EVENTS

Date:	Wednesday, June 28, 2006
Time:	10:30 AM -- 1:00 PM
Location:	Wohlstetter Conference Center, Twelfth Floor, AEI 1150 Seventeenth Street, N.W., Washington, D.C. 20036

June 2006

 

Does the United States Need a NICE?
Perspectives on the UK Model for Drug Reimbursement

 

 

The United Kingdom’s publicly financed National Health Service has granted near-veto power over drug reimbursement decisions to the National Institute for Health and Clinical Excellence, an independent organization known as NICE. As a result, British health authorities are expected to adopt or deny new medical technology based on NICE’s assessment of the benefits of this technology versus its impact on health-care costs. This process and the resulting delay in coverage have generated intense controversy in the UK. At the same time, NICE’s operation has aroused interest in constructing a similar mechanism in the United States. At a June 28 AEI conference, Andrea Sutcliffe, deputy chief executive of NICE, a group of British and American analysts, and an American biomedical industry representative examined NICE’s method and its implications for U.S. policy.

Andrea Sutcliffe
National Institute for Health and Clinical Excellence

Health systems around the world, regardless of their organizational structure or funding mechanisms, are under increasing pressure from soaring costs, rapid growth in medical technologies and services, and a lack of evidence-based clinical guidance. The National Institute for Health and Clinical Excellence (NICE) is an independent organization established in 1999 that provides national guidance on the promotion of good health and the prevention and treatment of illness. It works to relieve the pressures on the UK’s national health system by identifying clinical and public health guidance based on the best available clinical and cost effectiveness data. Moreover, this guidance benefits both patients and physicians by helping to resolve the uncertainty endemic in the health care system and to reduce the variation in the practice, availability, and quality of care.

NICE is commissioned by the Department of Health to provide appraisals on new and existing medical technologies and clinical and public health guidelines, and by the clinical community to assess the safety and efficacy of interventional procedures. Topics selected for analysis generally reflect national health priorities such as obesity or cancer, generate controversy, or have the potential to stretch available resources. The National Health Service makes funding available based in part on NICE’s recommendations and thus provides an incentive for health care professionals to implement those guidelines. NICE takes into account the various perspectives needed to develop guidance through public consultation and independent advisory committees composed of clinicians, health managers, economists, members of the medical technology industry, and other experts in the health community.

The entire NICE process is robust, transparent, and available for public scrutiny. Yet these strengths also make the system slow, which raises ethical concerns surrounding timely access to lifesaving interventions. NICE is working to produce speedier guidance through a single technology, single indication appraisal process established this year. Through this process, NICE issued draft guidance for the breast cancer drug Herceptin within two weeks of its licensure in the UK.

Further challenges surround the methodology used to assess cost-effectiveness. Health economics is an art, not a science, making it difficult to rely on any single model of evaluation. When technologies fall in a grey area of questionable value or cost per quality-adjusted life years (QALYs), NICE will take into account social considerations, such as whether or not other disease interventions exist, before issuing final guidance. Despite a controversial start, NICE has already introduced value for money in the health care system by increasing the use of effective and economical medical technologies.

Heinz Redwood
Independent pharmaceutical and health policy consultant

We want medicines to be safe, clinically effective, of guaranteed quality, and cost effective. However, despite some recent moves worldwide to introduce mandatory cost-effectiveness to health care systems, this should not always be the top priority.

In the UK, NICE provides both clinical and cost-benefit analysis of whether certain drugs and medical technologies should be used and funded by the National Health Service (NHS). Although adherence to NICE guidance is officially mandatory for prescribers and payers, the agency has no statutory powers of enforcement, so budget-conscious authorities often limit prescriptions even in the face of positive drug evaluation by NICE.

