Is That VBP on the Horizon, or a Mirage?

May 1, 2013

Pharmaceutical Executive

Pharmaceutical Executive, Pharmaceutical Executive-05-01-2013, Volume 0, Issue 0

Value-based pricing in the United Kingdom is getting closer, but it remains out of focus.

The news in late March this year that NICE will be responsible for the "full value assessment" of medicines under the United Kingdom's proposed new value-based pricing (VBP) system came after growing concerns that the government has remained worryingly unclear—and is betraying a lack of confidence—about how VBP will ­actually work.

Julian Upton

VBP is set to launch when the United Kingdom's existing Pharmaceutical Price Regulation Scheme (PPRS) expires in January 2014. The PPRS, established over 55 years ago, is a voluntary agreement between the UK government and the pharma industry that controls the profits made by pharma companies from selling branded drugs to the National Health Service (NHS), but allows them to set their own prices within the constraints of the profit cap. It aims to serve both industry and NHS procurement policy, while allowing patients access to the best medicines. The flaws of the system have come into sharper focus in recent years; as well as suffering under the weight of—in the words of Mike Birtwistle of MHP Health Mandate—the "inherent conflict between the role of purchaser and champion," (August 24, 2011) there is the fact that the PPRS does not focus its price cuts on drugs that are deemed to deliver less "value." The new system aims to address this by setting prices that reflect the value of the drugs to society.

But, despite VBP in the United Kingdom being talked about as far back as 2007 (and formally presented in 2010 by the current coalition government as a replacement for the PPRS), by the beginning of this year critics were still accusing the government of failing to make any progress on it.

In January, MPs on a House of Commons Health Select Committee declared that it was "unacceptable that the arrangements for VBP have still not been settled and that those who will have to work with those arrangements are still unclear about what [it] will mean in practice." The committees called for a decision on VBP to be taken "no later than the end of March." This call was honored—but only just.

On March 21, the Department of Health (DOH) announced that the new VBP system will build on NICE's existing appraisal processes but will also be "capable of incorporating a broader assessment of a medicine's benefits and costs, taking into account factors such as burden of illness and wider societal benefits."

But while this "last minute" confirmation of NICE's role within VBP may have satisfied the short-term demands of the Health Select Committee, it has not done much to clarify the key issues surrounding VBP.

The desire on the part of the DOH to demonstrate progress on VBP is understandable, says Birtwistle, but genuine progress isn't apparent. He adds that much of "the running (and thinking) remains to be done," (March 27, 2013).

For one, the term "value" itself remains elusive. As Meir Pugatch of Pugatch Consilium asserts: "Value is perceived very differently by the different players involved in the process, namely policymakers, producers, and, not least, patients."

Policymakers have displayed a tendency to attach a "more static meaning" to value, says Pugatch—"defined narrowly as value for money at a given point in time and in light of the desire to reduce or control costs." Such an approach to VBP, he goes on, "presumes a priori that a new drug has already been created. Payers do not attach value to the time, costs, and risks associated with the creation of the new drug, but rather only to its therapeutic outcomes compared with other treatments."

For Pugatch, the decision to place VBP firmly within NICE suggests that "the traditional 'realpolitik' approach to value is most likely to hold sway." The result will be that the United Kingdom is less well placed to become the source of the next new wave of innovative medicines.

Pray for delay?

NICE itself hasn't exactly helped to soothe the ongoing VBP anxiety; two weeks after the DOH's announcement, its own chief executive, Sir Andrew Dillon, told reporters: "I don't know very much more than what is in the public domain and the statements that have been made."

He went on to speculate that if VBP is to be "a radically different system, then whoever is involved in it is going to have to move very quickly." On the other hand, if it is "more of an evolution of the current arrangement, then it may be easier to see how 2014 is a more realistic prospect."

Such comments are unlikely to placate those calling for transparency and urgent clarification of the VBP process. Indeed, "evolution of the current arrangement" suggests that those predicting VBP will simply be a modified version of the PPRS may be right. Certainly, Dillon's uncertainty gives rise to the argument that a delay to the proposed January 2014 start date for VBP is inevitable.

For health economist Leela Barham, however, delaying VBP "could make a lot of sense." It would allow for efforts to improve access through innovation, health and wealth, such as automatic updating of formularies, to become established. Unfortunately, the opportunity to delay VBP "quietly" is impossible now following the Heath Select Committee's high profile criticisms. There is a chance though, she adds, that VBP could be introduced "in a phased way, tested on a few new products rather than all new products from January 2014." But one of the problems with this method is how to decide "who gets to be the guinea pig!"

A delay would however mean further uncertainty with regard to medicines funded by the Cancer Drug Fund (CDF), which, like the PPRS, is set to close in 2014. The fund covers the cost of cancer treatments that NICE has either rejected or not yet decided on. (By December 2011 the fund had made around 10,000 treatments available to patients in England, covering 34 products.) "The CDF is supposed to be a 'bridge' to VBP," says Barham. If VBP solves the perceived problems with NICE in making recommendations on new ­medicines, then such a fund would not be needed. But the current lack of detail on VBP again leaves this situation unclear.

Whatever the progress (or lack of it) on VBP, NICE's future, at least, seems assured. With effect from April 1, its status changed from a strategic health authority to an executive, non-departmental public body, with new, added responsibility for developing "guidance and quality standards for social care" and encouraging the "better integration of health and social care services." The acronym remains the same, but NICE now stands for National Institute for Health and Care Excellence (after eight years as the National Institute for Health and Clinical Excellence). And with the new remit comes new blood; Sir Michael Rawlins, NICE's chair since its formation 14 years ago, has stepped down to make way for Professor David Haslam, who, alongside more elevated positions, spent 36 years at the coalface of general practice as a primary care physician.

In Haslam's first announcement as chair he admitted that tough challenges lie ahead for the expanded NICE. Forging ahead with workable approach to VBP will be just one of them.

Julian Upton is Pharm Exec's European Editor. He can be reached at

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