Strong medicine

The National Institute for Health and Care Excellence (Nice) in England is a world leader in evaluating the effectiveness of pharmaceuticals, distinguishing products which enhance length and quality of life from those offering little more than existing cheap medicines. It does this adroitly in the face of the often weak and uncertain evidence which the clinical studies regulators accept for licensing.

While Nice is good at understanding the extra health benefit drugs provide – albeit usually with much uncertainty– the UK system fails to get value for money from new medicines. Research has shown that NHS expenditure in general represents very good value of money. For example, we know that it costs less than £10,000 for the NHS to improve health by one additional year of healthy life. But Nice’s ‘cost effectiveness thresholds’ mean the NHS generally pays much more than this for the health benefits new drugs offer. Nice commonly pays £30,000 per additional year of healthy life – and sometimes £50,000 or higher. Some of this spending is clawed back from companies through complex rebates, which do not differentiate between manufacturers based on their drugs’ effectiveness, and which only apply to new medicines after three years of Nice approval.

In principle, the NHS could get value for money from medicines when their patents lapse, and generic products enter the market. But evidence shows that, even when you factor in competition from generics, the NHS often gets little or no long-term value from the medicines Nice evaluates. This is not an abstract accounting issue: paying too much for new medicines takes funding away from highly effective interventions which the NHS is currently unable to provide to all those in need. Consider, for example, the long waiting times for elective surgery and mental health services, which exacerbate the large numbers of people who are economically inactive.

There is an urgent need for a medicines payment framework which, while incentivising R&D, is fairer to NHS patients. However, the pressure over recent months has been to spend more, rather than less, on medicines. Pharma companies have been pushing for increased Nice thresholds and lower rebates. They argue that prices are higher and access to new drugs better elsewhere in Europe, and threaten to reduce their investment in the UK unless payments increase markedly.

How credible is this threat? Multinational pharmaceutical companies have options for where to locate their manufacturing and R&D, as has been reflected in recent decisions. However, investment decisions are driven by their anticipated effect on profits. It defies logic that drug payment policies in the UK – which accounts for less than4 per cent of the international pharmaceutical market – area strong influence on R&D returns.

Instead, investment decisions are driven by the size and quality of the life sciences workforce and government support for R&D. There is also evidence to suggest that Trump’s ‘most favoured nation’ initiative may be pulling investment to the US.

Despite the weakness of the industry’s case, it is oft-repeated and has recently been echoed by some in government. On top of this has come pressure from the Trump administration, as part of trade negotiations between the UK and US, for increases in NHS expenditure on US medicines. Unsurprisingly, Trump has found common cause with US pharma, arguing that Europe receives a free ride on US-funded R&D. The reality is that the fragmented US health system fails to link the prices it pays for medicines to the benefits they provide. High prices incentivise the development of more drugs with low efficacy, resulting in pushback on prices from better organised European health systems.

To withstand the tsunami of pressure rolling in from the US and the pharmaceutical lobby, the government must take a sober look at the numbers. Recent analysis suggests that increased drug expenditure of £1bn would – by taking resources away from more cost-effective treatments – result in over 4,500 additional deaths and a loss of nearly 120,000 years in good health annually. This would certainly have knock-on effects, both for the public sector more widely– for example, by increasing local authority adult social care costs by £130m – and on the economy as a whole, to the tune of at least £6bn. The total loss would be the equivalent of 77 per cent of UK pharmaceutical exports, or nearly half the contribution pharma makes to GDP.

Earlier this year, the government rejected UK pharma’s demand for £2.5bn additional expenditure on branded drugs. The announcement at the start of December seems to suggest the government has now given way to US firms, although we do not yet have all the details. The evidence indicates a need for a robust position in trade negotiations with the US, alongside a long-term plan for fair medicines pricing for the NHS. The government may well find the NHS depends on it.

Image credit: NHS Norfolk and Waveney CCG via flickr