The Cost-Sharing Solution: The New NICE Ticket

J&J’s Velcade and Celgene’s Revlimid illustrate how pharma has adapted to the NICE UK cost-effectiveness watchdog. Now that the UK precedents exist, there will be more to come. But are they really pharma’s ticket to increased access, and do they assure the value to the health care system that they claim?

By Melanie Senior

The pharmaceutical industry’s relationship with the UK’s National Institute for Clinical Excellence started out as a black and white proposition: if NICE recommended a drug for reimbursement by the National Health Service, it was commercially viable in the UK; if not, the product was finished before it got started.

But pharma has been quick to adapt. Now companies have found a new strategy to overcome a rejection from NICE: risk- or cost-sharing schemes. The concept is simple: the manufacturer agrees to fund part of the cost of the drug, or at least to do so if it doesn’t live up to its effectiveness claims. By thus reducing the cost to the NHS, such schemes can in theory tip the cost-effectiveness balance to below NICE’s threshold—currently set at approximately £20,000-£30,000 per Quality Adjusted Life Year, or QALY. (Also see "The New, Value-Based, PPRS" - Pink Sheet, 1 Feb, 2009.)

Since the PPRS was published, the Department of Health has been in contact with various companies about schemes around several "high-profile" drugs, according to David Thomson, lead pharmacist at the Yorkshire Cancer Network.

So Janssen’s Velcade deal is somewhat pioneering, though it’s not the first to dabble in outcomes-based pricing: Pfizer Inc. in the late 1990s agreed to reimburse the extra cost of its cholesterol drug Lipitor over similar drugs in the class if patients didn’t improve.

But the main barrier to such schemes becoming an even more prominent feature of the UK drug landscape is administration. That’s why the PPRS document states that such schemes, although welcome in the flexibility they provide, "should be the exception rather than the rule."

The NHS simply doesn’t currently have adequate IT systems or sufficient administrative fire-power to manage a growing number of these plans nationally, in particular as each is likely to be slightly different depending on the drug and disease characteristics. The situation is compounded by the way the health service is set up, with local trusts having considerable autonomy. Such practical hurdles were one reason a first spate of "no-cure, no-pay" plans in Europe failed during the 1990s and the first half of this decade. (See "No Cure, No Pay: The Future of Drug Marketing?" IN VIVO, July 2007.) (Also see "No Cure, No Pay: The Future of Drug Marketing?" - In Vivo, 1 Jul, 2007.)

Janssen-Cilag claims that all of the UK’s Primary Care Trusts (PCTs, local health system administrators) have signed up to the Velcade Response Scheme and that rebates have been issued, but they can’t say how many, and for what value, until a review due to take place next year. With regard to administration, Celgene was lucky again—since it can easily administer the Revlimid "you-pay-then-we-pay" plan itself, piggybacking on the drug’s existing risk minimization plan, which is a condition of its license. (Because the drug is related to thalidomide, it must not be used in pregnant women.)

But given the scheme’s design, here too it’s unclear how much the company will actually have to fork out. As such, "we’re not sure the NHS is getting its money back," says Thomson, adding that PCTs may be advised to budget for the full cost of the drugs subject to cost-share, since the rebates are not being reliably collected. "The [administration] systems are not there, which means that as far as the NHS is concerned, these drugs are not cost-effective," he opines. In other words, the schemes may as well not exist at all.

Changing NICE: Too Soft, or Not Soft Enough?

Unsurprisingly, Thomson is in the payer camp that reckons NICE, far from getting tougher in its tacit encouragement of risk- and cost-shares, is in fact bowing to popular pressure. Some primary care providers feel such schemes are being used as a work-around to help NICE avoid an unpopular "no." The agency has in effect U-turned on a number of high-profile drugs in recent months following appeals and consultations—although it would argue that feedback and re-appraisal is a normal part of the assessment process. Another worry from the payer side is that the end-of-life guidance, ostensibly responsible for a number of the recent U-turns, is being interpreted too broadly.

The nature of NICE’s role means it will virtually always be under scrutiny, both from manufacturers and the UK payer—and will never please either. And this scrutiny and controversy will increase in line with NICE’s growing influence on drug pricing—courtesy of the new PPRS. "The PPRS has increased price flexibility quite deliberately, and NICE has a role to play in enabling that flexibility to be applied in appropriate circumstances," Dillon says. NICE doesn’t propose or negotiate on prices, but it assesses the impact on cost-effectiveness of rebates, and weighs up additional evidence that might justify a price increase—or not. (See "NICE’s Growing Role in Drug Pricing," The IN VIVO Blog, January 2009.)

NICE’s expanded role was likely a key driver behind calls for an independent review of how it assesses value. That review is expected in July. Industry has long argued that the QALY is too narrow and fails to take into account wider benefits to society that a product may offer, such as making life easier for care-givers and employers, and further to the industry’s contribution to the UK economy and to innovation. (See "QALY: The Cons".) In sum, "there’s too much calculation, and not enough judgment," says the ABPI’s Fisher.

More judgment won’t make NICE’s job any less controversial. In fact, the only level at which there’s broad agreement is that more levers for negotiation—such as those provided by risk-and cost-shares—between drug companies and payers, coupled with increased pricing flexibility, has to be the way forward. Clearly, not all of the pieces are in the right places yet. But at least industry and the UK Department of Health are engaging on such matters, and setting the backdrop for future cost effectiveness approaches in other countries.