The planned new value based pricing system for approving drugs to be funded by the NHS could end up costing the NHS more, the Department of Health’s own impact assessment states.

The impact assessment was published alongside the DH’s consultation document on moving towards valued based pricing.

The proposed new approach to pricing branded medicines would replace the existing cost effectiveness measure, which values one additional full year of quality life at between £20,000 to £30,000, with a system of variable effectiveness thresholds.

The change is being made as an attempt to stimulate research and development into more innovative drugs. For example, a higher cost effectiveness threshold would be applied to medicines that tackle diseases for which there are few drugs or treatments available or which are particularly severe.

Medicines that demonstrate wider societal benefits, for instance reducing the amount of time a patient spends with a carer, could also be set a higher threshold.

The consultation also proposes altering the existing quality adjusted life year (QALY) threshold to revise it down for new branded drugs coming onto the market that offer only “incremental” benefits.

Neither the consultation document nor the impact assessment sets out the “mechanism” for determining the different thresholds which the authors concede leads to “considerable uncertainties” on the NHS pharmaceutical spend, possibly resulting in a “large net effect on the total spending on pharmaceuticals”.

Under the new system the National Institute for Health and Clinical Excellence is envisaged as the “key source of advice on the relative cost-effectiveness of new medicines”.

Yet there is no guarantee that the current arrangement, where commissioners are obliged to pay for a drug if NICE has approved it, will continue when the new system replaces the current pharmaceutical price regulation scheme in 2014.

King’s Fund chief economist John Appleby told HSJ: “Drug companies may be worried if there is no central organisation making a firm recommendation to the NHS. They may not like it.”

Mr Appleby said it was not clear that the government “had made the case” that failure of drug companies to develop innovative new products was solely down to the price they were paid by the NHS.

However Association of the British Pharmaceutical Industry director general Dr Richard Barker stressed access was the most important issue.

He said: “The UK continues to lag behind Europe in the uptake of innovative medicines despite having amongst the lowest prices, so price alone is clearly not the main driver of access in the NHS.”

The consultation also proposes creating a separate system to cover the pricing of most existing branded drugs, which would sit alongside value based pricing. However, the Government is open to discussion with industry about applying value based pricing retrospectively to some drugs. Generic drugs will not be covered by the new system.