Spending on pharmaceuticals across the Organization for Economic Cooperation and Development (OECD) countries has increased by close to 50 per cent in real terms since 1998. Growth in spending has been driven to a large extent by newer and more expensive drugs replacing older therapies. As a consequence, public and private payers are considering whether to (conditionally) reimburse newer and (usually) more expensive drugs. Effectively, payers are imposing a fourth hurdle that biopharmaceutical firms must clear in order to attain widespread market access, the first three being safety, efficacy and quality of manufacturing practices.
The establishment of a fourth hurdle is a phenomenon that began in Australia in the early 1990s, and has since spread to other jurisdictions, particularly in Europe, each with its own ways of conducting technology assessment and implementing results. Even the world’s largest market for biopharmaceuticals, the US, has not been bypassed by the fourth hurdle: although considered to lag behind compared to other nations, a de facto fourth hurdle has been instituted. Among watershed events in the past five years, we have seen the enactment of federal regulations that allow cost and clinical evidence to be considered in outpatient drug reimbursement decisions affecting Medicare beneficiaries. Also, the Centers for Medicare and Medicaid Services (CMS) have stated that FDA authorisation is insufficient to support reimbursement decisions for certain physician-administered drugs, such as the erythropoesis-stimulating agents covered under Medicare Part B. And, in the private sector, the Academy of Managed Care Pharmacy (AMCP) trade group has issued detailed guidelines specifying precise parameters to be included by drug sponsors in the formulary dossiers they submit to payers for the purposes of reimbursement. But of all developments surrounding the fourth hurdle, none has had such farreaching implications as the establishment of the National Institute for Health and Clinical Excellence (NICE) in England and Wales in 1999. NICE has become the world’s most prominent appraiser of new medical technologies, including drugs and biologics. This article will evaluate its decision-making process, the controversial cases that have drawn media attention, and recent initiatives aimed at streamlining NICE assessments, concluding with an analysis of policy implications and the global ramifications of NICE.
OVERVIEW OF THE NICE DECISION PROCESS
NICE is a governmental organisation that functions in an advisory capacity to the British National Health Service (NHS). It is responsible for providing guidance on the “promotion of good health and the prevention and treatment of ill health” in England and Wales. In particular, NICE produces guidance with respect to:
- Health technologies – the use of new and existing medicines, diagnostics, treatments and procedures
- Clinical practice – appropriate treatment and care of patients with specific diseases and conditions
Broadly, NICE’s stated goals are to rationalise clinical care and eliminate inequities by geographic area. NICE’s raison d’être is premised on the oft-cited ‘tragedy of the commons’: resources are scarce but competing demands on them are infinite. A patient acts rationally in seeking an expensive treatment that produces a benefit (even if small) because the cost falls almost entirely on others. The same can be said for doctors who seek the best care for their patients as the costs, in terms of fewer resources for other patients, fall almost entirely on other doctors’ patients. Ultimately, however, from a societal perspective, to ensure efficient resource allocation, it is required that an intervention’s health benefits are greater than their opportunity cost, or the value of the next best alternative is limited.
NICE tackles this resource allocation problem by evaluating the costs, benefits and risks of new medical technologies, and recommending resource allocation accordingly. NICE does not commission primary research; instead, it bases its recommendations on systematic analyses and economic modelling. The costeffectiveness technique used by NICE to assess different treatments – cost-perquality- adjusted-life-year (QALY) – facilitates system-wide comparisons across a wide range of treatments. This ratio incorporates the added cost of a treatment over the current standard therapy, set against the additional health benefits conferred by the treatment.
Besides cost-effectiveness, equity considerations such as the burden of disease and the rule of rescue may inform reimbursement and use decisions, with treatments that target more severely impairing diseases generally being prioritised.
