Direct Contracting may offer ACOs a unique opportunity
The Direct Contracting model includes a unique feature allowing accountable care organizations the ability to contract with providers.
Feb. 20, 2009
The National Institute for Health and Clinical Excellence in England offers an interesting model for healthcare reform.
We asked Joanne Buckle for her perspective.
Q: What is NICE and what does it do?
A: In 1999, the British National Health Service (NHS) created the National Institute for Health and Clinical Excellence, or NICE. NICE is responsible for evaluating treatments and drugs and recommending whether or not the NHS should pay for them. In the years since then, other countries have looked to NICE as an example of how they might approach cost-effectiveness questions; in fact, last year, NICE established a policy consulting wing to help these countries. In the United States, the recently enacted stimulus bill includes $1.1 billion devoted to fund studies into the comparative effectiveness of different drugs and treatments.
One measure used by NICE to approve or disapprove payment for a drug or a treatment is the cost per quality-adjusted life year (QALY). Cost per QALY is internationally recognized as a method of comparing the cost-effectiveness of alternative treatments. Treatments that increase QALYs, but at a higher price than alternatives, are likely to be approved, as long as the resulting incremental cost per additional QALY is not too high. However, new treatments that have a very high cost per QALY are not likely to be approved for payment because the health budget is limited and these treatments are poor value for money and divert resources away from treatments that produce more QALYs for the same or lower cost per QALY.
Q: What are some of the negatives of the system?
A: One of the big criticisms of NICE is that it reduces the speed at which new drugs are taken up in the United Kingdom. It can take two or three years for a drug or a therapy to work its way through their process, so in the meantime, there is no incentive for physicians to prescribe it. In contrast, the U.S. Food & Drug Administration reports that the median time for review and approval of a new drug in the United States in 2007 was just over a year.
It has taken a long time for the drug companies to realize it, but they have now begun to build the NICE calculations in at an earlier stage of drug development. There is no point in spending five years developing something, then having NICE look at it and say they can’t approve it because it's too expensive. Now, the industry is focusing more on treatments that are cost effective.
It is important to realize that NICE doesn't look at everything; it's not a comprehensive system. And what they look at is often politically driven. Local primary care trusts (PCTs) are supposed to implement the recommendations made by NICE, but this does not always happen promptly, meaning that people living in certain areas can get certain therapies while those living in other areas cannot. They call this the postcode lottery, and it sometimes causes heated discussion in the media. Issues that come in front of politicians or the Department of Health that look like they’re going to be big cost issues get referred to NICE. It tends to be, obviously, the things they say 'No' to that hit the headlines.
Recently, we've seen public debate over expensive cancer drugs like Tamoxifen, a drug for the treatment of breast cancer. It was once considered too expensive, and while some believed it was unproven, others felt like it was their only hope. Some PCTs would pay for it while others would not. Patients who were denied the drug waged a fight in the media and with their local PCTs. Now, questions about the drug's cost versus efficacy have been answered and it is routinely prescribed to patients who need it. A similar situation is ongoing for a kidney cancer drug. Media coverage brought the issue front and center once again: There is a drug that can extend your life, but it costs too much money so you can't have it.
Q: What does NICE do particularly well?
A: In the United Kingdom, most people have become accustomed to not paying out of pocket for healthcare, and therefore they're less aware of the cost of each intervention. But I think there really is a general acceptance that you can't pay for everything out of a limited budget. In the United States, there is less transparency into costs and less recognition of budget limitations.
I don't think NICE gets everything right. But what it does do is encourage a lot of debate about how we spend healthcare dollars. When we see stories in the paper saying "So-and-so can't have their cancer drug," it becomes a platform for discussion about the 10 other people who might not be able to get their treatment if So-and-so does get his cancer drug. It encourages that kind of debate.
The principle that NICE promotes is that you assess the alternatives, looking at the cost and the benefits and deciding how much society is willing to pay for an additional unit of benefit. It sounds very obvious, but it doesn't happen in most countries. I think getting across that very, very simple idea is actually something that will be beneficial to everybody because it makes societal decisions about how to spend healthcare money much more transparent. But I don't know how to make it less political. Keeping NICE at arm's length from the government and not allowing too much political interference is difficult. We've done a reasonable job of that in the United Kingdom but not a great job. NICE's decisions should not be allowed to be swayed by a lot of people writing to their representatives to complain.
