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Long read

Access to new medicines in the English NHS


All health systems must find ways to ration limited resources. The question is whether they do so with their eyes closed or with their eyes open. In 2018/19, the English NHS spent almost £19 billion on drugs, almost 15 per cent of total public spending on health.

Should the NHS increase drugs spending to pay for the latest drugs for hepatitis or cancer, drugs that might prolong life for some patients but cost tens or even hundreds of thousands of pounds per course of treatment? Or should it spend the money in other areas, for example, ensuring that people can see a GP when they need one, ensuring that vulnerable people get basic treatment for long term-conditions or tackling health inequalities? How health systems make these decisions determines, in large part, their effectiveness. The choices determine the quality of people’s lives and, in some cases, who lives or dies.

This briefing describes the processes that decide whether NHS services in England will pay for patients to receive new, patented drugs, from the initial development and testing of drugs, to the National Institute for Health and Care Excellence’s (NICE’s) appraisal of their effectiveness and negotiations between the NHS and pharmaceutical companies to agree prices. If you have wondered why the cystic fibrosis drug Orkambi could be priced at £100,000 per 24-week programme, even though the pills can be manufactured at low cost, why the French and German systems would pay for the breast cancer drug Kadcyla when it was launched but the NHS initially refused, or why NHS England delayed providing the hepatitis drug Sovaldi to NHS patients even after NICE had approved it, this briefing should help to explain why.

The work for this project was funded by AbbVie, a member of The King’s Fund’s corporate partnerships programme. The information included here was independently researched, developed and written by The King’s Fund.

A note on terminology

Drugs can be referred to by their brand name (eg, Orkambi) or their chemical (or biological) name (eg, ivacaftor and lumacaftor). For simplicity, we generally use the UK brand names in this briefing.

The drug discovery race

When scientific research sheds new light on the nature of a disease, it typically triggers a race among research institutes and pharmaceutical companies to find substances that might have a positive therapeutic effect. From the 1950s to 1980s, for example, understanding of the functioning of human immunodeficiency viruses greatly increased. When the AIDS epidemic began in the early 1980s, pharmaceutical firms and research institutes started searching for drugs that might inhibit the functioning of the virus causing the disease. Burroughs-Wellcome discovered the first reverse transcriptase inhibitor, Azidothymidine (later renamed Zidovudine) in 1984 and a stream of new drugs followed. By the 2000s, life expectancy for people with HIV in high-income countries was close to that of the general population. Science had turned a devastating and incurable new disease, into a chronic condition within two decades.

The figure below provides an overview of the drug development process in England, from drug discovery to availability to patients through the NHS.

A graphic showing  overview of development, pricing, licensing and appraisal processes for new drugs

Clinical trials

Once a research institute or pharmaceutical company discovers a new drug, there is still a long way to go before it can be sold to health services or the population. First, the drug needs to go through a battery of laboratory and animal tests to make an initial assessment of its safety. After these tests, the organisation must then apply to the Medicines and Healthcare products Regulatory Agency (MHRA) in the United Kingdom (UK) for permission to conduct clinical trials on humans. Clinical trials are carried out in three ‘phases’.

If the research request is approved, the company first conducts phase 1 clinical trials to determine that the drug is safe in small doses in healthy volunteers. If the drug proves to be safe for humans, the company launches phase 2 clinical trials to gather information on dosage, side effects and efficacy for particular conditions. These are typically smaller-scale randomised controlled trials where people are selected at random to take the drug or an alternative treatment or placebo.

If the drug shows potential at this stage, researchers conduct larger phase 3 clinical trials typically involving hundreds – and sometimes thousands – of people at different locations. These studies allow researchers to make a more accurate assessment of the benefits of the new drug for a wide range of people and compare its effectiveness to existing treatments.

