On the wall of Sir Michael Rawlins' office in London is a cartoon of a group of men in suits cowering below a giant circular pill inscribed with the word pharma. Amid the supplicants strides an impervious figure from Britain's National Institute for Health and Clinical Excellence (NICE) with a puzzled look on his face. Like the man in the cartoon, NICE head Rawlins doesn't see why drug companies should deserve any deference. His organization uses hard-nosed cost-effectiveness reviews to decide which treatments Britain's National Health Service (NHS) should pay for. A new drug doesn't just have to work to impress NICE, it has to offer value for money and if it doesn't, whether it is life-saving or not, Rawlins' group won't approve it. With skyrocketing prescription prices bloating America's health-care system, many experts are now taking a hard look at whether America should embrace NICE's controversial methods. Rawlins talked to TIME about how NICE calculates a drug's worth, what its system might mean for the U.S. market and why drug companies are running scared:
Why is NICE needed? Shouldn't you get the drugs you need when you are
sick, regardless of cost?
All health-care systems are facing the problem of finite resources and almost infinite demand. And all health-care systems have implicitly if not explicitly adopted some form of cost control. In the U.S. you do it by not providing health care to some people. We are best known [for looking] at a new drug, device or diagnostic technique to see whether the increment in the cost of that treatment is worth the increment in the health gain. (See pictures of health care in Tehran.)
How is that measured?
It's based on the cost of a measure called the "quality-adjusted life year" [QALY]. A QALY scores your health on a scale from zero to one: zero if you're dead and one if you're in perfect health. You find out as a result of a treatment where a patient would move up the scale. If you do a hip replacement, the patient might start at .5 and go up to .7, improving by .2. You can assume patients live for an average of 15 years following hip replacements. And .2 times 15 equals three quality-adjusted life years. If the hip replacement costs 10,000 GBP [about $15,000] to do, it's 10,000 divided by three, which equals 3,333 GBP [about $5,000]. That figure is the cost per QALY.
So by the cost per quality-adjusted life year, you are basically
deciding how much a year of life is worth?
Yes. The most controversial area is where you place the dividing line between what is cost-effective and what is cost-ineffective. That is the "How much is life worth?" question. And there is no real empirical research to guide you. We have looked at what other government departments do. Our Department of Transport, for instance, has a cost-per-life-saved threshold for new road schemes of about 1.5 million GBP per life, or around 30,000 GBP per life year gained. The judgment of our health economists is that somewhere in the region of 20,000-30,000 GBP per quality-adjusted life year is the [threshold], but it's not a strict limit.
That's a tough decision to make for bureaucrats, is it not?
For many difficult questions, we capture public preferences by our citizens council, a representative sample drawn from the general public. For example, we asked if should we give greater priority to children than the elderly. The group decided that a year of life was worth just as much when you are a grandparent as when you are a child. That is very culturally specific and might not apply to other countries in the world.
Why doesn't NICE take into account other factors in its cost-effectiveness review, such as lost productivity to the workforce?
The quick answer is that our statutory instruments specify that we [should not]. But if you give advantage to people who are economically active, it means you disadvantage the economically inactive the elderly. That's something that British society would find difficult to accept.
It seems like NICE is forcing pharmaceuticals to play ball by offering
special discounts to Britain. How do you manage that?
Our list price is used as a reference price in other countries, so drug companies believe that a no from NICE is damaging globally. So they set up what we call "patient-access schemes." Drug companies may either give away certain portions of treatment [such as the last few doses of a course] or reimburse the NHS for those patients who don't respond, which has the effect of reducing the price of the drug and lowering the cost per QALY even though the reference price stays the same.
If the U.S., with its massive health-care market, did the same, could it
have a transformative effect on drug costs?
I think it could. The companies won't like it in America. But yes, it could.
And you don't buy the drug companies' arguments that doing so will
destroy their research-and-development budgets?
Drug development has become so expensive it's going to become unaffordable no matter what happens. A lot of the expense is a consequence of the drug-regulatory authorities, who pile on regulation after regulation, which makes getting a drug to market hugely expensive. But the expectations of investors have to be tempered as well. The 15-20% [growth] of some companies is not going to be possible in the future. A third of staff of some big pharmacy companies work in marketing, and many companies spend twice as much on marketing as R&D. That has got to go. I mean for Christ's sake, it's hopeless.