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Wrong Answer To High Drug Prices: Drug Rationing Hurts Patients, Discourages Innovation

The Fraser Institute
By Philip Stevens
February 2009
Around the world, tax-funded health systems are facing pressure from many directions. Populations are aging and consuming more health care, often for expensive, chronic conditions such as cancer. The latest treatments are becoming more expensive, as governments introduce ever more regulations into the drug development process. At the same time, increasingly consumerist patients in countries with state health monopolies are becoming less tolerant of government attempts to restrain access to these expensive medicines in order to contain costs.
 
This has led to enormous tensions between patients who want the latest drugs, and governments that are forced to ration those drugs in order to maintain some semblance of financial integrity for their state health systems. Such tensions underline the damaging absurdity of massive state intervention in both the drug development process and the health care systems that deliver those drugs. Not so NICE. In state-run systems, cost pressures typically prompt governments to ration access to treatments for patients, often via waiting lists or low usage of medical technology. As the pharmaceutical industry has limited leverage over governments (as compared, for instance, to medical unions), it is politically easier for cash-strapped governments to limit the number of new treatments available to patients. In order to provide a veneer of scientific rationale for these restrictions, governments often employ cost-benefit analyses, known as “health technology assessments” (HTAs), before new treatments can be procured within the state health care system. Though these assessments may save money in the short term, they unleash a number of hidden but noxious economic consequences and create undue distress for dying patients. Many countries are increasingly turning to these types of\ “comparative effectiveness” reviews to restrict access to expensive new drugs. Canada first instituted a Health Technology Assessment program in Quebec in 1988, and HTAs are now widely used at the national and provincial level. In 2004, Germany instituted the Institute for Quality and Economic Efficiency in the Health Care Sector (IQWiG), which provides “comparative effectiveness” information to health care insurers. Even the United States is poised to give more prominence to HTAs, as President Barack Obama has proposed to “establish an independent institute to guide reviews and research on comparative effectiveness” (Obama, 2008).
 
While many European countries make some use of HTAs, many other countries throughout the world, particularly in Asia and Latin America, are looking to the British health system for ideas about how to cut costs. All local providers within the British National Health System (NHS) are legally obliged to fund treatments recommended by the National Institute for Health and Clinical Excellence (NICE), created by the government in 1999. Conversely, if NICE deems a new treatment not to be cost effective, then all NHS providers will be prohibited from offering it to patients. The National Institute for Health and Clinical Excellence comes to its decisions by reviewing a range of evidence submitted by parties such as drug manufacturers,independent academics, and patient groups. It typically considers a new drug’s clinical effectiveness; cost per quality-adjusted life year (QALY)1 saved; and impact on costs borne by the NHS (Raferty, 2001). Bearing in mind that the NHS constitutes 83% of the UK’s expenditure on health (Klein, 2005), the blessing of NICE is absolutely vital if the vast majority of British patients are to benefit from a new treatment. Judging from Britain’s comparative international performance, NICE does a thorough job of keeping innovative drugs from patients covered by the NHS. According to Sweden’s Karolinska Institute, for instance, the United Kingdom is below average for the uptake of innovative oncology drugs (Wilking and Jönsson, 2005) (figure 1). Rarely a week goes by without media coverage of a terminally ill patient denied access to a new medicine readily available in other European Union countries or in the United States. Most recently, NICE refused to recommend a drug for aggressive bone marrow cancer, despite the fact that the drug can extend the lives of patients for up to three years (Smith, 2008, Oct. 28). NICE effectively serves as a nuclear weapon in the government’s cost-containment arsenal. If a drug does not meet its criteria, it will simply be unavailable to NHS patients, no matter what their need.

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