Guest Blogspot – The UK Government’s Latest Thinking on the Value-Based Pricing of Medicines

The UK Government yesterday published its detailed response to the three-month public consultation concluded in March 2011 on value-based pharmaceutical pricing. The Government has emphasised that work on the proposals is still at an early stage. The mistake made with the Health and Social Care Bill 2010-11 of consulting key interested parties too late has not been repeated. The Government appears to have a broad platform of support for its drug pricing policies and to have consulted early enough to have identified the main, potential pitfalls. The task now is for all the issues raised in consultation to be considered carefully whilst retaining the goodwill of all important interests.

A successful drug pricing scheme is enormously important because it is central to the confidence of the pharmaceutical and biotechnology industries in our country. The global decline in R&D productivity that has occurred in many drug companies has been causing cutbacks in R&D. The UK has already been affected by Pfizer’s devastating decision over R&D and cutbacks by other companies such as Novartis and AstraZeneca. We cannot afford to undermine drug industry confidence in a climate as sensitive as at present.

The pharmaceutical industry is already expressing great concern over the German value-based system introduced earlier this year, as illustrated by public criticisms from the CEO of Lilly.

The most important factors that do not seem to be getting as much attention as they deserve in the UK are:

• How the UK can have much flexibility in fixing drug prices when wholesalers are allowed to export to or import from other EU countries. One measure that might work in some instances would be for companies to be allowed to transfer revenue between products as with the current UK pricing system (PPRS). The intended total UK revenue from a company’s entire product range could then be achieved by adjusting the price of only those drugs where sufficient flexibility exists. Another option that might sometimes help is the adoption of patient access schemes. These have had limited success in the past and ways need to be found to improve them.

• Finding ways of handling the controversies that are inevitable in any value-based drug pricing system. Any such system necessarily involves reducing human health and suffering to numbers.  Highly subjective judgements cannot in truth be avoided.

• Preventing anomalies between drugs subject to value-based pricing and those products on the market already that have not had their value formally assessed.

The rest of the many pitfalls that I have highlighted in the past have been mentioned clearly in yesterday’s Government response. The improved understanding of Government over the nature of innovation is certainly encouraging. The Government appears to be considering the right issues. It has stated:

“The Department has used the responses to the consultation to inform our work to map out the future process for the development of value-based pricing. Coming up with a system to define what represents value is not an easy task, but we intend to continue to engage with industry, patients, clinicians, the NHS and taxpayers as our work to reform the pricing of medicines progresses. “

The Government preference is to achieve a voluntary arrangement with negotiations beginning in 2012. The new system is planned to come into force on 1^st January 2014 and apply to all medicines launched after that date in the UK.

Even NICE seems more sensitive to the human aspects of its work. The Chief Executive, Sir Andrew Dillon, said last week in connection with drug refusals:

“I genuinely think about what it would be like if it was me, or a member of my family. 

To the extent that there’s an individual who could benefit from treatment – and there may be only a very small number of them, and the benefit might be very limited –  I regret the fact that they are not able to get access to it.’’

Sir Andrew went on to say that measuring the “societal value” of drugs was “challenging” and admitted: “If there’s more we should do, we should talk about it.”

The Government indicated last November that NICE’s drug rationing role would be ended. Subsequently the Government has partially back-tracked because no better organisation could easily be established to evaluate drug value. However, the degree of subjectivity necessarily involved in evaluations suggests that decisions about individual drugs should ultimately be the responsibility of politicians or representatives of the Public. My understanding is that the Government is now leaning to the view that Ministers should make the final decisions after receiving advice from NICE rather than NICE actually having the power itself.

My past support for the removal of NICE’s drug rationing role partly reflected my concerns over the hurdles involved in devising a good, value-based pricing system and partly my view that Ministers should ultimately be responsible for key decisions over the value of human lives and the alleviation of suffering. In addition, several examples exist such as in connection with Alzheimer’s disease drugs whereNICE’s recommendations have in my view been seriously misguided. Value-based pricing would not be my preferred system but the Government’s willingness to listen gives real hope that it may be made to work successfully.