The National Institute for Health and Clinical Excellence (NICE) is a special health authority of the English National Health Service (NHS), serving both English NHS and the Welsh NHS. It was set up as the National Institute for Clinical Excellence in 1999, and on 1 April 2005 joined with the Health Development Agency to become the new National Institute for Health and Clinical Excellence (still abbreviated as NICE).
NICE publishes guidelines in three areas. The use of health technologies within the NHS (such as the use of new and existing medicines, treatments and procedures), clinical practice (guidance on the appropriate treatment and care of people with specific diseases and conditions), and guidance for public sector workers on Health promotion and ill-health avoidance. These appraisals are based primarily on evaluations of efficacy and cost-effectiveness in various circumstances.
NICE was established in an attempt to defuse the so-called postcode lottery of healthcare in England and Wales, where treatments that were available depended upon the NHS Health Authority area in which the patient happened to live but it has since acquired a high reputation internationally as a role model for the development of clinical guidelines. One aspect of this is the explicit determination of cost-benefit boundaries for certain technologies that it assesses. NICE also plays an important role in pioneering technology assessment in other healthcare systems through NICE International, established in May 2008 to help cultivate links with foreign governments.
The notion of an Institute to determine the clinical cost effectiveness of clinical interventions first emerged at the end of John Major's Conservative Government as moves elsewhere were being made to set professionally agreed standards for clinical care. In 1996, the UK National Screening Committee had been established by Sir Kenneth Calman and Muir Gray (now Sir Muir Gray) www.screening.nhs.uk/history by the Policy Team led by Dr Tim Riley and latterly Sir Charles Nightingale for the Department of Health . The NSC aimed to ensure that evidence based medicine informed policy making on what national screening programmes were approved for funding and what quality assurance mechanisms should be in place. This was a timely action as concerns over screening quality had emerged in breast cancer screening services came under question at Exeter in 1997  and followed in the wake of the 1995 Calman-Hine Report.
The idea of what was originally termed a National Institute for Clinical Effectiveness took root when Labour came to power having defeated John Major's Conservative Government in 1997. Frank Dobson became Secretary of State and was supported by a team of Ministers keen on introducing clinical and health outcome measures to achieve improvements in the quality and delivery of care. The team included Alan Milburn, Baroness Margaret Jay, and Tessa Jowell. The name and mission was agreed in a meeting between the Ministerial team, Dr Tim Riley and Dr Felicity Harvey shortly after the election and it was agreed that NICE should be described in the first policy white paper, The New NHS: Modern, Dependable 1997 
Since January 2005 the NHS in England and Wales has been legally obliged to provide funding for medicines and treatments recommended by NICE's technology appraisal board. This was at least in part as a result of well-publicised postcode lottery anomalies in which certain less-common treatments were funded in some parts of the UK but not in others due to local decision making in the NHS.
Before an appraisal, the Advisory Committee on Topic Selection (ACTS) draws up a list of potential topics of clinical significance for appraisal. The Secretary of State for Health or the Welsh Assembly must then refer any technology so that the appraisal process can be formally initiated. Once this has been done NICE works with the Department of Health to draw up the scope of the appraisal.
NICE then invite consultee and commentator organisations to take part in the appraisal. A consultee organisation would include patient groups, organisations representing health care professionals and the manufacturers of the product undergoing appraisal. Consultees submit evidence during the appraisal and comment on the appraisal documents. Commentator organisations include the manufacturers of products to which the product undergoing appraisal is being compared. They comment on the documents that have been submitted and drawn up but do not actually submit information themselves.
An independent academic centre then draws together and analyses all of the published information on the technology under appraisal and prepares an assessment report. This can be commented on by the Consultees and Commentators. Comments are then taken into account and changes made to the assessment report to produce an evaluation report. An independent Appraisal Committee then looks at the evaluation report, hears spoken testimony from clinical experts, patient groups and carers. They take their testimony into account and draw up a document known as the 'appraisal consultation document'. This is sent to all consultees and commentators who are then able to make further comments. Once these comments have been taken into account the final document is drawn up called the 'final appraisal determination'. This is submitted to NICE for approval.
The process aims to be fully independent of government and lobbying power, basing decisions fully on clinical and cost-effectiveness. There have been concerns that lobbying by pharmaceutical companies to mobilise media attention and influence public opinion are attempts to influence the decision-making process. A fast-track assessment system has been introduced to reach decisions where there is most pressure for a conclusion.
