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Pricing Dilemmas Mount
UK Nixes Popular Drugs, Raising Questions about European Launches.
By Pete Mitchell, Contributing Editor, Pharma DD
November/December
2006
Drug companies are beginning to look askance
at the UK as a forum in which to launch brand-new products, after some
controversial decisions on pricing and reimbursement from the country's
National Health Service (NHS). Moreover, other European countries are also
starting to follow the UK's lead on banning drugs that are not
cost-effective enough (which could also be read as "not cheap
enough"). The upshot could be not only poorer access to drugs on the
Continent, but a gradual withdrawal of pharmaceutical R&D facilities
from Europe as a whole.
In August of this year, the NHS rejected two
new bowel cancer drugs-Genentech's Avastin and ImClone's Erbitux. Both are
widely available in the US and some other European countries. Then, in
October, the service confirmed it would not approve cholinesterase
inhibitors for early-stage Alzheimer's disease (AD), despite data from more
than 30 clinical trials showing benefits.
The reasons for these decisions and many
others like them (see "UK Drama Highlights MAb Pricing," Pharma
DD, May/June 2006) are too complex to be described as "price
controls." In fact, the UK, unlike other European countries, does not
control drug prices directly. Instead, it imposes caps on each drug
company's revenues through a system called the Pharmaceutical Price
Regulation Scheme (PPRS). Drug companies operating in the UK are free to set
individual product prices at any level they choose, provided the company's
total profits stay below the PPRS ceiling.
The system forces companies to restrict drug
prices and volumes to levels affordable by the NHS. The ceilings are
renegotiated every five years, usually with price cuts: In January 2005, the
NHS forced a 7 percent across-the-board reduction. Even so, the industry
regards PPRS as a necessary evil.
"We regard it as the least worst system
in Europe," Richard Barker, director-general of the Association of the
British Pharmaceutical Industry, says. "The great benefit is that it
explicitly sets out to encourage innovation, by giving free pricing and
unlimited reimbursement for the discoverer of a new drug. It's an effective
supply bargain between industry and government."
Nigel Brooksby, UK managing director of
Europe's biggest pharma group, the French-owned firm Sanofi-Aventis, agrees
that the PPRS had brought an "environment of innovation" to the
UK. "We are lucky in that they more or less allow us to set our own
price when we introduce an NCE," Brooksby told Pharma DD.
"Although they do have something to say when we introduce new
formulations or dosages of existing medicines."
However, it is not just the PPRS that
companies have to worry about when pricing new products for the UK: There's
also the National Institute for Clinical Excellence (NICE). NICE's job is to
calculate whether medical interventions are good value for the NHS's money.
If it says they aren't, then the NHS will no longer reimburse them and
doctors will no longer prescribe them. NICE's assessments usually kick in
three years after a drug has been launched, although drug makers have to
allow for its machinations well in advance.
It was NICE that dropped the recent
bombshells over therapies for bowel cancer and AD. Some of the new
biological medicines rejected by NICE are, of course, very expensive indeed.
Avastin costs £924 for a 400-mg vial (US price $2,200), or £16,800 for
each course of treatment. A course of Erbitux costs £11,739. NICE decided
these costs were not worth the few months of delayed progression that the
drugs could deliver. Its calculations are extremely complicated, but boil
down to the fact that Avastin and Erbitux cost £88,000 and £45,000,
respectively, to deliver an extra year of life, while NICE's baseline
value-for-money figure—obtained by looking at other typical treatments
available on the NHS—is only £30,000 per extra year of life.
The decision for rejection of Avastin and
Erbitux therefore seems natural. But the latest NICE demarche, rejecting
cholinesterase inhibitors for mild AD, has really gotten the industry's
goat. The drugs concerned—Aricept (donepezil; Pfizer), Reminyl (galantamine;
Janssen/Shire), and Exelon (rivastigmine; Novartis)—are not especially
expensive, costing about £900 per year of treatment. NICE even admits that
the medications do benefit many early-stage AD patients.
NICE's decision on the AD medications was
evidently a tough one. The 30-strong expert AD committee could not reach a
consensus and had to use a secret ballot to decide whether these medicines
should no longer be used at all or whether they should be recommended for
only moderate AD. Restricted use was agreed by a slim majority of 16 votes
to 12.
NICE's chief executive Andrew Dillon defended
the verdict at a press conference: "All licensed drugs have an effect
for some patients, but we have to check where they have the most benefit. In
this case we can't be confident that most patients will receive real
benefits in the early stages of the disease." Clive Ballard, director
of research at the UK's Alzheimer's Society, replied bluntly that the
benefits are about 6 to 12 months of improved function and quality of life.
"NICE's cost analysis makes no sense whatsoever," he continued.
Pharma Fires Back
The industry pulled no punches either, condemning the decision on the
grounds of "commonsense and basic humanity, as well as sending negative
signals to those engaged in cutting-edge medicines research." Sanofi's
Brooksby adds, "It is flying in the face of commonsense to make
patients wait until their condition deteriorates before treating them, and
it also disregards the basic humanity of a situation where patients who
could benefit from a medicine are denied it."
Brooksby also points out that the UK
government had to be aware that Britain was not the only place to invest
R&D money—a veiled threat that the industry has often made before. For
NICE, however, the problem was twofold. First, anti-cholinesterase drugs
have quite limited benefits in mild AD; they don't defer progression of the
disease. Second, quite a few older people get AD. Those things said, the
modest-sounding unit cost of the treatments has to be aggregated across the
estimated 150,000 early-stage AD patients in the UK, which adds up to a lot
of money for not much gain.
Clearly, the firms concerned could have
improved the chances of a favorable NICE verdict just by reducing their
launch prices. This does happen: "There's a tendency for manufacturers
to set the launch price lower in the hope that they can charge twice that
after two or three years when the drug has proved its value to NICE,"
says ABPI chief Richard Barker. However, lowballing is a risky strategy,
said Brooksby. "There aren't many occasions these days you get anything
remotely resembling a price increase after launch," he says.
"Quite the reverse, it's more likely to be a decrease."
Manufacturers may sometimes prefer to hope
that moral pressure on NICE, backed by vocal patients' groups, would see
them through the assessment. Skeptics of the value of anti-cholinesterase
drugs admit the force of this tactic. One, Anthony Pelosi, a consultant
psychiatrist and AD expert at Scotland's Hairmyres Hospital, wrote in the
British Medical Journal that, although the drugs' effects are "by any
criteria modest" it will be "extremely difficult, perhaps
impossible, to wait for a diagnosed patient to deteriorate before starting
treatment."
Of course, the pricing dilemma is not just a
UK problem. The healthcare system of every European country is to some
extent publicly funded, and as a result governments feel they have the right
to intervene on drug pricing and reimbursement. Some examples of these
intervening groups are France's Transparency Commission and Germany's
Quality of Care Institute (IQWiG). Other European countries—in particular
the Netherlands, Sweden, and Italy—are even taking their lead from NICE
itself, piggybacking on the UK body's decisions to control their own
governments' reimbursement costs.
The UK's real distinction is in being further
down the road. "This sort of judgment is being made all the time, not
just in the UK health system, but all over the world," says NICE's
Dillon. "But in the UK we are doing it very carefully and very
transparently, so that everyone can look at and challenge the decisions that
we take." What isn't in doubt is that challenges will become ever more
frequent as ever more expensive drugs are launched.
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