Helena Bowden - Consultation Coordinator Value Based Pricing, Department of Health Skipton House 80 London Road London SE1 6LH.

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1 Helena Bowden - Consultation Coordinator Value Based Pricing, Department of Health Skipton House 80 London Road London SE1 6LH Victoria House Capital Park Fulbourn Cambridge CB21 5XB Tel: Fax: Web: 11 th March 2011 Dear Sir/Madam, Re: NHS Sustainable Development Unit response to the Department of Health consultation on A new value-based approach to the pricing of branded medicines. The NHS Sustainable Development Unit (SDU) welcomes the opportunity to respond to this consultation. This response is in letter form to better convey the overarching principles that the NHS SDU supports. The NHS SDU provides leadership, expert support, and technical guidance across the NHS and health system in relation to sustainability. The unit is keen to ensure that a joined up approach to economic, social and environmental sustainability are core to the current health reforms. Sustainability is an integral part of excellence in management. The health system requires clarity about the metrics, governance, and reporting mechanisms to maximise opportunities that will deliver savings and improve health outcomes through linked environmental, social and financial considerations. The Climate Change Act sets a legal requirement to achieve carbon reductions of 34% by 2020 and 80% by Work carried out by the NHS SDU for England indicates that the NHS needs to achieve a 10% reduction on 2007 levels by 2015 to meet the legal imperative. The act also highlights the requirement for climate change adaptation plans to be in place based on projected climate impacts relating to weather, specific illness, commodity price rises, increased migration and social impacts e.g. increased inequalities. The case for sustainability in healthcare is clear. There is sound evidence that many components of sustainability achieve cost reductions and immediate health gains. It ensures the development of a sustainable system which reduces inappropriate demand, reduces waste and incentivises a more effective use of services and products 1. 1 Decision making in the NHS using Marginal Abatement Cost Curves: Save Money by Saving Carbon, Cambridge: NHS Sustainable Development Unit.

2 The Importance of Pharmaceuticals for Sustainable Development Procurement in the NHS, the things we buy, such as drugs, equipment and food, has a greater carbon footprint than the buildings we use or the travel we undertake. 2 Of the things we buy pharmaceuticals have the greatest overall footprint. The majority of drugs used are well established and many are generic so will not be covered by value based pricing. The way we evaluate all drugs, current and new, generic and branded could be improved with a wider assessment process which examines the benefits and costs to the individual and society. The NHS SDU would be pleased to support work to develop practical methods to allow wider considerations to be included in drug evaluation and pricing. Value Based Pricing Key Principles The NHS SDU strongly supports the following key principles which are evident in the proposed value based pricing system. We recognise the importance of: Improving outcomes for patients Having a wide assessment process considering a range of factors which deliver benefits to patients and society Encouraging innovation Having a transparent evaluation and pricing system Ensuring the best use of NHS resources In addition to these the NHS SDU suggests that there are other important principles to incorporate. To improve outcomes for all, the value based pricing system should: Reflect the priorities and needs of all Reflect the responsibility we have for the health of current and future generations Be flexible enough to reflect the changing priorities of society More detailed discussion of these principles is given below. A Wider Assessment Process This consultation proposes a valuation system which includes benefits to wider society as stated in the objective to include a wide assessment, alongside clinical effectiveness, of the range of factors through which medicines deliver benefits for patients and society. The NHS SDU strongly supports this objective. Environmental sustainability should be considered alongside economic and societal sustainability in assessing the wider benefits and costs to society of treatments. For some treatments the benefits may be outweighed by the harms from the environmental impacts of their development, 2 NHS Carbon Reduction Strategy Update Cambridge: NHS Sustainable Development Unit

