Value Based Pricing for the NHS- An Interview with NICE Chief Executive Sir Andrew Dillon

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Gerald Clarke:          I’m Gerald Clarke, Editor at Pharma IQ. Today I’m joined by Sir Andrew Dillon, Chief Executive of the National Institute for Health and Care Excellence. Sir Andrew, it’s a pleasure to have you here.

So what is the role that NICE will play in value based pricing?

Sir Andrew Dillon:     Well, we have yet to see the final details of VBP but the government’s already given a pretty clear indication or what it wants us to, and that’s essentially to continue the job that we were set up to do almost 15 years ago now, which is to establish the clinical and cost effectiveness of most of the new drugs that are licensed in the UK, and to carry on doing that by looking at the incremental therapeutic benefit, the additional benefits to patients that new drugs bring over current standard care, and then to make that exquisitely difficult judgement as to whether or not that incremental benefit is justified by the price that the company wants the NHS to pay.  Now, there are some tweaks on that because value based pricing will require us to look in a bit more detail at what the government describes as wider societal benefits.  So it’s an attempt to make sure that we’ve really identified all of the potential value that that brings, all of that incremental benefit.  The government’s indicated that it wants us to look, particularly, at the extent to which a new drug is addressing the burden of illness for patients with particular diseases or conditions.  We’re looking now at how to put that brief into action, and we’re doing that through a series of meetings with stakeholders, including the industry of course.

Clarke:           So what are the key differences between Value Based Pricing and the pharmaceutical price regulation scheme?

Sir Andrew:    Well, they are clearly related.  The PPRS has been in operation in the UK for I think now around 50 years or close to it, and it’s been a source of considerable stability for the industry and for the NHS in its relationship and in the prices that the NHS pay.  So it’s an important mechanism in that relationship.  Value based pricing, from NICE’s point of view, provides an opportunity for us, through the assessment of therapeutic value that we’ll continue to do, to inform the judgement that needs to be made about whether or not the price justifies the additional benefit that a new treatment brings.  The precise relationship between value based pricing and the PPRS is something that won’t be fully revealed until the current round of PPRS negotiations are concluded.

Clarke:           Some past NICE quality decisions have been viewed as contentious.  Do you think there’s more education needed to enhance patients’ understanding of value based pricing?

Sir Andrew:    It is important that we are able to explain the basis on which we make decisions that affect all those that rely on the NHS for our care, and we try very hard to do that.  It’s, at one level, quite a simple concept.  It allows us to make a judgement consistently about the additional benefit that a new treatment brings.  Actually, when you go into the arithmetic, it can become quite complicated, and I appreciate that.  So I think what we have to continue to do is to reassure all of us who rely on the NHS for our care that there is a process in place for making sure that the money that the NHS is spending on new drugs and other products and, indeed, on other forms of practice – because it isn’t just new drugs that we assess the clinical and cost effectiveness of – are actually investments that the NHS can be confident are going to bring real additional benefit.  So, in other words, we need to be absolutely confident that, when we’re recommending something new for the NHS, something that it’s not doing or not doing routinely, that the additional health benefits that that investment will bring will be, at least, as good as the health benefits that are foregone elsewhere, in other diseases and conditions where that money could be spent.  I think, if we can put it in those terms, if we can try and relate it to the decisions that we all have to take on a day to day basis, where we’re making an assessment about how to use the inevitably limited resources that we have available, then I think we can get patients to understand, even though they may find it difficult, even though they may feel that health is far too sensitive an issue to be assessed in monetary terms.  Given that it does cost money to run the system, we’ve got a responsibility to make sure that the NHS is using its money as widely as possible.

Clarke:           Obviously every case is different but what sorts of considerations will go into value based pricing decisions?

Sir Andrew:    Well, we’re going to continue to use all of the experience that we have accumulated over the almost 15 years that we have been looking at new treatments, new forms of practice, and comparing them against standard practice and making that tricky judgement about value for money.  The opportunity that value based pricing brings, I think, is that it gives, overall, not just NICE but everybody interested in the way we go about making these judgements, the opportunity to reflect on whether or not or the extent to which the factors that the government have identified as important – burden of illness and wider societal benefit – can enhance our understanding of the additional values that new treatments and forms of practice can bring.

Clarke:           What are the major challenges in providing value based pricing, and how is NICE aiming to surmount these?

Sir Andrew:    The most immediate challenge for us is to make sure that we’re in a position to begin to apply our new methodology from the beginning of January 2014.  In order to hit that timetable, we started as soon as the Department of Health set out the brief it wants us to use.  We brought together stakeholders who have an interest in the approach that we take.  We’ve been talking to them about the best way to adapt our current methodology.  We’ve gone a long way down that road and we believe that we are going to be able to put in place an interim process, from next January, but it’s a real challenge for us to do that.  Added to the timescale challenge is the fact that these concepts – burden of illness and wider societal benefit – although, at one level seem fairly obvious, when you actually start to look for the methodology that would allow you to apply them systematically, in a methodology that needs to stand up to very close scrutiny, it becomes much more difficult.  The Department of Health, over the last couple of years, commissioned quite a lot of useful work from York and Sheffield universities and elsewhere, and we can draw on that, but we still have to convert that into practical adaptations of the approach that we currently take.  So it is going to be a challenge but we think we can do it.  At the moment, anyway, we’re on course to be in a position to apply the adapted methodologies from the beginning of next year.

Clarke:           What are the ideal outcomes of a value based pricing system?

Sir Andrew:    I think that what we really want to be doing, in a sense, one of the labels you apply to this is to get to a position where everybody agrees that the incremental benefit that a new benefit brings has been fully teased out in the analysis that is undertaken through the NICE approach or process.  I think that’s absolutely important.  We may still, on a case by case basis, not always agree with our stakeholders – some or all of them – on the extent to which we feel that that additional benefit justifies the price that the NHS is being asked to pay but, if we can be confident that we can all share an understanding of what a new drug brings, then we can go a long way, I think, towards reaching the point where, even though from time to time we might agree on that assessment of cost effectiveness, at least, we can be confident that we share the same perspective on the incremental therapeutic benefit, because we don’t always at the moment.  So, if we can make that improvement, if we can get that advanced, then I think that will be very helpful.