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Leela Barham is a freelance health economist and policy expert. She has published in peer-reviewed journals and presented at national and international conferences. She has provided advice to the Department of Health and Social Care on policy on pricing of branded medicines to inform the negotiation of a successor to the UK’s Pharmaceutical Price Regulation Scheme (PPRS), the Voluntary Scheme for Branded Medicines Pricing and Access (VPAS), as well as worked with patient groups, the NHS, pharmaceutical companies and many others internationally on the economics of healthcare and pharmaceuticals. Contact Leela on firstname.lastname@example.org
Value-based Pricing (VBP) was first discussed as far back as 2007 by the UK’s consumer authority, the now defunct Office of Fair Trading (OFT).
Value-based Pricing (VBP) was first discussed as far back as 2007 by the UK’s consumer authority, the now defunct Office of Fair Trading (OFT). The general concept of VBP was to set almost provisional prices based on the expected value of new medicines using immature data, with provisions to ‘correct’ the price should those expected benefits not be delivered in practice.
Over time proposals have been refined. By 2010 the Department of Health (DH) set out their proposals. Change was needed according to the DH, in order to fix problems in the system that stunted innovation and limited access to medicines. The proposals made it clear that it would be companies would who have to explain why they couldn’t supply a medicine at the ‘value-based price’, but companies would be able to take advantage of a wider assessment of the value of medicines including Burden of Illness (BoI), therapeutic innovation and improvement (TII) and wider societal benefits (WSB). DH said at the time that the Quality Adjusted Life Year (QALY) could be refined to capture these, but didn’t rule out other options.
The devil would need to be in the detail, according to many who responded to the DH proposals.
Dropping VBP for VBA
The National Institute for Health and Care Excellence (NICE) was given a ‘central’ role in VBA by the DH. By the time they were looking at VBA big changes had already been made, as the DH had already dropped the “innovation’ element. By January 2014 the P from VBP was also dropped.
NICE worked up their approach, moving away from the ideas of the DH and formally consulted on their proposals from March to June 2014. Instead of WSBs, NICE would consider Wider Societal Impacts (WSI). Both WSI and BoI would be implemented using refined QALY estimates that NICE’s Appraisal Committees would consider alongside the usual assessment of clinical and cost effectiveness.
But NICE would drop the transparency of End of Life (EoL) provisions that were introduced in 2009. These allow Committees to recommend products that extend life by at least 3 months for those with less than 24 months to live, for small patient groups. They’ve led to 14 positive recommendations for cancer drugs. NICE said they’d still play a role, but it seems hardly anyone agreed, with many citing loss of EoL as major concerns about NICE’s version of VBA.
NICE was also suggesting that the threshold for cost effectiveness would be limited to £50,000 per QALY. This is higher than the usual range of between £20,000 to £30,000 but less than cost per QALYs seen in some expensive products that had been recommended by NICE in the past.
Dropping VBA - For Now
The NICE consultation on VBA closed in June and NICE has taken stock of the 121 responses received from industry, patients and others. The tone of responses to NICE might best captured by the statement by a host of patient groups, pointing out that they were “disappointed”.
In the end, the working group at NICE decided to recommend to the NICE Board that “no changes to the technology appraisal methodology should be made in the short term”. And it seems that the NICE Board agreed.
Now the conversation is moving beyond pricing or even value, but to how new medicines are developed and following them all the way through to their use in the NHS. Andrew Dillon, as Chief Executive of NICE, is keen to see everyone take part in the discussions.
So all in all, VBP has been kicked into the long grass, with a bigger conversation on innovation to be picked up following the UK’s General Election in May of 2015. To paraphrase what one health economist said to me, “Years of work and that’s it?!”
Leela Barham (email@example.com) is an independent health economist and policy expert. http://leelabarhameconomicconsulting.blogspot.co.uk