Marketing authorisation

Once the three phases of clinical trials are complete, pharmaceutical companies must present the data from the trials to regulatory authorities to decide whether the drug can be marketed and sold in the country. In the UK, this is the MHRA and, until the it leaves the European Union in December 2020, the European Medicines Agency (EMA) (or, technically, the European Commission, which acts on the EMA’s advice). Within these agencies, a team of doctors, statisticians, chemists and other scientists reviews the company’s data to establish whether the drug overcomes the three hurdles of safety, quality of manufacture and efficacy (ie, that it improves outcomes for people with the relevant condition compared to the best alternative treatment or, where necessary, a placebo) and whether the benefits of taking it outweigh the risks. If they approve the drug, they also decide whether it should be available over the counter at a pharmacy or only on prescription.

For the moment (until December 2020), the UK is still a participant in the European Union’s regulatory system for licensing medicines. Under the EU system, companies generally apply to the EMA for authorisation for ‘innovative’ medicines, for example, those with new active substances, and the authorisation is valid across the European Economic Area and the UK. For other drugs, the company can apply to the medicines licensing agency in any member state and there are arrangements to ensure that the authorisation applies across the European Economic Area. The government will need to set out its approach to market authorisation once the UK has left the European Union.

Why are new drugs so expensive?

There are good reasons why a pharmaceutical company might, legitimately, set a high price for a new medicine. When scientists decrypt a new disease, pharmaceutical companies start the painstaking search for a compound that might offer an effective treatment. The history of drug development documents the victories (Zidovudine and Didanosine for HIV, for example) rather than all the projects that came to nothing. Yet only 5 in 5,000 drugs make it from preclinical development to clinical trials. And only one of those makes it through clinical trials to become an approved drug. This is an industry where development costs are high and the likelihood of success is low. These and other complexities – for example, how to apportion research and development costs between countries – also make it almost impossible to calculate what a ‘fair price’ might look like.

Governments protect companies’ investment incentives by granting patents, giving companies that develop new drugs the exclusive right to make and sell their new drug, and preventing other companies from selling an identical product. Patents typically last for 20 years from the date of filing. In doing so, they generally give the firm the ability to set above-competitive prices until the patent expires.

Patents are a particularly powerful mechanism for protecting prices and profitability in medicines. This is because new medicines are easy to define and patent (as a chemical entity has a specific formula that can be patented). It is also because both public health care and private health insurance look to insulate the patient and doctor from the cost of paying for health care at the point of use. This means patients and doctors are not put off by high prices because they do not pay them directly. Governments and insurers meanwhile want to give as many people access as they can, while keeping control of spending.

Companies can typically set high prices for a patented new drug on release, particularly if there are no alternative treatments for the condition. If other companies launch effective new treatments while a drug is in patent, the incumbent may then be forced to reduce prices if it wants to continue selling its drug in large volumes. However, it is only when the patent expires that companies can start manufacturing and selling generic versions of the drug (a medicine with the same active pharmaceutical ingredient as the originator drug) or a biosimilar version for more complex drugs (a medicine that doesn’t have any clinically meaningful differences from the originator drug). When generics or biosimilars enter the market, prices go down and the originator’s profits typically drop rapidly.

All of this supports the logic of setting high prices for a new drug on release, since pharmaceutical companies have a short window of opportunity to recoup the substantial development costs for a new drug, before being forced to reduce prices and see profits fall as competition develops.

Diagram showing typical evolution of drug prices and sales

Of course, this does not automatically mean that pharmaceutical companies are therefore setting reasonable prices for new drugs. There is a lively debate on whether the existing patent system, including scope for firms to extend patents and apply for supplementary protections, allows them to recoup excessive profits, more than would be needed to maintain sufficient incentives to develop new drugs. Pharmaceutical companies have also been prosecuted for anti-competitive practices aimed at maintaining excessively high prices for drugs.

Either way, the result is a political and technical challenge for governments and health systems, which must decide whether to fork out the $10,000 per patient per year for Zidovudine in the US in the 1980s or more recently in the UK, £80,000 for the hepatitis C drug Sovaldi, £90,000 for the breast cancer drug Kadcyla  or £100,000 per patient for the cystic fibrosis drug Orkambi. The result is also a tragedy for people who find themselves on the wrong side of the price curve. The rapid development of antiretrovirals for HIV and AIDS saved millions of lives. Yet high prices and inability to pay meant that many people were unable to benefit from them, even though they could have been manufactured at low cost. As a result, in southern African countries such as Botswana, whole generations of children grew up as orphans.

