Different Perspectives on Value Based Pricing in the UK

Thoughts on the proposed UK Value Based Pricing System

Give me another chance! The NICE technology appeals process is updated

By Sian Claire Owen

The UK National Institute for Health and Clinical Excellence (NICE) has released its updated guide to their technology appraisal appeals process. Interested parties have until 22 March 2010 to comment on this document before the new version is set in stone. At 30 pages, it is dry material indeed, but important nonetheless.

Established in 1999, NICE was created to provide guidance on the use of health technologies within the UK National Health Service (NHS). For a new drug or technology to be available on the NHS, it must be approved by NICE. Technologies are assessed on clinical efficacy and cost-effectiveness.

Producing clinical guidance is a laborious process, taking up to 24 months (11 to 13 months if guidance is urgently needed), and the chance to appeal the Final Appraisal Decision (FAD) must be squeezed into this time frame. And ‘squeeze’ is the operative word – appellants have only 15 working days to appeal an FAD from the day it is published in any medium, including on the NICE website.

There is no doubt as to the importance of the appeals process. Barbara McLaughlan is the Campaigns Manager for the Royal National Institute for the Blind (RNIB) and Chair of Patients Involved in NICE (PIN), a group of patient organisations involved in NICE decision-taking. As she explains: “Having a NICE FAD appeals process is essential because the health economics that support NICE decision-making are not an exact science.”

“Decisions can give grounds to appeal and it is not in the interest of any stakeholders to forgo that option.” However, she adds that: “Any controversies about the assumptions used in the decision-making process should be ironed out during the ACD and FAD consultation process. Having to go to appeal is not in the interest of anybody, least the patient who is hoping to gain access to new treatments.”

The past year has seen some fundamental changes in the technology appraisal process to oil the wheels and make the system more efficient. Updated guides to multiple and single technology appraisal processes, and the Patient Access and Flexible Pricing Schemes were introduced, all of which have impacted the appraisal process – hence, the revised appeals manual.

Alice Law, a spokesperson for NICE says: “The aim of these changes is to ensure that the grounds of appeal are consistent with those outlined in the Secretary of State’s Directions. But the revised manual also provides greater clarification on the appeal process.”

This clarification gives us more information on the modus operandi of NICE appeals, as well as details on exactly what is acceptable and what is not. There also has been some ‘textual pruning’ to eliminate repetition between sections. This is undoubtedly useful information, saving first-time appellants precious time, and preventing them from becoming tangled in a bureaucratic quagmire.

Centred at the core of the FAD appeal process are three grounds, and any appeal is strictly limited to the scope of these grounds:

Ground One: The institute has failed to act fairly and in accordance with the appraisal procedures set out in the Institute’s Guide to the Technology Appraisal Process

Ground Two: The Institute has prepared guidance, which is perverse in the light of evidence submitted.

Ground three: The Institute has exceeded its powers.

These remain largely unchanged, with one minor revision in Ground Two, which now states:

Ground Two: The Institute has formulated guidance, which cannot reasonably be justified in the light of evidence submitted.

“This amendment was not intended to change the scope of appeals,” says Law. “We felt that ‘cannot reasonably be justified’ means the same as ‘perverse’ but was easier to understand,” which is in line with their aim of keeping it clear.

McLaughlin was involved in the NICE FAD appeals process brought forward by Derbyshire Primary Care Trust (PCT) on the decision not to approve Macugen (used in the treatment of macular degeneration) for use on the NHS. She agrees that greater clarification is needed. “Personally I would have expected one or two of the appeal grounds put forward by Derbyshire PCT and the manufacturer of Macugen to succeed. It was surprising to me that none of them did, and clarification of the process may have helped.”

The proposed appeals process also irons out any discrepancies in the time it takes to consider appeals – the final appeal decision should be considered within 10 working days of receipt, and the final guidance published on the NICE website 15 days after the Guidance Executive meeting.  New updates recommend that the Department of Health apply funding direction as soon as the NICE guidance is published, in any medium, so consistency is key.

Given her experience with this process, McLaughlin adds that if she personally could introduce further changes to the guidelines, she would allow the introduction of new evidence and arguments in cases where the appeals process becomes lengthy. “Where appraisals stretch to a year and more there may well be occasions where new evidence becomes available that has a bearing on the decision about the safety, efficacy and cost-effectiveness of a new treatment,” she says. “In these cases it should be possible for the appeals panel to refer a decision back to the Appraisal Committee.”

