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Will NICE’s proposed reforms actually work?

by Zoë Molyneux | Analysis

30 July 2014

1 comment 1 comment

Cancer drugs

This post has been updated, below, in light of a recent announcement by NICE.

The way the NHS pays for new cancer drugs (not to mention radiotherapy and other treatments) is a complex and emotive issue, never far from the headlines. This is completely understandable – it can be devastating to be told that the NHS ‘can’t afford’ something that could offer hope or precious time.

But the NHS budget is finite, and any new drug must be paid for out of a limited pot. Someone has to work out how to make the numbers add up.

In the UK, a key player in this is the National Institute of Health and Care Excellence – known as NICE – recognised around the world as being the best at what it does.

But since its creation in 1999, NICE – an independent but publicly accountable body – has taken flak from several directions, being seen by critics as too slow, too opaque and too inflexible.

In 2010 the new Coalition Government announced plans to reform how NICE makes decisions, while simultaneously revamping the way drug prices are set.

This was good news. While we’ve always agreed that NICE does a difficult but vital job, we do think there’s room for improvement to better meet the needs of patients, the NHS and the pharmaceutical industry. It looked like the Government had recognised that the public deserved a more easily understandable, transparent system.

So we waited.

After more than three years of discussion, in July last year the Government asked NICE to develop proposals to change the way it makes decisions.

NICE eventually published these  in March and asked for comments. We’ve sent them our thoughts – they’re not very positive  – and so we thought we’d take the opportunity to look at the background, the proposals, and our thoughts on them.

This is going to take you into some fairly complex territory – the current system, and the new proposals, are pretty arcane, and rely on complex concepts. But please bear with us – we’ll try to set things out as clearly as possible.

Who sets the NHS drugs budget?

The NHS budget

The NHS spends £12bn on patented drugs every year

Medicines account for a big chunk of NHS spending – about £14bn out of a total of about £106bn. Of this, ‘branded’ medicines (whose prices are stable because they’re patented) cost around £12bn – these include things like Herceptin and Lipitor. The rest is unbranded, off-patent drugs –  e.g.  aspirin, or warfarin.

There are two main ways the NHS keeps a grip on this figure.

First, the Government and the pharmaceutical industry have a voluntary agreement – the Pharmaceutical Price Regulation Scheme, or PPRS, which caps the profits on branded medicines.

Set up in 1956, this gets renegotiated every five years. The current agreement, which came into effect this year, is pretty strict: spending will stay the same (around £12bn/year) for the next two years, with very small increases for the three years after.

This has to cover all approved branded drugs, plus anything new approved each year. And if pharma makes excessive profits, it pays them back to the NHS.

Secondly, bodies like NICE decide which new treatments should be paid for out of this budget (NICE covers patients in England and Wales – see info box, below, for other UK nations’ arrangements).

And although the media might make you believe NICE only says no to new cancer treatments, in fact it has only done so for a third of the cancer drugs it’s looked at.

NICE assesses new drugs according to two main criteria: clinical effectiveness and cost effectiveness. If they pass muster, they’re ‘recommended’ to the NHS. This is legally binding: if NICE says a drug should be available, the health service in England and Wales has an obligation to provide it to patients.

But NICE must look at all new drugs in a fair way – it can’t, for example, give special treatment to cancer drugs over diabetes drugs. Central to how it does this is a concept known as a ‘quality-adjusted life year’, or QALY – a complex, abstract concept that ultimately aims to measure a drug’s cost effectiveness.

What is a QALY?

A QALY calculation measures both the quantity and quality of life a treatment gives, and places a weight on a patient’s different ‘health states’ as they go through treatment.

A year of perfect health is given a ‘score’ of one, and a year of less than perfect health is worth less. Death – as you might expect – is considered to be equivalent to zero. However, some health states can be considered ‘worse than death’ and have negative scores (there’s more detail on this here).

This can be worked out, for example, by comparing data collected during clinical trials, to information about how patients fare during standard treatment.