3 production and use. For other drugs there may be an option between two treatments of similar efficacy but one may be a more environmentally and socially sustainable choice. The NHS SDU would argue the latter should be at a favourable price compared to the former. In assessing whether there is unmet need it would be logical to include non pharmaceutical measures such as changes to diet and activity. These public health measures are often associated with a wide range of benefits so may well be favourable when considered from a wider social perspective. Encouraging Innovation Value based pricing aims to encourage innovative changes in drug development. The NHS SDU welcomes innovation as central to the transformation to a more sustainable healthcare system. Technology, including pharmaceutical technology, can be an enabler for positive societal and environmental change. 3 Innovation can also help us to work in a way which is resilient and adaptable. A Transparent System The NHS SDU agrees that transparency is an important characteristic of any new system. Information on the sustainability of our choices should be available to the public to review. There are significant challenges in designing a clear transparent effective evaluation method for drugs. The NHS SDU has recognised this and is working with leading healthcare economists to identify what methods are needed to allow sustainability to be included in healthcare evaluation. Developing appropriate methods will require collaboration between many parties including the NHS SDU, the Department of Health (DH), the National Institute for Health and Clinical Excellence (NICE) and academic experts. In addition to inclusion of sustainability information in the evaluation of drugs, the NHS SDU recommends an environmental impact assessment be completed regarding value based pricing as soon as more information is known on the likely design of the new system. Best Use of Limited Resources The environmental effects of unsustainable actions are increasingly being priced into the costs we pay, whether it is the price of water, minerals, carbon or waste disposal. The Carbon Reduction Commitment is an example of this principle. In the years to come the NHS will need to use its environmental resources efficiently to deliver best value for money to the public. Therefore it is important that we start now to consider sustainability when evaluating choices in anticipation of the future economy in which environmental costs are included. 3 Routemap for Sustainable Health Cambridge: NHS Sustainable Development Unit.

4 The Priorities and Needs of All The NHS SDU supports the commitment in the NHS constitution for the NHS to promote equality through the services it provides and to pay particular attention to groups or sections of society where improvements in health and life expectancy are not keeping pace with the rest of the population. Because of this it will be important that the valuation of drugs reflects the values of everyone in society and the best interests of all and not simply those with the loudest voice. This is a significant risk in the proposed value based pricing system and is another reason why transparency is so important. Environmental sustainability is an important issue with regard to health inequalities. The effects of climate change will be disproportionately felt by the poorest and these are also the members of society who can least afford to adapt to climate change. Including sustainability in evaluation processes will lead to a fairer health system. Responsibility to Future Generations The decisions taken today will have an impact now and in the future. The basic principle of sustainability is to work in a way today which does not harm the ability of future generations to live well. The NHS SDU suggests that any new system instigated in the health service, including this value based pricing system, should adhere to this principle in both its design and execution. It will be the role of political decision makers to balance the needs as expressed by the most vocal of today s generation with both the needs of those with less voice now but also with the needs of future generations. Flexibility The proposed value based pricing scheme focuses on the need for stability in order to encourage innovation by pharmaceutical companies. While this is important we should also recognise that the judgements, which will inform the weighting given to different types of benefits and costs, are likely to change with time. It is reasonable to assume that the importance of sustainability as expressed by the public will increase as increasing effects, particularly of climate change, are seen. One might also expect shifting social priorities to be caused by demographic changes such as the aging population. Every effort should be made now to foresee these future changes in priorities and needs so that these can be incorporated into pricing decisions. Future treatments will be used in the context of changing models of care and the value of drugs may change based on this. The SDU expects a move to more sustainable models of care in the coming years. This should be taken into account when pricing drugs.

5 Note on Use of the Term Sustainable This consultation includes the words: The new system must also be stable and sustainable over the longer term, so that industry is able to plan and prioritise research in areas which can deliver the greatest potential benefits to patients and society. The terms sustainable and sustainability are used with a variety of meanings including ones that only relate to viability without the incorporation of environmental considerations. The NHS SDU uses an interpretation of sustainable in line with nationally recognised definitions that refer to economic, social and environmental sustainability. The unit would support this interpretation of the word sustainable in the above extract. Conclusion The NHS SDU strongly supports several of the underlying principles of value based pricing, particularly the goal to widen the perspective taken when evaluating new drugs. Furthermore the NHS SDU would support a similar perspective being used when evaluating all drugs current and new, branded and generic. The development of value based pricing presents an opportunity for the Department of Health to support the NHS in developing a more sustainable way of working. This in turn will have benefits for patients and society as a whole. In summary the NHS SDU strongly recommends that the DH considers and truly embeds social, economical and environmental sustainability into value based pricing and works with NICE to do this for all drug evaluation. It is our duty of care for the health of current and future generations. The NHS SDU would be pleased to support work to develop practical methods to allow wider considerations to be included in drug evaluation and pricing. Please do not hesitate to contact the unit for any further clarifications or questions in relation to this response. Thank you for the opportunity to respond to this consultation. Yours Faithfully, James Smith Public Health Registrar NHS SDU Imogen Tennison Lead Analyst NHS SDU