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How should NICE assess future costs and health benefits?

8035153-article-moneyThe latest smart phone has just been released and there are endless queues snaking across the phone shop ahead of the midnight launch. The phone is priced at £200 but in a year's time the value of the phone will drop.

Despite this, hundreds of people are willing to queue so they can get their hands on the latest technology and enjoy its benefits straight away rather than waiting until the phone is reduced to enjoy these benefits.

This is an example of what economists call “time preference” and is a fundamental assumption about human nature. People tend to want things now rather than waiting for them.

But how does the concept of time preference apply to health and should immediate costs and health benefits be treated differently from those that occur in the future? If we were ill we would surely want to feel better again in a week's time rather than wait for say a month.

Incorporating this time preference into the assessment of health costs and benefits is known as discounting and is an issue that NICE's Citizens Council has been grappling with at their latest meeting.

The Citizens Councill is made up of 30 ordinary members of the public, reflecting the age, gender, socioeconomic status and ethnicity of the people of England and Wales, who provide a public voice to NICE's work.

Last year, the group met to explore the use of incentives for encouraging healthy living, but as Sir Michael Rawlins, Chairman of NICE, acknowledged at the start of the meeting, this is “the most difficult topic that we have brought to the Citizens Council.”

Treasuring future health

The issue of discounting is important to NICE, because one of NICE's key functions is to assess whether the NHS should provide new treatments based on the value for money which that particular treatment provides for the NHS based on its benefits for patients and cost.

The amount of discounting chosen can effect whether treatments and drugs are available or not on the NHS. It makes current costs and benefits worth more than those occurring in the future because there is an opportunity cost to spending money now and there is desire to enjoy benefits now rather than in the future.

But the whole issue of whether you should discount health at all has divided experts for some time, as has the amount that should be discounted to the benefits of a new treatment over time.

If the main cost of a treatment occurs in the future, then we need to calculate how much the equivalent value is today. To do this, the cost needs to be adjusted by a certain amount which is called the discount rate, set by the UK Treasury in the Green Book.

Treating children

8042162-article-childDiscounting recently came to the fore when NICE looked into the use of a drug, mifamurtide, for the treatment of bone cancer in children and young people.

NICE originally said no to the use of the drug on the NHS because it was not considered value for money, coming out way above the cost effectiveness threshold of £30,000 per quality adjusted life year (QALY) because the treatment costs are immediate and the benefits stretch far into the future

But it was a contentious decision because for a small number of patients, mifamurtide could prove to be a cure.

Dr Jane Adams, who sat on the NICE Appraisal Committee that looked at mifamurtide, says: “The figure for mifamurtide was £57,000. But this figure is governed by what discount rate you use.

“The Appraisal Committee looked to the Methods Guide to see if another discount rate could be used but the committee had to stick within the rules.”

The issue was then taken up by the NICE Board who issued an amendment.

The Board concluded that when treatment effects of a drug are both substantial in restoring health and sustained over a very long period, at least 30 years, the Committee should apply a rate of 1.5 per cent for health effects and 3.5 per cent for costs rather than the normal 3.5 per cent for both costs and benefits.

“Reducing the discount rate from 3.5 to 1.5 per cent improved the cost-effectiveness, down to £36,000 per a QALY allowing the advisory committee to say yes to the drug”, says Dr Adams.

Far from clear cut

Despite this positive example, the Citizens Council found that there are many social and ethical issues to consider when considering how future health is valued over a long period of time.

Dr Bhash Naidoo, Associate Director for Research and Development at NICE, warns: “Discounting favours short term over long term policies and so discriminates against preventative and other public health programmes.

“The costs of a vaccination programme are big upfront so we devalue the benefits later down the line if we choose to discount.”

Professor Albert Weale, Chair of the Nuffield Council on Bioethics, says that the issue of discounting is a controversial one as discounting does not apply to postcode so why should it apply over different time periods.

It's now over to the Citizens Council to feed back their thoughts on discounting and to consider how different views on valuing future health benefits and costs translate into different discount rates.

Sir Mike says: "We are keen to hear from the Citizens Council on precisely this kind of difficult social values issue, as it will help provide guidance to our independent advisory committees when they are required to make recommendations involving this approach."

A report on the Council's views will be available on the NICE website for public comment, before the Council submits a report to the Board of NICE setting out its findings.

9 November 2011

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Copyright 2014 National Institute for Health and Care Excellence. All rights reserved.