CAUSES FOR CONCERN: IS NICE FAILING TO UPHOLD ITS RESPONSIBILITIES TO ALL NHS PATIENTS?

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1 HEALTH ECONOMICS Health Econ. 24: 1 7 (2015) Published online in Wiley Online Library (wileyonlinelibrary.com) COMMENT CAUSES FOR CONCERN: IS NICE FAILING TO UPHOLD ITS RESPONSIBILITIES TO ALL NHS PATIENTS? KARL CLAXTON a,b, *, MARK SCULPHER b, STEPHEN PALMER b and ANTHONY J CULYER b a Department of Economics and Related Studies, University of York b Centre for Health Economics, University of York ABSTRACT Organisations across diverse health care systems making decisions about the funding of new medical technologies face extensive stakeholder and political pressures. As a consequence, there is quite understandable pressure to take account of other attributes of benefit and to fund technologies, even when the opportunity costs are likely exceed the benefits they offer. Recent evidence suggests that NICE technology appraisal is already approving drugs where more health is likely to be lost than gained. Also, NICE recently proposed increasing the upper bound of the cost-effectiveness threshold to reflect other attributes of benefit but without a proper assessment of the type of benefits that are expected to be displaced. It appears that NICE has taken a direction of travel, which means that more harm than good is being, and will continue to be, done, but it is unidentified NHS patients who bear the real opportunity costs The Authors. Health Economics Published by John Wiley & Sons Ltd. 1. POLICY BACKGROUND In 2007, the UK s Office of Fair Trading suggested that the prices paid by the UK National Health Service (NHS) ought to be based on an assessment of the value that each drug offers (Office of Fair Trading, 2007). The type of economic evaluation already undertaken for NICE s technology appraisals can identify the maximum price the NHS can afford to pay; where the additional benefits offered by the drug just offset the benefits expected to be lost or displaced elsewhere because the additional resources required are not available to offer care, which would benefit other NHS patients. It is this principle, of paying the maximum, but no more than the maximum, for branded pharmaceuticals (and only whilst they are protected by their patent) that became known as value-based pricing (VBP) (Claxton, 2007; Claxton et al., 2008). Aside from estimating the additional costs and benefits that a new drug might offer, two other questions are critical: (i) how much health is expected to be displaced (an evidence-based assessment of the cost-effectiveness threshold); and (ii) how to establish mechanisms that would enable manufacturers to negotiate value-based prices in the UK that might be lower than in other countries (Claxton, 2007; Claxton et al., 2011)? In 2010, the government sought to translate the principles of VBP into a set of specific policy proposals (Department of Health, 2010, 2011). Subsequently, however, attention focused on widening the concept of value in the drug appraisal process (Department of Health, 2012). NICE was given responsibility for incorporating these other aspects of value into its Guide to Methods of Technology Appraisal subject to specific terms of reference from the Department of Health (DH). NICE made detailed proposals, which included increasing the threshold up to per quality-adjusted life-year (QALY) for technologies, which offered health benefits where the burden of was judged to be high (National Institute for Health and Care Excellence, 2014a). In responding to results of the public consultation, NICE has decided to make no changes in the short term, but to continue to consider how measures of burden and wider social benefit might be incorporated into the appraisal process (National Institute for Health and Care Excellence, 2014b). It is to be hoped that NICE will *Correspondence to: Centre for Health Economics, University of York, Heslington, York, YO10 5DD, UK. karl.claxton@york.ac.uk The copyright line for this article was changed on 25 August 2015 after original online publication The Authors. Health Economics Published by John Wiley & Sons Ltd. This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.

