Value Based Pricing – What’s the value in it?

Posted by: in Healthcare Insights on May 18, 2011

What price value?

At the annual NICE conference there was a lot of discussion and debate around value-based pricing (VBP). The UK coalition government, as part of its reform of the healthcare system, is aiming to introduce this concept on 1 Jan 2014 replacing the way the UK currently prices drugs for use by the NHS. This was previously the domain of the PPRS (pharmaceutical pricing regulatory scheme) and NICE.

The government feels that cost and, in an indirect way, pricing should not be seen as the remit of NICE.

The actual construct of how VBP will work is currently under consultation along with the other NHS reforms previously announced, such as GP consortia to manage local health budgets. This “time of reflection” has been brought about by the concerns of numerous stakeholders that the proposed pace of reform was too fast and not necessarily the most effective way forward.

As with many other EU countries,(Greece, Ireland, Portugal and Spain) the recent and ongoing, economic problems and high level of debt has led the UK government to look at significant cuts to public sector costs, such as the NHS and the drugs budget. Some however question whether there will be cost-savings with a VBP scheme.

Leading economists at the NICE conference proposed a pricing range for individual therapy areas within which a pharmaceutical or device/diagnostics company would have to pitch its UK price. The greater clinical benefit demonstrated over existing standard of care the more likely a price higher in the range would be accepted – a product showing limited benefit or just a me-too would find even a low price difficult to obtain.

However, for all the debate the telling point comes from government itself saying that it alone will decide on how VBP will work and be administered – which questions the value of the consultation process.

Demonstration, and inclusion of, innovation is going to be tough in this current economic climate with many thought leaders calling for the development of real world/life studies as part of the regulatory process rather than waiting until a product is licensed. Industry needs to take this approach on sooner and find more effective ways of running such studies.

 The rest of Europe will be watching with interest how the role of NICE evolves, how VBP is implemented and the impact of healthcare reform. Although the UK is a social system that differs to many of its neighbours the way it manages cost will be scrutinized by others.

By: Nigel Breakwell

Group Director, WCG

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