Value-based pricing in the UK and the possible role of NICE

Sir Mike Rawlins, chairman of the UK's National Institute for Health and Clinical Excellence, talks to Elizabeth Sukkar about the institute's possible role in value-based pricing.

Over the next three years, the UK's National Institute for Health and Clinical Excellence will have to gear up for some major changes in the area of drug reimbursement. The UK government wants to introduce value-based pricing (VBP) to replace the current pharmaceutical price regulation scheme (PPRS) – the long-running agreement between the Association of the British Pharmaceutical Industry and the Department of Health – when it expires in 2014. There has already been media speculation that NICE, which has considerable influence outside the UK, will no longer be able to ban drugs on the National Health Service in England and Wales and there are suggestions that the health technology assessment body will in future have only an advisory role.

Industry's main concern, perhaps, is in knowing who will set drug prices as part of the VBP discussions. If it is NICE, would that occur before or after a health technology appraisal? Dr Richard Barker, director general of the Association of the British Pharmaceutical Industry, has rejected the idea of NICE playing a pricing role. He also wants the institute's role evaluated alongside the discussions. Any incursion into pricing would run counter to the principles outlined in the PPRS which says: "NICE will not negotiate or publicly set or publicly indicate prices."

Sir Mike Rawlins, chairman of NICE, is agnostic as to whether it his organisation, the DoH, or someone else that takes responsibility for drug pricing. "I'm not sure that it necessarily matters," he says. "I'm more interested in the outcome, rather than the process." He thinks NICE could incorporate the role, but thinks that the industry might not like it: "the difficulty is that I don't know that the pharmaceutical industry will wear it".

Sir Mike is also interested in what happens with Australia's drug reimbursement system, which may be a model for VBP in the UK. He is "quite envious" of parts of the Australian system, whereby Professor Lloyd Sansom, chairman of the country's Pharmaceutical Benefits Advisory Committee, sits down with a company and negotiates a drug price if PBAC thinks it is too expensive. He thinks that system has its advantages.

"I don't really know what precisely is in [Health Secretary] Andrew Lansley's mind on value-based pricing. In one sense, we already do it. We look at the cost, [but] we don't set prices. The pharmaceutical industry likes the present arrangement whereby it has free pricing. We have these patient access schemes, which often enable us to acquire drugs at a lower price than the list price, but the companies are very keen on maintaining the [high] list price, because it's used as a reference price [in Europe]... Therein lie the difficulties, and I'm not sure how to square that circle."

Sir Mike recognises that there may be risks that involvement in drug pricing would dirty NICE's hands and sully its reputations for scientific integrity and independence from government. "Maybe it should be separate and that's fine." And that separate pricing body would not necessarily have to replicate NICE's cost-effectiveness work, he believes. "In theory, if something came in at £40,000 per quality adjusted life year, you might say to the company, 'Look, you're going to have to reduce the price by 25% and then we'll say yes.' The appraisal committee [NICE currently has] could easily indicate to whoever's going to do the price negotiation the sort of level the treatment would become cost-effective." In essence, this is what happens with PBAC, says Sir Mike. "It's just an added step. Whether the step should be done by NICE or somebody else, I'm neutral."

Second chance

While he is agnostic over their administration of drug pricing systems, Sir Mike has clear views on the systems themselves. Indeed, NICE already has some indirect experience in drug pricing. As Sir Mike alluded to above, NICE approves patient access schemes for medicines that the institute does not find to be cost- and clinically-effective in the first instance. These schemes allow patients access to drugs at a price they would not otherwise have got and they also give companies a second chance. They are supposed to be the "exception rather than the rule", according to the PPRS, but there are 11 of them already, mostly covering anticancer drugs. They can either be financially-based or outcome-based schemes. For example, they can involve a rebate (such as Johnson & Johnson's multiple myeloma therapy, Velcade (bortezomib)), there are dose-capping schemes where a patient gets 'x' number of doses and then gets the rest for free, there are cost-capping methods, and simple discount schemes.

Sir Mike is worried these schemes may become too complicated for the health service to implement. He says that in the case of Velcade, trusts have to be able to demonstrate to J&J which patients did not get a response and which ones did. "It should be quite simple, but if you have too many of these schemes running like that it becomes quite an administrative burden."

If the institute is approving these schemes, should it not be interested in what happens to them post-NICE? "We're only giving them a tick in the sense that if the scheme is implemented it will render the product cost-effective. But making a scheme operable is not our job. It's the Department of Health and the ministers who agree to a scheme ultimately, and then it's up to the NHS to sort it."

To the suggestion that patient access schemes might be a temporary measure until VBP comes through, Sir Mike responds that he has "no idea". He also says he has not started any VBP negotiations with the DoH as yet and, while the government has said it is planning to launch a formal consultation on the matter this month, Sir Mike doubts that Mr Lansley is “going to seriously think about it for a bit longer yet".

Elizabeth Sukkar is world editor of Scrip Intelligence, a sister publication of Regulatory Affairs Pharma. A longer version of this article will appear in Scrip 100 in December 2010.