Abiraterone

There's an important newish prostate cancer drug called abiraterone which doctors are keen to prescribe to suitable patients.  The drug was approved by the FDA in the USA in April 2011, and in Europe by the EMA in July.  The UK body responsible for approval drugs for use by the NHS, NICE, started its review process in May 2011, intending to conclude its glacially slow deliberations in May 2012. Today it's issued a draft decision that the drug should not be funded by the NHS.

This is not to say that abiraterone is entirely unavailable on the NHS.  The Cancer Drugs Fund was established last year to pay for unapproved drugs, subject to agreement for each patient by the Strategic Health Authority in their region: your chances are better in some regions than others (which is ironic, since the government said the Fund would end the "postcode lottery": I've no idea why they thought they could do that with a regional decision-making process).

There's no question at all that abiraterone is an important advance.  A phase III trial was stopped at the interim stage in September 2010 because the results were too good for it to be ethical to continue with the control group.  The drug works by blocking the body's production of testosterone in a novel way (prostate cancer, until it becomes hormone refractory, needs testosterone to grow), and was found to increase median survival time by 3.9 months in patients with metastatic castration-resistant prostate cancer.

So has NICE got it wrong?  Cancer Research UK, which helped discover the drug (now owned by Johnson & Johnson), has put out a press release saying so.  But really there's no way to tell.  NICE is supposed to consider not just effectiveness but also price in deciding whether to approve a drug: its starting point is the cost per Quality-Adjusted Life Year (QALY), which should not much exceed £30,000 (I haven't found an official statement of the current number), though other considerations can affect this.  We know how good abiraterone is, but we don't know what price Johnson & Johnson have offered it at, so we can't do the calculation.

Which brings us to NICE's real role in all this: it's implementing a pricing mechanism.  The manufacturing cost of producing a drug like abiraterone is trivial compared with the research and development costs, which are usually estimated at something in the region of a billion dollars.  There is therefore a huge gap between the average price the manufacturer needs to charge globally to make a profit, and the price at which the manufacturer is better off striking a deal in any particular market than walking away.  The NHS needs to keep prices down, the manufacture wants to charge the most it can, there's only one buyer and one seller, but there has to be some basis for price setting.  So the semi-public but not clearly defined QALY mechanism allows the manufacturer to calculate a price at which they think the drug will be approved.  The uncertainty has a reason to exist in that it prevents them from pricing the drug right on the limit.  And to reinforce this, there's no negotiation: the manufacturer offers a price and NICE either accepts it or rejects it.

But the mechanism works only if NICE does actually decline to approve some drugs, otherwise prices for new drugs would drift up.  So it has to apply its methods rigorously.  Meanwhile, the Cancer Drugs Fund has reduced the pressure on manufacturers to quote a price that will be accepted, because they know that they will get some sales even at a higher price.  Hence the failure of the market to clear in this case.

So why has NICE announced a preliminary decision to withhold approval?  It must be to give Johnson & Johnson the chance to make its offer more attractive.  Probably not by anything as crude as cutting the price, but by some mechanism such as providing the drug free to any patient remaining on it beyond a specified length of time.  In part this is because some other countries are willing to pay the official NHS price but no more, so Johnson & Johnson will want to keep the headline price high.

At this point I stop on reflect on the absurdity of the whole thing: humanity has created a system for funding drug development that prevents us giving drugs that are cheap to produce to patients who need them, even in one of the world's wealthier countries which is willing and able to pay something like its share of development costs.

The government has radical plans to change this price-setting process.  When I've read the details I'll comment on how they might work.