Tag: NHS

Private Finance Initiatives were first introduced by the Conservatives in the early 1990s and they became a popular method of funding a variety of new public projects under New Labour. These included the building of prisons, new roads, hospitals, schools etc. The idea is that a private firm funds the cost and maintenance of the public sector project, whilst the public sector makes use of it and begins repaying the cost – something like a mortgage, with contracts lasting for about 30 years. As with a mortgage, you are saddled with the payments and interest for many years to come. This is the problem now facing many NHS trusts, who are finding it too expensive to repay the annual charges to the PFI contractors for building and servicing the hospitals.

Undoubtedly, there are short term benefits – the public sector gets a brand new hospital without having to raise the capital, but in the long term, it is the public who end up repaying more than the hospital (or the PFI project) is actually worth. Data suggests that a hospital in Bromley will cost the NHS £1.2 billion, which is some 10 times more than it is worth. Analysis by the Conservatives last year suggested that the 544 projects agreed under Labour will cost every working family in the UK about £15,000. This, compared with the original building cost of £3,000, is leading to claims that the PFI projects do not represent ‘value for money.’

More and more NHS trusts are contacting Andrew Lansley to say that the cost of financing the PFI project is undermining their ‘clinical and financial stability’. More than 60 hospitals and 12 million patients could be affected if these hospitals are forced to close. Health Secretary Andrew Lansley commented that:

‘Like the economy, Labour has brought some parts of the NHS to the brink of financial collapse.’

Labour, on the other hand, argue that the PFI contracts they created were essential at the time ‘to replace the crumbling and unsafe building left behind after years of Tory neglect.’ Although the public have benefited from the development of new hospitals, schools, roads etc, the long term costs may still be to come. Once the schemes are paid off, in 2049, over £70billion will have been paid to private contractors – significantly more than the cost and value of the projects and it will be the taxpayer who foots the bill. The following articles consider this controversial issue.

Labour’s PFI debt will cost five times as much, Conservatives claim The Telegraph, Rosa Prince (27/12/10)
Rising PFI costs ‘putting hospitals at risk’ BBC News (22/9/11)
Hospitals face collapse over PFIs The Press Association (22/9/11)
NHS hospitals crippled by PFI scheme The Telegraph, Robert Winnett (21/9/11)
60 hospitals face crisis over Labour’s PFI deals Mail Online, Jason Groves (22/9/11)
Private Finance Initiative: where did all go wrong? The Telegraph (22/9/11)
PFI schemes ‘taking NHS trusts to brink of financial collapse’ Guardian, Lizzy Davies (22/9/11)
Hospitals ‘struggling with NHS mortgage repayments’ BBC News, Nick Triggle (22/9/11)

Questions

  1. What is a PFI?
  2. Briefly outline the trade-off between the short term and the long term when it comes to Private Finance Initiatives.
  3. What are the arguments for a PFI? What are the arguments against PFIs?
  4. If PFIs had not been used to finance building projects, how do you think that would have impacted the current budget deficit?
  5. Is the cost of financing PFIs likely to have an adverse effect on the future prosperity of the UK economy?

A huge majority of the British population are in agreement on one thing: UK drinking is out of control. At a cost to the NHS of over £2 billion per annum, it’s quite obvious that the current ‘binge drinking’ culture is unsustainable for those doing the drinking and for the NHS.

This issue was raised back in January 2010, when the Labour government came under pressure to impose a minimum price on alcohol. (see All-you-can-drink bans) The report published in early January suggested that a minimum price on alcohol of 50p per unit would save more than 3000 lives per year. Dr. Richard Taylor said:

“The evidence we took showed that minimum pricing was the most effective way forward and at the moment you can sometimes buy beer cheaper than water. Our message is that the price would be put up but only by a little for moderate drinkers. Surely that is a sacrifice to pay for the good health of young people.”

The Coalition’s plan is to introduce a minimum price for alcohol, which would increase the price of a can of lager to a minimum of 38p and a litre bottle of vodka would be a minimum of £10.71. By increasing the price of alcohol, it is hoped that demand will be reduced and this will go some way to tackling the problem of binge drinking.

However, many argue that the proposal will be ineffective. Some believe that the minimum price is not high enough and that such a small increase will have no effect. Others argue that it will only affect small supermarkets and will have a significantly adverse effect on pubs, which are already struggling. Furthermore, a concern is that by raising the price of alcohol, the only people who will suffer are the so-called ‘sensible’ drinkers. Those who go out and binge drink will be largely unresponsive to the higher price.

