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New price regulation mechanism would ‘benefit the NHS’

Posted on 9 February 2011

Health economists at the University of York say a robust framework is needed for a new purchasing system for medicines to make sure it delivers anticipated benefits for the NHS.

Research by the University’s Centre for Health Economics says that careful specification of the “value-based pricing” (VBP), due to be introduced by 2014, would help to align the incentives for manufacturers, the NHS and individual prescribers. A consultation period on the proposals is due to end in March.

Recovering VBPs through national rebate agreements would allow manufacturers to agree a rebate for the NHS without it having an impact on prices in other countries

Professor Karl Claxton

According to the York research team, the introduction of VBP provides an opportunity to base pharmaceutical pricing and access to new health technologies on sound principles, reflecting social values and the reality of a budget-constrained NHS.

The research report describes a potential framework for VBP in the devolved NHS set out in recent government reforms, as well as identifying the critical details of how the framework would be implemented. 

Manufacturers would still be free to set list prices and prescribers would be reimbursed at list prices as long as a nationally-agreed rebate agreement is in place. This would provide incentives for prescribing to reflect value to the NHS and for manufacturers to negotiate value-based rebates nationally with the Department of Health.

One of the research team, Professor Karl Claxton said: “Recovering VBPs through national rebate agreements would allow manufacturers to agree a rebate for the NHS without it having an impact on prices in other countries.”

The researchers say it is critical that any VBP agreement should be combined with national or, possibly, local sales volume agreements between the NHS and manufacturers to limit excess and cost-ineffective prescribing.      

Professor Claxton added: “Any assessment of value requires a transparent, accountable and evidence-based appraisal of the costs and health benefits offered by a drug, so the National Institute for Health and Clinical Excellence (NICE) appraisal process remains central to VBP.”

The researchers say it is critical that an assessment of the health expected to be forgone elsewhere in the NHS due to additional costs of a drug displacing other NHS activities (ie, the cost-effectiveness threshold) is evidence based. Research, also based in York, is under way using recently available national data to provide these estimates.

The triggers for when VBPs, once set, would be renegotiated must include the arrival of cheaper generic medicines and new evidence becoming available. Without the former, the NHS may never benefit from innovation and without the latter, there will be little incentive for manufacturers to conduct evaluative research and the NHS would not realise the benefits of publically funded research. 

The current consultation on VBP proposals raises the question of whether there are other aspects of social value which ought to be included such as effects on patients, carers and the wider economy as well as different weights that might be attached to health improvement in different circumstances.

Critically, including other aspects of benefit of a drug must be matched by accounting for those same benefits that are likely to be given up to release resources to purchase the new drug, the report says.

Professor Claxton added: “Uncertainty in the assessment of costs and health benefits, the need for further evidence and the irrecoverable costs committed when the NHS purchases a technology also need to be reflected in lower initial VBP at the outset.

“Although supporting innovation is important, paying ‘innovation premiums’ for particular products has little to commend it.”

Notes to editors:

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