Ultimately, this is closer to a ‘real’ measure of life gained or lost, as it adjusts for how much patients can live a normal, comfortable life.

Around the UK

NICE guidance automatically applies in England and Wales. If NICE recommends a new drug, hospitals across these countries must make them available to suitable patients within 90 days of the guidance being issued. But what about the rest of the UK?

In Wales, where there is no NICE guidance on a drug, a body called the All-Wales Medicines Strategy Group can create interim guidance that applies to Wales only.

In Northern Ireland, the NI Department of Health, Social Services and Public Safety looks at NICE guidance once it has been issued and considers whether to ‘endorse’ it. In the majority of cases it does endorse NICE guidance,  but there is no set timescale for it to do this.

In Scotland, a separate body called the Scottish Medicines Consortium (SMC) exists to perform the same role as NICE. NICE guidance therefore does not apply in Scotland. The SMC’s process is broadly similar to NICE’s, but it is normally faster and they have recently introduced new approaches for medicines for rare and very rare conditions.

This can be vital, as treatments can be very different. One might help someone live longer, but have serious side effects. Another might make someone feel much better, but not help them live as long.

Using QALYs helps NICE do the tricky job of comparing, say, cancer drugs and hip operations in a similar and fair way.  It considers the added benefit of new treatments, not by considering the actual extra years of life they provide, but by looking at the quality of those years.

How does NICE use QALYs to make a decision?

Once a treatment’s additional QALYs have been worked out, NICE can work out the cost of these from the manufacturer’s set price. This is the ‘cost-per-QALY’ – and the figure that often ends up making headlines.

At the moment, NICE reckons up to £20,000 per extra QALY is ‘acceptable’ for the NHS, and recommends most new treatments below this price-tag.

If it’s between £20,000-30,000, NICE will consider other factors (called ‘modifiers’) to make its decision, including:

  • how confident they were about the cost per QALY calculation
  • whether quality of life was measured accurately on the trials
  • whether the treatment is better than existing treatments
  •  whether it supports the non-health aims of the NHS (such as efficient spending, or encouraging innovation)

If the drug costs more than £30,000 per QALY, then it normally gets a ‘no’.

But since 2009, drugs, which could extend life by between 3 and18 months, and which cost up to £50,000 per QALY, have been given special consideration under ‘end-of-life’ criteria (more on this later).

This has allowed NICE to approve drugs to give people with terminal illness a little more time. This was something that the system was having trouble with, but which much of the public, quite understandably, puts a huge value on.

What are the problems with this approach?

Over the years, some serious issues have been raised with NICE’s approach:

  • It’s not very flexible – there are no exceptions to the above criteria
  • It’s often slow (although has got faster in recent years).
  • It can be unpredictable
  • Because it operates on a case-by-case basis, it can’t take a wider view of the NHS drugs budget.
  • It’s inherently skewed towards drugs, rather than surgery or radiotherapy.
  • It’s not sufficiently sensitive to complex factors, e.g. whether one type of side effect is ‘worse’ than another
  • It doesn’t always account for what matters to patients
  • But mostly, it’s incredibly hard to understand.

There have been attempts to fix some of these problems over the years, such as the ‘end of life’ criteria we mentioned above.

But another, more drastic, change came from Government in 2010 – the Cancer Drugs Fund, which created a different way for patients to get cancer drugs. It was set up in response to reports that the UK uses fewer cancer drugs than comparable countries.

The Fund is a completely separate budget for the NHS, earmarked for cancer drugs that have either been rejected by NICE, or which it hasn’t yet got round to looking at. NICE has no say on the Cancer Drugs Fund, which currently covers 41 drugs, but only for patients in England.

Initially intended as an interim short-term measure while a new system was being worked on, it was extended last year to run to 2016,  and we still don’t have a new, workable system.

(It’s important to note that doctors can always make an Individual Funding Request if other NHS funding routes don’t work and their patient’s case is outside the norm. But these only apply in very limited circumstances.)