So will McLaughlin and colleagues be commenting on these updated guidelines? “We are in the process of putting together a response,” she says. “Our draft will then be circulated among members of PIN, and then we will submit a joint response to strengthen the patient voice in these discussions.”

All in all, these alterations are designed purely to make the appeals process quicker and slicker. When asked who would benefit most from these changes, Law says: “The appeals manual is targeted towards consultees involved in technology appraisals who would like to lodge an appeal.” In other words everyone’s a contender, time willing.

• The updated guide to the technology appraisal appeals process is available on the NICE website [Link: http://www.nice.org.uk/]
• Interested parties have until 22 March 2010 to comment on the revised appeals manual.

The updated guide clarifies and standardizes the acceptable grounds for appeal and provides a clearer picture of the appeal process.

ISPOR EU 2009: Bringing the Eiffel Tower into Perspective

Sometimes, at the earlier stages of drug development, getting a drug approval, reimbursement, and access to markets can feel as daunting as standing beneath the Eiffel Tower and looking up through all the intricate metal fretwork to the narrow and distant top. It’s a long way and, as with climbing the Eiffel Tower, is best accomplished in stages (and, if you are like me, with some fear and trepidation). Once you begin the journey, you find many other people doing the same things you are (for better or worse). But once you do get to the top, there is the exhilarating feeling that the world is now at your feet, and the possibilities are tremendous.

At the 12^th Annual Conference of the International Society for Pharmacoeconomics and Outcomes Research (ISPOR) held in Paris last week, the main theme was healthcare decision-making in Europe – in essence, the pinnacle of the drug and device development process. Many of the sessions were concerned with how to attain the best decisions possible – how the decision-making process differs from country to country and the types of evidence and agreements that are welcomed by the national reimbursement agencies.

As most of us who are intimately involved in creating the evidence base and presentation materials for such decision-making know, each Health Technology Assessment (HTA) national agency has its own way of viewing and prioritising the data. So much so, that while some basic elements are the same, essentially if you have seen one HTA submission, you have seen just one HTA submission – the need to consider the next submission with fresh eyes is essential to a successful process.

This point was illustrated in a plenary session that compared three of the most influential HTA agencies in Europe: from France, England, and Germany.

Dr Laurent Degos, the Chairman of the Haute Autorité de Santé (HAS) of France, outlined the four principles for the French approach to HTA :

• Use of an independent body to carry out HTA, separate from the decision-makers
• An immediate assessment for each new product
• Separate medical and economic assessment
• Delayed multiple full HTA

By these principles, the HAS ensures that innovative products are rapidly assessed by an objective authority; that the cost of the product does not affect the medical decision, and that eventually, when there is more evidence about the comparative position of the product relative to alternative treatments, that this is reassessed in context. Essentially, the questions the French are asking of the product are:

• Is it good enough to be reimbursed?
• Is it better than any other treatment?

In Germany, on the other hand, the Institut fϋr Qualität und Wirtschaftlichkeit im Gesundheitswesen (IQWiG) thinks of HTA assessment as answering two slightly different questions, with some underlying sub-questions:

• Do we need it?
  • Does it have patient-oriented benefit?
  • Is it better than what we already have?
  • Is it necessary?
• Is the price right?
  • Do we have alternatives?
  • What are the costs of other treatments in this field?
  • What is the relation between the additional benefit and the additional costs?

Dr Peter Sawicki, IQWiG’s Director, confirmed that the most desired level of evidence is head-to-head trials with comparative treatments; placebo-controlled trials are acceptable only if there is no comparator. Interestingly, if there is no adequate alternative, then cost-benefit analysis is not allowed – in this way the German system gives incentive for truly innovative products. And only if the answer to the first question (do we need it?) is yes, will the assessment continue to the second question. In IQWiG pricing is negotiated using an efficiency frontier – a graphical comparison of benefits and costs for all treatments in a therapeutic area to help determine an appropriate price (‘ceiling price’) for a new drug. This system is different from that of the National Institute for Health and Clinical Excellence (NICE) in England, which tends to use the quality-adjusted life-year (QALY).

NICE, as the most venerable (and possibly venerated) of the three national agencies, has 5 principles to its guidance — that its assessment must be:

• Robust
• Inclusive
• Transparent
• Independent
• Timely

Using these principles NICE tends to “muddle through elegantly,” as Sir Michael Rawlins (Chairman of NICE) put it. NICE analysis uses a Citizen’s Council to make social value judgements, performs scientific assessments on the reliability of the evidence, and makes case-by-case decisions, especially if the cost per QALY is greater than £30,000. For NICE, the QALY is ‘a tool not a rule’; and NICE, unlike IQWiG, doesn’t apply a hierarchy to the evidence. WIth more than 624 types of published guidance that spans appraisals, clinical guidelines, interventional procedures and public health, NICE’s history is impressive, and many other countries look to NICE as a benchmark for their own appraisal system.

