Government considers raising NICE cost-effectiveness threshold to appease pharmaceutical industry

After a months-long dispute between the UK government and the pharmaceutical industry over NHS drug pricing, reports say prime minister Sir Keir Starmer is prepared to negotiate.

One option, which would increase the amount paid for drugs, is to raise the National Institute of Health and Care Excellence (NICE) cost-effectiveness threshold which has stood at £20,000-£30,000 since 1999. Currently, NICE will only approve medicines that cost less than this for each year of quality life they provide patients.

The government is now considering a higher range of £25,000-£35,000, national reports have said.

However, in another twist, this proposed increase sees ministers at loggerheads over where to find the billions to pay more for medicines, with neither NHS chiefs nor the Treasury wanting to foot the bill, The Times, reports.

If the upper end of NICE’s threshold had risen with inflation since 1999, it would now be around £56,794 and if it had increased in proportion with the growth of the NHS budget since 2014, it would be £59,150, according to the Association of the British Pharmaceutical Industry (ABPI).

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‘It is becoming increasingly difficult to defend a forever frozen threshold,’ it said in a statement. ‘Without action, the benefits that medicines offer to patients will continue to be undervalued, and the UK will increasingly set the bar too high for NHS patients to benefit from new medical innovations.’

The ABPI called for ‘urgent action’ to increase the NICE baseline threshold to £40,000-£50,000 which will, over time, lead to a greater share of the NHS budget being allocated to medicines.

In defence of the opposite camp, the Nuffield Trust have published new analysis of the situation and urged the government to stand firm against pressure to increase drug prices.

Nuffield Trust senior policy analyst, Sally Gainsbury, said: ‘The question of how much the NHS should be willing to pay for a life-extending drug has always been fraught with difficulty, but with the health service already under immense financial pressure, giving in to demands from pharmaceutical companies to spend more on drugs would mean less money available for other services and treatments.

‘New medicines are on average much less cost effective than existing services like GP appointments, which benefit more of the population.’

According to the Nuffield Trust analysis, the current £30,000 NICE threshold is ‘currently set too high’. This is because the £30,000 exceeds the average cost to the NHS of producing one Quality Adjusted Life Year (QALY) through its existing services such as GP care or a surgical procedure.

Ms Gainsbury added: ‘Over the decades, the NHS has developed mechanisms to counterbalance the considerable power of drug companies to get the most out of its budget for patients. A weakening of that counterbalance, such as through an increase to the maximum price NICE will allow for new medicines, would be a blow both to patients and the taxpayer.’

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Other proposed changes involve adjusting NICE’s ‘discount rate’ so that the NHS can better justify higher spending on treatments that aim to prevent illnesses many years down the line.

A Government spokesperson said: ‘We’ve committed to working with industry to accelerate growth in spending on innovative medicines compared to the previous decade.

‘We've secured a landmark economic partnership with the US that includes working together on pharmaceutical exports from the UK whilst improving conditions for pharmaceutical companies here.

‘We're now in advanced discussions with the US Administration to secure the best outcome for the UK, reflecting our strong relationship and the opportunities from close partnership with our pharmaceutical industry.’

This issue began last month, when the ABPI rejected the government’s drug pricing offer as ‘unsustainable’.

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At issue was a voluntary pricing scheme that sets an annual cap on how much the NHS can increase its spending on branded medicines. When spending exceeds this cap, pharmaceutical companies must pay rebates to the government – essentially returning excess revenues above the agreed threshold.

These rebate rates were initially forecast at around 15% but have risen to about 23% this year as NHS spending on branded medicines grew from £6.9bn to £8.4bn.

The government offered to reduce the industry’s costs by around £1bn over three years, but drug companies forecast payments totalling £13.5bn over the same period, so they rejected the deal and no agreement was reached.