NICE Consultation on Valuing Drugs(ended June 2014)

Barbara's Response to NICE Public Consultation (June 2014)

Barbara Arzymanow


National Institute for Health and Care Excellence

Review Guide to the Methods of Technology Appraisals Addendum- 2014




Barbara Arzymanow


Independent Consultant / Writer /Think Tank Contributor


True Research Limited (healthcare financial consultants)

E-Mail Address



Consultation questions


1 Does proportional QALY shortfall appropriately reflect burden of illness?



The true burden of illness depends heavily on the personal circumstances of the individual. For example, a concert pianist with Parkinson's Disease causing impaired movement will suffer much more from the illness than a poet, whose work may be unaffected. Professor Hawking, aged 72, with long-standing motor neuron disease, provides an exception to most dogma on quality of life.


Just as every patient needs to be seen individually by a doctor any fair assessment of quality of life must look at each person individually. The assessments made on each person would inevitably involve a high degree of subjectivity and require heavy resources, but a more rigid system would be bound to lead to controversial and unpopular decisions.


The Public and the Press would be more critical of the NICE proposals if they were easier to understand. Many of the key points are cloaked in jargon and hide rather than avoid the fundamental problem that no consensus exists about how to value human lives or how to measure quality of life. Different expert panels from different cultures would come up with very different conclusions. If decisions based on QALYs continue to be made, NICE will be criticised in the Press whenever the outcomes appear heartless.


2 Does absolute QALY shortfall provide a reasonable proxy for wider societal impact of a condition?



Societal impact does not depend purely on the patient's health. It also depends on what the person does when ill and on what would be done without the illness. For example if the bread-winning member of a family cannot work or a young mother cannot look after her children, there may be a much greater cost to society than in the case of a single, childless person. The societal value of a drug to a patient also depends heavily on how the person responds e.g. what dose is required to be effective and what side effects the individual experiences

3 Does a maximum weight of 2.5 in circumstances when all modifiers apply function as a reasonable maximum?



There is no objective reason for choosing any particular limit.


4 Should we allocate specific ‘weights’ to each of the ‘modifiers’ so that they add up to a maximum of 2.5? If so, do you have a view on what weight should be added in each case



Any weights would be largely arbitrary.

5 Will the approach outlined in this document achieve the proposed objectives of improving consistency, predictability and transparency in the judgements made by our independent Appraisal Committees when they consider the clinical and cost effectiveness of health technologies?



The proposals are a hotchpotch of arbitrary measures cobbled together to overcome some of the least popular aspects of previous policies. The ideas regarding end-of-life drugs and the elderly can represent major changes from NICE's original thinking. The differences highlight just how arbitrary many value-based methodologies are. If judgements become more consistent, transparent and predictable, it is only because the rules are becoming inappropriately rigid.

6 Are there any risks which might arise as a result of adopting the value-based assessment approach as outlined above? If so, how might we try to reduce them?


The risk is that patients will see NICE as unfairly rationing drugs and that no money will actually be saved. NICE could contribute much more by concentrating on advising on what is medically best rather than trying to value drugs.

7 Are there any other comments you wish to make?

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NIICE should have regard to the terms of the 2014 PPRS.

The current Terms of Reference on which NICE is operating were issued by the Department of Health in June 2013. The Heads of Agreement for the 2014 PPRS were not concluded until November 2013. The PPRS is a formal five-year agreement between the Department of Health and the pharmaceutical industry. The 2014 PPRS takes precedence over the earlier Terms of Reference given to NICE. The Heads of Agreement stated:

NICE will not negotiate, publicly set or publicly indicate prices”

This provision is consistent with a view that NICE should reduce its involvement in valuing drugs and focus more on medical advice, as its full name “National Institute for Health and Care Excellence” suggests.
































NICE can no longer affect the total NHS drug bill.

