In October 2016, the National institute for Health and Care Excellence (NICE) and National Health Service England (NHS England) launched a 12 week consultation on proposed changes to the arrangements for evaluating and funding drugs and other health technologies appraised through NICE’s Technology Appraisal (TA) and Highly Specialised Technologies (HST) programmes.

The consultation closed on 13 January 2017 and it indicated that, in general, the proposed changes will apply to all NICE technology appraisal topics considered after 1 April 2017.

Current Situation Relating to Funding, NHS England and NICE

At present in the UK, all medicines are required to meet the 3 key “pillars” of medicines regulations by demonstrating efficacy, safety and quality of a medicinal product, before a Marketing Authorisation (commonly referred to as a licence) is granted by the regulatory authorities. In order for a medicinal product to be successful, in a country where the majority of the healthcare is provided by a centralised state organisation – the NHS – it has become, in effect, necessary to overcome an additional hurdle relating to its funding and reimbursement.

NHS England manages the budgets that enable care to be provided and has a statutory responsibility to ensure that its functions are exercised effectively, efficiently and economically within the funds provided to it by the Department of Health. NICE appraises the clinical and cost effectiveness of new health technologies (including medicines) and in doing so, it takes account of the fact the NHS has fixed resources available to it.

At present medicines appraised by NICE and which have a cost-effectiveness ratio of £20,000-£30,000 per quality adjusted life year (QALY) are usually recommended for adoption by the NHS, but the final decision is made by NHS England. It is important to note that these decisions relate to whether funding would be made available to the various organisation within the NHS in order to use the health technologies and they are not intended to fetter the clinical discretion of doctors to use the most appropriate treatment to care for their patients.

Background to the Current Consultation

The importance of taking account of the financial impact when managing the introduction of new drugs and other technologies was highlighted by the Public Accounts Committee which recommended that “The Department of Health and NHS England should, in collaboration with NICE, ensure affordability is considered when making decisions that have an impact on specialised services. For example, building in consideration of how the cost of implementing NICE recommendations can be kept affordable within available commissioning budgets, and by using national bargaining power to get best prices for high-cost drugs”.

The independent Accelerated Access Review has also identified the general issue of affordability, as well as emphasising the importance of developing a collaborative framework through which transformative technologies can be moved quickly through development, evaluation and adoption.

Aims of the Consultation Proposals

NICE and NHS England say they intend to work together more closely to better manage access to new drugs and medical technologies (devices and diagnostics) by simplifying and speeding up some appraisals, and by making more clear the arrangements for funding others.

The consultation sets out a number of ways in which NICE and NHS England say they can provide an environment that encourages the life sciences industry and the NHS to work together in the best interests of patients.

It suggests this would be achieved by facilitating collaboration and providing opportunities for early dialogue between innovators and the NHS, and by speeding up appraisal and adoption processes, which would enable the development of arrangements that deliver the right outcomes for both patients and the life sciences industry.

The consultation suggests the proposed changes will benefit:

  • patients – by providing timely access to the most effective and cost-effective new treatments more quickly and by providing greater clarity for patients about the point at which treatments for very rare conditions that are appraised by NICE will automatically qualify for funding from routine commissioning budgets;
  • the life sciences industry – by increasing the opportunities for companies to help manage the introduction of their new technologies into the NHS by providing more flexibility in the adoption of cost-effective, high budget impact technologies into the NHS. It also says there will be greater clarity for companies about the point at which treatments for very rare conditions that are appraised by NICE will automatically qualify for funding from routine commissioning budgets;
  • the NHS – to meet the challenges relating to financial sustainability.

The Consultation Proposals

In summary, the proposals in the consultation document are:

  • the introduction of a new ‘fast track’ NICE technology appraisal process for the most promising new technologies, which fall below an incremental cost-effectiveness ratio of £10,000 per QALY, to enable these treatments to be evaluated and if successful, to reach patients more quickly.
  • To operate a “budget impact threshold” of £20 million, set by NHS England, to signal the need for an early dialogue with companies to agree special arrangements to better manage the introduction of new technologies recommended by NICE. The “budget impact threshold” scenario is said to apply to a small number of technologies that, once determined as cost effective by NICE, would have a significant impact on the NHS budget.
  • To vary the timescale for the funding requirement (from the standard 3-month period of deferred funding) when the budget impact threshold is reached or exceeded, and there is therefore a compelling case that the introduction of the new technology would risk disruption to the funding of other health services.
  • To automatically fund from routine commissioning budgets, treatments for very rare conditions up to £100,000 per QALY (5 times greater than the lower end of NICE’s standard threshold range) which have been assessed via NICE’s HST programme. The consultation also provides the opportunity for HSTs above the £100,000 per QALY range to be considered through NHS England’s annual specialised commissioning prioritisation process.


It appears that NHS England and NICE have worked together to develop what they perceive is the optimal approach to implementing these proposals. The consultation sets out how both organisations propose to develop and coordinate their processes and are said to have been agreed by both organisations, subject to the outcome of consultation.

There are potentially some encouraging proposals in the consultation. The introduction of the NICE fast track technology appraisal process (probably replacing the abbreviated process) should be well received.

The automatic funding from routine commissioning projects for very rare diseases up to £100,000 per QALY represents the first time that NICE will formally appraise treatments for very rare diseases. Although the term “very rare” is not defined in the consultation document nor in European medicines legislation, it is likely that previous NICE guidance indicating a prevalence of 1 in 50,000 will be the critical level used for defining “very rare”. The other point to note is that a “budget impact threshold” of £20 million per annum (suggested by NHS England and applying to all other NICE appraisals) does not apply in these specific circumstances. Whilst this is good news for very rare diseases, as acknowledged by NICE itself, it is likely to be applicable only to a very small number of treatments.

On the other hand, the proposed changes may generate responses from key industry stakeholders as it introduces the concept of “budget impact threshold” of £20 million per annum as proposed by NHS England. This is significant because even if a treatment is likely to be approved for use by NICE, if the budget impact assessment (which is conducted early in the appraisal process) is thought likely to exceed the £20 million per annum threshold, NICE can pause the appraisal process and request the company to engage with NHS England in order to discuss and agree commercial terms before proceeding with the assessment process. This may impact the likelihood of companies willing to take up opportunities to develop treatments for rare diseases.

The consultation and the proposals do not address the funding issues associated with treatments for rare diseases which often have a QALY figure over £100,000 nor the longstanding debate over whether a QALY based approach is the best way of determining the cost effectiveness of treatments for rare diseases. This is likely to continue to limit the ability of UK patients to access innovative and effective treatments for rare and neglected diseases.

This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.