Articles

How can raising the price of alcohol improve health BBC News, Michelle Roberts (18/1/11)
Pub association responds to alcohol minimum price BBC News (18/1/11)
SNP refuses Britain-wide alcohol minimum price Telegraph, Simon Johnson (19/1/11)
Experts say the new minimum prices on alcohol sales are not enough Wales Online, Abby Alford (19/1/11)
UK drinking ‘is out of control’, two thirds of public believe Guardian, Alan Travis (18/1/11)
Alcohol price plans will only save 21 lives per year, says expert Telegraph, Tom Whitehead (19/1/11)
Supermarkets forced to charge ‘minimum price’ for alcohol in bid to curb binge drinking Mirror News, James Lyons (18/1/11)

Report
Alcohol House of Commons Health Committee (10/12/09)

Questions

  1. Using a diagram, explain how a minimum price control on alcohol will work. What are the likely effects?
  2. Which factors will determine the effectiveness of the minimum price?
  3. Why is it that ‘binge drinkers’ may not be responsive to the higher price?
  4. The Mirror article refers to ‘loss leaders’. What are they and how are they relevant here?
  5. What other policies could be used to tackle binge drinking?
  6. Given that taxes on products such as alcohol and cigarettes raise so much tax revenue for the government, would there be an adverse effect by raising the minimum price on alcohol?
  7. Why is the current drinking culture unsustainable?
  8. Is alcohol a de-merit good? Why is it an example of market failure?

The government has been under a lot of pressure to tackle the culture of binge drinking. Figures for 2006/7 show that the cost to the NHS of binge drinking was £2.7 billion per year. In response, MPs are calling for a change in government policy towards the alcohol industry, arguing that at present the drinks industry has more control over policy than health experts. So what can be done?

In a report published in early January 2010, the House of Commons Health Select Committee proposed a minimum price per unit of alcohol, tighter controls on advertising and mandatory labelling. A minimum price, the Committee argued, would reduce demand by heavy drinkers who are looking for cheap alcohol. At present, many supermarkets have promotions that involve selling cider and beer at below cost, allowing people to ‘pre-load’ cheaply at home before going out drinking. The report suggested that a minimum price of alcohol of 50p per unit would save more than 3000 lives per year and a minimum price of 40p per unit would save 1100 lives.

Dr. Richard Taylor, an independent MP and member of the Commons Health Select Committee, said:

“The evidence we took showed that minimum pricing was the most effective way forward and at the moment you can sometimes buy beer cheaper than water. Our message is that the price would be put up but only by a little for moderate drinkers. Surely that is a sacrifice to pay for the good health of young people.”

However, those opposed to setting a minimum price per unit of alcohol argue that it would be unfair on moderate drinkers, that it wouldn’t work and that it could even be illegal. Instead, they argue that that government intervention needs to be smarter. It should not target everyone, but solely those groups consuming the most alcohol. The British Beer and Pub Association suggests that 10% of the population consumes 44% of all alcohol.

It appears that the government won’t be following Scotland’s minimum price on alcohol, but will instead impose bans on all-you-can-drink deals and introduce compulsory identity checks. However, supermarket deals don’t appear to have been targeted. Successive governments have failed to tackle this problem sufficiently, but with an election approaching, will this be a proposal that is promoted?

Raise alcohol price to save lives, MPs argue Telegraph, Rebecca Smith (8/1/10)
Commons committee backs minimum alcohol pricing BBC News (8/1/10)
Campagain to tackle cut price alchol The Arran Banner (8/1/10)
Wyre Forest MP calls for alcohol minimum pricing The Shuttle (8/1/10)
Should 50p be minimum price for a unit of alcohol? Have your say BBC News (8/1/10)
BBPA: minimum price would be ineffective Morning Advertiser, Ewan Turney (8/1/10)
Cost of binge drinking doubles for the NHS rises to £2.7 billion Mirror, James Lyons (2/1/10)
Bring in 50p minimum price for alcohol, MPs urge Guardian, Toby Helm (3/1/10)
All-you-can-drink pub offers facing ban BBC News (19/1/10)
Too much of the hard stuff: what alcohol costs the NHS THE NHS Confederation, Issue 193 January 2010
Minimum pricing for alcohol essential, says Health Committee Marketing Week, David Burrows (8/1/10)

Minimum alcohol pricing ‘will affect the poor’ BBC News, Kevin Barron and Gavin Partington debate (8/1/10)

Questions

  1. How is the equilibrium price of alcohol determined?
  2. Illustrate and explain the effects of the imposition of a minimum price.
  3. To what extent is a minimum price likely to be effective? How is elasticity likely to play a role in the effectiveness of such a policy?
  4. Why could the introduction of a minimum price on alcohol be illegal and contravene European competition law?
  5. What are the arguments for and against a minimum price on alcohol? Explain how and why some people will gain and others will lose.
  6. How would a minimum price on alcohol affect government spending? Would more investment in prevention lead to a lower cost to the NHS? Explain your answer.
  7. Why might bans on all-you-can-drink deals be ineffective?

