Value-Based Pricing: Too High a Price for UK Pharma? - Pharmaceutical Executive


Value-Based Pricing: Too High a Price for UK Pharma?

Pharmaceutical Executive

DOH defines value

The fundamentals of the plan are relatively clear. The government intends to curtail the National Institute for Health and Clinical Excellence's (NICE) power to determine whether the NHS should adopt a drug for reimbursement or not, with formal recognition granted to the Department of Health (DOH) as the sole entity responsible for making pricing decisions on new products. NICE will retain responsibility for conducting initial cost-effectiveness appraisals on selected drugs and is given an expanded remit to set broad therapeutic guidances on how these medicines should be made available in the treatment of diseases. Pharma companies will decide on whether to offer products to the NHS at the prices the DOH government sets down, while physicians make a judgment on whether to prescribe them.

The nub of the matter is that these decisions will hinge on price thresholds geared to the maximum amount the government is prepared to pay, with higher thresholds in place for medicines tackling particularly severe diseases or diseases with unmet needs; those that can demonstrate "wider societal benefits"; and those that evidence "greater therapeutic innovation and improvements compared with other products."

Details, details

Despite Whitehead's broadly welcoming words, the government's narrow definition of innovation in the VBP proposals, in phrases such as "significant improvement relative to existing treatments," is a cause for ABPI concern. "Huge breakthroughs that transform treatment outcomes in a disease area don't happen very often in the normal course of science," Paul Catchpole, the ABPI's Director of value and access, told Pharm Exec. "You have to be able to reward the incremental steps in order to get onto the next step." He highlights that in areas such as colorectal cancer, recent important advances have only arrived through a series of increments. "The danger is if we don't reward those increments, if those treatments aren't used, then the UK will start to fall behind other countries that are making them available."

Can value be incremental?

Paul Healy, senior researcher for the UK think tank Stockholm Network, is similarly concerned that if innovation is understood only in a "binary sense," and follow-on medicines are viewed as duplicative and wasteful, it "could hinder the potential for the breakthrough innovations that very often are discovered on the back of these follow-ons." In addition, he says, patients could be deprived access to follow-ons, many of which are clinically superior to their first-in-class counterpart and can be a more effective means for treating patients. Half of all the drugs on the current World Health Organization (WHO) Essential Drug List, he reminds us, are follow-on compounds.

More bluntly, industry analyst Walton accuses the government of "forgetting how the model of pharmaceutical innovation works." True, he says, science occasionally provides a breakthrough of epic proportions, "but often this is more by luck than judgement."

The apparent favoring of the elusive breakthrough over steady incremental innovation is just one frustrating symptom of what some see as the VBP proposals' general vagueness. "The devil lies in the details," says Catchpole. "The problem is that so little detail has been elaborated so far." For ABPI, there needs to be a system where all the important aspects of innovation can be appropriately identified, valued, and rewarded. And innovation is dependent upon your position as a stakeholder, Catchpole adds.

The Stockholm Network's Healy agrees. He contends that if a VBP system fails to appreciate the true value of medicines by focusing only on factors that policymakers, rather than patients, perceive to be valuable, then industry innovation may only be directed toward those medicines. Patients may value treatments that offer, for example, greater dignity, convenience, and independence, but if such medicines are insufficiently rewarded in the pricing system, manufacturers may be duty-bound not to develop them in the long term.


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