The problems faced by UK patients in accessing many innovative new drugs are nothing to do with the National Institute for Health and Clinical Excellence (NICE); this is due to the fact that global drug prices are dominated by the US market, according to a leading health economist.

Therefore, at current global prices, NICE guidances have not been overly restrictive - they have not been restrictive enough, Karl Claxton, Professor of Health Economics at the University of York, has told a meeting in London organised by the Westminster Health Forum (WHF) in London.

Prof Claxton is the co-author of a recent study which shows, for the first time, the impact on other NHS patients of new and more expensive drugs and other treatments. Since 2004, NICE has used a threshold range of £20,000-£30,000 per quality-adjusted life years (QALYs) to assess how much additional NHS cost incurred for supplying new treatments would displace an amount of health for other patients, but the authors of the new study believe that £18,317 per QALY would be a more accurate threshold.

The chance of the threshold being less than £20,000 is 64%, while the chance that it is less than £30,000 is 92%, according to the study, which was funded by the Medical Research Council (MRC) Methodology Research Programme. Moreover, £18,317 per QALY is likely on balance to be an overestimate of the “true” threshold, especially for new drugs that impose great costs on the NHS, the researchers add.

“For many branded drugs, we are paying too much rather than too little,” Prof Claxton told the WHF meeting.

“The more financial pressure you put on the NHS, it responds by improving productivity, and that means that the cost-effectiveness threshold has fallen. All the evidence that we’ve got is that the more financial pressure the NHS is under, the more likely it is that that threshold will fall,” he explained. 

So what does this mean for innovation?

The most important thing is that the companies and investors responsible for developing, manufacturing and bringing new drugs to market are given “a very clear signal” of the benefits that healthcare systems will pay for. Having a clear, empirically-based estimate for threshold is part of providing them with the clarity and predictability they need for investment decisions, and it is then for the manufacturers to decide whether a particular investment is worthwhile, said Prof Claxton.

“Not all investments are worthwhile, and it is not the job of the NHS to make them so," he said. The NHS is not a tool of industrial policy and nor can it be, because it cannot distinguish between companies which locate in the UK and those that do not – for it to do so would be illegal under European Union (EU) law, he pointed out. 

So if we want to support innovation, the last thing we should do is pay more than the value of the benefits for a product. This damages health for NHS patients, distorts incentives and leads to over-investment in high-cost R&D, which does not lead to products which are sufficiently valuable for the NHS, he told the meeting.  “It’s bad for the NHS, it’s bad for patients - and it isn’t any good for the [pharmaceutical] sector in the long run either.” 

A much more sensible way to support innovation is, using the same resource, to invest in basic fundamental biomedical research, he suggested. This will provide the foundation for new generations of genuinely innovative products which will provide the types of benefits and command the kind of “quite reasonable” prices which will provide a return on investment.

Prof Claxon also proposed that this resource should be used to make sure the NHS is a great place to do high-quality evaluative research; “high-quality, quick and cheap – not only would that provide us with the evidence we need, it will actually make the UK a much better place to locate your R&D infrastructure,” he told industry delegates at the meeting.

Finally, he called for a mechanism that allows manufacturers to negotiate appropriate prices in the UK, without fear that they will be referenced around the world and the rest of the world market. "Without that, many manufacturers quite reasonably will say: 'I will not negotiate, I would prefer to not sell this product in the UK, it’s too much of a threat to other markets'," he said.