Updating of England’s budget impact test threshold

England has a lot of ways to put downward pressure on prices of new treatments and the budget impact test - prompting commercial discussions if a new treatment looks like it will cost more than £20 million in any of the first three years of introduction - is just one.

The budget impact test was introduced in March 2017, but secured as part of wider negotiations with the industry a consultation is currently asking whether the threshold should now be £40million. Leela Barham takes a look at the proposal.

History of the budget impact test

NICE consulted on bringing in a budget impact test back in 2016. This was brought in even whilst a cap on total branded medicines spending was in place via the Voluntary Scheme for Branded Medicines Access and Pricing (VPAS). A new version of VPAS is in place now, known as VPAG, which also limits NHS spend on branded medicines. That describes the budget impact test applying for any of the first five years after launch.

The proposal to introduce yet another tool in the toolbox to limit spending was not universally popular in 2016; just under half of those who shared their thoughts said no (48%) and just under a third said yes (32%). Less popular still was the choice of £20 million for the threshold where commercial negotiations to help manage budget impact with more than half against it (53%) and even fewer supporting it (13%).

The ABPI even mounted a legal challenge to the introduction of the budget impact test, but wasn’t successful.

Those commenting back then had views on just what the threshold should be based upon, including that it should be related to wider notions of affordability like proportional GHP spend on health. The ABPI suggested £100 million (I guess if you don’t ask, you don’t get!).

The budget impact test – and the £20 million threshold – was implemented as envisioned in the consultation document, so presumably no one receiving the responses was swayed by what others thought.

£40 million threshold

At the end of July, NHSE – the biggest buyer of specialised medicines in the UK – and NICE – the HTA body – opened a consultation to find out what people think of changing the budget impact test threshold to £40 million.

The consultation was a commitment made in VPAG implying that negotiations to secure the deal covered a host of policies, not just the nuances of a spending cap.

The consultation on raising the threshold suggests that this change will “ensure that the BIT continues to target those technologies presenting the greatest budget impacts for the NHS, whilst ensuring that the threshold is only exceeded in a minority of evaluations.”

Workability seemed to be a key driver in setting £20 million because NHSE only has so much capacity to negotiate treatment by treatment, so presumably the choice of £40 million could help manage the to-do list.

Whilst not part of the consultation documents this time around, back in 2016 NICE had noted that they had looked back and found that 80% of budget impact estimates for technology appraisals between June 2015 to June 2016 were below £20 million.

New BIT threshold by January 2025

The consultation on a new threshold for the budget impact will closed on the 25th September.

NHSE says that it will be producing a thematic report on responses received. They’re expecting a lot of responses. There were 151 consultation responses to the original consultation on the budget impact test. Yet, there are just two questions, so it’s not likely to be all that complicated a piece of work to analyse responses:

Q1: To what extent do you agree or disagree that the BIT threshold should be increased from its current level of £20 million?

Q2: To what extent do you agree or disagree that, as set out in the VPAG agreement, the BIT threshold should be increased to £40 million?

Whilst there may well be plenty of other thoughts that stakeholders table in their replies to the consultation, it must be likely that the threshold will change to £40 million. Afterall, it’s a number that has emerged from government and industry negotiations, which will have included NHSE and NICE.

For companies looking to bring their new treatments to market, the most relevant question is likely to be when this will take effect. NHSE has said that it will “implement any required changes to the BIT threshold by the end of 2024.” It will also stay that way until the end of VPAG in 2028.