Details of UK government plans for value-based pricing.
Local decision-making
Pharmafocus January 2011 (Volume 13, Issue 1).

On December 16 the Secretary of State for Health Andrew Lansley launched the Government’s consultation paper on the eagerly anticipated (though subsequently abandoned) value-based pricing (VBP) approach for branded pharmaceuticals that was intended to supersede the PPRS (Pharmaceutical Price Regulation Scheme) programme from January 2014.

PPi’s Adam Barak reviewed the Department of Health (DoH) document and provided his initial reactions to what the government had in mind.

In his statement on December 16, the Health Secretary emphasized that the VBP system which is to be introduced for 2014 will enable patients to access the medicines they need by bringing prices and value closer together and taking into account unmet need, innovation and benefit to society. The statement indicates that the Government considers that the current PPRS/NICE structure is not producing the degree of pharmaceutical innovation, nor the level of patient access that is desired, and so the new VBP is an attempt to address both these ambitions.

The consultation paper outlined the Government’s plans for VBP, but also poses 20 questions to which the Government is seeking responses during the consultation period which ends on March 17. Below is an initial assessment of the main features of the Government’s VBP plan.

Summary

• Cost effectiveness (CE) will be a key determinant of price with mandatory CE data to be prepared by the manufacturer for any new drug seeking NHS coverage from 2014 (as is currently the situation in Scotland for SMC applications)
• The VBP programme effectively marks the end of patient access (risk sharing) schemes from 2014
• The new rules won’t be applied retrospectively to drugs launched prior to January 2014
• The plans are to replace the current approach of NICE’s 2 thresholds (£30k per QALY standard threshold and the higher ‘end of life’ threshold) with multiple thresholds reflecting different levels of relative value
• It will take longer post Market Authorisation to launch a product in the UK as the current, rapid PPRS price notification procedure to the DoH is to be replaced by the VBP appraisal process
• The government (presumably a new department within the Department of Health) seems likely to manage the new programme, rather than a different body (such as NICE), so in essence mirroring the approach of other European governments (such as Spain and Italy)
• The UK will not be adopting any form of formal external (international) reference pricing
• The UK will not be adopting any form of formal internal (national) reference pricing, i.e. capping drugs’ prices (e.g. through DDDs[1] at the ATC[2] level 4) to those considered similar which are marketed in the UK
• A possible radical change to devolved decision-making (Scotland and Wales) is hinted at in the paper
• Cost per QALYs (Quality Adjusted Life Years) are not mandated (yet) as the mechanism to represent different levels of value, but they appear to be at the top of the list being considered
• The proposed system is truly new, unlike anything else in the world, though it is a cousin of the French HAS system insofar as the different value thresholds may be seen as analogous to the ASMR system
• The new VBP scheme will only apply to branded medicines, generic medicine arrangements will continue unchanged

Overview of proposals

• Government will set maximum (reimbursed) prices to reflect ‘value’ (essentially = the end of ‘free-pricing’ by manufacturers), bringing the UK in line with most European countries
• The new scheme won’t be retrospective by default, only applying to new branded drug launches from 2014 and some previously launched medicines (criteria not elaborated)
• The pricing status for drugs launched prior to 2014 is envisaged to be determined though a continuance of a ‘PPRS-type’ environment
• Patient access schemes (risk sharing) are seen as superfluous under the new system, so we can expect the role of PASLU (NICE’s PAS department) to diminish or change – the proposals don’t refer to Scotland which has its own PAS body and programme (PASAG)
• A major rationale for the new programme is for innovation and therapeutic improvement to be (properly) rewarded with a higher threshold (=higher prices) to encourage manufacturers to invest in the R&D that will bring step breakthroughs (paragraph 4.23). The effectiveness of this approach will in part be determined by the level of the threshold determined and what a company will need to demonstrate to secure access to this threshold.
• Orphan drugs (and those for rare diseases) might be treated differently (outside of the proposed framework), an explicit question in the consultation
• By moving away from the five year agreement period of the PPRS, it is implied that the price decreases seen in the UK every five years will also be abandoned

