What if NICE's risk-sharing deals don't work?

Drugmakers have been trying to persuade the U.K.'s cost-effectiveness watchdog to pay for their pricier meds by offering risk-sharing discounts. Those deals--through which a drugmaker foots the bill for part of the treatment, or accepts payment only if treatment works--are why some expensive treatments have made the National Health Service formulary.

But what if those deals don't really save the NHS money? Some British health economists studied one such arrangement covering multiple sclerosis meds like Teva Pharmaceutical Industries' (NASDAQ: TEVA) Copaxone and concluded that it was "a fiasco" and "a costly failure," the Financial Times reports. Why? The NHS agreed to pay four drugmakers about 8,000 pounds ($11,700) per year for their MS treatments; the companies in turn agreed to cut their prices if the drugs didn't keep the disease at bay. Only this deal didn't work that way, experts maintain.

Some 5,000 people went on the meds; however, the treated patients saw their MS progress faster compared with those who were untreated, the FT says. Worse, the prices weren't discounted as the NHS deal stipulated, because the designated monitoring group said the move would be premature. "[T]he manufacturers would need to pay the NHS to use the drugs to make them cost effective," a leading health economist concluded in the British Medical Journal.

This cost-sharing deal was the first ever for the NHS. So it's possible that more recent pricing deals will work better. You can be sure plenty of experts will be watching after this BMJ report. And considering that NICE's decisions are often followed--and imitated--in other countries, it won't just be the Brits who will take heed.

- read the FT story