2 2 K. CLAXTON ET AL. begin to place the unidentified NHS patients who bear the real opportunity costs of its decisions at the heart of its deliberative process and especially as it reconsiders how other attributes of benefit might be taken into account. 2.. COST-EFFECTIVENESS, DISPLACEMENT AND THRESHOLDS The importance of opportunity cost in the DH s terms of reference was clear: Adopt the same benefit perspective for all technologies falling within the scope of VBP, and for displaced treatments (Appendix 1) (National Institute for Health and Care Excellence, 2014a). Since 2004 opportunity cost, or displacement, has been reflected in NICE s appraisal process through specification of an explicit cost-effectiveness threshold range of and per QALY (National Institute for Health and Clinical Excellence (NICE), 2013). This range was based on the values implied by the decisions made by NICE prior to 2004 but is widely recognised (including by NICE) as having little or no empirical foundation. Nonetheless, the proposed value-based assessment suggested increasing the upper bound to per QALY for all technologies. 1 Which threshold to apply within this range was torestoninformalconsideration of whether the burden of could be regarded as sufficiently high when measured in two different ways. Important questions include: how might NICE resist the pressure to apply higher thresholds routinely? What does recent history tell us about the NICE s ability to resist such pressure? How can an adequate assessment of displacement be considered? Recent history gives cause for concern. It seems that, for many years, NICE has not been rejecting technologies with ICERs below the upper bound of per QALY, so has evolved as an effective minimum threshold. Recent evidence suggests that, even when special considerations, such as end of life criteria, 2 do not apply, many technologies with ICERs above per QALY are nonetheless recommended (a 0.5 probability of rejection resulted from ICERs of to per QALY, Dakin et al., 2014). It is quite clear (empirically) that the official lower bound of the NICE threshold ( per QALY) is generally not the relevant one; and that the upper bound ( per QALY) has effectively become the starting point for deliberation. One explanation for this acceptance creep is that the broad selection of stakeholders who contribute to the NICE process excludes a key constituency: those unidentified NHS patients who bear the true opportunity costs of NICE decisions. NICE undoubtedly faces extensive pressure from the direct beneficiaries of a positive recommendation, including manufacturers, the patients who might benefit and their clinicians. Indeed, these stakeholder groups have, quite appropriately, become an important part of the appraisal process. However, without institutional leadership to ensure balance, there is much less pressure to take full account of the likely impact on other NHS patients. The most recent evidence and the nature of the recent proposals suggests that NICE is not providing sufficient leadership and is failing to uphold this critical responsibility to all NHS patients. 3. POTENTIAL CONSEQUENCES OF INCREASING THE THRESHOLD RANGE The consequences of increasing the threshold should be of deep and general concern. This is especially so, as it comes after publication of the only empirical research to have estimated how much and what type of health is expected to be displaced using national data on local NHS expenditure and mortality outcomes across different areas. This peer-reviewed NIHR and MRC-funded research was originally suggested by NICE as a topic for the MRC in The results suggest that the upper bound of is certainly too high and even NICE s increasingly irrelevant lower bound may also be too high (Claxton et al., 2013). The recently renegotiated Pharmaceutical Price Regulation Scheme took a threshold of per QALY to be an appropriate basic threshold representing (unweighted) QALYs displaced (Department of Health and Association of the British Pharmaceutical Industry, 2013). Given this agreement and the evidence currently available, it is the 1 Currently, only drugs that fulfil NICE s criteria for special consideration of life extending interventions given to patients at end of life may have an ICER of up to per QALY and still be recommended. The conditions for satisfying these criteria are, however, very specific and apply to a small proportion of new products. 2 See foot note 1 mentioned earlier.

