Is investing in medicines harming the health of the UK population?

To help those with little time, the answer to the headline is no. For those who want to know more, read on!

How the NHS spends its money is subject to considerable scrutiny and debate. Should we spend resources on training more doctors or increasing the wages of existing nurses? Should we prioritise more intensive care beds or more diagnostic scanners? In the language of economists – what is the ‘opportunity cost’ of taking one decision over another and how can resources best be utilised to maximise health gain? The answer is often far from clear and depends on many factors.

One area of NHS spending that attracts particular attention is medicine. In 1999, the National Institute for Health and Care Excellence (NICE) was founded to decide which medicines the NHS should use, ensuring they are both clinically effective and cost-effective and can therefore be considered a ‘good use’ of taxpayer money. Since then, NICE has required (with some exceptions in its methods) medicines to provide one quality adjusted life year (QALY) for every £20,000 to £30,000 of its cost (which includes the medicine’s price and other expenses associated with its use). For every £20,000 to £30,000 spent, the medicine must deliver additional length and/or quality of life equivalent to one year spent in perfect health.

A recent study published in the Lancet [1] has disputed the existing decision-making threshold used by NICE. The authors argue that allowing NHS patients access to new NICE-recommended medicines has, counterintuitively, harmed wider population health by displacing other more cost-effective areas of spending.

This conclusion centres on the authors’ belief that the NHS actually spends, on average, £15,000 to generate one QALY. This implies that NICE’s £20,000-£30,000 decision-making threshold is too high and does more harm than good.

In this blog, Victoria Jordan explains why the ABPI disagrees with this conclusion and examines some of the assumptions that underpin it.

How to put a value on medicines

The cost-effectiveness of medicines is the most robustly scrutinised area of health spending. All new medicines and significant extensions of their licence undergo a comprehensive evaluation of their costs and benefits before being made available to NHS patients. On top of this assessment, medicines are subject to further price reductions and cost control measures, as well as additional industry-wide rebates on branded medicine sales [2]. No other activity in the health service undergoes such stringent evaluation or cost containment measures. Indeed, many NHS health interventions would probably not be available to patients if they did.

The lack of evaluation of other health service activities makes comparing the opportunity cost - what must be ‘given up’ to accommodate spending on new medicines - very hard. We do not know what the actual opportunity cost is.

Where did £15,000 come from?

The figure of £15,000 used in the Lancet paper is an example of the illusory truth effect – repeat it enough times, and it becomes an answer to this highly complex question.

In 2015 researchers sought to estimate the opportunity cost in the NHS and reported an average estimate of £12,936, although their specific estimates for different disease areas varied widely. [3] Why the value of £15,000 came to be used is unclear but is perhaps because it is a more rounded number. Its prominence was also furthered by the Department of Health and Social Care (DHSC)’s interpretation that £15,000 expresses research estimates of the opportunity cost in the NHS in 2016 prices, with some further adjustment to note the inherent uncertainties surrounding such estimates  [4].

Uplifted to current prices, DHSC’s interpretation would be £19,085 [5]. It is also interesting to note the large discrepancy between DHSC’s use of £15,000 per QALY in its impact assessments compared with the Green Book’s societal value of a QALY at £70,000 - this is the guidance issued by HM Treasury on how government departments should appraise policies, programmes and projects.

Using £12,936 as a basis for the estimate is problematic. There are fundamental assumptions made in the research methodology and the results can only be as good as the data that is available. The estimate relies on mortality data (which is not complete and when available is sometimes of low quality) that has been adjusted to account for unobserved quality of life improvements. Some of the assumptions made are arguably unrealistic. A study exploring the uncertainty in the estimate found several sets of plausible assumptions that would place it within NICE's cost-effectiveness threshold range [6].

What is the opportunity cost in practice?

In reality, the impact of increased spending in one area of the NHS on other services is unknown and, wrongly or rightly, disinvestment does not usually happen. Funding decisions are multifactorial, and if a strict cost-effectiveness analysis approach was taken for other areas of spend, the NHS would not, for example, fund many routine services, including maternity and neonatal care, support those with visual impairment, or prioritise treatment for helping those suffering from poor mental health. There are, understandably, differences in how much the NHS spends for a health outcome across different services, patient types and disease areas.

Another critical factor when considering this question is accounting for the rebates industry pays back to the NHS (DHSC allocates the money to NHS England and the other UK devolved nations) as part of its commitment in the 2024 VPAG to continue supporting the financial sustainability of the NHS [7]. £6.5 billion was passed back to the NHS between 2019-2023 and in the current VPAG, which runs between 2024-2028, payments could reach around £17 billion. This money flow back into the NHS is not inconsequential when it comes to considering the impact of NICE recommending new medicines.

Why does any of this matter?

NICE is clear that, in general, it considers medicines costing between £20,000 and £30,000 per QALY to represent good value for money for the NHS [8]. Whether this is too high or indeed, in our opinion, too low, will likely continue to be debated. We think it is important such debates are better informed and consider a broader perspective on what is value for money, including the impact for patients in need of effective treatments.

NICE’s threshold is a highly visible signal of what the UK is willing to pay for new medicines. How medicines are valued contributes to global industry perceptions and the UK’s attractiveness to conduct research and clinical trials, launch new medicines, locate manufacturing and make other investments.

The NICE evaluation process has become increasingly challenging and is exerting greater pressure on medicines prices than ever before. Some may argue this is a good thing, but it is not without other impacts. For example, England has slipped from being the first for the availability of new medicines to NHS patients (compared to other countries in Europe) to ninth in under ten years [9].

Clearly there is a balance to be struck. NHS spending pressures are acute and the industry has agreed to support the NHS by paying back any money spent on branded medicines over an agreed level of annual growth to help address this challenge. However, ensuring patients have access to the right medicines at the right time and in the right place is a key part of fixing the NHS, improving patient outcomes and ensuring the UK can be a centre for Life Science innovation, investment and growth.