The National Institute for Health and Clinical Excellence (NICE) is the independent agency in the UK charged, amongst other things, with assessing the cost-effectiveness of new drugs. In a report published on 19 November 2009, NICE found that the drug sorafenib, branded as Nexavar by its manufacturer, the German pharmaceutical company, Bayer AG, was not cost-effective. The drug can extend the life of terminally ill patients with liver cancer. However, it is very expensive, costing about £3000 per month per patient.

The NICE press release (see link below) quotes Andrew Dillon, the Chief Executive of NICE, as saying: “We were disappointed not to have been able to recommend the use of sorafenib, but after carefully considering all the evidence, including the proposed ‘patient access scheme’ in which the manufacturer offered to provide every fourth pack free, sorafenib does not provide enough benefit to patients to justify its high cost.”

Not surprisingly people suffering from liver cancer, and also various patient groups, were highly critical of the decision. But with a limited budget for the National Health Service and the increasing pressure to save costs in order to reduce the public-sector debt, many difficult choices like this have to be made.

What NICE attempts to do is a cost–benefit analysis of new drugs. Whilst costs can be difficult to measure, especially over the longer term, the benefits are much more problematic as they have to take into account the effects on the quality of people’s lives – something that will vary enormously from one patient to another. And then there are the effects on family and friends and on the economy. The measure used in the NHS and elswhere is the QALY – ‘quality-adjusted life year’. In paragraph 4.8 of the full NICE report (see link below), it was noted that

“the base-case ICER [incremental cost-effectiveness ratio] presented by the manufacturer was originally £64,800 per QALY gained and when the patient access scheme was included [where every fourth pack is supplied free to the NHS by Bayer] this went down to £51,900 per QALY gained. Both ICERs were substantially higher than those normally considered to be an acceptable use of NHS resources.”

2009/069 NICE appraisal of sorafenib for advanced hepatocellular carcinoma NICE press release (19/11/09)
Final appraisal determination Sorafenib for the treatment of advanced hepatocellular carcinoma (Full document) NICE (19/11/09)
NHS denies drug to cancer patients (video) ITN (on YouTube) (18/11/09)
Liver cancer drug ‘too expensive’ (including videos) BBC News (19/11/09)
UK’s NICE says Bayer liver cancer drug too costly Reuters (18/11/09)
Nice’s decision not to approve the liver cancer drug Nexavar is painful but necessary and Drug for terminal liver cancer patients ‘too expensive’Telegraph, Rebecca Smith (19/11/09)
NHS says it’s too expensive to keep you alive Telegraph, Janet Daley (19/11/09)
Bayer’s patent case hearing in HC today Tines of India (18/11/09)

Questions

  1. What makes the choice of whether to provide a particular drug to a pateint an ‘economic’ one?
  2. Imagine you were a person suffering from liver cancer. What evidence would you wish to bring to the government to persuade it to ignore NICE’s recommendation?
  3. Is the use of QALYs the best means of assessing the benefits of a drug? Explain.
  4. What are the arguments for and againist the NHS providing expensive drugs free to people on low incomes but charging a price well above the current prescription fee to those who could afford to pay? If such as scheme were introduced, on what basis should such a price be determined and should it be on a sliding scale according to people’s income and/or wealth?

This podcast is from the Guardian. The first part consists of a report by Anna Dixon, Director of Policy at the King’s Fund (an independent ‘think tank’). The podcast considers “the economics of healthcare. Why are the Americans so opposed to adopt a system of socialised medicine? Does the NHS make economic sense? And how will the squeeze on public finances impact upon our most cherished of services?”

The Business: The NHS and economic recovery Guardian podcast (19/8/09)

Questions

  1. How do the UK and US healthcare systems differ?
  2. Why does the US system result in greater healthcare inequality than the National Health Service system in the UK?
  3. For what reasons may Americans resist healthcare reform?
  4. What lessons can be learned by the NHS from the US healthcare system?
  5. Compare the issues of monopoly power of drug companies, doctors and hospitals in the two systems? In which system is the countervailing power of purchasers likely to be greater?