Con-Dem-nation of the NHS

The recent formation of the UK coalition government was followed rapidly by the release of policy plans that outlined some changes to the provision of healthcare in the UK. This included a restructuring of NICE and a 'move to a system of value-based pricing, so that all patients can access the drugs and treatments their doctors think they need'.

Value-based pricing requires an understanding of stakeholder needs, in terms of the cost and consequences of one treatment option over another: drugs will then be approved for use only at a price that relates their clinical value to that of existing treatments. Even the first in a new class of products will be compared by payers with current standards of care. Until now, pharma companies in the UK have been free to set the price of their products, which can serve as a benchmark for the rest of Europe.

NICE was originally established to encourage appropriate drug prescribing and discourage inappropriate prescribing based on an assessment of cost-effectiveness. Although there have never been any published thresholds for deciding what constitutes cost-effectiveness, a number of reviews have shown that any such barrier, if it exists, can be surmounted under certain considerations of value.

We have numerous examples of expensive drugs used to treat orphan diseases that can never be expected to meet any cost-effectiveness threshold, yet will be reimbursed by the health service because they represent a life-saving intervention, or sometimes the final course of action for an otherwise untreatable condition. The current recommendation suggests that this type of assessment of the value of a new medicine, to the patient, the prescriber and to society should be the driver of reimbursement.

Value-based pricing was put forward previously as an alternative to the current UK PPRS, which regulates profitability while promoting 'the efficient and' competitive development and supply of safe and effective medicines'. Although it is unclear how the new plans would be implemented, since the PPRS was not due to be reviewed until 2014, the new approach will consider price, rather than cost-effectiveness, as an alternative method of cost-containment that may drive the industry to review both its drug development priorities and market access strategies. This may include price–volume agreements, whereby products are reimbursed based on an agreed budget, or patient access schemes where reimbursement is dependent on a successful outcome of treatment.

Currently, no one really knows how to define value in healthcare, let alone how to measure it. However, it seems clear that those drugs that deliver the best value, in terms of true medical innovation, will command a price commensurate with that value. Current trends point to a need for phase IV clinical trials, especially head-to-head comparisons, which may even form part of future regulatory requirements. Those drugs that represent marginal or no improvement will have difficulty gaining reimbursement in an increasingly regulated market. A pricing approach based on value to the NHS will therefore provide an incentive to the pharma industry to develop drugs that are more likely to be cost-effective and command a price that will provide an acceptable return on investment.

It may be that reimbursement agencies around the world also adopt a process that focuses more on price than cost-effectiveness and that pharma will have to respond by selecting appropriate drugs to put through clinical development, implementing programmes that demonstrate value to patients, both in clinical and economic terms.

Successful commercialisation is no longer just about gaining regulatory approval. It is about meeting the needs of a growing number of stakeholders, including physicians, patients, governments and payers. Success requires integrated pharma team working, including the right external expertise where needed, to bridge the traditional silos of R&D, marketing and regulatory, and focus on common goals. This multi-stakeholder approach will ensure your drug gets the best possible chance to succeed in the all-important launch window – and beyond.

The Author
K Ian Johnson is research director at Complete Market Access - Macclesfield, UK.
He can be contacted at ian.johnson@complete-ma.com

This article was first published in PME July/August 2010 as part of the Thought Leader series.

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