Why is the $1,000 pill cheaper in the UK?

And other questions reporters should continue to ask about healthcare costs here and across the pond

A few days ago FiercePharma, which bills itself as the “pharma industry’s daily monitor,” posed this intriguing question: “Why does Gilead’s Sovaldi cost $84K in the US and $57K in Britain?” That’s a question I’ve been urging the press to ask as it continues to report on the high price of Sovaldi, the drug to treat hepatitis C that has become a poster child for the stratospheric cost of medicines in the US. Despite its super-high price tag, Sovaldi is gaining widespread adoption in the US, and drugmaker Gilead’s aggressive pricing strategy is paying off for the company. UnitedHealth Group care recently announced it spent $100 million on the drug during the first three months of this year. In the end, private payers (like employers) and government payers (like Medicare and Medicaid)—and, eventually, all of us—foot the bill for high-priced drugs in the form of higher insurance premiums or more out-of-pocket costs.

I found myself in London a few weeks ago, and stopped by the offices of NICE, Britain’s National Institute for Health and Care Excellence, to dig deeper into why Sovaldi costs more in the US and to learn what recommendations NICE was making for Sovaldi—information that might be useful for reporters stateside. NICE conducts cost effectiveness analyses of new drugs and makes recommendations to the National Health Service about which drugs offer enough therapeutic value to warrant coverage by the health service. Since 2000, NICE has appraised over 500 healthcare technologies and has approved almost 80 percent of them including those okayed for restricted use. The Institute’s technology appraisals are binding on NHS doctors, hospitals, and primary care facilities, since the drugs are paid for out of the public purse. NICE’s clinical guidelines, which offer guidance in a specific therapeutic area, are not binding but most doctors follow them. The public can always pay privately for a drug NICE doesn’t approve for public funding. The Institute is currently considering whether Sovaldi will be approved for public funding by the National Health Service. The decision process involves input from patient groups, academics, providers, and the drug makers, and the Institute is expected to issue a draft guidance this month. (Draft guidance typically contains provisional recommendations for whether or not a technology should be funded and under which clinical conditions.) A final decision is expected by October. In the meantime, the National Health Service in England has agreed to pay 19 million pounds ($32.3 million) to treat with Sovaldi some 500 patients who have acute liver failure and who are waiting for a liver transplant. In other words, the drug is being limited to the sickest patients in Britain. That’s essentially the same recommendation made this spring by the California Technology Assessment Forum, a group funded by insurers.

I was particularly interested in knowing how NICE makes its decisions. How does it determine where healthcare dollars should be spent and who benefits the most? NICE uses a metric called a QALY (quality-adjusted life years measurement) that assesses a drug’s effect on length of life and the quality of life it offers to the person receiving it. The metric takes into account that a treatment may help a patient live longer, but since it is adjusted for quality of life, it can also capture things such as side effects which put patients at risk for other illnesses. After NICE determines the quality of life a drug offers in terms of a person’s health, it also considers cost effectiveness—specifically, “the cost of using the drugs to provide a year of the best quality of life available,” which is then “expressed in pounds per QALY.” If a treatment costs more than 20,000- 30,000 pounds per QALY ($34,000-$51,000) it is not considered cost effective and is less likely to be approved for funding. The Institute considers whether the money is best spent healing one person with the disease or is better spent on other people getting other treatments or services (like, for example, paying for more nurses to make in-home post-partem visits to new moms). In April, NICE turned down the breast cancer drug Kadcyla made by Roche because its effectiveness did not warrant its cost of more than 90,000 pounds ($153,000) per patient. The Institute’s draft guidance said it didn’t work well enough to justify routine use in the National Health Service.

The US doesn’t have an oversight system like NICE, and Obamacare specifically prohibits the Patient-Centered Outcomes Research Institute, a new agency created under the health reform law, from considering the cost of treatments in its work. Medicare can’t consider cost either when it decides to cover a new drug or device. In Britain, drug prices are set through “discussions” between the government and drug makers which result in a pharmaceutical price regulation arrangement. Not so in the US, where compaines can generally charge what they want with no government oversight. As FiercePharma pointed out, “there’s not a lot payers can do [about costs] in the US without an official cost-effectiveness body to set paramenters and make tough choices.” Because of drug company power, it’s not likely we’ll get such a body anytime soon.

Last week, the Washington, DC-based National Coalition on Health Care, a group of healthcare employers, providers, and consumers, announced a “Campaign for Sustainable Rx Pricing,” an effort to “spark a national dialogue” about the high cost not only of Sovaldi but also of some 200 other expensive drugs in the pipeline. In a front page Washington Post piece Monday, Coalition president and CEO John Rother described a coming “tsunami of expensive medicines” that, the Post wrote, “collectively threaten to bankrupt the healthcare system.” Barry Werth, a journalist who has written about the pharmaceutical industry for decades, told the Post: “We’re heading for some kind of reckoning. I don’t know that anybody has thought through how that’s going to play out.” Rother said to me, “We’re trying to raise an issue for public discussion that could threaten the stability of the whole healthcare system. It’s fair to say it’s not being responsible when a company prices a drug so aggressively and doesn’t think of the needs of the healthcare system as a whole.” In other words, is a drug worth it no matter what its price? Will those expensive medicines crowd out other healthcare services? These are threads we continue to urge reporters to follow. (Putting Sovaldi’s high cost in perspective is a good start. Vox.com’s Sarah Kliff, for example, recently reported that California might have to spend more buying Sovaldi for the state’s Medicaid beneficiaries than it spends now for K-12 and higher education. If Kaiser Permanente gave Sovaldi to all its patients with hep C, The New York TimesElisabeth Rosenthal tweeted over the weekend, it would double the insurer’s pharmacy spending.)

Rother told me one of the goals of his Sustainable Rx Pricing campaign is to move the country toward a more systematic appraisal of costs, benefits, and, equally important, a discussion of who pays. Right now, insurance companies make those cost-benefit judgments—and, hardly in a systematic way. One company pays for a drug; another may not. Rother’s not sure what the solution might be in America’s private health system, and says he has no expectation that Gilead will drop the price of Sovaldi. But, at least, for the first time some pretty big stakeholders—insurers, employers, and unions— are publicly questioning specific costs in the system.

As we’ve been reporting, the media have a big role in fostering a public discussion of the cost of medicines and healthcare in general—the great unfinished businesss of health reform. For most of the Obamacare debate, the press acted as followers. This is a chance for reporters to take the lead, to move beyond the rhetoric of rationing the pols like to exploit to explanations of how to rationalize or improve the way we pay for drugs in this country—and, yes, how other counties control costs with, often, better outcomes.

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Trudy Lieberman is a longtime contributing editor to the Columbia Journalism Review. She is the lead writer for The Second Opinion, CJR's healthcare desk, which is part of our United States Project on the coverage of politics and policy. She also blogs for Health News Review. Follow her on Twitter @Trudy_Lieberman. Tags: , , , ,