Well, no, not exactly

Countries like Australia and the United Kingdom have independent boards that evaluate a new drug’s effectiveness and set a price based on that estimated value.

Actually, they set the amount they’re willing to pay. And sometimes they don’t get the drug therefore. For the price is still negotiated, even if one offer is set……

17 thoughts on “Well, no, not exactly”

  1. Er, what is to stop Medicare negotiating a price? As Biogen’s biggest customer-to-be by far they can say “we’ll pay you a price that gives you a 10% ROI on your forecast of worldwide sales and if you want more try squeezing some rich and/or foreign customers”. If Biogen turn down a reasonable offer then it’s not Medicare’s fault and they can point at Biogen when anyone complains.
    Has anyone passed a law saying that Medicare has to pay ten times as much as the NHS? Or is Vox making that bit up?

  2. Obvs the FDA approved this long shot drug because the Dems are desperate for something to try on Biden.

  3. Wait, if they’re good enough to be able to know the real market price – based on a drug’s effectiveness (and . . . what? Absent comparisons to other, non-existent drugs?) then they’re obviously smart enough to set prices for everything!

  4. Aga,

    It’s a straightforward calculation. 1) How many QALYs does the drug give you? 2) How much are we willing to pay per QALY?

    This doesn’t get you the market price; just the price that the NHS is willing to pay.

  5. That is right Andrew M, but it leaves out one other factor — opportunity cost.

    If the UK refuses to pay the price for a drug, then it still has the money. Some other drug will be bought instead, and some other people cured. The aim should be to get the most people cured for the amount of money allotted.

    This issue bugs me when people discuss shelling out for expensive medicines in NZ. In their crusade to get the state to subsidize horrifically expensive drugs, the crusaders omit to discuss that if they get their way some other people will suffer instead. You can save a lot of lives for the $500,000 a year that some drugs cost. And if the overall budget is increased, then money is lost to other areas, such as education.

  6. @Chester

    Yes, this is Culyer’s “bookshelf” (https://www.york.ac.uk/media/che/documents/papers/researchpapers/CHERP121_Cost-Effectiveness_thresholds_Health_Care.pdf) – a great/terrifying example of this is Kosovo where when they audited things, it turned out the health budget was being blown on a few super expensive cancer drugs with limited benefit while vital drugs were going short. An attempt to rationally reallocate the budget saved an awful lot of lives (though I don’t know how the cancer patients felt about being denied their medication or what the political blowback was) but it shows how bad things can get if the budget isn’t watched like a hawk. I know quangocracy is not the favoured flavour in this part of the blogosphere but NICE has some very smart professional people who do a lot of good work making sure taxpayers’ cash isn’t spunked away on high cost, largely ineffective treatments.

    In terms of what Andrew M said, opportunity cost comes into it but that’s largely implicit in the decision of how much to pay per Qaly. Interestingly different parts of government price it rather differently – generally outside of healthcare spending, there’s a willingness to pay more (eg safety infrastructure for road/rail cuts deaths but at some cost, and I think in that sphere they’re willing to pay £60k per Qaly; the number isn’t as arbitrary as it sounds and economists get hired to figure this stuff out based on people’s implied willingness to pay etc. There are some interesting calculations along those lines – I think in an appendix to the Treasury Green Book – showing how they estimate people’s willingness to pay for reduced journey times when doing road projects). In principle the figures shouldn’t get too out of line as it would be mad to be prepared to pay far more to save a life via drugs or surgery than by the equivalent cost per life saved of building a bridge to replace a railway level crossing (the calcs for how worthwhile abolishing level crossings are, in life and cost terms, are also publicly available and pretty interesting).

    One thing worth mentioning is there’s some evidence people do value a Qaly more highly if it’s at the end of life – this is the theoretical argument for why some end of life cancer drugs that can give a few more months with loved ones might be appraised at a somewhat higher price than the pure Qaly gain would suggest. In practice the calculations Andrew M mentioned do get some fudge for reasons like this – have chatted a few times with an economist who sits on these committees and he’s not always happy with the amount of fudge that happens. Cancer drugs and certain others are always an area of political pressure which complicates the issue.

  7. MBE: An obvious example of this is the colossal expenditure on covid. How many lives were and are being sacrificed to save one covid patient.

    Of course it looks different when you’re the one who’ll get the chop. No doubt if I was coughing my lungs out, I’d be screaming that the whole population of the world starving to death is far too small a price to give me a few seconds more.

    But I’m naturally selfish. As I’ve mentioned before.