The 2014 PPRS has effectively already determined the NHS drug bill in each of the five years 2014 to 2018. Under the scheme the industry pays rebates to the Government. These pay back the excess over the agreed amount to be paid for drugs in each year. Increased prescribing of expensive new drugs by doctors need not displace funding for other healthcare because the extra cost of the drugs would be cancelled out by an increased rebate. The industry and the Department of Health have in effect agreed a fixed-price deal under which doctors can prescribe whatever they like without affecting the NHS drug bill in the five-year period covered by the agreement. NICE will therefore have no role during the period of the 2014 PPRS in protecting the NHS drug bill from inappropriate prescribing of expensive drugs.


The only benefits from NICE's drug valuing activities over the five years covered by the 2014 PPRS will be

to protect companies with a lack of important, new products to launch during the period from having to pay excessive rebates as a result of other companies launching innovative drugs at overinflated prices. In view of the fact that NICE's drug valuing role will be of benefit only to the drug industry, my view is that these activities should be de-emphasised at NICE in favour of a more educational role in informing doctors, other healthcare professionals, politicians and the Public about what is medically best or most healthy.


Value-based pricing outside the pharmaceutical industry is rare. In most industries prices are determined by supply and demand, applying a mark-up to costs, making comparisons with situations with similar circumstances or applying a formula. There is little reason to believe that a value-based appraisal is the best way to determine what drugs should be available. Drugs are usually (but not always) cheap to manufacture. The main reason for fair prices is to give a return on and encourage R&D in order that mankind can continue to benefit from new drug discoveries. This objective does not relate closely to the value of individual new medicines but it is well covered by the PPRS. NICE would do more to help pharmaceutical investment in the UK if it talked more about the value of innovation and less about arbitrary controls on individual drug prices.


The 2014 PPRS gives excellent value to the NHS by keeping growth in total NHS spending on drugs at a rate well below inflation and below that on other NHS services over the five-year period and avoiding any need to ration drugs. The Government was lucky in concluding the deal at around the time when the economy was weakest and so austerity measures seemed most appropriate. The industry aims to achieve good long-term growth and may in due course reasonably aim for a 2019 PPRS that will allow sales to outstrip inflation.


The attractions of a fixed-price agreement are in my view great enough for both the industry and the Department of Health to wish to continue the arrangement well beyond the 2014 PPRS. If all goes well, the system could last 10 to 20 years. There is nothing unusual about fixed-price contracts. They occur routinely in many industries such as telecommunications, broadband, energy supply, buffet restaurants, subscription services, contract car hire, loans and life assurance.


Some health economists believe that allowing doctors to prescribe what they wish without regard to the value of drugs will distort the market and encourage an unsustainable level of prescribing of expensive drugs. These commentators think that the 2014 PPRS could end in tears with a huge demand being created for excessively costly medicines that cannot be afforded over the long term. They therefore argue that NICE must continue to value and ration drugs even though the industry is willing to pay for five years. I think that these fears will turn out to be mistaken. Drug companies without major new drugs will be unable to gain sales easily because of the rebate. They will therefore reduce marketing and educational expenditure in order to raise profits. Hopefully organisations like NICE can fill the gap by offering good independent advice. Drug companies that do have major new drugs will increase the rebate paid by others because of the way the system works. Everyone will have a vested interest in criticising any company that imposes unreasonable drug prices.




Need for Further Consultation

I have not proposed the abolition of NICE because it does internationally outstanding work outside the arena of drug valuation and because its drug pricing skills may be needed if a future PPRS requires it or becomes unworkable. However, the 2014 PPRS is a game changer. Further consultation and possibly new terms of reference are appropriate. The guarantees under the 2014 PPRS have removed the time pressure.




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Closing date: Friday 20 June 2014 5pm


PLEASE NOTE:NICE reserves the right to summarise and edit comments received during consultations, or not to publish them at all, where in the reasonable opinion of NICE, the comments are voluminous, publication would be unlawful or publication would be otherwise inappropriate.