So, is an international appraisal system likely in the near future? A resounding No! seemed to be the answer – even when considering only the scientific evidence. For those of us who enjoyed the magnificent views from the Eiffel Tower during our sojourn in Paris, the realisation that a different tower in a different country will give us an entirely new perspective seems only fitting.

‘You say HTA, I say CER’: international perspectives on evidence-based health policy

Terms such as ‘evidence-based health policy’, ‘comparative effectiveness research’ (CER) and ‘health technology assessment’ (HTA) are no longer restricted to discussions among health economists – they have become household topics.

But are people defining them differently? Or are we all unwittingly speaking the same language? After all, George Bernard Shaw once described America and England as two countries separated by a common language. For health economists (or any other interested persons) seeking to understand healthcare systems outside their own country, there are several, recently available resources:

The Milbank Quarterly recently published an article (Chalkidou K et al. 2009;87(2)) analysing CER and evidence-based health policy in four countries: Britain, France, Australia and Germany. The authors, who are employed by each of the four countries’ HTA/CER entities, as well as the Center for Medical Technology Policy in the USA, interviewed key stakeholders in CER entities in each country, as well as reviewed the agencies’ web sites and legal framework documents. This article was designed to provide a ‘lessons learned’ summary for the USA as it works to develop its own CER, from other Western countries that use HTA/CER in their decision making.

Using 10 core attributes that capture the main aspects of the four HTA/CER agencies, Chalkidou et al concluded that while each country’s HTA/CER entity has developed HTA/CER unique to its own health system, each has adopted a core set of desirable procedural principles to ensure that the HTA/CER is relevant to each country’s healthcare system.

Overall, some of the key lessons learned are:

• HTA/CER should be a demand-driven entity (ie, relevant to its stakeholders and not merely an academic pursuit);
• Negative press coverage and intense controversy are par for the course (and indeed indicate that the HTA/CER entity is fulfilling its role); and
• The three ingredients for success are strong political endorsement, early engagement of stakeholders, and commitment to evidence-based practices to gain professional approval.

For a more academic discussion of differences in HTA, check out Claude Le Pen’s editorial in the European Journal of Health Economics (2009;10;121-123), in which he compares the philosophical differences in social contracts underlying Britain’s NHS and France’s Sécurité Sociale.

An interview with Dr Naoki Ikegami in Expert Review of Pharmacoeconomics & Outcomes Research (2009;9(3):201-204) provides some insights into the Japanese healthcare system, especially in comparison with the UK’s NHS and NICE.  Dr Ikegami is Professor and Chair of the Department of Health Policy and Management at Keio University School of Medicine. However, he offers international expertise to his perspective as he received a Master of Arts degree in health services studies with Distinction from Leeds University and was a visiting professor at the University of Pennsvlania’s Wharton School of Business and Medical School.

Shishkin and Vlassov discuss the need for modernisation of Russia’s healthcare system in the British Medical Journal (BMJ 2009;338:b2132). They describe the recent reforms as Russia transitioned to a market economy and the proposed reforms through 2020.

Finally, the ISPOR (International Society for Pharmacoeconomics and Outcome Research) website provides a detailed description of many countries’ health care systems (the Global Health Care Systems Road Map), including processes for pricing and reimbursement, and health technology assessment (HTA, referred to as comparative effectiveness research [CER] in the USA).

The website also provides access to papers from a special issue of Value in Health — Health Technology Assessment in Evidence-Based Health Care Reimbursement Decisions Around the World: Lessons Learned (June 2009;12(s2):S1 – S53).

Greenflint, the sister company to Rx Communications Ltd, understands the challenge faced by health economists in helping people to understand what comparative effectiveness research and evidence-based medicine really are – in language that people who are not directly involved with these disciplines can readily understand.

Our booklet, Comparative Effectiveness and Evidence-based Medicine, doesn’t come from a health policy approach, however. We take a more practical standpoint, by helping the reader understand how and when these methods are applied, and their uses, limitations and applications to healthcare provision. In addition, we’ve designed the content so that you can add your own company examples and perspectives into the text to make it relevant to your own audience.

If you would like to see a copy of this booklet, please go to our website or contact either Steve Handley or Ruth Whittington at Rx Communications Ltd for more information.