3 CAUSES FOR CONCERN: IS NICE FAILING TO UPHOLD ITS RESPONSIBILITIES TO ALL NHS PATIENTS? 3 lower bound of , not or the proposed per QALY that can provide a conservative assessment of the amount of health that is likely to be displaced. The scale of the health consequences of the observed acceptance creep can be simply illustrated. For example, a new technology with an ICER of that would cost the NHS an additional 10m per year would be expected to generate up to 334 additional QALYs each year. However, with a threshold of per QALY, finding the 10m required from existing resources would be expected to lead to a loss of 500 QALYs each year across different areas (Table I). Therefore, NICE may already be doing more harm than good by using the upper bound of the existing threshold range ( per QALY), for example, imposing a net loss of 166 QALYs for every additional 10m that NICE guidance costs the NHS. Raising the upper bound to would only increase the damage done, for example, with an ICER of the technology would be expected to generate up to 200 additional QALYs each year so the net harm to the NHS would increase to 300 QALYs for every additional 10m of NHS costs. The estimates of the health effects of addition NHS costs that are available indicate what type of health is likely to be lost and in which areas (Claxton et al., 2013). For example, the health effects of 10m reported in Table I also indicates how these 500 QALYs are likely to be made up including (i) the type of health effects (e.g., 33 additional deaths and 151 life years in the above example); and (ii) where these different types of health effects are likely to occur, for example, with greater life year effects in cancer and circulatory s and greater quality of life effects in mental health and respiratory and neurological s. 4. REFLECTING OTHER ASPECTS OF VALUE Applying any threshold that is higher than one that reflects the health that is expected to be displaced will necessarily reduce overall health outcomes (more QALYs will be lost than gained). This may be reasonable Table I. The health impact of 10m based on estimates of the distribution of health forgone (Claxton et al., 2013) assuming a cost per quality-adjusted life-year threshold of Change in spend Additional deaths LY lost Total QALY lost Due to premature death Quality of life effects Totals 10 ( m) Cancer Circulatory Respiratory Gastro-intestinal Infectious s Endocrine Neurological Genito-urinary Trauma and injuries* Maternity and neonates* Disorders of blood Mental health Learning disability Problems of vision Problems of Hearing Dental problems Skin Musculo skeletal Poisoning and Accident and Emergency Healthy individuals Social care needs Other (General Medical Services) LY, life year; QALY, quality-adjusted life year.

4 4 K. CLAXTON ET AL. if the type of health that is gained is regarded as more valuable than the health that is lost, or regarding the people gaining it to be more meritorious in their claim on resources than others. Therefore, taking account of other aspects of value associated health (e.g., burden of ) or non-health aspects of value (e.g., wider social benefits) requires an assessment of how much improvement in health (QALYs) is worth giving up to achieve more of these attributes of benefit and how much health and other attributes of benefit are expected to be displaced Burden of As part of its value-based assessment plans, NICE proposed to represent burden of using a measure of proportional shortfall. 3 A maximum weight of 2.5 was to apply to the cost-effectiveness threshold when considering drugs for s regarded as having a high burden. Estimates of burden of in this form are available across all the areas reported in Table I and are reported in Table II for a sample of ICD codes in which NICE has issued guidance over recent years. 4 The burden associated with the average of the displaced QALY effects across the NHS is significant (a proportional shortfall of 8%) and suggests that some drugs will have health effects in areas where the burden is lower than in those where health will be displaced (e.g., irritable bowel syndrome). 5 This means that the threshold should be lower, not higher, in such circumstances. If an explicit set of weights had been specified, then the weighted QALYs displaced could have been calculated and a weighted QALY threshold reported, based on whichever basic QALY threshold is regarded as appropriate given the evidence currently available. Taking account of other aspects of value will inevitably lead to more QALYs being lost than gained. However, failing to consider explicitly what type of health is displaced and for whom means that the health gained could well be less valuable (i.e., lost in areas of lower burden) and not more valuable than the health that is lost (i.e., lost in areas of higher burden) Wider social impact NICE appeared to be concerned that reflecting the net non-health impacts on patients, carers, and wider society would have a pronounced age gradient (patient populations where the consumption of services is greater than their production) (Meltzer, 1997). Caution is indeed warranted because measuring and valuing non-health effects poses difficult and disputed questions of social value whilst offering few benefits the UK market has little influence on drug development (Claxton et al., 2010). Nonetheless, the estimates provided by the DH (Appendix B) combine all marketed and non-marketed effects using evidence currently available and methods that are consistent with the Treasury Green Book (required by the terms of reference). These are reported in Table II for the same sample of ICD codes. 6 NICE s proposals rejected the approach developed by DH, partly on a mistaken view that it would be inconsistent with government legalisation on age discrimination, and instead adopted an absolute shortfall measure of burden as a proxy for wider social impact. 7 This was to be taken into account in the same way as proportional shortfall : by applying a maximum weight of 2.5 to the basic threshold of per QALY. Exactly 3 The expected QALYs lost due to having a (the difference between quality adjusted life expectancy for the general population and those with the ) as a proportion of the remaining quality adjusted life expectancy with (all matched for age and gender). 4 Estimates are available for all three digit ICD codes by age and gender; see Appendix A 5 The burden associated with a particular technology for a particular indication and patient population would be better estimated within the assessment report and manufacturers submissions (as suggested in NICE s proposals), rather than using these averages for each ICD code. 6 The estimates (see Appendix B: methods to estimate wider social benefits) are a function of age, gender, and quality of life and ICD chapter head and can be linked to estimates of displaced QALY by ICD code, which are detailed in Appendix A: displacement by ICD code and Claxton et al The QALYs lost due to having a the difference between quality adjusted life expectancy for the general population and those with the matched for age and gender.