NICE faces problems not only with its lack of authority, but also with inherent difficulties in cost-effectiveness analysis. Sometimes, evaluating drugs solely through cost-benefit analysis goes against humanitarian concerns. For example, the agency prompted political protest for its refusal to recommend beta-interferon or glatiramer acetate for those who suffer from multiple sclerosis, even in an absence of alternative treatments for the disease. Mandatory guidance was issued based upon cost-effectiveness analysis even in the face of mitigating clinical and social factors. Perhaps it is more sensible to use such analysis as a guide, rather than the mandatory basis for medical decisions.

In general, cost-effectiveness analysis is not so much an exact science as a combination of subjective and objective observation. Predicting QALY can be difficult for new and innovative medicines: for example, estimates ranged from $18,000 to $327,000 for verteporfin and $79,000 to $165,000 for teripartide. As another example, survival rates among those who use Gleevec are significantly higher than those who do not-- a conclusion that may not have been reached during preliminary analysis. Moreover, the NICE process is quite lengthy: for drugs to treat multiple sclerosis, chronic myeloid leukemia, wet-age macular deterioration, and osteoporosis, the process took between eighteen and thirty-four months. Although NICE is “doing its job” well, national guidance on the cost-effectiveness of innovative medicines is burdensome and not necessarily wholly accurate.

Overall, cost-effectiveness analysis should be used as an optional tool in arriving at decisions, but should not be mandatory. Clinically, prescriptions should be driven by patient need rather than by strict numerical analysis; industrially, the delay in product introduction to the market brought on by lengthy cost-benefit analysis weakens incentives for pharmaceutical development; and practically, a focus on QALYs over clinical and ethical priorities faces certain political resistance.

Steve Pearson
Harvard Medical School and America's Health Insurance Plans

Does the United States foster the development of drugs that lead to comparatively small clinical benefits (so-called bridges to nowhere)? Comparison of the health technology assessment systems in England and the United States should help answer this question. Our health technology system is fragmented and pluralistic, with many organizations, both public and private, evaluating the clinical and economic viability of various developments.

In contrast, England’s NICE evaluates new technology from both a clinical and cost-effectiveness standpoint. The organization emphasizes systematic analysis of clinical evidence, comparative effectiveness, and cost-effectiveness. This is done in large part through calculating estimated costs per QALY for new drugs. For several reasons, no specific “threshold” exists beyond which drugs are not approved: first, it is difficult to empirically arrive at an exact number beyond which NICE would not approve new technology; second, certain drugs may be more worthy of approval even at high cost per QALY (e.g. drugs for diseases with no other known treatments); and third, specifying an exact cost per QALY figure would guide pharmaceutical pricing practices too strongly (firms would price just under the threshold). It is safe, however, to say that NICE generally approves drugs with cost per QALY of $15,000 to $20,000, and generally does not approve ones with cost per QALY of $50,000 to $60,000 or greater.
 
NICE provides useful guidance for the U.S. in some areas, but it is of little use in others. It cannot provide effective pricing guidance and is difficult to apply within the U.S. system of insurance choice. It has also not “solved” the problem of cost-effectiveness analysis-- NICE still does not know all of the specifics of how to make a perfect cost-effectiveness model. There are, however, several ways in which NICE provides an effective model: given the organization’s long existence, it is clear that the concept of cost-effectiveness analysis is politically durable; focusing on curing inequity as well as maintaining cost-effectiveness is also politically feasible; as NICE’s independence has shown, the decision-making process can be shielded from the government; and decisions can be made transparent to both organizations and to the public.
 
If the United States decides not to adopt a system similar to NICE, what are other possible options? First, the health care system could be left unchanged, even in the face of spending an ever-increasing proportion of GDP. Second, the system could be decentralized, either among private care plans or among individual states. Third, a more market-based system that emphasizes patient choice could be adopted. Fourth, economic evaluation of drugs could be centralized, either in the FDA or elsewhere in the government. Finally, mixed public and private models of health technology assessment could be adopted. The NICE model is certainly useful, but it is not the only one that could be used.