The fourth hurdle

In the UK in the 1990s, consensus was emerging on the need for a ‘fourth hurdle’ in assessing new drugs. The evidence-based medicine movement was in full swing, highlighting astonishing variability in clinical practice, outcomes and efficiency from one service to another. After the licensing authorities had assessed the drug’s safety, quality and efficacy, somebody needed to consider the drug’s price and its benefits in comparison with existing treatments and decide if it should be offered ‘for free’ by social insurance or public health care systems. At the time, Ministers in the UK often made the decisions on whether a new drug should be available through the NHS.

In April 1999, Tony Blair’s Labour government established the National Institute for Clinical Excellence (renamed the National Institute for Health and Care Excellence in 2013 to reflect its extended remit – under the Health and Social Care Act 2012 – to provide guidelines on the delivery of public health and social care services) to help the NHS meet three continuing objectives: to improve continually the overall standards of care; to reduce unacceptable variation in clinical practice; and to ensure the best use of resources so that patients receive the greatest benefit. As for new drugs, NICE was tasked with making rigorous independent decisions on whether the NHS should pay for them, against a backdrop of stretched NHS budgets and postcode lotteries, where the NHS in some areas would pay for new drugs, while others did not. When it was established, NICE offered recommendations that the NHS could choose to accept or ignore. From 2005, it made statutory decisions, meaning that the NHS generally had to start paying for drugs that NICE recommended within three months of NICE’s decision.

NICE’s first assessment, of Glaxo Wellcome’s influenza drug Relenza, set the tone for what was to follow. NICE judged that there was insufficient evidence that Relenza reduced the severity of the flu for at-risk groups. At best, it only reduced the duration of symptoms by a day. In an epidemic year, it might cost the NHS as much as £100 million, if it could be prescribed. The answer was no. Sir Richard Sykes, Glaxo Wellcome’s chairman, arrived at Downing Street to get the decision overturned, threatening to move the company’s operations out of the UK if it wasn’t. But the government held its nerve, and the NHS accepted NICE’s recommendation.

NICE’s assessment process

Under the Voluntary Scheme for Branded Medicines Pricing and Access, which came into operation in 2019, NICE now automatically reviews all new drugs launched in the UK, or the use of existing drugs for new diseases unless there is a clear rationale not to do so. This is a change from previous practice, where NICE would select which new drugs to review based on their importance for patients and the NHS. The Secretary of State for Health and Social Care must formally agree to or amend NICE’s planned work programme before it can start the appraisal process for new drugs.

NICE works to a set of principles when assessing new drugs and technologies. It aims to identify care that is high quality, good value, and provides the best outcomes for people using health services within the budget available. It also commits to carry out its work independently, to consult broadly, to consider the advice of professionals and service users, to rely on robust information, and to base its recommendations on an assessment of population benefits and value for money. It also strives to ‘balance the need to achieve the most overall benefit for the greatest number of people with the need to ensure fairness and respect for individual choice’.

NICE follows a three-stage assessment process for new drugs: scoping, assessment, and appraisal. In the scoping phase, it determines which specific questions need to be addressed, for example, which diseases and patient groups to consider and which existing drugs to compare the new drug against. In the assessment phase, it evaluates the evidence of the drug’s clinical- and cost-effectiveness. In the final phase, an appraisal committee reaches a decision on whether the NHS should fund the new drug, based on factors including the strength of the clinical evidence, the degree of clinical need among patients, the cost-effectiveness of the drug given its proposed price and the robustness of the economic evaluation. In a nutshell, NICE will typically decide that the NHS should make a new drug available if the benefits of the new drug are greater than the opportunity cost (the health benefits from other drugs or health care interventions that are forgone once part of the health care budget has been used to buy this new drug instead).

In the 2010s, it took NICE an average of 48 weeks to complete the appraisal for a single drug and 74 weeks for a group of drugs. NICE typically starts the assessment process before the pharmaceutical company has launched the drug in the UK, with the aim of publishing its recommendations at around the same time it becomes available to purchase. Nevertheless, NICE has been criticised for the time it takes to complete assessments and provide recommendations on new drugs.

