How much should a public health system pay for new drugs?

Mr Brendan Kennelly, Health Economics and Policy Analysis research group at NUI Galway
Mar 03 2015 Posted: 15:19 GMT

Recently published research, which looked at the cost thresholds for relatively expensive new drugs in the UK, will be discussed at NUI Galway on Friday, 6 March.

Professor Karl Claxton from the University of York will speak at an event hosted by NUI Galway’s Health Economics and Policy Analysis research group. Professor Claxton’s talk, ‘Methods for Estimating the Cost-Effectiveness Threshold for NICE and the NHS’ will take place at 2pm in Lecture Hall 1 of the Cairnes Building on the North Campus of NUI Galway.

“While the research is based on British data, its findings are very relevant for Ireland given that the HSE uses a very similar system to the NHS for deciding which new drugs are to be reimbursed,” explained Mr Brendan Kennelly, Health Economics and Policy Analysis research group at NUI Galway. “Every public health system has to cope with a limited budget and has to decide how to use the available resources to achieve the best possible health outcomes for all the people that are entitled to use the system. This is a very challenging decision involving important questions about ethics, values, measuring health, and opportunity costs.”

Health economists have developed a concept called a Quality Adjusted Life Year (commonly known as a QALY) to help this decision making process. A QALY is equal to one year of life in perfect health. When public health systems decide whether or not to reimburse a pharmaceutical company for a new drug they often refer to the cost per QALY of the new drug.

In February, a group of leading health economists at the University of York produced important new research on this issue. A team, which was led by Professor Karl Claxton, estimated the effects of changes in NHS expenditure on the health of all NHS patients. The results indicate that £13,000 of NHS resources adds one Quality Adjusted Life Year to the lives of NHS patients. It suggests that the NHS offers much better value of money that was previously thought.

Currently in the UK, the National Institute for Clinical and Healthcare Excellence (NICE) uses a threshold of £30,000 per QALY to judge whether the health benefits offered by a new drug are greater than the health likely to be lost elsewhere because of the additional cost imposed on the NHS. The York research shows that this threshold is too high and as a consequence the approval of new drugs at current prices is doing more harm than good to NHS patents overall.

In Ireland, the maximum that the HSE will pay for a new drug is around €45,000 per QALY. This has led the HSE to reject certain drugs as being too expensive relative to the health benefits that they produce. “The recent controversy over the cost of Soliris, a life-saving but very expensive drug for people with a rare blood disorder, is just one example of the difficult choices that public health systems have to make on a regular basis,” says Mr Kennelly.


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