  8. Bloke in North Korea (Germany province)

    It will be most interesting to see if this gets the nod anywhere outside the US.

  9. The National Audit Office estimates the coast of the Government measures for covid at £372Bn to the end of March 2021.
    Has anybody worked out the sums lost to large private businesses?

    Add to this the personal cost in lost lives, destroyed jobs and businesses and the additional cost of treating the near 5000,000 who have had their diagnosis / treatment delayed while our overworked NHS staff made Tik Tok videos.

    Lamposts and piano wire………

  10. Bloke in North Korea (Germany province)

    MBE, part of the difference is that cancer patients are largely (not all, but largely), people with a high quality of life and quite some reasonable life expectancy remaining until they get hit “in their prime”. The average cancer patient lose masses of QoL and lifespan. With dementia, quality of life is heading rapidly towards zero as is life expectancy.

    I’ve criticised the regulators for approving some rather marginal treatments in the last couple of years (under pressure from none less than Joe Biden), but success in cancer treatment has come in waves, and we are now seeing a resurgence of success, some very interesting and relatively effective new therapies, that are there because some less interesting ones were bought in the last decade or two, maintaining the economic incentive to keep going. If we can spare patients the horrors of chemo with targeted therapies, that is also a gain, even without a gain in lifespan.

    I’d be happy to trade in my care insurance costs for an undertaking that, should dementia strike, the insurers will pay for a 9mm round and the clean-up.

  11. You don’t become an ‘ eminent authority ‘ without publishing research. Research doesn’t get done without funding or publication. Guess who controls both? Only the most obscure corners of science are not controlled by gatekeepers with financial interests which is why they remain underfunded and obscure.

  12. Unless things have changed, the price agreed by the UK ‘independent’ (Ha!) board, is the maximum one that the NHS will pay, the pharma can charge what it likes to non-NHS.

    Also there used to be a process whereby a pharma would agree to lower prices of other established drugs in order to get the full price for their new wonder-drug.

  13. “No effectiveness against the disease shown.” Drugs against CVD (roughly, against heart attacks) routinely get approval without showing effectiveness. It’s enough that they reduce cholesterol. So if the cholesterol/heart attack hypothesis is wrong – and it may well be – then the whole schemozzle equals money wasted and hopes dashed.

    Confusion of correlation with cause lies behind the (probable) ineffectiveness of this new Alzheimer’s drug too.

  14. A Canadian economist has done the cost benefit analysis for covid.
    The conclusion was that the NPIs (lockdowns, etc) cost 282 times as much as the loss from the disease itself.

  15. This (from wiki) is an interesting comment on drugs v lifestyle/ wealth effect on tuberculosis is relevant. Tuberculosis used to kill one in seven people, but had already declined a lot by the time the first drugs were introduced

    “The British epidemiologist Thomas McKeown had shown that ‘treatment by streptomycin reduced the number of deaths since it was introduced (1948–71) by 51 per cent…’.[110] However, he also showed that the mortality from TB in England and Wales had already declined by 90 to 95% before streptomycin and BCG-vaccination were widely available, and that the contribution of antibiotics to the decline of mortality from TB was actually very small: ‘…for the total period since cause of death was first recorded (1848–71) the reduction was 3.2 per cent’.[110]:82 These figures have since been confirmed for all western countries (see for example the decline in TB mortality in the USA) and for all then known infectious diseases. McKeown explained the decline in mortality from infectious diseases by an improved standard of living, particularly by better nutrition, and by better hygiene, and less by medical intervention. McKeown, who is considered as the father of social medicine,[111] has advocated for many years, that with drugs and vaccines we may win the battle but will lose the war against Diseases of Poverty.[112] Thereto, efforts and resources should be primarily directed toward improving the standard of living of people in low resource countries, and toward improving their environment by providing clean water, sanitation, better housing, education, safety and justice, and access to medical care. Particularly the work of Nobel laureates Robert W. Fogel (1993)[113][114][115][116] and Angus Deaton (2015)[111] have greatly contributed to the recent reappreciation of the McKeown thesis. A negative confirmation of the McKeown thesis was that increased pressure on wages by IMF loans to post-communist Eastern Europe were strongly associated with a rise in TB incidence, prevalence and mortality.[117]

    Our hysterical reaction to covid has pushed 100 million into absolute poverty, reversing years of improvement. Another 300 million have gone on the breadline (no education for the kids, etc). (UN figures)

    In light of this the Canadian economist may be a bit conservative in his calculations.

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