Quality-adjusted life years (QALY) and incremental cost-effectiveness ratios (ICERs)

NICE has developed a detailed methodology for assessing the costs and benefits of new drugs in comparison with other drugs and interventions, with the aim of identifying which drugs offer the greatest benefits given their costs. NICE uses the information supplied by the company to calculate the number of ‘quality-adjusted life years’ that patients will, on average, gain from taking the new drug, in comparison with existing therapies. This encompasses not just the number of extra years of life that the drug offers in comparison with other therapies, but patients’ quality of life, for example, reduction in pain or ability to perform basic activities of daily living.

With a measure of the health benefits of the new drug in comparison with existing therapies, and the price of the new drug and associated treatment costs in comparison with existing therapies, NICE can calculate an incremental cost-effectiveness ratio (ICER) for the new drug, that is the cost, using the new drug, of each additional quality-adjusted life year. The method allows NICE to make consistent decisions about whether to pay for interventions across different technologies, clinical areas and patient groups, and the opportunity costs of paying for one health care intervention at the expense of another.

Diagram showing incremental cost-effectiveness ratio (ICER) calculation

With these calculations, we can imagine a virtual merit order of drugs reflecting their costs and benefits, from those with the lowest ICER to those with the highest. Cheap, effective drugs for fatal diseases in children might come at the top of the list, delivering a huge increase in quality-adjusted life years for just a few pounds per treatment. Low cost drugs, such as generic statins to reduce the risk of cardiovascular disease, might come somewhere in the middle, delivering a more modest but significant increase in people’s quality-adjusted life years for a relatively low price. Right at the bottom might be expensive new drugs for people at the end of their lives, drugs that cost hundreds of thousands of pounds for a course of treatment but on average only prolong people’s lives for a few months while they are in poor health. The question now is where to draw the line within this ranking, between the drugs that the NHS should pay for and those that are too expensive given the benefits they offer.

NICE’s cost–benefit threshold

During the early years of its operation, NICE did not explicitly set out the maximum it thought the NHS should pay for an additional quality-adjusted life year. Senior leaders explained that they did not have a single fixed figure in mind. However, as NICE’s decisions accumulated, it became clear that it was approving new drugs with ICERs in the range of £20,000 to £30,000 per QALY (ie, drugs that offered additional QALYs for a cost of £20,000 to £30,000 more than the existing alternative treatments per QALY).

In 2004, NICE clarified that it is likely to recommend adoption of drugs with an ICER below £20,000 per QALY; for drugs with an ICER between £20,000 and £30,000 per QALY, it would consider the degree of certainty relating to the company’s calculation of costs and benefits, the innovative nature of the technology, the particular features of the condition and patient population, and the wider societal costs and benefits; and for drugs with an ICER above £30,000, the ‘case for supporting the technology on these factors has to be increasingly strong’. In some instances, NICE has approved a drug only for restricted use with a narrow subset of patients, since the drug only has sufficient benefits for these groups.

NICE has become one of the UK’s most successful health policy exports. Countries around the world established independent bodies using similar methods to decide whether their health systems should pay for new drugs. In many countries, these bodies have set higher ICER thresholds than NICE: €50,000 to €300,000 per QALY in France€45,000 in Ireland; and around €41,000 in the Netherlands, for example. This is one of the reasons why NICE might reject a new drug for the NHS while other European countries approve its use within their health systems, although differences in assessment approach for different drug prices in these countries might also play a role. Some other countries have much lower ICER thresholds, for example, New Zealand at NZ$13,000. Should NICE raise its threshold to match France or Ireland or lower the threshold to bring it closer to New Zealand? That depends on how much money you think the country should spend on health care and the proportion of the NHS budget you think it should spend on medicines versus other interventions to improve people’s health. In 2019, researchers from the University of York argued that NICE should lower the threshold to £15,000 to better reflect the costs and benefits of spending on drugs versus other forms of health care. NICE responded that this would prevent NHS patients accessing most new medicines when they are released.

