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Integrated NHS finances: what do they mean for High Cost Drugs?

Oli Hudson and Steve How, of Wilmington Healthcare, explore NHS England’s new system-level funding and its impact on prescribing for High Cost Drugs

Last autumn, a new ‘system-level’ funding arrangement* was introduced that sees Integrated Care Systems (ICSs) or groups of providers working together to determine how money should be spent locally.

The scheme, which supports integrated working by moving the majority of the health budget to ICSs for distribution, will have a significant impact on prescribing for High Cost Drugs.

The background

Before the end of March 2020, hospitals that bought High Cost Drugs were either reimbursed by NHS England or they claimed the money back via a pass-through arrangement with the local Clinical Commissioning Group (CCG), depending on who commissioned the clinical service in which the medication was supplied.

With CCG commissioned services, an NHS trust would bill a CCG for a High Cost Drug, prior to the consideration of any contract level risk-sharing mechanisms. The CCG was responsible for settling the bill and regulating spending in this area.

That all began to change when, in response to the pandemic, Payment by Results (PbR), and ‘associated administrative and transactional processes’ were suspended and replaced by block contracts managed by NHS England/ Improvement (NHSE/I).

This was later followed by the introduction of system-level funding. which together with other joined-up finance structures already in place, will drive big changes in patient pathways.

Integrated Care Budgets

This year, new arrangements will see CCGs’ commissioning budgets and primary care budgets and many of the specialised commissioning budgets, together with certain other directly commissioned services, central support or sustainability funding and nationally held transformation funding, all come under a system-led “single pot”.

The money will be used by the ICS to strategically commission services at a place- based level. This work will increasingly be carried out by partnerships of providers (ICPs) comprising Acute Trusts, Mental Health and Community Trusts, and Primary Care Networks (PCNs).

There will be a move away from episodic or activity-based payment in secondary care, with the introduction of the blended payment model. This is a flexible framework that comprises a fixed payment with one or more of the following – a quality or outcomes-based element; a risk-sharing element; a variable payment.

Current thinking is that the High Cost Drugs Budget will sit within these blended contracts payments for CCG/system commissioned services. The CCG will still account for the use of High Cost Drugs, usually via Blueteq. However, there will be a shift in financial pressure back to the provider as there is no pass-through to a separate CCG budget.

NHS England (NHSE) Specialised Commissioning will continue to retain the budget for cancer and certain rare diseases. However, as CCGs merge into ICS boundaries, a lot of the specialised commissioning budget will move to the single pot managed by the ICS. For these services, most High Cost Drugs will still be contracted via NHS England. However, for some older products, such generic chemotherapy, antifungals and Cytomegalovirus (CMV) drugs, the budget will be devolved to the system single pot.

These changes are likely to affect formularies, and with the mandated introduction of 100 percent ICS coverage by April 2022, it is likely that formulary boundaries will follow suit, with Area Prescribing Committees resetting boundaries accordingly.

Population health

System-level funding will force a step-change in integrated working as NHS providers unite to form powerful alliances, with formal collaborative arrangements in place to enable them to operate at scale.

As systems take on whole population budgets, they will increasingly determine how resources are to be used to make a difference in outcomes, inequalities, productivity and wider social and economic development against their specific health challenges and population health priorities – factors that will be particularly important for pharma to consider when justifying the need for a High Cost Drug.

There will also be a more uniform approach to procurement across the NHS as digital and data will be used to ensure that financial information relating to different ICSs is shared, including data on prescribing costs and rebates for different drugs. Data from across different ICSs will also be used to improve patient outcomes and put the patient at the heart of their own care.

Impact on pharma

The new financial arrangements will bring big changes for pharma, particularly with regard to payers as, in the main, within the ICSs the providers will become responsible for managing the cost of the drugs. So, clinical service directors who previously passed the bill for High Cost Drugs on to CCGs, or were reimbursed by NHSE, will now be looking closely at their value within blended contracts.

Therefore, the price of a High Cost Drug will be very significant within the overall price of a procedure, and cheaper biosimilars that can save more in direct costs are likely to become increasingly attractive, unless the whole pathway cost is understood and the wider value of a High Cost Drug within it is clearly shown. So, those with High Cost biologics are going to have to think carefully about their value proposition.

As the cost of care across whole pathways becomes more visible in the new joined-up systems, companies selling High Cost Drugs need to focus on outcomes and how their products can deliver value in the long-run by helping systems to reduce both upstream and downstream costs.  It will also be important to align the product with key NHS Long-term Plan priorities, such as delivering more preventative and population-health based care.


Changes in NHSE finance models will have a significant impact on prescribing for  High Cost Drugs as providers not only become directly involved in procurement but must also fund these drugs from a single pot of money that has to be used across the entire system. This is going to drive major reconfiguration across all pathways.

While these changes pose threats to companies with High Cost Drugs, which will face increasingly strong competition from biosimilars, they also bring opportunities to support providers by identifying ways to drive down costs across whole pathways and helping them to improve patient outcomes via a joined-up population health approach.

Formulary insights and competitive landscape

Wilmington Healthcare has launched a new system that enables pharma to gain a clear understanding of formulary status across therapy areas and territories in the UK. InFormulary XD is a cloud-based platform that enables users to gather data and real-world evidence on formularies and see how their product is performing in the competitive landscape.

>>Discover how InFormulary XD connects healthcare data intelligence, market insight and key stakeholder information to bring your competitive landscape to life.​