Healthy funding

C&I Issue 23, 2008

Even before the credit crunch began to bite, it was clear the world was facing a healthcare funding crisis. Expenditure is rising at an alarming rate – according to OECD figures, it accounted for 3.5% of GDP in Europe in 1960, and this proportion had doubled by 1990. By 2005 it had risen to almost 9%. And as the average age of the population in the developed world increases, the number of older people who are not working grows, leaving the declining proportion of society that is in employment to pick up the growing healthcare bills.


While the NHS provides universal coverage in the UK, in practice the cost of providing everything possible is too expensive, and increasingly tough decisions have to be made about where resources should be spent. Because EU member states retained the authority to make healthcare decisions, there is no fixed idea across Europe of how this should be done.


NICE all round?
The UK has pioneered the use of health technology assessments to decide what should be paid for. The National Institute for Health and Clinical Excellence (NICE) was set up in 1999, and since then has published many guidance documents declaring whether a drug or treatment is cost-effective, and thus whether it should be available on the NHS. In practice, this has led to arguments from patients and doctors that they are not allowed the latest wonder-drug, and from primary care trusts that they can not afford to pay for everything NICE says they should.


Some of its decisions leave pharma companies up-in-arms about the NHS’s unwillingness to pay for their medicines, but it is not just because of the direct effect on the UK market. Increasingly, other countries are piggy-backing on NICE rulings and implementing these choices in their own healthcare systems. So if NICE says ‘no’, numerous other countries will too.


One of these is Hungary, as health minister Mélinda Medgyaszai told a recent high-level conference in Paris, organised as part of the current French Presidency of the EU. ‘It’s very nice of the UK to help us with NICE, as there is no way in Hungary we could create this data,’ she said. ‘We are keen on working together; we have common problems, so why not common solutions? We are a small country, and HTAs (Health Technology Assessments) are too expensive. We should work together at an EU level.’


Germany takes a different tack – its NICE equivalent, IQWIG, relies on reference pricing. Drugs are grouped into therapeutic categories, and the maximum amount it will reimburse for a drug in that category is set. In practice, once one drug in a category loses patent protection, the reimbursement amount drops to the generic level for the whole category, including those drugs with intact patents.


Some drugs do not fit into a reference price group, and IQWIG is testing a new system that looks at cost effectiveness as well as clinical effectiveness. ‘Efficiency frontier analysis’ highlights which therapies are efficient, and which are not. ‘It’s down to a fair comparison of alternatives in clinical trials,’ claimed Peter Sawicki, IQWIG’s director. ‘We’re not interested in placebo – we don’t want to show it’s better than nothing, we want to know if it’s better than we had before. For a new drug that has no additional benefit compared to the best current treatment, no additional cost is justified. The efficiency frontier model shows how much we should pay for additional benefits.’


The French agency, the National Authority for Health (HAS), has been set up more recently, and takes both tacks. ‘Before we negotiate price, we look at efficacy, both medical benefits and clinical importance,’ said its chairman, Laurent Degos. ‘This is done on an individual product basis immediately after licensing, and benefits are looked at postlicensing once it’s on the market. We are trying to control healthcare expenditure today so we don’t have to ration it tomorrow.’


Whether countries choose to rely on HTAs, price ceilings or a mixture of the two, industry and some politicians are worried that this overarching focus on cost containment will have a detrimental effect on innovation. But the EU health commissioner Androulla Vassiliou told the Paris conference: ‘We badly need innovation, and encouraging a lowcost generic market allows money to be spent on innovative medicines.’


Pharma companies are concerned too. The drug discovery process is expensive, and as regulators demand more and longer late-stage clinical trials, these costs will only go up. Many countries are already slow to adopt newly approved medicines, and these extra cost-effectiveness hurdles cut into the time they have to recoup their costs before the patent expires. And if companies cannot recoup their costs, fewer new drugs will reach patients.


Low cost generics
Generics can be substantially cheaper than the original patented medicine, particularly for bigselling drugs that rapidly gain many competitors on patent expiry. This frees up chunks of the health budgets, and industry argues that this should be used to pay for innovative treatments rather than allowing drug budget cuts. Yet if few innovative medicines reach the market, there will be no new generics either, claims French MEP Françoise Grossetete. ‘I keep telling my EU colleagues that there will be no generics without innovation,’ she said. ‘If we cut prices, then we will not be able to have any new drugs. If we cut reimbursement rates then we deprive pharma companies of the money.’


Anders Olauson, president of the European Patients’ Forum, claims there is a contradiction here. ‘We push for research, and at the same time say, “Sorry, it’s too expensive.” There is an ethical contradiction between the huge investment in research to fund treatment for unsolved disease if at the end of it we say it’s too expensive,’ he said. ‘We need to broaden our view of healthcare since a disease affects all areas of life.’


Indeed, NICE assessments do not include the knock-on effects of medicines on other areas of spending. If a costly medicine enables a patient to lead an independent, productive life for longer, then there will be a cut in other healthcare costs and they will continue to pay taxes. But it’s not just the patient – if a family member gives up work to look after them, then they do not pay tax either, and are probably claiming benefits. If all related factors were included, then suddenly an expensive medicine may look cost-effective after all.


NICE is secretive about the cost-effectiveness models it uses, and pharma companies have been trying to force it to make them public. This issue came to a head with last year’s court case over Alzheimer’s medicines, where Eisai and Pfizer were granted a judicial review of NICE’s decision not to pay for them in the early-stages of the disease. They wanted to challenge some of NICE’s assumptions, but without access to the model this was impossible. As Eisai’s UK managing director Paul Hooper said, not releasing the model is bad for science. ‘Were the industry to publish something like this and not be transparent in how it works, I’m sure we would get completely hammered,’ he said.


UK pharma trade association ABPI’s director general Richard Barker can see no reason why there should not be complete transparency. ‘We can all disagree about the answers, but there should be nothing murky about how the calculations are done,’ he said. And with NICE’s decisions having increasing power in markets other than the UK, being sure that the decisions are fair in the first place has never been more important to the pharma industry.


Patients are not happy either, and highprofile cases where NICE says ‘no’ regularly make the headlines. ABPI president Chris Brinsmead, UK president of AstraZeneca, believes there needs to be a frank, open and honest debate on the availability of medicines. ‘We are calling for the patient groups, healthcare charities, doctors, government, NICE and the NHS to join with the pharmaceutical industry to debate these crucial issues and hammer out a lasting solution,’ he said. ‘The time has come to discuss how we best resolve the issue, and where better than on a public platform?’


There have already been moves to create novel ways of paying for expensive medicines. Johnson & Johnson refunds the NHS if patients do not respond to its multiple myeloma drug Velcade (bortezomib), but GlaxoSmithKline’s offer to pay for initial treatment costs for Tyverb (lapatinib) in breast cancer patients has been rejected. And the UK government’s recent decision to allow patients to pay the extra to receive expensive drugs opens a whole new set of problems (C&I 2008, 22, 5).


Ultimately, however, it would seem that improved efficiency is the only answer to the spiralling cost of healthcare, however, that efficiency is achieved. As Imperial College’s Nick Bosanquet told the British Medical Journal recently: ‘There will be no incentive to invest in a new kind of health service while the easy option of continued growth in high spending in the old one remains.’ He believes that while health spending as a share of GDP may well rise in the long term, health systems must be redesigned for the future.


Sarah Houlton is a freelance journalist based in London, UK.

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