The U.K.’s National Institute for Health and Care Excellence may raise the cost-effectiveness threshold for the first time in 26 years. This threshold represents the maximum amount that a healthcare system is willing to pay for an additional unit of health benefit, typically measured in terms of quality-adjusted life years. It is not a rigid cutoff, though. Rather, it serves as a signal as to what the government is willing to pay.
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There’s been a sharp decline in foreign direct investment in the British life sciences sector in recent years, as it fell by 58% from £1.9 ($2.5) billion in 2021 to £795 million ($1.04 billion) in 2023. According to FirstWord Pharma, to “stem the outflow of investment and to appease President Trump” the British government is considering raising the level of a cost-effectiveness threshold used as a benchmark to determine whether a healthcare intervention provides value for money for the National Health Service.
The National Institute for Health and Care Excellence assesses medicines and other medical technologies based on clinical- and cost-effectiveness as well as the overall cost to the NHS. To do this, the agency makes use of a measurement of clinical benefit called the quality-adjusted life year, which combines length of life gained from a treatment and its impact on patients’ quality of life. Currently NICE considers medicines costing between £20,000 ($26,032) and £30,000 ($39,048) per additional QALY gained to represent good value for money for the NHS.
Though it technically refers to the maximum amount that the NHS is willing to pay for an additional unit of health benefit—typically measured in terms of QALYs—it is not a rigid cutoff. Rather, it’s a guide which can be adapted case by case. Despite exceeding £30,000 per QALY, some medical technologies may still get positive NICE recommendations.
Nonetheless, the threshold is viewed as a key signal to the life sciences sector that can shape investment, pharmaceutical pricing and even which clinical trials are carried out in the United Kingdom.
The current £20-30k/QALY range has been in place since 1999, the year NICE was founded. Politico reported last month that a 25% increase to £25-37.5k/QALY could be in the offing. This change is reportedly a fundamental component included in the plans senior British officials presented to the Trump administration to adjust drug prices and spending in an effort to stave off United States tariffs on imported pharmaceuticals. Britain is evidently “in advanced talks” with U.S. officials to avert such duties.
It remains uncertain, however, whether the U.K. government will confirm a 25% increase in the cost-effectiveness threshold and how the Trump administration and British pharmaceutical industry will react.
The Association of the British Pharmaceutical Industry has long sought a change in the level of the threshold. ABPI wants a considerably larger increase than the government appears to be willing to adopt, namely to £40,000-£50,000 and then index-linked to inflation thereafter. The trade group recognizes that additional funding would be needed to support this.
Advocates for a threshold increase say that there should concurrently be better uptake of new medicines in Britain. Accordingly, a NICE positive recommendation ought to imply rapid and equitable access across the nation. But raising the threshold without a concomitant increase in pharmaceutical budgets would preclude this. In fact, it could leave a “black hole” in the NHS budget. As a result, some patients may have to wait even longer to be treated. Consider what happens when the threshold is increased without a corresponding budgetary expansion. While this could allow for an expensive new drug to gain access to the NHS, somewhere else in the system cuts would have to be made. In turn, this could harm other patients’ health.
To address this problem, Health Secretary Wes Streeting is pushing for a “top-up” fund for increased pharmaceutical spending rather than expecting the money to come from existing NHS budgets, according to The Times of London.
The York Health Economics Consortium posed a question last week to an expert panel of consultants, “should NICE revisit its cost-effectiveness threshold? Or is the current £20k-£30k per QALY still fit for purpose?”
My main takeaway from the insightful discussion was that whatever number NICE adopts in future, it will reflect a policy choice that appropriately balances societal “health, fairness and innovation.” As such, it’s a ”living tool, not a fixed rule,” which ought to “evolve with evidence” as well as “policy priorities.”
Of course, given how globally interconnected the pharmaceutical industry is, the outcome of the current policy deliberations won’t in all likelihood be strictly an internal (U.K.) matter. Outside influences, including those emanating from the Trump administration, will have their impact on the level decided upon for the cost-effectiveness threshold.