HealthLawProf Blog

Editor: Katharine Van Tassel
Concordia University School of Law

Wednesday, December 3, 2008

NICE's Cost/Benefit Analysis

The New York Times' Gardiner Harris reports on the balancing of costs and benefits of drugs in England and impact that has on other countries as all try to cope with the rising drug prices.  He writes,

Images When Bruce Hardy’s kidney cancer spread to his lung, his doctor recommended an expensive new pill from Pfizer. But Mr. Hardy is British, and the British health authorities refused to buy the medicine. His wife has been distraught. . . . 

If the Hardys lived in the United States or just about any European country other than Britain, Mr. Hardy would most likely get the drug, although he might have to pay part of the cost. A clinical trial showed that the pill, called Sutent, delays cancer progression for six months at an estimated treatment cost of $54,000.  But at that price, Mr. Hardy’s life is not worth prolonging, according to a British government agency, the National Institute for Health and Clinical Excellence. The institute, known as NICE, has decided that Britain, except in rare cases, can afford only £15,000, or about $22,750, to save six months of a citizen’s life.  British authorities, after a storm of protest, are reconsidering their decision on the cancer drug and others.

For years, Britain was almost alone in using evidence of cost-effectiveness to decide what to pay for. But skyrocketing prices for drugs and medical devices have led a growing number of countries to ask the hardest of questions: How much is life worth? For many, NICE has the answer.  Top health officials in Austria, Brazil, Colombia and Thailand said in interviews that NICE now strongly influences their policies.  “All the middle-income countries — in Eastern Europe, Central and South America, the Middle East and all over Asia — are aware of NICE and are thinking about setting up something similar,” said Dr. Andreas Seiter, a senior health specialist at the World Bank.

Even in the United States, rising costs have led some in Congress to propose an institute that would compare the effectiveness of new medical technologies, although the proposals so far would not allow for price considerations. At the present rate of growth, medical costs will increase to 25 percent of the nation’s gross domestic product in 2025 from 16 percent, with half of the increase coming from new drugs and devices, according to the Congressional Budget Office.

To arrest this trend, the United States needs to adopt at least some of NICE’s methods, said Dr. Mark McClellan and Dr. Sean Tunis, who served earlier in the Bush administration as, respectively, administrator and chief medical officer of the Center for Medicare and Medicaid Services. Dr. Tunis said he spent a lot of time in government “learning about NICE and trying to adopt the processes and mechanisms they used, and we just couldn’t.” That’s because the idea of using price to determine which drugs or devices Medicare or Medicaid provides has provoked fierce protests. But Dr. McClellan said the American government would soon have no choice.

Drug and device makers, which once routinely denounced the British for questioning product prices, have begun quietly slashing prices in Britain to gain NICE’s coveted approval, especially because other nations are following the institute’s lead. Companies have said that they will consult with NICE to help determine which experimental compounds enter the final stage of clinical trials, so the British agency’s officials will soon influence which drugs enter the market in the United States.

The British government created NICE a decade ago to ensure that every pound spent buys as many years of good-quality life as possible, but the agency is increasingly rejecting expensive treatments. The denials have led to debate over what is to blame: company prices or the health institute’s math.

Dr. Michael Rawlins, chairman of NICE, blames the industry, saying that some companies raise prices “to get profits up so their executives can get better bonuses.” Dr. Karol Sikora, a prominent London oncologist, said that the institute’s math was flawed and that Dr. Rawlins had a “personal vendetta” against cancer treatments.

Drug company executives who were interviewed uniformly promised to cooperate with NICE, but industry advocates were not so kind. Robert Goldberg, vice president of the Center for Medicine in the Public Interest, an advocacy group financed by drug makers, likened Dr. Rawlins and his institute to terrorists and said their decisions were morally indefensible. . . .

Britain’s National Health Service provides 95 percent of the nation’s care from an annual budget, so paying for costly treatments means less money for, say, sick children. Before NICE, hospitals and clinics often came to different decisions about which drugs to buy, creating geographic disparities in care that led to outrage. (Such disparities are common in the United States, even for federal Medicare patients.)Now, any drug or device approved by the institute must be offered to patients. The institute has also written hundreds of treatment guidelines in hopes of improving, and making more consistent, basic medical care.

The institute has analyzed the cost-effectiveness of surgical operations, cancer screening tests and medical devices. For example, it found that drug-coated cardiac stents were worth only $450  more than bare-metal ones. In the United States, stent price differences are often far wider. . . .

. . . because of the institute, Britain’s National Health Service has been among the first to balk at paying such prices, which has led many companies to offer the British discounts unavailable almost anywhere else. 

Johnson & Johnson, for instance, agreed to charge for Velcade, another drug for multiple myeloma, only if tests showed it was effective in a particular patient. Novartis agreed to give free injections of Lucentis, a drug for age-related macular degeneration, if patients needed more than 14 shots. Dr. Rawlins said these deals were constructed by drug makers to hide from other countries the discounts offered in Britain.  “It’s a good deal for us, but I can’t see that it will work in the long run because I can’t see that others countries will be so dim as to not notice it,” Dr. Rawlins said. . . .

But the most pressing question for the industry is what influence the British institute will have in the United States. The United States already spends more than twice as much per capita on health care as the average of other industrialized nations, while getting generally poorer health outcomes.

Michael O. Leavitt, the Bush administration’s secretary of health and human services, said in a September speech that, at its present growth rate, health care spending “could potentially drag our nation into a financial crisis that makes our major subprime mortgage crisis look like a warm summer rain.”  And while there is fierce disagreement about how and whether to control drug and device expenses as part of a broader reform of the health system, many say some cost controls are inevitable. At a September device industry conference in Washington, a seminar on the issue was standing-room only and half of the questioners mentioned NICE. . . .

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