In July 2022, Integrated Care Systems (ICSs) became the statutory bodies responsible for commissioning medicines and budget allocation, replacing Clinical Commissioning Groups (CCGs). In this article, we review the key budget- and funding-related challenges, the outlook for 2023, and implications for therapies preparing to launch in the UK.
UK financial environment
The current UK healthcare environment reflects long-standing resource constraints, compounded by an acute stressor in the pandemic, which has caused a system-wide backlog for non-urgent, elective care services, quality of care concerns such as poorer patient outcomes (e.g., time-pressured treatment), and delays in emergency services. Financial experts including NHS England’s Chief Financial Officer, Julian Kelly, are warning of pressure for efficiency savings and troubled times ahead for the NHS due, in part, to the economic challenges brought on by inflation. The government’s 2022 Autumn Budget Statement outlined that the NHS’s budget is set to increase by 3.3 billion pounds sterling in the next two years – a value expected to have a limited impact given the existing system constraints and inflation. Moreover, with the NHS facing a total estimated funding shortfall of GBP 20 billion by 2024, real-terms implications on the healthcare system remain to be seen in this ever-changing macroeconomic environment.
ICS financial situation and reasons
At the subnational level, significant financial and resource inefficiencies in the former CCGs had been recognized as issues prior to the pandemic and ICS implementation. From 2019 to 2020, 27 percent of all CCGs were found to be in a deficit. One of the key goals of ICS formation was to achieve more sustainable and efficient use of resources through increased commissioning power and economies of scale compared to CCGs.
However, 22 ICSs (of the 33 with published data available) are already reporting sizeable first-year deficits of up to 11 percent of their overall budget. These deficits have mainly resulted from a withdrawal of the funding streams that helped keep CCGs afloat during the pandemic, which could add up to GBP 4 billion across all ICSs. Inflation-driven cuts and long-term inadequacies in government funding could be additional contributing factors.
Financial deficits are heightened by the larger, more heterogeneous treatment population covered by ICSs, which has more varied health needs and priorities when compared to those covered by CCGs. Significant discrepancies in indices of Multiple Deprivation (IoMD) scores indicate varying inequalities and starkly contrasting demographics following the merging of 211 CCGs into only 42 ICSs.
One consequence of these sizeable, unplanned deficits could be budget cuts in areas where budgetary constraints are already prevalent, such as in ICS medicines spending. For the population included in the Southwest London ICS, for example, medicines spending as a proportion of total recurrent baseline funding has declined by about two percent since 2018. While this value may at first appear inconsequential, ICS medicines spending is expected to increase as a result of increasingly decentralized commissioning.
Manufacturers must take newly established and streamlined ICS goals and priorities into account when considering the launch of new medicines in the UK to manage short-term budgetary concerns and long-term population needs.
Outlook for 2023
NHS England expects all ICSs, including those carrying deficits going into the pandemic, to break even for 2022 and 2023. It is unclear what the consequences will be if ICSs are still in the red by the financial year end, but experts are pointing to potential additional spending restrictions from the NHSE.
Further complexity is expected from formal plans for a phased shift of commissioning decisions from centralized NHSE to local ICSs for specialized services. Of over 150 specialized services(from high-volume interventions through to high-cost innovative treatments, requiring specialized expertise and equipment), over 65 services have been deemed suitable to delegate to ICSs, ranging from chemotherapies and mental-health treatments to HIV services. Highly specialized services for rare disorders will remain nationally commissioned by the NHSE.
While plans are in place for this shift to occur in April 2023, several senior sources have hinted a likely delay in the delegation of a large majority of specialized services to April 2024 instead, due to the key risks associated with regional control of such significant funding sums in a time of major economic pressure. Instead, it is expected that ICSs will be encouraged to work more closely with regional commissioners to provide specialized services through joint ICS-NHSE committees.
Depending on population footprint, several ICSs will be jointly commissioning specialized services across a wider geography, creating further geographical variability with the risk of postcode lotteries of the past returning. In 2023, funding will be based on historic costs and gradually move toward needs-based allocation starting April 2024. As this policy takes root, the effect will have significant implications in terms of spending allocation and prioritization and criteria the NHS looks for in manufacturers.