5 CAUSES FOR CONCERN: IS NICE FAILING TO UPHOLD ITS RESPONSIBILITIES TO ALL NHS PATIENTS? 5 Table II. Measures of Burden (Appendix A) and wider social benefits (Appendix B) associated with the average of displaced quality-adjusted life year effects (Claxton et al., 2013) Proportionate shortfall (% QALY loss) Absolute shortfall (QALY loss) Wider social benefits (net production) C22 Liver cancer 73% C22 Liver cancer 10.7 M05 Rheumatoid arthritis C25 Pancreatic cancer 73% C25 Pancreatic cancer 9.97 E11 Diabetes C34 Lung cancer 71% C34 Lung cancer 9.68 M45 Ankylosing spondylitis C92 Myeloid leukaemia 38% F20 Schizophrenia 7.62 F30 Depression G20 Parkinson s 31% G35 Multiple sclerosis 6.18 F20 Schizophrenia C90 Myeloma 31% C92 Myeloid leukaemia 6.15 J45 Asthma C64 Kidney cancer 22% G20 Parkinson s 4.6 M81 Osteoporosis G35 Multiple sclerosis 18% C90 Myeloma 4.45 G35 Multiple sclerosis J43 Emphysema and 17% J43 Emphysema and 3.8 J43 Emphysema and COPD COPD COPD G30 Alzheimer s 14% C64 Kidney cancer 3.75 G40 Epilepsy F03 Dementia 14% F30 Depression 3.63 L40 Psoriasis F20 Schizophrenia 12% M05 Rheumatoid 2.83 Displaced Average of arthritis displaced QALYs M05 Rheumatoid 11% E11 Diabetes 2.68 E66 Obesity 8138 arthritis C61 Prostate cancer 11% Displaced Average of 2.07 C53 Cervical cancer 6912 displaced QALYs I26 Embolisms, 11% J45 Asthma 1.86 K50 Irritable Bowel 6284 fibrillation, thrombosis Syndrome E11 Diabetes 11% G30 Alzheimer s 1.68 J30 Allergic rhinitis 5234 C18 Colon cancer 10% F03 Dementia 1.68 G20 Parkinson s 3102 I21 Acute myocardial 9% G40 Epilepsy 1.32 C50 Breast cancer 2888 infarction I64 Stroke 8% C18 Colon cancer 1.28 G30 Alzheimer s 351 Displaced Average of displaced QALYs 8% I26 Embolisms, fibrillation, thrombosis 1.16 A40 Streptococcal septicaemia F30 Depression 6% C61 Prostate cancer 1.06 F03 Dementia 2430 G40 Epilepsy 4% I21 Acute myocardial 1 I64 Stroke 6949 infarction J45 Asthma 4% I64 Stroke 0.83 C18 Colon cancer 8061 C50 Breast cancer 3% C53 Cervical cancer 0.6 C61 Prostate cancer C53 Cervical cancer 3% C50 Breast cancer 0.55 C64 Kidney cancer L40 Psoriasis 2% A40 Streptococcal septicaemia 0.38 I21 Acute myocardial infarction J10 Influenza 2% J30 Allergic rhinitis 0.3 I26 Embolisms, fibrillation, thrombosis M81 Osteoporosis 2% M81 Osteoporosis 0.28 J10 Influenza J30 Allergic rhinitis 2% K50 Irritable Bowel 0.26 C90 Myeloma Syndrome A40 Streptococcal 2% J10 Influenza 0.19 C92 Myeloid leukaemia septicaemia K50 Irritable Bowel 1% L40 Psoriasis 0.19 C22 Liver cancer Syndrome E66 Obesity 0% E66 Obesity 0.18 C34 Lung cancer M45 Ankylosing spondylitis 0% M45 Ankylosing spondylitis 0.11 C25 Pancreatic cancer QALY, quality-adjusted life year.