How the new scheme will work

• Manufacturers would submit a price using their own health economic analysis to demonstrate that at the price submitted, the product meets the basic (lowest) CE threshold (e.g. used for ‘me-toos’). If the manufacturer wants a higher price (meeting one of the higher thresholds),’expert panels’ will review the submission and decide if they agree or not. If the manufacture and DoH disagree (the manufacturer wants a price higher than that the government is prepared to meet), “it would be the company’s responsibility to explain to the public why it was not prepared to offer that drug at an appropriate price. “ (paragraph 5.7)
• Timing of submission is unclear, but it is presumably post-MA (Marketing Authorisation) rather than pre-MA (as it is in some countries such as Sweden). The opportunity to launch quickly in England (currently ~4 weeks from MA) will almost certainly disappear unless the price applied for equates to the basic (lowest) threshold.
• Cost effectiveness (probably using QALYs) will be used in determining the value of the price thresholds ( NICE today) to compare the value of the particular drug technology with other ways of using the money in the NHS
• Some will be disappointed that the QALY may still have such a key (and increased) role in the UK, it will certainly make HE assessment key to determining the likely price the NHS will offer manufacturers (paragraph 4.13-4.14)
• Thresholds (modifiers) will be applied for drugs where there is a particularly high burden of illness, for especially severe disease or where wider social benefits are described. This takes equity into account in pricing, something that very few countries do, and is excellent news and is to be applauded.
• The door is opened for different price assessments if a drug is used in different settings/ indications from launch or for subsequent label extensions, though the DoH concedes that the mechanisms for this will be complex
• It is not entirely clear how the thresholds would work, however it seems likely that they could either refer to multiple CE thresholds such as £10k/QALY, £30k/QALY, £50k/QALY etc. or that the QALY is used for the basecase threshold with different weightings employed to derive the various upside thresholds. Whichever way is employed, a tool such as the QALY becomes pivotal to pricing decisions. This is a potentially worrying precedent for those not enamoured with the central role of QALYs in allocation decisions, but is excellent news for health economists and HE modellers!
• If there is ‘insufficient evidence’ at launch (price submission), it is suggested that a provisional or interim price ( the Netherlands) could be set and reviewed later if new data arrives. This would probably mean a low launch price, increased later if better data arrives, which from an external reference pricing perspective will not be welcomed by manufacturers (as a low interim UK price may be used in other markets to establish national prices there and these prices are unlikely to be corrected upwards if there is a subsequent price increase in the UK).

Local decision-making

• From paragraph 5.3 a new role for the SMC, AWMSG and NICE is implied, with the devolved bodies, along with NICE providing guidance to ministers and manufacturers on costs and benefits. The implication is that the new body responsible for supervising VBP will have a UK-wide remit and will be supported by the HTA bodies.
  • Currently prices established with the DoH are applied UK-wide and this will presumably be the same in the new environment. The extent to which the new decision-making environment might supersede any of the devolved bodies’ current responsibilities is unclear – there is no mention in the paper of the SMC determining (as it currently does) which drugs should be approved for NHS funding in Scotland, but this omission does not necessarily imply that these arrangements are going to be curtailed. With GP consortia in England having the devolved responsibility for choosing which treatments to fund, it seems probable that the SMC and AWMSG will retain similar functions for their respective areas.
  • However, if the DoH in its VBP deliberations is effectively carrying out an HTA on value for money (across Britain), it becomes questionable whether there needs to be a parallel process in Scotland or in Wales
  • Under devolved powers it is likely to be the Scottish Parliament and Welsh Assembly that will decide on what changes may need to be taken in Scottish and Wales respectively in response to UK-wide VBP, rather than this being an output of the current round of consultation and Westminster policy.
• The link between these new, DoH-granted prices and payers’ decisions to pay these prices is not fully elaborated in the paper (paragraph 5.11 addresses it in part). If the DoH agrees a high price with the manufacturer, a second decision, as today, is whether or not the PCT (GP Consortia) will decide whether or not to purchase at that price level and this process is not a focus of the DoH paper.
• The new role of NICE is going to be an output of the consultation. It is likely to be an expert hub, offering guidance to the government and manufacturers alike on costs, benefits, cost effectiveness and relative cost effectiveness, but will be stripped of its formal mandate to local payers on reimbursement

The 20 Questions

Any UK stakeholder or interested party has the opportunity to partake in the consultation. These are the 20 questions on which the DoH is asking for comments.

1. Are the objectives for the pricing of medicines set out in Section 3 of this document – better patient outcomes, greater innovation, a broader and more transparent assessment and better value for money for the NHS – the right ones?
2. Should value-based pricing apply to any medicines that are already on the UK market before 1 January 2014? If yes, should this be determined on an individual basis, or are there particular groups of drugs which might be considered?
3. Are there types or groups of medicines, for example, those that treat very rare conditions, which would be better dealt with through separate arrangements outside value-based pricing?
4. Do you agree that we should be willing to pay more for medicines in therapeutic areas with the highest unmet needs, and so pay less for medicines which treat diseases that are less severe and / or where other treatments are already available?
5. How should we approach the issue of a single drug which delivers significantly different benefits in different indications?
6. What steps could be taken to address the practical issues associated with operating more than one price for a drug, if we took such an approach?
7. Do you agree that – compared to the current situation – we should be willing to pay an extra premium to incentivise the development of innovative medicines that deliver step changes in benefits to patients but pay less for less innovative drugs?
8. In what ways can we distinguish between levels of innovation?
9. How can we best derive the weights that will be attached to each element of the assessment? Are there particular elements we should put greater weight on?
10. What measure should we use to define the weightings? Options might include using the existing Quality Adjusted Life Years (QALY) measure, patient experience and expert opinions or some combination of these.
11. How can we best derive the different categories for burden of illness and therapeutic innovation and improvement?
12. What approach should be taken under value-based pricing where insufficient evidence is available to allow a full assessment of the value of a new medicine?
13. Does the system set out above describe the best combination of rapid access to prices and affordability?
14. In what circumstances should a value-based pricing assessment be subject to review?
15. What arrangements could be put in place within the new medicines pricing system to facilitate access for patients who may benefit from drugs previously funded through the Cancer Drugs Fund, at a cost that represents value to the NHS?
16. Will the approach outlined in this document achieve the proposed objectives of better patient outcomes, greater innovation, a broader and more transparent assessment and better value for money for the NHS?
17. Are there other factors not mentioned in this document which the new system should take into account?
18. Are there any risks which might arise as a result of adopting the value-based pricing model as outlined above? If so, how might we try to reduce them?
19. What steps could be taken to ensure that value-based pricing has a positive impact in terms of promoting equalities?
20. Are there any other comments or information you wish to share?

