: Terms of Reference
Although short in length (just one page) the Terms of Reference set up a considerable challenge for NICE to deliver on.  It’s also been referred to as a ‘blueprint’ by the DH. It sets out requirements that NICE needs to meet.  The tricky requirements are listed below.

• Applying the same perspective both for new medicines but also for any treatments that they may displace (essentially the notion of opportunity cost on a like for like basis). Not straightforward at the best of times, and even more challenging if the wider societal perspective is taken.

• A ‘simple’ system of weighting for burden of illness for the most serious conditions.  Few would say that even fully understanding the burden of illness is easy. We can often (but not always) count the pounds and pence, but how well do we capture missed life opportunities for patients and their carers?  The DH doesn’t allude to such bigger questions but suggests that this could done be via a simple percentage weighting proportionate to the QALY loss suffered by patients.  It’s not clear how this avoids double counting (since a large part of the benefit of a new medicine is presumably reducing the burden of the disease or at least slowing down or helping to manage the eventual burden of a disease).

• Take account of wider societal benefits.  The DH have an excel tool to help NICE (a ‘ready reckoner’), although even that may be limited and out of step with the more sophisticated approaches seen in other countries and economists still argue over the choice of method.  Then there is the potential political fall out from supporting the working age could prove controversial even in our current austere times.

NICE has already flagged how difficult it is to actually ‘do’ the wider societal benefits and burden of illness when they responded to the VBP proposals in 2011.  The ToR provide little direction to help them overcome the difficulties, but maybe that’s right; NICE will need to figure this out as the technical experts.  In 2011 NICE also suggested that the way to build in the non-pricing elements of the VBP proposals would be through an additional New Medicines Panel, with input from a Patient Need Expert Panel.  It remains to be seen if NICE will stay with those proposals or opt for something else now.

Tucked away in the notes is also the challenge to take both a ‘selective’ approach to wider societal benefits but also that NICE should apply them systematically and consistently.  It seems NICE has some scope to approach this pragmatically but over time there will be an informal ‘case law’ and precedents being set.

No mention of price or the threshold
Price isn’t mentioned at all; nor is any new cost threshold threshold; two really important parts of whether something offers ‘good value’ or not. Presumably these are still sat with the DH as part of the reserved powers for price setting.

Value doesn’t include an additional component of innovation
Initial proposals for VBP included the potential for a component of value related to innovation (‘therapeutic innovation and improvement’).  The DH has now dropped this, with a footnote explaining that this is “ensure that innovation is rewarded only when the technology’s use brings extra value”.  Not stated but implicit is that the innovation must be picked up and rewarded via the basic QALY and the additional components of value being introduced under VBP; wider societal benefit and burden of illness.  Also unsaid but an issue cited by some was the scope for double counting as the benefits for patients and the NHS from innovation should be via health outcomes and cost offsets.  Allowing a further adjustment could have overdone it.

Countdown to VBP
With less than 6 months until VBP is due to be implemented NICE will have to decide how much of the existing DH work to draw on and pragmatically how to adapt existing processes, including methods manuals, templates etc, to meet the deadline.  As ever, NICE will be closely watched.  But bigger questions still remain; what will the Scottish Medicines Consortium choose given it has freedom over their own value assessment? Will we even need the All Wales Medicine Strategy Group if all new medicines will be VBP’d? How will a ‘value-based price’ actually be determined? And just how will any of this secure better access to medicines?

Leela Barham is an economic consultant. She can be contacted via her site or at leels@btinternet.com