The Good, The Bad, And The NICE: A Cautionary Tale For Government Negotiation – Pacific Research Institute

The Good, The Bad, And The NICE: A Cautionary Tale For Government Negotiation

One of the cornerstones of Great Britain’s National Health Service is an agency that approves and controls access to prescription drugs, the National Institute for Health and Care Excellence.

NICE recently announced a new policy that could delay and restrict access to new medicines for British citizens if the agency deems they don’t pass its “budget impact test.” A drug may be approved as safe and effective, but patients could still wait for years to get it if the agency believes the cost could exceed a certain total threshold.

“Thousands of patients will wait longer for treatment for conditions like heart disease, cancers and diabetes while medicines which stand to benefit the most people are caught up in the system,” according to the head of the British Association of the Pharmaceutical Industry Mike Thompson.

“Use of new medicines in the UK is already poor, with [British] patients seven times more likely to get a newly launched medicine in places like Germany or France.” Predictably, UK patient groups have expressed outrage and dismay, warning that this proposal will sentence thousands of patients to an early death.

Why is this relevant in the United States? NICE’s intervention is made possible because this single government body has the authority to decide which medicines will be reimbursed and available to patients.

But, proponents argue, NICE can obtain lower prices for medicines. That is for the simple reason that it is the only game in town. That’s what “government negotiation” means. It is the equivalent of the Godfather making “an offer you can’t refuse.”

The downside is that the government makes the call on when, what, and for whom treatments will be available, guided by political and budgetary considerations.

NICE shows the underside of government exercising its power to purchase or not purchase drugs and set prices.

On this side of the Atlantic, we see another government program that shows how access to medicines can be advanced while keeping costs down—the Medicare Prescription Drug Benefit program, or Part D.

Since Medicare Part D began operating in 2006, it has consistently outperformed budget projections, and nearly 9 out of 10 seniors say they are satisfied or highly satisfied with the program. It works because private health plans negotiate with pharmaceutical manufacturers for the best prices and, just as importantly, they compete with each other to offer the lowest prices and best benefit structure to seniors.

Seniors can select the plan that offers the drugs they need while still knowing they have protection if their doctors prescribe other medicines, choosing from more than 150 categories of drugs covered under each plan.

Consumer choice and competition are key.

Seniors pay an average of $34 a month for their Part D prescription drug coverage this year, about half the amount they were expected to be paying at this point, more than 10 years after the program began. Some seniors pay nothing for their drug benefit because it is folded into comprehensive private Medicare Advantage plans. Taxpayers also are saving money, with the cost of the program coming in about half what the Congressional Budget Office had projected.

In some cases, private competition actually reduces prices below what is paid by countries that impose government price controls. For example, drugs that can cure Hepatitis C are now available for lower prices in the U.S. than in many European countries.

Price controls take many forms, and government “price negotiations” is one of them. Governments don’t negotiate; they dictate prices. That might work in the short term, but price controls quickly lead to shortages and, in the long term, to a significant loss of innovation.

That isn’t stopping talk of allowing the U.S. government to negotiate prices in Medicare Part D. But that would be another step toward a NICE-like system in the United States where a government entity explicitly says that if they don’t like the price of a drug, it won’t be available to you.

The designated head of the Food and Drug Administration, Dr. Scott Gottlieb, faces the Senate for his confirmation hearings this week. He has many tools in his medical bag to help make drugs more affordable, including modernizing the FDA approval process, removing barriers to contracting based upon value and outcomes, and creating a pathway for more competition in generic drugs.

And for seniors, the key is to protect the Part D model where sophisticated private purchasers have proven they can negotiate very effectively on behalf of millions of seniors and allow them to choose the drugs they need, not have the government decide which ones it will make available.

Ask patients in the UK about their access to new medicines, and they can tell you just how bad NICE can be.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

Scroll to Top