Author: Professor Alistair McGuire, LSE
This discussion formed the first part of the Forum on Medical Innovation event.
Panel 1 consisted of Lord Darzi (Imperial College, UK), Professor McGuire (LSE), Mark Pearson (OECD), Professor Claxton (University of York), John Milligan (Gilead Sciences), Mary Baker (European Brain Council), Isabel de la Mata (European Commission) and Professor Geoff Dusheiko (UCL).
This panel began with an introduction by Lord Darzi, Imperial College followed by a presentation of the background themes to be discussed by Professor McGuire, LSE.
In his presentation Professor McGuire raised the issue that these were challenging times for the regulation of the industry with an extension of the traditional regulation due to safety and efficacy concerns, into the regulation of pricing and reimbursement of new pharmaceutical products. Regulation in this sector has increased the cost of R&D, as more evidence and data are required to satisfy stronger regulatory requirements. This has also lengthened the time to market, which erodes the patent protection put in place to offer appropriability of R&D return as an incentive to induce manufactures to accept the costly and uncertain consequences of R&D activity. Clearly getting the optimal form and structure of the various components of regulatory control in this area is a complex task.
As a result of these complexities regulatory authorities have incrementally adjusted their requirements. In recognition of lengthening market access times the regulators primarily responsible for safety and efficacy issues, the US Food and Drug Administration (FDA) and the European Medicines Authority (EMA) have established a number of fast-track options for manufactures of innovative medicines. Unfortunately, definitions of innovation across the various designated fast-track routes are neither completely explicit nor consistent across tracks.
Reimbursement and pricing regulation has increasingly asked that the value of new medicines be determined through comparison to existing treatments, with an increasing emphasis on value based pricing (VBP). This has meant that clinical trials are being re-designed with head-to-head comparisons, rather than placebo comparators, becoming the new norm. Moreover a definition of value has to be established, particularly with respect to claims of innovation, if higher levels of reimbursement are to be established.
While innovation can be defined broadly as an increase to the knowledge base, regulators tend to relate innovation to improvements in health benefits alone. Professor McGuire noted that Health Technology Assessment (HTA) agencies increasingly estimate health benefits either through Therapeutic Value Added (TVA) or with recourse to a threshold level of cost per health benefit achieved, where the Quality Adjusted Life-Year (QALY) gained is the common estimate used. The TVA introduces inconsistencies in acceptable level of health benefit to be gained as different therapeutic areas are measured with respect to different baseline estimates of existing therapeutic value; the estimate of acceptable health benefit will differ when considering cancer treatments compared to the acceptable level of health benefit a new pharmaceutical must achieve in the area of cardiovascular disease, for example. Conceptually the establishment of a threshold cost per QALY would overcome these difficulties, as a commensurate health benefit definition, the QALY, applicable to different therapeutic areas is used. In practice however different methods of estimating the acceptable cost per QALY can be adopted. The most common approach is to rely on an estimated Willingness to Pay (WTP) definition, where a threshold is established that is held to represent society’s WTP for the adoption of new treatments as related to the QALYs achieved from these treatments.
Others, including Professor Claxton, have argued that in the budget constrained systems of the European health care systems the opportunity cost of introducing new treatments ought to be explicitly judged with respect to their ability to displace existing treatments. The actual estimates of the threshold cost per QALY differ markedly, at least within the English health care system where both approaches have been compared. Such inconsistencies in the calculation of the threshold cost per QALY are further complicated by the adoption of different thresholds for so-called end-of-life therapies; essentially higher thresholds for cancer treatments. While little empirical evidence exists to support these higher thresholds they are increasingly used, adding to the regulatory inconsistencies.
It was stated that while other regulatory instruments, particularly for the reimbursement of medicines has been suggested, such as auctions and prizes, none have gained widespread support. Apart that is for specific treatments, with the most obvious examples being in the area of creating incentives for new antibiotics and malaria treatments.
Mark Pearson from the OECD opened the discussion by agreeing that regulation in this area was not optimal, and that it had been increasingly incremental in its response to new highly priced, innovative medicines. He felt that there was a need to re-consider the regulatory landscape in its totality, with possibly a demand for a complete re-structuring of this area of regulation. He defended this position by reference to the increasing numbers of highly beneficial, but highly priced medicines that were being assessed within the budget constrained European market.
Professor Claxton argued that it was precisely because of the budget constraints within the health care sector that a common, opportunity cost based threshold cost per QALY should be established. He presented the argument that in Europe generally, but specifically in the UK, the health care budget was pre-determined by the central government and the health sector had to live within this established level of public finance. Once established this budget constraint means that any new medicine, no matter how effective, had to be considered in terms of what would have to be displaced if this new treatment was considered a viable treatment option. The only way to do this, he argued, was through the establishment of an agreed opportunity cost estimated cost per QALY, where the QALY was taken to be the preferred measure of health benefit as it allows comparison across therapeutic areas.
John Milligan, from Gilead Sciences, took the discussion forward by, acknowledging that the European health care systems worked within pre-determined budget constraints, but that this tended to dampen manufacturers incentives to pursue new medicines as the costs of R&D are soaring and it is becoming harder to generate meaningful returns on these R&D investments. He was concerned that even when highly effective medicines were produced, the budget implications were such that, even if cost-effective compared to existing therapies, new medicines might continue to be rationed if the disease prevalence were such that the budget impact was perceived by regulators to be too great.
Mary Baker, in giving the patient perspective, while recognising these complexities argued that budget constraints were an unavoidable fact of life. She did think, however, that the various inconsistencies arising from incremental changes to the way medicines were regulated ought to be re-considered, highlighting that inconsistent regulation gives a muddled signal to everyone within the health sector.
Geoff Dusheiko gave a clinical perspective, arguing that high prices and the lack of an early prevention model skewed treatment towards late disease. He discussed the importance of correctly costing R&D and finding an accepted average on the price of treatments and pharmaceutical products. He mentioned the limitations of value-based pricing and the problems they face with QUALYS, NICE and NHS in building treatments. Additionally, he pointed out that the NHS did not correctly interpret the data related to health technology assessment. Finally, he discussed the need in measuring health outcomes and the need of an outcome database that is purpose driven and not data driven.
Isabel de la Mata argued that the focus should be on prevention rather than lowering prices. She emphasised the importance of raising awareness and engaging society and patients more in the decision process. She also mentioned some of the weaknesses of the European Union’s pharmaceutical regulation, like its failure to include efficiency.
The ensuing open discussion elaborated on the points that the presenters had made. Much was accepted. The evolving inconsistencies of the current regulatory approaches to medicines and the acceptance of binding budget constraints and the opportunity cost approach to establishing cost per QALY thresholds was hotly debated. A number of participants raised more practical issues relating to a concern that even if optimal regulation, however defined, could establish the true value of the health benefit delivered by new medicines the existing incentive structures within many of the European health care systems inhibited the up-take and diffusion of such medicines.
Video: Panel one
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