England Edges Toward National Cancer Tariff

April marks the start of an ambitious, if overdue, data collection project in the UK that could ultimately lead to England’s National Health Service paying a series of pre-determined tariffs for cancer drug procurement and delivery across all segments of the disease. If such standardized pricing materializes, the implications for pharma would be significant.

The tariff idea isn’t new, and already exists for most acute services in England. But its expansion into areas such as cancer has been held up by poor data and inadequate IT systems – deficits affecting many other progressive steps related to upgrading healthcare delivery.

To address both these shortcomings, a nationwide chemotherapy data collection plan will begin in April 2012. At least half of England’s 150 or so regional payers (Trusts) will have to input information about all patients receiving NHS-funded chemotherapy into a centralized data repository based in Oxford called the Chemotherapy Intelligence Unit.

The CIU will ultimately help generate a series of fixed, average prices that the NHS would use to reimburse Trusts for delivering cancer treatment. It would also create another set of tariffs (ten bands covering a spectrum of regimen-costs) tied to the procurement of cancer drugs. These tariffs would reflect average procurement costs collected from across the country, not any particular region’s actual costs, which vary as a result of drug rebate deals, demographics and other regional cost differentials.  As a result, individual Trusts may, depending on the actual costs they incur, win or lose in funding a particular regimen—to begin with, anyway.  Longer term, such a system will likely lead to national price standardization towards the lowest common denominator.

Thus the advantages for the NHS – and individual trusts – are clear: budgetary planning heaven and (probably) lower prices.

For pharma, it’s apparently yet another threshold (besides NICE’s) holding down price. There will be a high-cost drugs exclusion list, but it can’t exclude too many targeted cancer drugs, or “it won’t work”, says one senior NHS cancer pharmacist.

Despite the likely trend toward standardization longer-term, there is a potential silver lining: companies will still have room to negotiate with individual Trusts to ensure a particular drug or regimen is available and affordable. (Indeed, the NHS tariff will only determine what a Trust is reimbursed, not what it should pay).What’s more, “tariffs provide a great way of hiding discounts,” noted the pharmacist.

Pharma’s great fear around price discounts is their effect, if made public, on wider global pricing strategies. The averaging game used to create tariffs would provide ample shelter. It may also mean, though, that pharma is hit twice, since discounted costs may be input into the data repository to calculate the average reimbursement tariff, and some Trusts may request additional further discounts.

We’re years away from such a system however –if indeed we ever get there.  “There’s no date set for the introduction of a national mandatory tariff for chemotherapy,” said a Department of Health spokesperson. Moreover, only trusts equipped with e-prescribing (about half the total) are initially required to report the data –and even then, reporting is mandatory for only 8 of the 42 total data items. Critically, those 8 don’t include the costs of buying, and administering, chemotherapy drugs – costs that will feed the tariff idea. Only by 2014 do all trusts have to submit all data points.

Still, despite many remaining road-blocks, the direction of travel is clear. It’s towards a place where, short of arriving with outstanding incontrovertible outcomes data from day one, pharma will have to bend their prices to fit the system, rather than vice-versa.

image courtesy of flickrer Orin Zebest used under creative commons