Tuesday, November 22, 2005

NICE: Not So Nice

(Hat tip: Mommy)

Should insurance pay for every medicine, no matter how non-cost effective it is? Britian feels it should not:
Millions of patients around the world have taken drugs introduced over the past decade to delay the worsening of Alzheimer's disease. While the drugs offer no cure, studies suggest they work in some patients at least for a while.

But this year, an arm of Britain's government health-care system, relying on some economists' number-crunching, said the benefit isn't worth the cost. It issued a preliminary ruling calling on doctors to stop prescribing the drugs.

The ruling highlighted one of the most disputed issues in medicine today. If a treatment helps people, should governments and private insurers pay for it without question? Or should they first measure the benefit against the cost, and only pay if the cost-benefit ratio exceeds some preset standard?

As the article notes, this is not the case in the United States. Here, if a procedure will help and no alternative can be found, it will be paid for regardless. But in Britian, if something costs too much as compared to the value gained (based on a formula), they won't pay.
"There is not a bottomless pit of resources," says Phil Wadeson, finance director for the National Health Service unit that oversees hospitals and doctors' offices in Liverpool. "We reached the point a while ago where there is far more medical intervention available than any health-care system can afford."
This is a serious dilemma that will eventually face US insurance companies as well, and therefore it is cause for concern. The uproar in Britian is not what one would expect: Outrage that insurance companies won't cover medicines that are not cost-effective. Rather, the complaints are the formula which the National Institute for Health and Clinical Excellence (NICE) used to come up with their formula.

NICE's formula tries to measure "quality-of-life" differences that result from medicines, and come up with a financial formula on that basis. But people are not happy with their formula:
NICE "has this strange mathematical formula they put heaven knows how many numbers into and out comes: 'Yes, it's affordable,' or 'No, it isn't,' " says Antony Dennis, a Web-site designer in the village of Ramsbury whose mother takes Aricept. "Things like the relationship my mum has with her grandson are probably not easy to put into that formula."
It is interesting to note that people seem to recognize that not every treatment can be paid for. Rather, they are arguing that while some are not worth paying for, the ones NICE has said are not worth it actually are. It almost sounds like a concession of sorts by the people - they do not expect insurance companies to pay for treatments that are just too much for too little.

I wrote above that the same issues will eventually face the United States. But I feel that this, thankfully, may not be true. The socialized system in the United Kingdom places a limit on profits a company can make on any given medicine, ensuring that costs remain low. It also limits, however, those companies' abilities to pay for other medicines. In the United States, the companies tend not to run into these issues. If one medicine is somewhat cost-prohibitive, they are able to ratchet up the prices on other medicines to make up for it - but at least those who need the former are able to get it.

It will be interesting to see if the United States' privatized system will be able to weather these types of claims in the coming years. If costs do begin to get too high, watch for a major fight between those who prefer to keep most medicines low, as the UK does, at the sacrifice of other medicines being administered vs. those who let the market decide, which may result in many drugs shooting up in price - but keep all medicines covered and available to the public.

Hopefully, the privatized system will ensure that such a thing never happens. But it is an issue worth noting.

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  1. Hm, ensure the cost won't get too high? How come the cost in the US is higher already than in Europe then?

  2. Because the companies are keeping the profits, which they can't do in the UK et al. Then again, they pay much higher taxes.

  3. Sigh... Okay, I messed up a bit in this post - I was debating what conclusion I wanted to draw from the article, and switched as I was writing, so it wasn't as clear as I wanted it to be.

    I'm not going to edit it for now - the points still stand, they're just a bit fuzzy...

    Jewropean - the costs are higher now, but that is a function of the markets. The American consumer is willing to pay the prices of the drugs; so the companies are able to charge more. Those prices are held in check in countries such as the UK, as I'm sure you're well aware. By the same token, US companies prefer not to get into fights or not pay claims which will hurt their reputations; and perhaps there's even a bit of heart there. Therefore, they will pay for just about any medicine that provides a benefit, even if that medicine is not very cost-effective.

    However, if too many drugs become non-cost effective, it will be much harder for them to do this. In that case, they will either have to make concessions such as NICE suggests, or raise prices on the more typical medicines to compensate. Hopefully, the privatized system will ensure it never reaches that point.