Of course, there are substantial differences between health care systems and their approaches to assessing new drugs which makes it difficult to make simple comparisons – such as comparisons of ICER thresholds – between countries. In England, for example, NICE often imposes restrictions on the use of a new drug on the NHS, for example, specifying the precise group of patients that are eligible to receive it (see below). In doing so, it aims to ensure that patients who will gain most from taking the drug are able to access it. In some other countries, the authorities are more likely to approve a drug for any of the uses for which it received marketing authorisation.

Equity, fairness and other ethical considerations

NICE’s approach to cost-effectiveness analysis is founded on utilitarian principles, with the aim of maximising the benefits of health spending for society as a whole. The logic of the system is to ensure that the NHS uses its funding to deliver the greatest overall improvement in health with the resources at its disposal. In its cost–benefit analysis, NICE considers the number of quality-adjusted life years that a new drug will deliver, without making any judgements about the value of an additional life year for a particular patient or social group. In NICE’s analysis, an additional quality-adjusted life year for a child is given the same importance as one for an older person.

Since its establishment, NICE has recognised the case for considering a broader range of ethical perspectives in its decision-making. As it explains in its note on decision-making principles, ‘NICE believes that overall population needs are paramount in determining the fair allocation of resources. But it also recognises that in some circumstances, in the interests of fairness, the needs of particular groups may override those of the broader population.’

Since the mid-2000s, NICE convened a Citizens’ Council to provide perspectives on moral and ethical issues relevant to NICE assessments. Patients, carers and the public can now contribute perspectives to NICE’s work through its public involvement programme. Some researchers have argued that NICE could be more systematic in addressing ethical considerations, for example, equity and fairness, in its reviews of new drugs.

At times, there has been criticism of an approach that focuses primarily on maximising overall efficiency in improving health and wellbeing, with less attention to other factors. In 2002, NICE issued its assessment of the use of photodynamic therapy with the drug Visudyne for macular degeneration. Citing an ICER of £80,000, NICE approved the use of the photodynamic therapy only for a person with macular degeneration in their ‘better-seeing eye’. NICE’s view appeared to be that Visudyne was cost effective only to save the sight in one eye when a person was going blind in both eyes. Charities accused NICE of requiring people to go blind in one eye, before it was prepared to save the other. Whether or not this was a fair characterisation of NICE’s position, the notion that people would need to lose sight, or be in the process of losing sight, in one eye before they could get the drug offended the public’s sense of fairness and decency.

The growing number of special cases

One way in which these complexities have manifested themselves is in the growing number of drugs granted special treatment. In 2008, the Secretary of State for Health, Alan Johnson, commissioned an independent review of access to medicines, which included access to end-of-life drugs. In response to the findings, NICE agreed to raise the threshold for end-of-life drugs for small groups of patients with fewer than 24 months to live. It agreed to approve end-of-life drugs in this category up to a new ICER threshold of £50,000 providing the treatment extended people’s life by a minimum of three months. Before the changes, NICE often rejected expensive end-of-life drugs that extend people’s lives for a short period because of their high cost per QALY. The changes make it more likely that these drugs are approved, but of course this means fewer resources to spend on medicines for other patients and diseases, even when these have a lower cost per QALY.

In 2017, NICE made an even more significant change, adopting an ICER threshold of between £100,000 and £300,000 for drugs that treat ‘very rare diseases’. These are typically ‘orphan drugs’, meaning that there is no available alternative therapy, for diseases that affect fewer than 1 in 50,000 people. The prices of these drugs are also often extremely high, reflecting the high development costs for companies, the relatively small volumes of the drug that the company is likely to be able to sell, and lack of competition to constrain prices once a drug is developed. The approval of these expensive drugs may also have a less significant financial impact for the NHS since only a small number of patients will receive them.

It is easy to recognise some of the ethical considerations that led NICE to increase by a factor of 10 its threshold for these drugs. In some cases, these are the only drugs for rare and fatal diseases in children. It is extremely difficult for governments to deny severely ill children available drug treatments, even if a utilitarian assessment would conclude that the money is better spent elsewhere. But where does this leave the principle of a merit order, where the priority is spending on the drugs that have the greatest overall impact for the population?

