Discounting – if not now, when?

MAP Insights: Discounting – if not now, when?

Everyone and anyone working in market access, health economics and outcomes research and, in policy and public affairs is currently watching developments with the draft NICE Manual.

We know that NICE is hard at work analysing consultation submissions, consulting other experts, perhaps making changes, with the view to publishing its final report in early 2022.

We’ve had a taste of what NICE would like to introduce by way of the severity modifiers, and there are elements of these proposals that we welcome, such as wider consideration of real world evidence in health technology appraisals (HTAs) and the modular update on health inequalities. However, we at MAP Biopharma continue to be baffled by one major issue: the seemingly foot-dragging reluctance to include a revised discounting rate in the manual. We think that this is a missed opportunity for NICE. Let me explain why.

In simple health economic terms, the higher the discount rate, the lower the value of medicines over time. In the UK, medicines prices are already controlled by the Voluntary Scheme for branded medicines pricing and access (VPAS) which was agreed between the government and industry in 2019. This stipulates that the branded medicines bill will not grow more than 2% in any of the five years of the agreement. Discounting is especially crucial in the case of advanced therapy medical products (ATMPs), in areas like cell and gene therapy, where development and manufacturing costs are high and cost-effectiveness analyses are sensitive to the discount rate applied. It should also be pointed out that many of the innovative medicines used in the NHS are under confidential commercial pricing arrangements which means that the actual cost to the NHS is much lower than the list price.

In its proposals, NICE agrees that there is good evidence supporting the case for change to lowering the discount rate from 3.5% to 1.5% for costs and benefits. However, NICE has decided that these discussions are better made during the next round of VPAS negotiations which are expected to be concluded by the end of 2023 for implementation in January 2024. This is punitive to drugs companies but also restricts patient access to promising and innovative new technologies. It should also be acknowledged that HM Treasury, in its Green Book (A1.54, p.87 and A6.16, p.121), advises that the discount rate for health and life outcomes should be 1.5%.

The UK has traditionally been viewed as a high priority launch market for new medicines and the 1.5% discount rate would help to make it an attractive environment for these companies to carry out research, conduct clinical trials and launch innovative medicines. This in turn helps fulfil the ambitions laid out in the Life Sciences Vision.

Sadly, we know of a company that has had to exit the UK market as a result of the discount rate. Under the proposed severity modifier, it would make it even harder to achieve. We understand that a lower discount rate would have been likely to keep the company in the UK. And given that many pharmaceutical companies would see the UK as a first-to-launch market because of the strength of a positive NICE recommendation, there is, inevitably, a snowball effect in plans to launch in other markets too.

We need to think long and hard about the direction of travel this may have. We know that the number of cell and gene therapies currently in the pipeline will multiply by at least two by the end of this decade. The HTA system and processes need to accept this and begin to prepare now by working with the NHS to help enable patient access to these complex, innovative technologies. With the 1.25% increase in the Health and Social Care levy from April 2023, one would have thought that this would help in the decision making.

At the recent MAP Patient Access conference in September 2021, we asked the audience when they thought the lowering of the discount to 1.5% should come into effect; 79% said that it should be implemented now within the manual consultation and nobody said it should be deferred to the VPAS negotiations.

So, what should be the answer to this conundrum? Well, it would be wise to look at the reduction of the discount rate with immediate effect. Not so that pharmaceutical companies can make more money but so that the patients who need these life-saving and life-enhancing treatments can get on with their daily lives.     

Gerald Chan

Associate Director, Policy, Public Affairs & Communications
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