Does the NHS make full use of its monopoly on drug purchasing?
Edmund Stubbs, 5 December 2015
A new report in The Lancet shows that the price of new cancer drugs varies widely across the world. The range is from only 28 per cent to a staggering 388 per cent of the nominal price for the same drug. Information on prices is however frequently restricted. Some healthcare organisations are required never to disclose the discounted price they have received in relation to a certain drug as a condition for getting further discounts. This way individual institutions are often not aware of the discounts received by others.
In the report, Britain is a high achiever, paying relatively low prices for its cancer drugs. Mediterranean countries also perform well. Germany, Sweden and Switzerland, are however, all at the other end of the value for money spectrum, usually paying more.
It is encouraging to learn that the UK’s NHS succeeds in paying relatively little for its oncology medicines. It suggests that the National Institute for Health and Care Excellence (NICE) is performing well. Its system of Quality Adjusted Life Years (QUALYs), which evaluates drugs according to the quality of life they can offer patients at unit cost, seems to ensure that pharmaceutical companies will know they have to offer favourable terms if they want the NHS’s enormous custom.
As the NHS is one of the largest purchasing organisations in the world, it can exercise considerable influence in determining how much it is willing to pay for procuring its needs. However, Lord Carter’s recent review of NHS purchasing shows that the organisation could do much better in ensuring that it pays the lowest possible prices for medicine and other supplies. As a telling example, he found instances of soluble tablets being bought at a cost of £1.50 per tablet, when insoluble versions of the same drug which cost only 2p can be used to equal benefit by most patients. Across the NHS Lord Carter discovered a collective potential to save billions of pounds each year by such smart purchasing.
As far as cancer drug procurement is concerned the UK is efficient and economical. It, like other successful national purchasers such as Spain and Portugal have large, tax-funded, national health systems where collective purchasing is more easily possible compared to social health insurance systems.
Although social health systems certainly have their merits, with many such European systems judged overall to be performing better than the NHS, in terms of procuring drugs from international companies it seems the larger the organisation, the easier it is to obtain favourable pricing. Germany, one of the highest paying countries according to The Lancet’s paper, could be hampered by its more fragmented social health insurance system and associated limited purchasing power despite its higher population.
As with most issues in healthcare there is no hard and fast rule. Greece pays low prices for its medical procurement despite having a social health insurance system. Nevertheless, the evidence contained in The Lancet’s paper suggests the latent power the NHS has to improve the cost of its procurement, a power than could be used ever more smartly as its efficiency drives continue.