Mark Pauly
University of Pennsylvania

An exact replica of NICE would be neither sensible nor successful in the United States. No analogous entity has ever existed in this country that could serve as a learning tool for implementation of a NICE-like model. Unlike the UK, the United States does not rely on a uniform and unitary national health authority or a fixed dollar budget for the procurement of health services. Serious ethical, political, and economic dilemmas arise when there are no budgetary constraints to make the tough calls on controversial issues that would otherwise fall to human deliberation. Nevertheless, neither the private nor even the public sector operates on a fixed budget. Without a national health entity functioning on limited resources or divine instruction on the value of a QALY, the United States would neither want nor benefit from monolithic guidelines.

From the outside, it is not clear how NICE and English health authorities interpret the word guidance. Are these rules, or only guidelines that one is free to reject? And if the latter, then what does free mean? Regardless of how the UK defines these words, the United States should consider cost-effectiveness analyses strictly as the basis of informed recommendations but not grounds for national mandates allowing or prohibiting particular medical interventions. Perhaps there exists a market failure in the production of cost-effectiveness studies in that not enough are performed or are of sufficient quality. Thus, some public financing of data collection and analysis may be in order based on the proposition that such efforts would serve a public good. The general model would be public financing of the data, albeit private or pluralistic choice about its use. A public subsidy could be in the form of a voucher, which would be issued to citizens or bundled with their insurer, and then allocated to their chosen institution for cost-effectiveness analysis or for their own personal appropriation of cost-effectiveness guidance.

A market-based way of employing cost-effectiveness analysis would be one in which a variety of health plans would choose different dollar values per QALY as their method of management and marketing platform, with premiums adjusting accordingly. Health plans would perhaps be free to reject paying for services that turn out to be uneconomical, and a lawyer-roof safe harbor could be established to allow for coverage denial.

In terms of Medicare, cost-effective measures are more likely to trickle into the private, rather than public, plans. Seeing that rationing of new technology in Medicare is inevitable, it would be preferable that such measures not be subject to caprice, but preformed in a tidy, pragmatic way based on well-founded analytical methods of cost-effectiveness analysis. The catch, of course, is that prudence and delay in coverage often go hand in hand. However, in an unregulated and transparent market, one would predict the emergence of some health plans where all new technologies would be covered with no delay, but for a higher price, and some where coverage would be withheld until adequate cost-effectiveness studies could be performed. Finally, utilizing cost-effectiveness models for the dissemination of information, but not for uniform decision-making, may be a step toward transparency in a notoriously opaque system.

David L. Gollaher
California Healthcare Institute

With budget constraints increasing and health care costs escalating, we are likely to see a more pronounced shift toward greater government control of health care spending. In such a realm, would utilizing cost-effectiveness analysis mitigate the basic inequities prevalent in the U.S. health care system? In a single payer system like that which exists in the UK, making national decisions of cost-effectiveness does indeed serve the needs of the populace as a whole. However, in the U.S. health system where care is fragmented and diverse, it is not necessarily the case that any one payer, or even the federal government, could make a cost-effective decision that would address the fuller inequities of the system. While the United States may lack a centrally organized NICE-like body, various degrees of cost-effectiveness analysis and discount negotiations are nevertheless pervading the private sector.

The United States has perhaps the most inefficient health care system in the developed world, yet has produced the greatest engine of medical innovation. If lifesaving technologies are somehow the product of this messy and variable system, will it be possible to reduce the systems’ inherent inefficiencies without undermining its innovative framework? Producers of medical technologies worry that cost-effectiveness research will not be applied in a manner that allows for further development of new technologies and competition on price that greatly benefit society. They fear that national policies on cost-effectiveness that originate from perhaps Medicare will ultimately filter through the entire health system. While manufacturers and consumers agree that both research and equal access to medical technologies should be encouraged, they have no idea how to bridge these supposed antithetical pursuits. Collectively, interested parties should work to disprove or eliminate this contradiction.

AEI research assistant Elizabeth DuPré and AEI intern Brian Rose prepared this summary.