In 2004, NICE’s Citizens’ Council captured the range of views on the issue, with a majority of its members in favour of paying higher prices for these drugs, but a significant minority arguing for the same cost-effectiveness appraisals for all treatments. There have been continuing disagreements regarding NICE’s approach to appraising new drugs, leading NICE to launch a review of its assessment methodology in 2019 (see box below).

Approval for restricted use

As NICE has found itself assessing a larger number of expensive new medicines, one strategy it has adopted is to attach restrictions to the use of these medicines in the NHS. In its decision on Visudyne in 2002, discussed above, NICE approved the use of the medicine only for patients meeting three cumulative conditions: they had to be patients with ‘classic subfoveal CNV’ (a form of macular degeneration), patients with ‘relatively good visual acuity in the eye being treated’, and patients receiving treatment in their ‘better-seeing eye’.

This is one of the reasons why people in England may struggle to receive an expensive drug even after NICE has approved its use by the NHS. Doctors in NHS services will need to be able to justify that a patient meets all the necessary criteria to receive the drug. In some cases, they may need to refer a patient to a central service to complete tests or make the final decision.

NICE’s methods review

In July 2019, NICE launched a review of its evaluation methods for health technology appraisals. The review covers a broad range of technical issues including:

  • how NICE assesses uncertainty in its appraisals, for example, uncertainty about the effectiveness of a new drug or its costs

  • how quality of life is assessed and incorporated into NICE’s economic analysis

  • specific challenges in assessing the costs and benefits of some new technologies, for example, targeted gene therapies for some cancers

  • how NICE assesses the burden of illness and wider societal impact of particular diseases as part of its assessment process

  • how NICE addresses equality considerations in development of its guidance.

NICE is planning to launch a public consultation on its emerging findings and proposals in autumn 2020.

National negotiations on drug prices

In the mid-2010s, NHS England found it increasingly difficult to keep spending within budget for specialised services for rare or more complex conditions. One of the reasons for this was the increasing volume of effective but expensive drugs and medical equipment for these conditions. This sometimes led to an apparent additional hurdle for new drugs: being recognised and incorporated within NHS England’s guidance and funding arrangements for these conditions.

In early 2015, NICE approved NHS provision of Gilead’s hepatitis C drug Sovaldi. In the following months, NHS England delayed consistent provision of Sovaldi given the impact this would have had for the NHS budget. Instead, it applied quotas and prioritised prescription of Sovaldi to patients with the most severe need while it attempted to renegotiate prices with Gilead. In 2017, NHS England reached a deal with Gilead and other drug companies to bring down the price of hepatitis C drugs and provide access to a larger group of patients.

In 2017, following a consultation run by NHS England, NICE agreed to introduce a new step in its appraisal of new drugs, where it assesses the financial impact for the NHS of providing the drug in its first three years. If the financial impact for the NHS exceeds £20 million in any of its first three years, NHS England may engage in commercial negotiations with the company on the price of the drug or other commercial issues before the NHS starts prescribing it to patients. If an agreement isn’t reached, NHS England may ask NICE to recommend how the drug should be phased in, in order to reduce the budget impact.

In the two years from spring 2017 to spring 2019, NICE completed budget impact assessments for 111 new drugs. It found that 31 of these new drugs met the budget-impact threshold, ie, that they would have a budget impact for the NHS of more than £20 million in one of the first three years. However, in the large majority of cases, it was possible to renegotiate the price of the drug or reach a different commercial agreement before NICE issued final guidance on them. NHS England did not therefore need to ask NICE to provide recommendations on how the drugs should be phased in. At the time of writing, NHS England has not yet asked NICE to delay or phase in new drugs to reduce their budget impact for the NHS.

Final hurdles

Even after NICE has recommended the use of a new drug, and NHS England has completed any subsequent negotiations on prices, there may still be a delay before clinicians start to prescribe a drug as part of routine practice. Clinicians need to learn about a new drug, to incorporate new clinical guidelines in their practice or, in some cases, need additional training to become confident in prescribing it safely.

