Jeremy Laurance: Drug companies must help the NHS reduce costs

How much is a cancer drug worth? That is the question at the heart of the dispute over the Government's planned emergency cancer drugs fund.

A stream of new agents has come on to the market costing eye-watering sums running to tens of thousands of pounds per patient per year. Most have limited effects, extending life by a matter of months at best.

Many people nevertheless feel it is inhumane to deny a clinically effective drug to terminally ill cancer patients – and even a few extra months of good quality life can make a big difference.

But the cost of the drugs – as of any treatment – cannot be ignored. If we did so, we would quickly find the country's entire national income spent on health.

This is something that enrages patients and their families, denied NHS treatment that is deemed not "cost effective". They and their supporters rail against use of the language of accountancy. But it is difficult to know what other words to use. A couple of decades ago it was called "rationing", but that was just as unpopular.

It is the ethical duty of any public health system to spend the available cash to get the best results for patients. Every pound spent on a patient for a less effective treatment is a pound denied to another patient for a more effective treatment. That was the rationale behind the establishment of Nice, which has become the whipping boy of the Daily Mail.

The pharmaceutical industry has done an excellent job in developing new treatments that patients need. Many also save the NHS money by reducing the requirement for hospital treatment. But others offer marginal gains, yet earn fat profits.

The current system for ensuring the NHS gets value for money from the drugs it uses is flawed because it allows companies to modulate prices of all their drugs within an overall cap on profits. So the system allows them to cut their prices where there is a lot of competition and leave them high – as in the case of cancer drugs – where there is unmet need.

The Government wants a scheme based more closely on the benefit each drug brings to patients and the extent it addresses unmet need – so-called "value-based" pricing. But the companies protest that prices charged in the UK set a benchmark for the world, and are unwilling to negotiate discounts.

Today's report from the Rarer Cancers Foundation offers a way out of this impasse. It proposes setting an overall cap on the total earnings from the NHS for a particular treatment, which would be commercially confidential. The net effect is that it would reduce NHS costs. There would be an official price for the drug and a lower, discounted NHS price.

There are obvious drawbacks to the proposal, including the loss of transparency. The RCF says two safeguards are necessary: an annual report on the working of the scheme by the Government's cancer tsar and scrutiny by the National Audit Office of whether the scheme offers value for money.

Whatever the difficulties in implementing such an arrangement, the fundamental point holds. The Government has made a £50m gesture this year and may quadruple that next year, in favour of the cancer lobby. It is time for the drug companies to step up to the plate.