Implications for manufacturers
As the process of devolving responsibility begins, the stakeholder landscape will extend beyond just the national commissioner (NHSE) and the HTA body informing NHSE commissioning (NICE). It is becoming increasingly important to demonstrate value not only at a national level, but also at a subnational level to drive decisions based on a wider impact on the local ecosystem.
- Tailoring and contextualizing for the right stakeholders:
- When a new treatment is being commissioned, manufacturers need to identify the right stakeholders to tailor value propositions to their specific priorities
- For Highly Specialized Services, the importance of checking the list of NICE assessment criteria to achieve NICE recommendation will remain key for NHSE commissioning
- For Specialized Services shifting to ICSs, it is expected that the NHSE will maintain heavy involvement with a patchwork of different geographical arrangements; this could be due to ICSs needing to meet a set of criteria in the pre-delegation assessment framework before taking on budgetary control or may be a result of the operation of joint ICS-NHSE commissioners if regional delegation is delayed. In the case of joint commissioning, manufacturers must be prepared to meet the varying sets of priorities of both stakeholders
- For Non-specialized Services locally commissioned by ICSs, there is also geographical variability with no specific requirement for an ICS to commission a service it does not deem useful or cost-effective for its population. Manufacturers should expect variations in decision-making on medicines management and prescribing to emerge depending on the specific service and population needs
- To accelerate implementation in local ICSs, it is equally important to target the right local stakeholders on the ground to ensure priorities are clearly communicated between the commissioners and clinicians. ICSs are evolving at different speeds; independent decision-making may happen at different places within or between ICSs as the area-prescribing committees (APCs) develop their own formularies and ways of interpreting overall ICS medicines guidelines to adapt to local care pathways and service nuances. For competitive therapeutic areas, active communication with clinicians on economic prescribing and cost-effectiveness is especially relevant, to avoid the risk of being replaced by technology due to simply being cheaper; in particular, manufacturers must consider the competitive implications of ICS-level confidential agreements sought by competitor organizations
- When a new treatment is being commissioned, manufacturers need to identify the right stakeholders to tailor value propositions to their specific priorities
- It will be crucial to communicate clinical, cost, and operational efficiencies provided to the overall pathway beyond therapeutic benefits. As ICSs exert greater influence, value propositions must now widen to cover more beyond NICE assessment criteria on clinical efficacy, safety, cost effectiveness, and patient quality of life. In addition to demonstrating evidence of cost savings, manufacturers need to closely support ICSs in realizing the magnitude of savings, i.e., in absolute terms and the implications for the different priorities of each ICS, considering their strategic goals in demand management and population health. Particularly, ICSs will be interested in products that can:
- Reduce demand in health services and resources and/or allow treatment in the community or home settings
- Prevent the patient’s condition from escalating and requiring more costly treatment and care
- Improve the quality of treatment administration by reducing frequency or providing a less invasive treatment
- Reduce the frequency of follow-up care and/or help patients become fully de-medicalized in the long term
- Reduce the patient’s dependencies by relieving their symptoms and allowing them to regain independence
Ultimately, ICSs will be interested in products that can support the prevention of ill health and reduce the need for healthcare and social care resources. Examples include (i) oral antibiotics as the preferred option over intravenous antibiotics for as long as appropriate to avoid hospital visits; (ii) use of pharmacological interventions to manage respiratory diseases (e.g., asthma and COPD), hypertension, atrial fibrillation, high cholesterol, and diabetes to prevent disease progression that requires hospital stays; (iii) lifestyle disease management such as obesity to prevent complications and long-term care.
Conclusion
As devolving responsibilities at national (NICE and NHSE) and regional levels (ICSs) materialize in the UK, manufacturers will need to actively engage with the NHSE and ICSs to quickly adapt to the new landscape and tailor value propositions to the strategic goals of the right stakeholders to be prioritized for budget allocation in an environment of financial constraints.
