The coalition has set up a ring-fenced fund, with a budget eventually increasing to £600m, to improve access to cancer drugs. Given the UK’s poor ranking in international studies on cancer survival probabilities, this may seem reasonable. But why the unusual approach of singling out one particular type of therapy, for one particular type of disease, instead of simply injecting the additional funds directly into the NHS?

The reason is that a number of expensive cancer drugs have been rejected by the National Institute for Health and Clinical Excellence (NICE), and are therefore not available through general NHS funding. One of the purposes of the cancer drug fund, then, is to sideline the decisions of NICE. Effectively this marks the end of the attempts to ration medicine by cost-effectiveness.

In a nutshell, this “rational rationing” approach is based on the notion that a fixed healthcare budget can be allocated in such a way that the number of life years, or “quality-adjusted life years” (QALYs), is maximised. One could think of a hypothetical health system with a fixed budget of 300 gold coins and three curable diseases, X, Y and Z, each of which affects 100 patients. A cured patient lives a year longer than a non-cured one. Curing X costs one gold coin per patient, curing Y two gold coins, and curing Z three gold coins.

The treatments thus differ in their “return on investment”. Rationing by cost-effectiveness would suggest that treatment for X and Y would be funded for all patients, whereas treatment for Z would not be funded at all. The alternatives are to promise X, Y and Z to everybody, and then quietly limit access through means like waiting lists; or to allocate funds according to the bargaining power of interest groups, i.e. industry lobbyists or patient groups. But both alternatives would save fewer life years at the same cost.

Some critics have denounced NICE decision making as a system of Soviet-style central planning. It is. But this is not the fault of NICE per se; it is the logical consequence of NICE decisions being taken within the framework of the NHS. In a market-based framework, NICE would merely be a consumer counselling agency, issuing recommendations which would not be binding for anyone.

Within a government-funded and government-controlled system, rational rationing, bad as it is, is the one-eyed creature among the blind. However, it is one-eyed with an advanced cataract in the remaining eye. Firstly, the algorithm behind NICE’s decisions has always been opaque. It is often claimed that NICE rejects treatments which cost more than £30,000 per QALY, but that figure is an urban legend. NICE has already discretionarily approved treatments which cost well above £30,000 per QALY, while rejecting some that cost substantially less. Secondly, conducting cost-effectiveness studies is itself extremely expensive, which is why NICE can only appraise a small proportion of medical treatments. But most of all, cost-effectiveness studies rely on crude standardisations. They effectively pretend that within pre-defined subgroups, all patients are alike.

And still, with an institution like the Cancer Drug Fund, we are moving closer to a healthcare system in which the allocation of scarce resources is determined by the vociferousness of its different “stakeholder” groups. Cancer patient associations receive a high level of media attention, and no politician in his right mind would want to infuriate them.

Once again, it’s all about what is seen and what is not seen – even in a hypersensitive sensitive area such as healthcare.

Kristian Niemietz

Dr Kristian Niemietz is the IEA's Editorial Director, and Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).