So what about the new NICE proposals, which are collectively called ‘value-based assessment’?

What are the new proposals?

You can read the full proposals here, but these are the key points:

First, they’ve proposed two new ‘modifiers’, called ‘Burden of Illness’ and ‘Wider Societal Impact’. These are intended to make NICE’s initial QALY calculation more accurate – a laudable aim.

  • Burden of Illness is – as the name suggests – supposed to capture the severity of an illness, in terms of average QALYs lost amongst each group of patients (e.g all lung cancer patients, or all patients with arthritis)
  • Wider Societal Impact is an attempt measure how a drug treatment affects wider society ( helping people back to work).

They’re also planning to drop ‘End of Life’ criteria, but the upper threshold for recommending a drug will be increased to £50,000 per QALY gained.

What do we think of the new guidelines?

The first thing to say is that we’re really disappointed by the new proposals.

Most importantly, they do nothing whatsoever to address the wider issues that keep popping up around how to allow fair, consistent access to new drugs:

  • The way drugs are actually priced has not changed – there is no revision to the PPRS – something initially promised by the government in 2010 and which we really want to see.
  • There’s still massive inconsistency across the nations of the UK.
  • NICE’s decision-making process will not become any more predictable nor easy to understand.

But we also disagree with the specifics. The idea of using a modifier like Burden of Illness, (which is calculated in QALYs) ignores the fact that original QALY calculation already takes some of this into account. This feels like double-counting to us, and we don’t see how it can work in practice.

Similarly, Wider Societal Impact could far too easily prejudice the system against older people if not carefully and sensitively designed – something that would be devastating for cancer patients, the vast majority of whom are over 65. Building ageism into our drug approval system is emphatically not something we want to see.

We asked doctors, and – as importantly – patients, what they thought too. Their sentiments were broadly similar to ours – they couldn’t see the point of the proposed reforms, nor any significant benefit arising from them.

All in all, this is a massive missed opportunity.

What next?

NICE’s consultation on the changes closed at the end of June. Once they’ve considered the comments they’ve received, they’re hoping to introduce changes in autumn 2014. There will be an announcement once NICE has decided what it will do next.

In the meantime, we’ll continue to speak with politicians and reaffirm the principles we think should guide NHS funding of cancer treatments – and try our best to influence proceedings.

We know that for patients that are experiencing cancer that it can be worrying to see headlines that talk about rationing of cancer drugs.

But we hope that the concerns we’ve expressed to Government will help open a much wider, sensible discussion about funding for cancer drugs, and that this will one day lead to a genuinely transparent, workable, comprehensible system. One that works for the NHS, the drugs manufacturers, who invest time and resources in developing and producing new treatments, and to those that matter most of all – patients.

[EDIT:  In September 2014, NICE announced that it has shelved proposals for value-based assessment as there was “no consensus” from those who responded to the consultation. It has now said it wants to see a wider review of how the NHS supports innovation and adopts new treatments, going beyond NICE’s processes and involving the Government and NHS England. In particular NICE will be looking at how the NHS pays for cancer drugs, and the role of the Cancer Drugs Fund. While this process has taken a long time, we are pleased that NICE has recognised these wider issues and hope this review will bring about clearer solutions.]

Henry & Zoe


  • J Dunn
    9 August 2014

    What we should be concentrating on is how to get the rich drug companies to lower their prices. The more we raise the UK drug budget then the more they will raise their prices. Perhaps UK charities like yourselves should be funding national research schemes through our universities, not giving money to wealthy drugs companies who can afford to finance their own research.


  • J Dunn
    9 August 2014

    What we should be concentrating on is how to get the rich drug companies to lower their prices. The more we raise the UK drug budget then the more they will raise their prices. Perhaps UK charities like yourselves should be funding national research schemes through our universities, not giving money to wealthy drugs companies who can afford to finance their own research.