Why raising NHS spending on new drugs by 25% is the wrong decision – health economist’s view

For nearly three decades, decisions about which medicines the NHS pays for have not been made by ministers, but by the National Institute for Health and Care Excellence, known as Nice. Its job has been powerful: to act as a check on the pharmaceutical industry by demanding evidence that new drugs are clinically effective and worth the price, protecting NHS budgets from spiralling costs.

That independence has helped to shape how NHS money is spent in England and Wales, and, just as importantly, what it is not spent on. Nice does not exist to block new medicines, but to make sure limited public funds are used where they deliver the greatest benefit.

The Nice cost-effectiveness threshold for approving new medicines is currently £20,000 to £30,000 per additional year of good quality life (measured as “quality adjusted life years”). The UK government now plans to take control of this threshold from Nice and raise it to £25,000–£35,000 per quality adjusted life year from April 1. The result will be less money available for existing NHS services and medicines, and, most worryingly, for public health and prevention.

Trade pressure and US drug companies

This change has come from wider government concerns over protecting UK-based pharmaceutical manufacturing, and now from pressure to open up the UK market to US drug companies. Shifting the decision-making power to ministers rather than Nice represents a far-reaching structural change, not just an administrative one.

Ministers have agreed to lift UK health service spending on new medicines by 25% as part of a deal with the US to avoid the tariffs threatened by President Donald Trump. This will apply to all new medicines, not just those manufactured by US-based companies. They have told Nice to change its rules to achieve the terms of this agreement. Nice will continue to evaluate evidence on new drugs but will be subject to the new threshold set by ministers.

This uplift to the threshold is the first since Nice was set up in 1999. We already have an imbalance in spending between prevention and treatment that heavily favours treatment. A further threat to this imbalance would be that the pharmaceutical industry presses in future for further increases to the threshold in line with inflation.

So much of the ill health and premature death in the UK population is down to lifestyle and, for example, smoking, harmful alcohol use, poor diet, lack of exercise and declining mental health.

Focusing attention and budgets on new expensive branded drugs, many of them from the US, will draw attention away from tackling the underlying causes of premature ill health and death, which are often linked to poverty and inequality.

Nice’s chief executive, Jonathan Benger, recently told the Financial Times that further increases in the price at which drugs are judged cost-effective would deliver diminishing returns. He said there are better ways to support life sciences investment in the UK.

The US deal is expected to cost the NHS around £3 billion, largely through paying higher prices for branded medicines. If that £3 billion were instead invested in public health prevention, it could generate an estimated 618,000 quality adjusted life years, according to research from York University. That is around three times more than could be achieved through treatment alone.

This plan to raise the Nice threshold directly contradicts the direction set out in the UK government’s NHS 10 Year Health Plan for England, which prioritises neighbourhood health care, prevention and reducing inequality.

What the international evidence shows

In 2022 the Organisation for Economic Co-operation and Development (OECD) called on countries to spend more on preventing illness, rather than treating it. The report suggested increasing the share of national income – gross domestic product (GDP) – devoted to prevention by around 1.4 percentage points.

The warning was clear. Health systems focused on treatment alone are less prepared for future pandemics. Resources should be spent to take account of the fact that around 80% of chronic conditions such as heart disease, stroke and diabetes are at least partly preventable.

Three-quarters of public health interventions assessed by Nice fall well below the current cost-effectiveness threshold, meaning they offer good value for money. There is evidence that if governments want better value from the NHS, the cost-effectiveness threshold should be lower and closer to £13,000 per quality adjusted life year. This would make it possible to increase spending on prevention, which currently accounts for just 5% of total NHS spending.

To fund the planned 25% increase in drug spending, the government will need to raise taxes or cut spending elsewhere. If those cuts fall on public health or on areas such as housing, transport, employment or access to green space, the long-term damage to population health will be severe.

Investment in those areas supports healthier lives and reduces preventable illness and premature death. If public money is not available for this prevention, the government will be forced to look for novel ways to fund it, such as public-private partnerships and social outcomes contracting (which is when payments are linked to specific outcomes rather than merely delivering activities).

Any short-term boost to economic growth from US drug trade deals is unlikely to outweigh the long-term costs of an ageing population living with preventable ill health, and the pressure that puts on health and social care.

Rhiannon Tudor Edwards does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.