Is it time for NICE to revise its threshold?

By Mary Gabb (mary.gabb@rxcomms.com)

“There just isn’t, and never will be, enough money to provide every possible service” – a reminder to participants of the NICE Citizens Council (November 27–29, 2008) as they were asked to consider in what circumstances should NICE recommend interventions where the cost per QALY (quality-adjusted life-year) is above the threshold range of £20–30,000. The Council’s conclusions drew criticism from Alan Maynard, OBE, a professor of health economics.

Professor Peter Littlejohns, clinical and public health director of NICE, offered the reminder as part of the meeting’s introduction. As he noted, NICE was created by the Government in the United Kingdom (UK) in 1999, but was left to develop its own criteria for recommending technologies to the National Health Service (NHS) as well as its own threshold. The £20–30,000 range was set in 2004 and, according to the Council’s report, is divided as follows: “ £20,000 per QALY as the sum below which an effective treatment would normally be accepted; and £30,000 per QALY as the sum above which very good reasons would be needed to gain acceptance. The acceptance of interventions costing between these two figures would be subject to debate.”

During the 3-day meeting, participants considered the myriad factors affecting the decision of whether to maintain the threshold and to recommend a technology, including the certainty of the evidence under consideration, disease severity, avoiding immediate loss of life, averting a public health threat, fostering potentially valuable medical research, treatment of rare diseases, to address need and/or equity, unmet clinical need, the existence of other therapies, whether the technology is a bridge to future therapies, ease of obtaining patient compliance, and whether a technology creates extra costs or benefits outside the health arena, to carers or the wider community (e.g., a reduction in crime due to drug misuse). Overall, the committee voted on 15 circumstances that might prompt a departure from the threshold; the results are shown below.

*An initial vote revealed that two of the 29 Council members felt there were no circumstances in which NICE should depart from the established threshold. These two members took no further part in the voting.

Also according to the report, NICE authorised medicines that lie above the £30,000 threshold on “only four or five occasions”. Deviations from the threshold have received criticism from Prof Maynard, Professor of Health Economics and Director of the York Health Policy Group in the Department of Health Sciences at the University of York, UK (He also noted that he was “involved in establishing NICE” in 1997). Prof Maynard argues that “this decision to ignore the efficiency rule and apply an arbitrary equity value judgment is inherently unfair for those not in the last two years of life.” This unfairness also applies to higher and more generous thresholds for those with rarer conditions. Moreover, he notes the problem of definition – “What is end-of-life? What is a rare disease? Both of these categories are rather ambiguous.”

Despite inflation and increased NHS funding, the NICE threshold has never been changed, according to report. Moreover, not every technology is appraised by NICE and “much decision-making in the NHS, including which treatments to pay for, is still local.” Prof Maynard agrees: “Essentially, we’ve got two rationing mechanisms.”

The Council report will be presented to the NICE Board in May 2009. It is available on-line and is open for comments.

Universal healthcare in the US? Not yet, but probably soon

Mary Gabb (mary.gabb@rxcomms.com)

With President-elect Obama’s proposed plan to reform the US healthcare system, this will be the closest the US has gotten to universal health coverage. We provide a snapshot of the Obama healthcare plan and highlight some of the criticisms it has received from health economists.

The Obama plan mandates affordable, accessible health coverage for every person and attempts to control healthcare spending. To achieve the former, the Obama plan eliminates the concept of “pre-existing conditions.” Every American can purchase health insurance regardless of current medical conditions or previous medical history, by choosing from any of the following options:

• For low-income earners, expansion of Medicaid and subsidies to purchase insurance for those who do not qualify for Medicaid
• “Pay or play” mandates requiring larger businesses to provide meaningful health insurance to their employees or pay a tax; small businesses would be exempt from this mandate and smaller firms would receive tax credits to help pay for health insurance (“small(er)” has not yet been defined)
• Comprehensive public health insurance modelled after the plan currently available to all federal employees
• For individuals who choose (or are forced) to buy personal insurance, the creation of a National Health Insurance Exchange, in which heavily-regulated private policies would be offered at group rates
• Expansion of the State Children’s Health Insurance Program (SCHIP) to cover all children.

The Obama plan will seek to reduce costs by:

• Focusing on preventive medicine and requiring the use of proven disease management programs
• Improving health technology (namely, requiring use of standardised electronic medical records)
• Creating an independent organisation for assessing and comparing cost-effectiveness of drugs, devices, and diagnostic tests, modelled after the National Centre for Clinical Health and Excellence (NICE) in the UK.
• Easy access to primary care, with a focus on coordinated team care
• Payment systems that reward health outcomes rather than volume of services provided.