6 6 K. CLAXTON ET AL. the same problems apply: no explicit weights were proposed (whether evidence-based or not), with no proper account taken of the burden associated with the displaced QALY effects (average of 2.07 QALYs in Table II). The notion that absolute shortfall might be a proxy for wider social benefits is quite clearly fallacious. If there is any relationship, it appears more likely to be a negative one. This has consequences for patients with certain s, which might be regarded as unfair. For example, improving the health of patients with ankylosing spondylitis offers very high wider social benefits, which are higher than those that are likely to be displaced ( per QALY is associated with the average of displaced QALY effects), but would be scored very low using the two measures of burden proposed by NICE. Similarly, the wider social benefits associated with improving health outcomes in depression is higher than the benefits likely to be displaced but lower than the absolute burden likely to be displaced. Whether or not the implications of these proposals were anticipated or represent reasonable and widely shared social values is unclear (Rowen et al., 2014) CONCLUSIONS NICE s recent proposals seems to confirm the other evidence that the direction of travel is towards a greater concern for the interests of those stakeholders who are already well represented at the expense of its responsibilities to all NHS patients. The evidence suggests that more harm than good is being done, but it is the unidentified and unrepresented NHS patients who bear the true (health) opportunity costs. Although finding reasons to approve new drugs is undoubtedly politically expedient, this cannot be ethically literate, because the interests of NHS patients, whether they are identifiable or not, are just as real and equally deserving of the type of care and compassion that can be offered by a collectively funded health care system. It is to be hoped that NICE will begin to place the unidentified NHS patients who bear the real opportunity costs at the heart of its deliberative process; especially as it reconsiders how other attributes of benefit might be taken into account. The key issue remains that of finding a mechanism allowing manufacturers to agree potentially lower prices in the UK that reflect their value to the NHS (whichever attributes of benefit are included). Unfortunately for the NHS, this critical issue appears to have been entirely neglected, despite a number of suggestions about how UK transaction prices for drugs could be insulated from parallel trade and international reference pricing (Claxton, 2007; Claxton et al., 2011). NICE cannot be held responsible for this policy failure. The only price negotiation mechanism in place is that which has always been available: discounts offered product by product (e.g.., Patient Access Schemes). Consequently, the best that can be expected is the rejection of effective drugs when manufacturers are unwilling to offer sufficient discounts to global prices. The worst that can be expected is that NICE will find reasons to approve them nonetheless and inflict considerable damage on the NHS and the patients it serves. ACKNOWLEDGEMENTS We would like to thank Susan Griffin, Andrea Manca, Claire McKenna, Marta Soares and Eldon Spackman for providing comments on a joint submission to the NICE consultation on value-based assessment (Review of the Guide to the Methods of Technology Appraisals, 2014) on which this paper draws. We would also like to thank Marta Soares for revisions to Appendix 1: Clarification on aspects of the threshold project proposed to be used within VBP, Marta Soares and Karl Claxton, University of York. July 2013, which forms the basis of Appendix A. This material was presented to the NICE Methods Working Party on VBP, Meeting 2, 19 July We would also like to thank Gavin Roberts for providing the material contained in Appendix B, which was 8 The UK evidence suggests people are willing to accept smaller improvements in health when the gains are in areas with high absolute shortfall, but there is no UK evidence that supports weighting using proportional short fall D. Rowen et al., Update: Eliciting Societal Preferences for Weighting Qalys According to Burden of Illness, Size of Gain and End of Life. Policy Research Unit in Economic Evaluation of Health & Care Interventions (Eepru) Research Report, (Sheffield: EEPRU, Universities of Sheffield and York, 2014), ibid. Society s preference for more rather than less resources for other uses (both marketed and non-marketed) seems self evident.