Various initiatives led by the national NHS bodies and academic health science networks aim to speed up the adoption of cost-effective new medicines and other technologies within NHS services. In 2014, the government launched an ‘accelerated access review’ with the aim of speeding up access to innovative drugs, devices and diagnostics for NHS patients. Following the review, NHS England established the Accelerated Access Collaborative, bringing together industry, regulators and other partners, to accelerate the introduction of new treatments. As part of the scheme, the government provides financial incentives and support for the adoption of selected drugs.

Special access arrangements

There are, in addition, a few special arrangements that might allow patients to receive an expensive drug on the NHS even if NICE has not approved it. One is for the pharmaceutical company to reach an agreement with a funding body such as NHS England to provide a drug at a discount, or to reach another type of commercial arrangement, before the drug has completed NICE’s appraisal process successfully. These arrangements have become increasingly important as the NHS, companies and regulators have been encouraged to speed up the approval for new drugs. In some cases, the arrangements have allowed firms to collect additional evidence on the drug’s effectiveness to present to NICE during the technology appraisal process. In some of these schemes, these arrangements allow the pharmaceutical company to gather stronger evidence of the cost-effectiveness of the drug so that it can secure NICE approval at a later stage.

Another route comes from the tendency of governments to provide additional funding for particular conditions and patient groups. In 2011, David Cameron’s coalition government established the Cancer Drugs Fund, allocating an additional £200 million per year to NHS England to allow patients to receive expensive new cancer drugs that NICE had rejected on cost-effectiveness grounds. In 2015, the government reduced the number of treatments available through the fund to curb spiralling costs. Also in 2015, researchers at the University of York concluded that the fund represented poor value, diverting money from other more effective drugs and interventions.

The government subsequently asked NICE to carry out the cost-effectiveness analysis and decide which drugs should be included in the scheme. The reformed Cancer Drugs Fund re-opened in July 2016 as a ‘managed access fund’ for cancer drugs. Under these arrangements, NHS England will fund anti-cancer drugs generally for up to two years while more data is collected on their effectiveness, before NICE assesses them and makes a decision on whether they should be available in the longer term through the NHS. In 2021, the government plans to replace the Cancer Drugs Fund with a new ‘innovative medicines fund’ with additional funding to speed up access to wider range of new drugs for cancer and other conditions.

Cap on growth in spending on medicines

The Voluntary Scheme for Branded Medicines Pricing and Access (an agreement between the Department of Health and Social Care and the Association of the British Pharmaceutical Industry) aims to keep the costs of branded medicines predictable and affordable for the NHS. Under the scheme, participating pharmaceutical companies agreed to place a 2 per cent cap on the growth in sales of branded medicines. If the growth in sales of branded medicines is higher than 2 per cent, the industry has committed to repay the excess. This will mean that the growth in spending on branded medicines should be slower than the growth rate in overall NHS spending. The agreement came into operation in 2019 and will remain in place until 2024.

End note

This explainer has outlined the long journey from the discovery of a new drug to it becoming available on the NHS: the initial scientific research, the search for new compounds, the clinical trials, the marketing authorisation, the cost-effectiveness analysis and the commercial negotiations before, finally, an NHS doctor can prescribe a new drug to their patients.

In doing so, the explainer has attempted to shed some light on why governments, regulatory authorities, pharmaceutical companies and others take the decisions they do on the pricing and funding of new medicines: for example, why pharmaceutical companies often set high prices for new drugs, why governments allow them to do this, and why NICE recommends some expensive new drugs for the NHS while rejecting others. It has also discussed why authorities have sometimes found themselves reaching contentious decisions, such as NICE’s recommendations on Visudyne, and why the authorities have adapted their decision-making for particular groups.

The UK’s approach to assessing the costs and benefits of new drugs has been one of its most successful health policy ‘exports’. Since NICE was established, many other high-income countries have created similar bodies to assess new drugs. The system aims to protect pharmaceutical companies’ incentives to invest in developing new drugs while placing some limits on the amount of health care funding spent on drugs and ensuring that this funding is spent wisely. Without a robust system for making rationing decisions for drugs and other medical interventions, there is a risk that the health services spend their resources on less effective interventions while other better options go unfunded. At the same time, even a brief discussion highlights the complexities of making these rationing decisions.