Guest Blogspot: Think carefully about value-based drug pricing in the UK and let common sense prevail.

David Cameron and Jeremy Hunt share an important skill. They both have firsts from Oxford in Politics, Philosophy and Economics (PPE). I am not the greatest fan of this course because I would like to see more scientists, engineers and mathematicians in Parliament.  However, PPE must be close to the ideal academic background for tackling drug pricing. The decisions to be taken in this area require political, philosophical and economic insight. The key issues relating to medicine and science of relevance to drug pricing policy could be learnt in a few days and are not where the controversy lies.

The concept behind value-based pricing (VBP) is that a drug has a value reflected in its benefit to patients and society. The idea is that the NHS should be prepared to pay up to this level for the drug. A person who has studied PPE should be able to spot immediately that such a pricing system cannot avoid controversy. It will inevitably lead to special pleading by patients, doctors and medical charities.

The UK Government has limited flexibility over drug prices because we cannot stray too far from international levels owing to parallel imports and exports, reference pricing, the impact of competition from alternative drugs and the need to secure supplies of product. The UK cannot sensibly price individual drugs at a level more than about 30% different from average European levels. Unfortunately VBP as applied in different countries or advocated by different teams produces quite a broad range of prices for the same drug. Often the band is much wider than the range of prices dictated by international market forces. Many of the necessary inputs into the process are subjective and heavily dependent on personal opinions and priorities. Even the methodology lacks a consensus among experts.

Drugs can generate value in many ways and each product has to be assessed individually.  Examples of some of the common ways in which a drug might contribute to value include extending life, improving the quality of life, curing illnesses, slowing down or preventing diseases, making life easier for carers, reducing the burden on healthcare professionals, getting people back to work sooner and reducing medical costs (e.g. if drugs are cheaper than surgical alternatives or if they reduce the chance of needing to be admitted to hospital).  Some products have value for less common reasons, for example, contraceptives, agents used for diagnostic purposes, drugs that reduce the infectivity of diseases and antibiotics held in reserve in case resistance develops to alternatives.

A major input to many value calculations is the worth of a human life or of extra years of life even if this fact is not stated explicitly. Here we face inevitable controversy. Are all human lives worth the same? Do people with responsibilities to others (e.g. to young families) have more valuable lives? Is each year of life worth more in a baby, a working adult or an elderly person if the quality of life is the same? Do people who have become ill through their own lifestyle (e.g. smokers) deserve the same consideration as those who have lived healthy lives? Anyone who believes that he can value human lives or years of life to within 30% is living on a different planet from me.

The value of a year of life is generally accepted to depend on the quality of life. There will never be agreement as to what people’s quality of life is because everyone has his own views. The range of considerations that could be taken into account is enormous. For example, Parkinson’s Disease is a greater handicap to a pianist than to a poet. Someone who has won a Gold Medal in the Paralympics may have a different view about his quality of life from many other people with the same disabilities. Who can know with any degree of accuracy what the quality of someone else’s life is?

The medical benefits of a drug vary considerably from patient to patient. A truly fair VBP system would have to make the best estimates for each individual patient. The required dosage and therefore the cost in different patients often varies by much more than 30% as a result of such factors as the patient’s weight, the speed with which his body uses up each dose, the severity of illness, racial differences and variations in the effectiveness of the drug in different forms of the disease. The use of a drug in a particular patient is also more justifiable if cheaper alternatives are unsuitable for him (e.g. because of an allergy). No VBP system can possibly take into account all the relevant facts affecting the likely benefit of a drug to every patient because individual circumstances differ too much.  Some patients are bound to be the victims of decisions that appear unfair.

Searching questions need to be asked. The first is what are the policy aims that should be achieved by a good pricing scheme. The following are widely accepted:

  1. The total cost of drugs to the NHS must be affordable and reasonable  in the context of economic conditions and other demands on public funds,
  2. As many drugs as can be afforded should be available to patients so that each person can receive what the medical profession genuinely believes to be best in the circumstances.
  3. Investment and R&D should be encouraged, especially in the UK.
  4. Bureaucratic delays in making drugs available or reacting to new evidence should be avoided.
  5. The system should be non-controversial and be both fair and seen to be fair.

Achieving the above five objectives has been accomplished by the UK drug pricing scheme (PPRS) for most of the past 55 years. When change has been needed the scheme has adapted. The Government has kept out of controlling the prices of individual drugs. Instead the total NHS drug revenues of each company are in effect controlled. Rebates are paid if a company’s revenues are excessive. Until NICE became involved all drugs were normally available. The UK had drug prices below those in most comparable countries and used to achieve healthy inwards investment.  Companies with important new drugs avoided excessive revenue by lowering the prices of older drugs if necessary. The reason why this system worked is that companies were prepared to accept lower prices in return for stability and for support during the barren periods that every firm faces from time to time in R&D. The idea that the Government needs to focus rewards on companies launching block-buster drugs (aka innovative breakthroughs of high value) is absurd. They will do well whatever the British Government does.

Achieving value in the NHS is laudable.  Jeremy Hunt and David Cameron deserve success in negotiating an improved UK drug pricing scheme with due regard to the past but with fresh minds. No country has yet implemented VBP without considerable debate and very mixed publicity. The way forward is to build trust between all interested parties. Care needs to be taken to anticipate and manage controversy.

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About Barbara Arzymanow

Barbara Arzymanow is a Research Fellow at 2020health and is a founding director of an independent healthcare consultancy firm. She has been an investment analyst specialising in Pharmaceuticals for 25 years, prior to which she carried out academic medical research in university laboratories. Her experience, obtained entirely from outside the pharmaceutical industry, gives her a unique, political perspective independent of commercial lobbies. She has extensive experience in financing the biotechnology industry, which is vital for the long-term standing of medical research in the UK. She has always been inspired by the scientific excellence within the UK and would like to see collaborations between industry, the NHS and academia strengthened. For more information about Barbara's research and writings including submissions to Government Departments please visit http://www.researchideas.co.uk . Barbara also tweets as @barbararesearch .
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