7 CAUSES FOR CONCERN: IS NICE FAILING TO UPHOLD ITS RESPONSIBILITIES TO ALL NHS PATIENTS? 7 presented to the NICE Methods Working Party on VBP, Meeting 3, 27 August Of course, the views expressed in this report, as well as any errors or omissions, are the sole responsibility of the authors. Claxton and Sculpher are former members of the NICE Technology Appraisal Committee, and Palmer is a current member. Culyer is a former vice chairman of NICE. The University of York receives funding from the National Institute for Health Research to undertake technology assessments for NICE and from NICE to participate in the NICE Decision Support Unit. REFERENCES Claxton K OFT, VBP: QED? Health Economics 16(6): Claxton K, Briggs A, Buxton M et al Value based pricing for NHS drugs: an opportunity not to be missed? British Medical Journal 336: Claxton K, Walker S, Palmer S et al Appropriate perspectives for health care decisions. Centre for Health Economics. Centre for Health Economics, University of York: York. Claxton K, Sculpher M, Carroll S Value-based pricing for pharmaceuticals: Its role, specification and prospects in a newly devolved NHS. CHE Research Paper CHERP60.pdf (York: Centre for Health Economics, University of York). Claxton K, Martin S, Soares M et al Methods for the Estimation of the NICE Cost Effectiveness Threshold. Centre for Health Economics (CHE) Research Paper 81. CHE, University of York: York. Dakin H, Devlin N, Feng Y et al The influence of cost-effectiveness and other factors on NICE decisions. DOI: /hec.3086, Health Economics. Department of Health A New Value-Based Approach to the Pricing of Branded Medicines - a Consultation. London Department of Health. Department of Health A New Value-Based Approach to the Pricing of Branded Medicines: Government Response to Consultation. Department of Health: London. Department of Health Technical report on wider social benefits: briefing document. Paper presented at NICE workshop 24th October 2012 (London: Department of Health). Department of Health and Association of the British Pharmaceutical Industry PPRS: Heads of Agreement Heads of Agreement for the 2014 Pharmaceutical Price Regulation Scheme. Department of Health: London. Meltzer D Accounting for future costs in medical cost-effectiveness analysis. Journal of Health Economics 16: National Institute for Health and Care Excellence. 2014a. Consultation Paper: Value-Based Assessment of Health Technologies. NICE: London. National Institute for Health and Care Excellence. 2014b. Value Based Assessment. Item 4, NICE Board Meeting 17 September. NICE: London. National Institute for Health and Clinical Excellence (NICE) Updated Guide to the Methods of Technology Appraisal. NICE: London. Office of Fair Trading The Pharmaceutical Price Regulation Scheme. An OFT market study. OFT: London. Rowen D, Brazier J, Mukuria C et al Update: Eliciting societal preferences for weighting QALYs according to burden of illness, size of gain and end of life. Policy Research Unit in Economic Evaluation of Health & Care Interventions (EEPRU) Research Report, (Sheffield: EEPRU, Universities of Sheffield and York). SUPPORTING INFORMATION Additional supporting information may be found in the online version of this article at publisher's website.