Tuesday, November 30, 2010

Drug Pricing: British Reforms Based on Clinical Outcome, “Value-Based” Pricing

Parliamentary Office of Science and Technology (POST)

The government intends to reform the way in which drugs purchased by the NHS are priced. It aims to ensure that drug costs more fully reflect clinical benefit and to improve patient access to new treatments. This POSTnote outlines current pricing policy and examines other options to evaluate drug pricing, including “value-based” pricing.

Industry requires reassurance from the Government that there will be return on investment through purchasing new medicines. Evidence suggests that the UK lags in taking up new medicines compared with other European countries. For example, the DH’s Cancer Reform Strategy reports that the UK has a take up rate of new cancer medicines at 60% of that in other European counties.10 Clinical trials compare a new drug against the best standard of care currently available (for example the latest available drug). Due to a number of factors, such as the poor take up of new medicines in the UK, companies sometimes carry out more clinical trials abroad. It is considered unethical to perform a clinical trial against older, less effective drugs.

There are two elements in evaluating a drug. Licensing bodies assess the efficacy (success in providing a desired result) and safety of a new drug, while NICE measures the clinical and cost effectiveness of a new drug. Cost-effectiveness can be measured only once a drug has been licensed and in clinical use, allowing assessment over time, through comparison with other treatments. This can take a long time. NICE can perform an assessment at launch based on an estimate of cost-effectiveness taken from the pre-launch trials combined with modelling; information from industry is usually, but not always relevant to these analyses.

For instance, one of the first PAS was for beta-interferon, used to treat multiple sclerosis (MS). NICE initially rejected the drug as not being cost-effective, a decision that was criticised by patient groups which claimed that it had not looked at the long-term benefits of treatment. The DH implemented a PAS to make the treatment more cost-effective. Ten years on, there is still no consensus as to whether this is a cost-effective treatment for MS.

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