How do we value innovation? In particular, how do we value innovation in healthcare? And how much are we prepared to pay for it? Take, for example, a new analogue insulin, a novel opioid analogue for pain relief, or a sustained-release version of a generic immediate-release agent. How much more would we be willing to pay for these? How much more should we be expected to pay? These questions are far from theoretical, in fact they are very specific and real consequences for NHS budgets, pharmaceutical industry profits and, perhaps most of all, for those patients who need these new drugs.

We could start by looking at how we deal with innovation in everyday life. Believe it or not, there are four iPads in my house. How did this happen? Well, like many people, I am always keen to have the latest gadget. So as each new iPad comes out - slimmer, quicker, with a retina display or whatever - I want to own it. And I then I hand down my old iPad to my wife or one of my children. Recently, I started to wonder how much more I had paid for my iPad 2 than my iPad 1.
I expected it to be quite a bit more. But when I looked back at my records, was it 20 percent more? Thirty percent more? No, they were the same price. I then checked the receipt for my iPad 3 - lo and behold, that too cost exactly the same. When innovation comes at the same price as the original model, it is very tempting to buy!

So why doesn't Apple charge extra for innovation? The answer is: to keep its market share. What has happened is that consumers have become very astute. We want our gadgets to be better, thinner, lighter, and faster; we love innovation. But we don't want to pay extra for it. In the competitive market for consumer goods, innovation is the way to maintain market share - provided the price is right.

And that's why I have four iPads in my house. I am certain that if there had been a price increase when each new version came out, I would probably have waited or perhaps just kept the previous model. When further iPads are launched, will I need the new features each one offers? Probably not. The truth is that I am fine with what I have. But will I want to buy them? Yes. I will want them because I haven't got them. Whether I need them or not is irrelevant.

Can we apply any of this to innovation in medicine? Recent decisions from NICE have shown that despite patient pressure, paying over £90,000 for innovation is simply not considered value for money. Abandoning human insulin in favour of using insulin analogues across the board has been seen as buying into the concept of innovation whilst ignoring the economic realities. The NHS is increasingly reluctant to pay for innovation for its own sake, and is insisting that it has to translate into real benefits for patients and demonstrably improved outcomes. In essence, the health service wants its iPad 6, but at the same price it paid for the iPad 5 - and it wants to be sure that the new features are really worth it. As a consequence, there is considerable unease in the medicines marketplace. Pharmaceutical companies are wary of value-based pricing assessments. More and more, they are seeing CCGs commissioning on outcomes and looking for risk-sharing arrangements.

The development of new medicines is a good thing, but for both sides to benefit, we need to strike a balance. We want innovation to drive the marketplace, but not to break the budget. G

Stoptober 2014: stop smoking challenge

This October, Public Health England (PHE) is encouraging smokers to go 28 days without a cigarette in their annual Stoptober campaign. The 2013 campaign saw 250,000 people take part and 65% of those who took part successfully quit for 28 days.

Stoptober 2014 will provide smokers with free support tools and comedy content, including:

  • a new stop smoking pack
  • a 28-day mobile phone app
  • text support with daily updates and jokes
  • quitting advice and tips for coping.

For further information on Stoptober please visit:
stoptober.smokefree.nhs.uk

Update your knowledge:

GP curriculum heading 3.01 - Healthy people: promoting health and preventing disease

To find out more about tobacco harm reduction strategies and stop smoking services, please read the Guidelines in Practice article at: egln.co.uk/go/40215