Q: What are the societal implications of using a system like NICE?
A: One of the things NICE doesn't do is look at health inequalities, whereas our local PCTs—where people receive most of their healthcare—have a duty to do that; that’s one of their targets. Guidance that might make sense on the national level might not relate to one of their priorities on the local level. For instance, a PCT might have a target to reduce heart disease for people below the poverty level or people in a socially deprived area or an ethnic community. That means they might want to target more resources toward those people, even though the cost-effectiveness of that calculation would be above the NICE threshold. So they might want to take their resources and direct them in a slightly different way from where NICE says they should. That gives them a bit of a dilemma, because they might then run out of money. And if NICE says they have to do something, they're supposed to do it, but effectively these are similar to unfunded mandates in the United States. They might simply not have the money to do it, without cutting somewhere else. It isn't always as clear-cut as it should be.
There is debate about whether QALYs are the right measure to use for healthcare rationing. Should you give the same weight to an intervention that gives five years of life to somebody age five as you would to giving five years of life to somebody age 70? There is a strong argument that says QALYs are age-ist. Not always, but in a lot of cases, the calculations implicitly give a higher weighting to younger people. QALYs don't give any indication of how much somebody needs the intervention; it actually only focuses on their capacity to benefit. It's sort of a societal judgment—that's the way NICE has to do it. It's not the way every country might choose to do it, though. They might choose to reduce health inequality strongly, and therefore give much more weight to QALYs that come from somebody who is socially deprived versus somebody who is very wealthy. Or they might go the other way and say people who are very wealthy and have high incomes and are hugely productive in society are actually worth more in terms of each life year. While the formula to measure cost-effectiveness is clear-cut mathematically, the methodology implicitly encompasses lots of ethical judgments about society's views on which patient populations are most deserving of investment in their health.
A recent New York Times article highlighted the debate, and the hard decisions that must be made. A new drug could extend the life of a kidney cancer patient by about six months, at a cost of $54,000. NICE says the six additional months should only be funded if the cost is less than $23,000. The patient and his family, of course, believe if there is a treatment that would extend his life, he should receive it, regardless of cost. An examination of the cost versus benefit of several kidney cancer medicines by a university group concluded that none of them came even close to being worth their expense in cost per QALY terms. NICE agreed, igniting a firestorm of debate. A group of oncologists articulated their disapproval of the decision in a letter to The Sunday Times expressing their views that NICE doesn't properly assess cancer patients. They pointed out that citizens are finding themselves in the position of mortgaging their homes to pay for treatments that are readily available to sufferers living in other countries.
While admitting that kidney cancer affects a very small group, fewer than 6,000 Britons each year, NICE maintained that policy decisions should be consistent no matter the size of the impacted group of patients. However, on Nov. 5, 2008, NICE backed off somewhat, deciding that in cases where fewer than 7,000 patients per year are affected, they should allow more expensive treatments than they normally would. A final ruling is pending.
NICE blames drug companies, at least in part, for some of the problems with access to and payment for certain drug therapies. One example is thalidomide, a drug used in the mid-20th century to fight morning sickness. Its use was discontinued for pregnant women because it caused birth defects, but it became popular in the fight against cancer. The drug is very inexpensive to produce, costing less than $1 per pill in Brazil. Apparently, thalidomide's maker, Celgene, has raised the price to about $180 per pill, or $66,000 per year, pricing it above NICE's threshold.
The really good thing about NICE is they can take a very long-term view. They can actually come out with a recommendation that says something is worth the investment because our health in 50 years' time will be better. They can do that because they're a bit divorced from the political cycle, and they don’t have to wrestle with private insurance company turnover issues.
Joanne Buckle is a principal and consulting actuary in the London office of Milliman.
U.K.'s NICE sheds light on comparative value
THIS INTERVIEW Feb. 20, 2009 The National Institute for Health and Clinical Excellence in England offers an interesting model for healthcare reform. We asked Joanne Buckle for her perspective. Q What is NICE and what does it do? A In