How can UK pay for Sovaldi? Health bonds, says pharma leader

The problem of highly effective but high priced and 'unaffordable' medicines such as Sovaldi needs to be addressed in the UK - and could be solved by adopting creative solutions.

That is the view of Stephen Whitehead, the chief executive of UK pharma industry's trade organisation the ABPI, who says new approaches have to be explored if novel, high cost medicines are to reach patients on the national health service.

Speaking at an eyeforpharma conference in London on Thursday, Stephen Whitehead gave a wide ranging review of the UK market, deploying his trademark candour to address many of the controversies and hot topics for pharma and the NHS.

He acknowledged that while the general public had a positive opinion of the sector, pharma has a reputation problem among healthcare professionals and managers within the NHS.

He revealed that a new ABPI-commissioned survey of 3,000 of its stakeholders found that worries about high prices had shot to the top of the list of concerns for healthcare professionals and NHS managers. Whitehead said negative sentiment on prices had not figured in previous annual surveys, but had 'in the space of a year' emerged as the number one issue.

This is in some ways surprising, as the UK pharma industry has frequently been at loggerheads with NICE, the NHS cost effectiveness watchdog, over high cost drugs, especially in cancer.

However this year, Gilead's groundbreaking new hepatitis C drug Sovaldi has undoubtedly been the most talked about drug. Sovaldi (sofosbuvir) is remarkable for its efficacy, curing more patients than ever, faster, and with fewer side-effects – but also for its high price.

Naming the drug directly, Whitehead said Sovaldi was an exceptionally effective drug, but also acknowledged that its cost presented a huge problem for the NHS.

"Sovaldi costs around £35,000 per patient, and there are approximately 215,000 patients [in the UK as a whole]. If you do the maths, that is £7 billion for all those patients to receive it: that's not affordable in our system."

Putting the figure in context, Whitehead pointed out that this expenditure would represent 70% of the £10 billion NHS drugs bill, clearly not a realistic proposition for the NHS or other pharma companies seeking reimbursement.

Whitehead's admission that Sovaldi is 'unaffordable' is a remarkable break from the usual protocol of industry defensiveness over price and value, and signals a willingness on the part of the ABPI to consider new approaches to pricing and reimbursement.

NICE gave the go-ahead for Sovaldi's use on the NHS last month, but sought to minimise expense by specifying which sub-groups of patients should receive it and which should not.

The approval of Sovaldi had been predicted, thanks to its very high efficacy in curing patients faster and with fewer side-effects than existing regimens. However, the fact that the drug (and others like it) could break the NHS budget has been acknowledged elsewhere. Speaking to pharmaphorum earlier this year, Charles Gore, chief executive of charity the Hepatitis C Trust, used the same terms to describe the drug, and called on pharma and the NHS to arrive at a workable solution on price and access.

The Bond concept

Stephen Whitehead said the pressures that drugs such as Sovaldi created on healthcare systems could not be ignored by the pharma industry, and that it had to engage in 'quite creative debates' with payers on how to allow access to the drugs without swamping healthcare budgets.

He suggested one eye-catching idea: that the NHS could issue bonds, in much the same way as government bonds currently work. This would mean that the NHS would issue bonds to a pharma company, and in return would gain access to drugs upfront, but spread its payment over 10 years, with the bond 'maturing'( i.e. full payment being made) at the end of this period.

Whitehead said that this would answer one of the current conundrums of pharmaceuticals – many drugs promise cost-effectiveness in the long term, by preventing life-threatening or chronic illnesses from developing. This is particular the case with Sovaldi and hepatitis C, a disease which slowly damages the liver over many years, but often produces no symptoms until it reaches a stage where patients become acutely ill.

Sovaldi and other novel hepatitis C drugs could prevent tens of thousands of deaths, and avert the need for liver transplants in some cases, which are hugely expensive for the health service. In this way a bond paid off over 10 years could spread the cost of treatment, matching it more closely with when the savings are delivered through prevented illness.

Offering no further details about the concept – or if it had been discussed with health service leaders – Whitehead nevertheless said such ideas would have to become reality in the future.

Acknowledging pharma's inertia up to this point, he said: "Our response hitherto has not been adequate to meet the challenge on price....repeating the old story about a drug costing £1-2 billion to develop doesn't work anymore."

He added: "We have to think of these creative solutions if these drugs are to get to patients."

Whitehead did reveal that he is in frequent communication with NICE's chief executive Sir Andrew Dillon, who has also expressed the desire to come up with entirely novel ways of appraising and paying for new treatments.

Only yesterday, Sir Andrew issued a statement announcing plans for a new, holistic review of NICE's methodologies. He said it was necessary to step back and consider "how risk and reward is shared between the industry and a publicly funded NHS", and build these into future systems.

The similarity in the language – including the conciliatory tone – gives some hope that the two sides could at last be converging in their thinking.

Existing pricing system

The need for further innovation in pricing and access models suggests that the UK's newly minted PPRS pricing system is not providing enough of the answers.

The new PPRS was introduced in January this year, and sees the pharma industry for the first time effectively underwriting the NHS drugs budget: the ABPI and the government have agreed a spending cap, and any overspend is refunded by the industry to the NHS.

For pharma, the system should be beneficial in reducing cost-containment measures, which result in the UK being 'low and slow' in its uptake of new medicines compared to its peers in western Europe.

Whitehead says the rebate provided by industry to the NHS will be £400 million this year, and could be as high as £1 billion next year.

He says one of the advantages of the system is that it makes the industry a true partner in the NHS, whereas before it was not.

However there is little sign that the NHS is acting differently in regard to drug spending because of the new deal. The health service is struggling to cope with rising workload and flat-lining budget, and NHS managers are taking the same 'belt tightening' approaches to all areas of spending.

For that reason, admissions from the head of the ABPI that new blockbuster drugs can be 'unaffordable' for the NHS looks like a genuine attempt to break out of a deadlock with the NHS and NICE. Equally, promises of a 'flight path' to help smooth uptake of new drugs and an 'Office for Innovation' within NICE look to be sincere attempt to forge a new approach; but it remains to be seen if there is enough support in the global pharma industry and in the NHS leadership to take on potentially new complex systems and to share these risks.

Andrew McConaghie is Managing Editor, Feature Media at pharmaphorum. Follow Andrew on Twitter.