Reactions

The programme is a very bold one and will see significant change for drug pricing in the UK, and by implication, how drug prices are established and evaluated across the world. Some of the key questions which arise include:

• If innovation is to be encouraged and rewarded by application of threshold modifiers leading to higher prices, then what will be key to success is the degree to which the higher thresholds will be accessible, what the evidence criteria will be
• Similarly, since the maximum reimbursed price will be driven by the threshold modifiers, the success to the DoH and manufacturers supplying the UK market will be based on what price levels are approved in the UK vs what other countries are approving for the same products. If, as a result of VBP in the UK, achievable British prices are lower than what other European governments are granting, manufacturers will be obliged to assess whether a UK launch is feasible, as through external reference pricing and parallel trade, if a British price is low compared to elsewhere, the net impact of a UK launch on regional revenues may be a negative one.
• Manufacturers will be wary of accepting interim (low) prices in the UK prior to the possibility of achieving a review and a higher price later, as through international reference pricing in other countries, the temporary, low UK price will already have had a negative impact on the prices of drugs in other countries
• QALYs are an imperfect measure of value, and many commentators will have been happy to see the back of them in a post-NICE environment. However, unless a more appropriate alternative methodology for comparing the value of different interventions can be made to work in a convenient and transparent way, they do seem to be here to stay and with this new approach, their role will become even more important than it is presently
• There will need to be some clarity on plans for the prices of medicines launched before January 2014
• If risk sharing schemes are seen as superfluous under the new regulations, the implication is that payers (be that GP consortia or presumably the SMC or the AWMSG) will make individual decisions on whether to fund a technology based on the list price and guidance. Manufacturers will have a limited opportunity to develop schemes to support patient access other than the initial review of price (under VBP) based on the data submitted at the time. This may make it harder for manufacturers to supply drugs to UK patients as patient access schemes allowed the maintenance of higher list prices but sales at effectively lower prices, so that prices were not compromised in countries referencing UK list prices. Without the possibility of insulating UK prices, not launching in the UK becomes a prospect under circumstances where the price offered in the UK is lower than the prices achievable in other markets.
• The composition of the expert panels (who will have the responsibility for determining if a technology qualifies for a higher threshold and hence a higher price) is not described. This will need to be elaborated as their expertise and ready availability will be key to making quick, authoritative decisions and not delaying patient access post Marketing Authorisation. Will they be DoH employees alone or a mixed group involving doctors, patient representatives, academics and others? To what extent will these panels be acting on behalf of or duplicating funding allocation decision-making at the local level?
• There is no mention of an appeals procedure in case the prices granted (or the threshold modifiers recommended) are not acceptable to the applicant. This seems to be a major omission.
• Questions 3 and 4 of the DoH’s 20 questions address an especially difficult area that all countries struggle with, the pricing of drugs to treat orphan and rare diseases and whether they should receive concessions (such as higher prices and ring-fenced funding) or not. The DoH should be applauded for consulting on this very contentious point. Nobody wants to see excessively high prices just because a condition is rare, but where the lack of patient numbers challenges R&D and the development of therapeutics is marginal for the developer, it does seem appropriate, and in line with all the polices incentivising orphan drugs from a regulatory perspective, that concessionary prices (which would otherwise fail the QALY test) are granted.

Conclusion

The consultation paper has been very well prepared by the DoH, setting out most of the aspects of relevance for the introduction of VBP in the UK. All stakeholders, industry included, should be encouraged to use the opportunity of the consultation period to submit their views on what is being proposed, both relating to the 20 questions posed and other aspects of how VBP might be introduced into the UK and the implications of so doing. This article sets out some of the main aspects of the plan, what should be embraced, what is perhaps more contentious and those areas requiring further elaboration. It is hoped it will help to inform stakeholders in responding to the proposed scheme.

[1] DDD Defined Daily Dose

[2] ATC Anatomical Therapeutic Chemical – the WHO’s classification system