Britain is missing out on pharma investment thanks to medicine rationing
A subtle version of fiscal drag has seen the amount the NHS is prepared to spend on treatments reduce in real terms, meaning patients are missing out on life-saving treatment and the economy is missing out on investment, says Gareth Lyon
The UK government has spent decades testing the limits of just how far industry can go in discounting prices for innovative medicines in the NHS. Recent industry news shows that the sector was not bluffing when it talked about the potential impact on investment in this country.
Several of the world’s largest pharmaceutical companies have paused or pulled investments in the UK, citing market access and pricing as major issues. Meanwhile other European countries such as Spain and Poland have been actively courting pharmaceutical investments and making life as easy as possible for them.
There has been a lot of discussion about the crucial multi-year industry pricing agreement, VPAG (The Voluntary Scheme for Branded Medicines Pricing, Access and Growth) which seeks to limit NHS spending on innovative medicines. With negotiations dragging on, industry has faced incredible frustration and uncertainty impacting a large part of the UK market.
But this is not the only mechanism limiting NHS use of potentially life changing medicines. The value-based rationing imposed by the National Institute of Health and Care Excellence (NICE) means that treatments which have at least limited market access in other European countries are shut out of the NHS – with patients often being completely oblivious of the availability of treatments.
Value of life has declined
The principles behind NICE are hard to argue with: there must be a rational basis for keeping state spending on healthcare under control. But NICE has been subtly operating its own version of fiscal drag over the past 20 years by freezing the amount it is prepared to pay for a treatment as measured in Quality Adjusted Life Years (QALYs) – resulting in a 47 per cent real-terms reduction in what the UK is prepared to pay for a new medicine between 2009 and 2025. Effectively this means that the value put on a year of good health for a UK patient has declined by nearly half during that time.
These limits on the availability of medicines to patients are exacerbated by fragmented budgeting within the NHS. Even when a particular medicine is allowed within the NHS and judged by medical professionals to be the right treatment, it will sometimes not be used because a particular Integrated Care Board (ICB) or Trust may lack the funds – resulting in postcode lotteries across the country.
All of this matters both to UK patients missing out on potentially life-changing medicines, but also to the UK economy. The domestic market is a critical factor that major pharma companies take into account when deciding whether to make their investments. Major investments of the sort the UK is increasingly missing out on are, for each company, once-in- a-generation decisions worth hundreds of millions or even billions of pounds. They also have very significant spill-over effects for suppliers and associated companies.
The UK will have to work hard to start winning these investments again and it will not happen overnight.
Pricing is also just one factor in attracting and retaining these kinds of investments. Other countries such as Poland have worked hard to make partnership working between academic and commercial researchers easier.
Spain has also worked to remove unnecessary burdens around setting-up clinical trials – meaning also that patients in that country can access treatments earlier and that their health providers benefit from direct investment and support.
Tax too is an area where countries can make themselves more attractive – and low rates of corporation tax can make even a relatively small market very attractive for pharma investments.
The UK has potential strengths in all of these areas. Many UK universities have well-deserved reputations for excellence in life sciences, while the NHS presents incredible opportunities for clinical trials, making use of very extensive (if currently highly fragmented, hard to access and thus and under-utilised) datasets. Policy Exchange’s previous recommendations on vaccines policy in our report A Fresh Shot, including improving provider and patient access to health records, apply, just as much to the wider pharmaceuticals market.
The UK government already has a life sciences sector plan and there is a lot of good in it as a starting point. But despite these positive intentions there is scepticism in industry about how or when it will be put into effect. Now is the time for the government to work with industry, academia, the NHS and patients to go beyond this and to become one of the best places in the world to research, develop, make and access innovative medicines.
Gareth Lyon is head of health & social care at Policy Exchange