Affordability and access

The key challenge facing the NHS this Parliament is to deliver value for money on an unprecedented scale. By 2015 the NHS needs to achieve £20 billion of productivity savings, while in the longer term health spending will have to come sustainable.

The rising cost of health technologies is a key factor behind the drive to improve efficiency and the Government has set out plans to get greater value from pharmaceutical spending. NHS spending on pharmaceutical treatments represents 11 per cent of the NHS budget. Medicine is changing and new treatments have the potential to transform how healthcare is delivered, improving the patient experience and saving money. However investing in new treatments also brings upfront costs and all health systems are now developing rationing mechanisms to ensure spending on drug therapies is cost effective.

Key to the Government’s policies to improve value is reform of the pricing system. Value-Based Pricing (VBP) was proposed by the Office of Fair Trading in 2007 as an alternative to the Pharmaceutical Price Regulation System (PPRS), which allowed drug companies to set prices, but capped their profits. In December 2010 the Department of Health published proposals to replace the existing PPRS with a new VBP system. In its consultation the Department set out its key objectives: to ensure better better access for patients to drugs, encourage more innovative drugs and deliver better value for the NHS.

Some have questioned whether this will meet the Government’s objectives. There is uncertainty over how this will work in practice during this time of change in the NHS and whether the regulation is fit for the reforms to commissioning. With tighter budgets now starting to bite there is now an urgent need to debate how to ensure affordability and access in the NHS. In February 2012 Reform partnered with MSD to hold a seminar exploring the Government’s proposals. Andrew Jack, pharmaceutical correspondent at the Financial Times, led the session. We recorded and transcribed the seminar.

Key themes of the seminar

Principle and practice

The seminar showed that while many agree with Value Based Pricing (VPB) in principle there are a number of concerns in practice. With drug companies no longer free to set prices it is still not clear how “value” will be priced and whether payors will reward the full value of new treatments. While reforming the system should create “prices… that send the right signals for the sorts of things the NHS wants”, many expressed concerns that reforming pricing might deter innovation.

Measuring value

Much of the discussion explored the role of data in improving the value of drugs. Andy McKeon from the Audit Commission argued that clinical trial data allows the National Institute for Clinical Excellence to make better value assessments on pharmaceuticals than other technologies. However the NHS has not developed data on morbidity and drug use for whole populations of patients over periods of time. This would make it possible to track the value of different drugs.

Innovation in practice

The seminar demonstrated that a more holistic approach is needed to maximize value from pharmaceuticals, rather than reforming drug pricing in isolation. As Andrew Jack argued, “there is a danger of excessive focus and scapegoating of drug pricing.”

Many argued that innovative new treatments can potentially transform the delivery of care and release resources in the health system, such as the transformation of mental health care in the 1980s. However as Nick Timmins argued, “when you do get genuine innovation that provides a complete shift in the way you deliver care, how do you ever find a way of taking out the cost that you have saved to show you’ve got a net benefit?”

Improving the value of drugs also means improving adherence and compliance to regimes. David Stout from the NHS Confederation discussed the role of partnerships between the NHS and industry to encourage best practice in the delivery of medicine. David Stead from NHS South suggested the industry needs to develop delivery systems “that improve compliance so that we can reduce the colossal amount of waste of medicines.”

Valuing innovation

To assess the value of pharmaceuticals policymakers need to measure the impact of innovative new treatments that replace the old ways of doing things. Otherwise new treatments become additional costs.

Ultimately lots of uncertainties remain over the Government’s proposal to introduce VBP, such as the role of NICE and ministers in decision-making. Giles Denham said that the policy will be rolled out incrementally: “this is not some big bang that is going to suddenly change what’s going on”. This will reassure the critics, but it will worry those who believe that dramatic change is needed that delivers disruptive innovation.