Several health economists have criticised the Obama plan. Among their criticisms, from an economics point of view:

• What exactly will this new healthcare system cost? Some have suggested $2 trillion over 10 years.
• The tax rate on businesses that do not participate is undefined – if its too low companies would have every incentive to cash out of the plans they offer and pay the tax instead.
• As noted by Victor R. Fuchs, PhD¹, every dollar spent on healthcare – no matter how inefficiently – is used to provide income to tens of thousands of people providing health insurance or healthcare (ie, telephone and computer operators, claims payers, insurance sales people, actuaries, benefit managers, consultants, etc). Can this already dire economy absorb those job losses?
• Ultimately, the US government will control all healthcare, because, as noted by the WSJ editors, federal officials will run “not only the new plan but also the ‘market’ in which it ‘competes’ with private programs – like playing both umpire and one of the teams on the field.”

From the healthcare point of view, the Obama plan may create more problems than it solves:

• Payment based on outcomes depends in large part on adherent patients. Like merit-based pay for teachers, this can be unfair to those professionals who do their best but are at the mercy of a small fraction of irresponsible people that they serve.
• With the cost-effectiveness agency, will providers and insurers incorporate the assessments into everyday practice?
• This plan, which eases the US into universal coverage by working with the current system, does not eliminate the paperwork and bureaucratic headaches for doctors already dealing with multiple insurance plans.
• Perhaps most frustrating, as expressed by Joseph R. Antos, PhD², “[Obama's] plan would reorganize the health-insurance market but not change the basic financial incentives in the system that drive up spending.”

The US Congress will determine how much of his plan is implemented; only time will tell if it is successful.

Tough choices about expensive drugs

By Mary Gabb (mary.gabb@rxcomms.com)

The UK ‘s National Institute for Health and Clinical Excellence (NICE) has recently ruled that four drugs used to treat advanced kidney cancer are not effective enough to warrant their coverage by the National Health Service (NHS). NICE estimated that the drugs cost between £71,500 and £171,300 per QALY, far exceeding the typical NICE cut-off of £30,000 per QALY.

This isn’t the first controversial decision by NICE. The BMJ reports on a survey of England ‘s primary care trusts (with which patients can lodge an ‘exceptional request’ for drugs to be funded that are not approved by NICE), showing large differences in the policies and processes for approving such requests or appeals.

Moreover, the impact of NICE decisions does not remain solely in the UK . The US has been watching and studying NICE, as part of an effort to rein in the more than US$2 trillion (16% of US GDP) it spends on healthcare each year. A bill was introduced into the US Senate to establish the Health Care Comparative Effectiveness Research Institute, which would review evidence and conduct studies to determine which drugs and devices provide the best clinical outcomes. Annual funding for the institute after 5 years is projected to be US$300 million.

Another strategy used by the US to manage such high-cost medications is to incorporate co-insurance into the tiered drug co-payment system. In the tiered system, drugs are prioritised to tiers 1, 2, or 3 based on the payers’ preference for the drugs, and patients are required to pay a fixed fee (a ‘co-pay’ based on the tier, see below).

Co-insurance is sometimes referred to as tier 4 drugs, but instead of a fixed amount for co-payment, the consumer is charged a percentage of the overall drug cost (usually 20% to 33%). Co-insurance is applied to drugs with very high price tags, such as the latest biologic drugs developed for cancer and other chronic illnesses that require long-term therapy. For a drug that costs $100,000 per year, the tier 4 co-payment (or co-insurance cost) could be more than $30,000 for the patient.

Sir Michael Rawlins, who (in an interview with The Observer) vehemently criticised the pharmaceutical industry for ‘perverse incentives’ to increase the price of drugs, also pointed out that “we have a finite amount of money for healthcare, and if you spend money one way, you can’t spend it in another”. Nonetheless, the cost-effectiveness criteria used by NICE may be under review next year.

Another proposal under consideration by the NHS is to base drug pricing on the value a drug offers, not on the cost to develop it. Currently, the UK Department of Health negotiates with the Association of the British Pharmaceutical Industry to set price controls and profit caps for pharmaceutical manufacturers.

With rumours of co-pays being instituted in the NHS and a US presidential election in full swing (see the August 21 edition of the New England Journal of Medicine for a review of each candidate’s health care plan) , health economists will be making more of these decisions with other stakeholder.