NICE carries out assessments of the most appropriate treatment regimes for different diseases. This must take into account both desired medical outcomes (i.e. the best possible result for the patient) and also economic arguments regarding differing treatments.
NICE have set up several National Collaborating Centres bringing together expertise from the royal medical colleges, professional bodies and patient/carer organisations which draw up the guidelines. The centres are the National Collaborating Centre for Cancer, the National Clinical Guidelines Centre for Acute and Chronic Conditions, the National Collaborating Centre for Women and Children s Health, and the National Collaborating Centre for Mental Health.
The National Collaborating Centre then appoints a Guideline Development Group whose job it is to work on the development of the clinical guideline. This group consists of medical professionals, representatives of patient and carer groups and technical experts. They work together to assess the evidence for the guideline topic (e.g. clinical trials of competing products) before preparing a draft guideline.
There are then two consultation periods in which stakeholder organisations are able to comment on the draft guideline. After the second consultation period, an independent Guideline Review Panel reviews the guideline and stakeholder comments and ensures that these comments have been taken into account.
The Guideline Development Group then finalises the recommendations and the National Collaboration Centre produces the final guideline. This is submitted to NICE who then formally approve the guideline and issues this guidance to the NHS.
As with any system financing health care, the NHS has a limited budget and a vast number of potential spending options. Choices must be made as to how this limited budget is spent. By comparing the cost effectiveness in terms of health quality gained for the money spent. By choosing to spend the finite NHS budget upon those treatment options that provide the most efficient results, society can ensure it does not lose out on possible health gains through spending on inefficient treatments and neglecting those that are more efficient.
NICE attempts to assess the cost-effectiveness of potential expenditures within the NHS to assess whether or not they represent 'better value' for money than treatments that would be neglected if the expenditure took place. It assesses the cost effectiveness of new treatments by analysing the cost and benefit of the proposed treatment relative to the next best treatment that is currently in use.
Quality-adjusted life years
NICE utililises the quality-adjusted life year (QALY) to measure the health benefits delivered by a given treatment regime. By comparing the present value (see discounting) of expected QALY flows with and without treatment, or relative to another treatment, the net/relative health benefit derived from such a treatment can be derived. When combined with the relative cost of treatment this information can be used to form an Incremental Cost-Effectiveness Ratio (ICER) to allow comparison of suggested expenditure against current resource use at the margin (the cost effectiveness threshold).
As a guideline rule, NICE accepts as cost effective those interventions with an incremental cost-effectiveness ratio of less than 20,000 per QALY and that there should be increasingly strong reasons for accepting as cost effective interventions with an incremental cost-effectiveness ratio of over a threshold of 30,000 per QALY.
Over the years, there has been great controversy as to what value this threshold should be set at. Initially, there was no fixed number. But the appraisal teams created a consensus amount of about 30,000. However, in November 2008 Alan Johnson, the then Secretary of State, announced that for end-of-life cancer drugs the threshold could be increased above 30,000. 
The first drug to go through the new process was Lenalidomide. And its ICER was 43,800. 
Cost per quality-adjusted life year gained
The following example from NICE explains the QALY principle and the application of the cost per QALY calculation.
A patient has a life threatening condition and is expected to live on average for 1 year receiving the current best treatment which costs the NHS 3,000. A new drug becomes available that will extend the life of the patient by three months and improve his or her quality of life, but the new treatment will cost the NHS more than three times as much at 10,000. Patients score their perceived quality of life on a scale from 0 to 1 with 0 being worst possible health and 1 being best possible health. On the standard treatment, quality of life is rated with a score of 0.4 but it improves to 0.6 with the new treatment. Patients on the new treatment on average live an extra 3 months, so 1.25 years in total. The quality of life gained is the product of life span and quality rating with the new treatment less the same calculation for the old treatment, i.e. (1.25 x 0.6) less (1.0 x 0.4) = 0.35 QALY. The marginal cost of the new treatment to deliver this extra gain is 7,000 so the cost per quality life year gained is 7000/0.35 or 20,000. This is within the 20,000- 30,000 ceiling range for NHS funding so the NHS will fund the new treatment at its expense without charge to the patient.
