The challenge presented by personalised medicine to healthcare payers

Dr Timothy Riley discusses the challenges faced by healthcare payers since the introduction of personalised medicines, looking in particular at the reimbursement policies created by the UK’s NICE. 

Health services are constantly under pressure to get more from less. Users and patients have a wider choice of new health technologies (drugs, devices, and therapies of all kinds) than ever before. Plus globally, each of us is living longer, which in itself opens up a wider spectrum of disease risk and complexity for medicine to address. This perfect storm of: growing populations, longer lives, and a wider spectrum of disease call to question how affordable are the new health technologies so that each life can be “covered”?

Many health economies at a national level now use health economics as tool in deciding which health technologies to adopt. Clinical and cost effectiveness thresholds for access to new therapies and treatments (what should or should not be paid for) are therefore under continual review.

Since 1999, when the National Institute for Clinical Excellence (NICE) was established in the UK, the notion of deploying health economics as a market regulator for new medicines has transitioned from the academic to the practical. To be eligible for reimbursement in the NHS, new drugs have had to successfully navigate “appraisal” by NICE. Over the years, the NICE methodology has become more sophisticated and it is fair to say it has become a benchmark for many governments outside the UK. The methodology is increasingly used as a model for adaption and adoption in their own healthcare systems.

“The question of whether personalised medicines should be added to the drug formulary is becoming increasingly commonplace.”

However, NICE and its appraisal methodology is set to evolve even further with the UK Government’s stated intent to move to Value Based Pricing for NHS England by 2014. The policy, and its pros and cons, has been widely commented upon, but the question here is whether it will be fit and sufficiently adaptive to meet the new generation of personalised treatments that are coming to the market.

The question of whether personalised medicines should be added to the drug formulary is becoming increasingly commonplace. The drugs in question are often expensive and where they do provide benefit, it is often to small numbers of people. Personalised treatments will inevitably become a tidal wave of cost pressure to services as technology innovates new drugs and affected groups and individuals lobby for reimbursement.

These treatments work by being adapted to the genetic makeup of individuals and are characterized by modified or redesigned biologic agents. They are commonly grouped under the term pharmacogenetics (where the focus is on single genes) and pharmacogenomics (where the focus is at genome level). Their small target patient groups and high cost put them well into the “super orphan” category, which consequently makes it increasingly difficult for health care systems to decide whether they should be included on their drug formularies.

What makes these new drugs a difficult proposition is that the established methodologies for appraising health economic benefit are best tailored to treatments that give benefits for a greater number of lives. Appraising a drug targeted at very specific patient groups becomes increasingly difficult as the numbers benefiting becomes smaller. Consequently, the NHS (for the UK) and indeed other healthcare systems are grappling with how to develop policies that can accommodate pharmacogenomic therapies.

Up until recently, case examples have tended to define the policy. NICE first tackled this issue with Herceptin (trastuzumab) in 2002 for HER2-overexpressing breast cancer patients and in 2010 NICE supported advised reimbursement of AstraZeneca’s non-small cell lung cancer drug Iressa (gefitinib) in EGFR29 mutation-positive patients as tested by a companion diagnostic test. This trend for “tailoring” treatments to individuals and small populations looks set to continue.

“Appraising a drug targeted at very specific patient groups becomes increasingly difficult as the numbers benefiting becomes smaller.”

The decisions are not clear-cut. In the development of these new personalised medicines, complementary development of companion diagnostic tests will assume equal importance. Indeed, for Bristol-Myers Squibb’s Yervoy (ipilimumab) advanced melanoma drug, NICE cited the absence of a validated diagnostic test for identifying which patients are likely to have a sustained and robust as one of its reasons for originally recommending against the melanoma therapy’s use in 2010. Phase III trial evidence overturned that decision in late 2012.

Cost is a significant issue for Governments and health insurers alike. By way of example, Ipilimumab approximates to £80 000 per course of four treatments per patient and it only requires patient numbers to get into double figures for there to be an additional £1m cost to the formulary.

In reality, the issues for HTA and reimbursement are twofold. First, methodologies have to be adapted to provide a meaningful appraisal of the new drug. Second, the thresholds and criteria for value should allow fair access but also be mindful of broader health system economics. This might require a more explicit consideration of affordability – which to date, has been outside the NICE remit.

Methodologies are being developed to accommodate personalised medicines including companion diagnostics. Merlin et al., 2012 in their framework for reviewing co-dependent technologies have started to highlight the issues to be addressed. These are already informing methodology development at NICE here in the UK and other HTA agencies internationally1.

Impact on broader health system economics becomes a more difficult issue without rationing debates resurfacing. NICE appraisals of drugs with companion diagnostics are increasing. A total of 16 appraisals covering 6 drugs and their companion diagnostics have been completed by NICE and two more are in the pipeline: the BRAF V600 mutation in concert with emurafenib for malignant melanoma and the anaplastic lymphoma kinase fusion (ALK) genes] marker in concert with Crizotinib for non-small-cell lung cancer. The Irish National Centre for Pharmacoeconomics estimate the annual treatment cost for vemurafenib as Euro 56,7K, with a gross budget increasing from approximately Euro1.4 million in 2012 to Euro 2.8 million in 2016. For NHS England alone that would extrapolate to a £24M cost pressure for just one drug. Add the costs of those already appraised and the additive costs become very significant: certainly a big rise on the £800m cost of new drugs appraised from 1999 to 2004.

“Impact on broader health system economics becomes a more difficult issue without rationing debates resurfacing.”

The jury is out on whether Value Based Pricing (VBP) will effectively allow the innovation for more personalised medicines and yet refocus costs to the most effective drugs. As originally described VBP should allow this shift persuasive outcome data will be required. It can also be expected that with the broadening scope of NICE involvement, the process is likely to be lengthy and lead to delays in access.

In England, the final word will inevitably be with the national commissioning body, NHS England who are increasingly bearing down on, and standardizing on, specialized treatment costs including drugs and diagnostics across the 140 specialist services2.

In short, even when a personalised treatment has navigated NICE it looks more likely that market access will also be defined by being “NHS affordable”.


1. Merlin T, Farah C, Schubert C, Mitchell A, Hiller JE, Ryan P. Assessing personalised medicines in Australia: A national framework for reviewing codependent technologies. Medical Decision Making, August 15, 2012

2. NHS England, Manual for Prescribed Specialized Services, November 2012



About the author:

Dr Tim Riley is CEO of the Wellstate group that includes Wellstate HTA which advises pharma and Governments on market access and regulation. Dr Riley led the development and establishment of the National Institute of Clinincal Excellence (NICE) in 1999 as the Head of UK government policy for Health Outcomes and Clinical Effectiveness. A frequent commentator on global developments on HTA and market access, Tim Riley has considerable experience as a CEO of NHS payer and provider organisations and is member of the Global Health Leaders Forum (a network including Ministers, Government policy leaders and health CEOs). He is a member of a number of Government groups that include the NHS Futures Forum and the NHS Health Services Research Board as well as specialising in new policy developments in the emerging markets of Latin America.


Will value based pricing effectively allow the innovation of personalised medicines?