If the patient was expected to live only one month extra and instead of three then NICE would issue a recommendation not to fund. The patient's Primary Care Trust could still decide to fund the new treatment, but if not, the patient would then have two choices. He or she could opt to take the free NHS standard treatment, or he or she may decide to pay out of pocket to obtain the benefit of the new treatment from a different health care provider. If the person has a private health insurance policy the person could check to see whether the private insurance provider will fund the new treatment. About 8% of the population has some private health insurance from an employer or trade association and 2% pay from their own resources.
Basis of recommendations
Theoretically, it might be possible to draw up a table of all possible treatments sorted by increasing the cost per quality-adjusted life year gained. Those treatments with lowest cost per quality-adjusted life year gained would appear at the top of the table and deliver the most benefit per value spent and would be easiest to justify funding for. Those where the delivered benefit is low and the cost is high would appear at the bottom of the list. Decision makers would, theoretically, work down the table, adopting services that are the most cost effective. The point at which the NHS budget is exhausted would reveal the shadow price, the threshold lying between the CQG gained of the last service that is funded and that of the next most cost effective service that is not funded.
In practice this exercise is not done, but an assumed shadow price has been used by NICE for many years in its assessments to determine which treatments the NHS should and should not fund. NICE states that for drugs the cost per QALY should not normally exceed 30,000 but that there is not a hard threshold, though research has shown that any threshold is "somewhat higher" than being in the range 35,000 - 40,000.
The House of Commons Health Select Committee, in its report on NICE, stated in 2008 that "the (...) cost-per-QALY it uses to decide whether a treatment is cost-effective is of serious concern. The threshold it employs is not based on empirical research and is not directly related to the NHS budget, nor is it at the same level as that used by Primary Care Trusts (PCTs) in providing treatments not assessed by NICE, which tends to be lower. Some witnesses, including patient organisations and pharmaceutical companies, thought NICE should be more generous in the cost per QALY threshold it uses, and should approve more products. On the other hand, some PCTs struggle to implement NICE guidance at the current threshold and other witnesses argued that a lower level should be used. However, there are many uncertainties about the thresholds used by PCTs." It went on to recommend that "an independent body should determine the threshold used when making judgements of the value of drugs to the NHS."
The work that NICE is involved in attracts the attention of many groups, including doctors, the pharmaceutical industry, and patients. NICE is often associated with controversy, because the need to make decisions at a national level can conflict with what is (or is believed to be) in the best interests of an individual patient. From an individual's perspective it can sometimes seem that NICE is denying access to certain treatments but this is not so. Patients are freely able to get access to the treatment but may have to contribute to the cost. For example, approved cancer drugs and treatments such as radiotherapy and chemotherapy are funded by the NHS without any financial contribution being taken from the patient. But certain cancer drugs not approved by NICE because of cost will be available only if the patient is prepared to pay a co-pay to make up the difference in the NICE perceived value and the actual cost. Where NICE has approved a treatment, the NHS must fund it. But not all treatments have been assessed by NICE and these treatments are usually dependent on local NHS decision making. For example the NHS usually pays for several rounds of treatment for fertility problems but because NICE has not assessed them some PCTs may cap the number of rounds and the patient may then have to pay privately if he or she wished to continue with fertility treatments beyond the capped level.
NICE has been criticised for being too slow to reach decisions. On one occasion, the Royal National Institute of Blind People said it was outraged over its delayed decision for further guidance regarding two drugs for Wet AMD that are already approved for use in the NHS. However the Department of Health said that it has 'made it clear to PCTs that funding for treatments should not be withheld simply because guidance from NICE is unavailable'.
Some of the more controversial NICE decisions have concerned donepezil, galantamine, rivastigmine (review) and memantine for the treatment of Alzheimer's disease and bevacizumab, sorafenib, sunitinib and temsirolimus for renal cell carcinoma. All these are drugs with a high cost per treatment and NICE has either rejected or restricted their use in the NHS on the grounds that they are not cost-effective.
A conservative shadow minister once criticized NICE for spending more on communications than assessments. In its defence, NICE said the majority of its communications budget was spent informing doctors about which drugs had been approved and new guidelines for treatments and that the actual cost of assessing new drugs for the NHS includes money spent on NICE's behalf by the Department of Health. When these were added to NICE's own costs, the total cost of the technology appraisal programme far outstrips the cost of NICE communications.
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