Offsetting NHS funding from existing services to pay for expensive new drugs could be harming the health of the nation, a study suggests.

The cost of innovative new medicines “do not always justify the benefits they offer”, researchers warned.

They suggest England’s pharmaceutical pricing policy should be reformed “to better serve the health needs” of all NHS patients.

However, NHS spending watchdog the National Institute for Health and Care Excellence (Nice) said its role is “vital”, with it helping to prevent a “postcode lottery” in patient access and potentially higher costs.

The study, led by academics at the London School of Economics and Political Science (LSE), looked at how many additional years of full health were generated by drugs approved by Nice between 2000 and 2020.

New drugs can be a lifeline for patients who have significant unmet clinical needs. However, innovative drugs are expensive, and their costs do not always justify the benefits they offer

The analysis found new medicines led to 3.75 million additional years of full health, costing £75 billion.

However, it suggests that redirecting that funding to existing services could have generated five million years of full health.

Researchers said that while new drugs “could have benefited patients who received them” access “came at a considerable cost for others who might have missed out on potential health gains due to necessary disinvestment or underinvestment in other forms of care to fund these newly recommended drugs”.

Lead author Huseyin Naci, associate professor of health policy at the LSE, added: “New drugs can be a lifeline for patients who have significant unmet clinical needs.

“However, innovative drugs are expensive, and their costs do not always justify the benefits they offer.”

Academics said the findings relate to Nice’s cost-effectiveness threshold and suggest it should be lowered.

In this environment, offsetting funding from existing services to pay high prices for new drugs can more adversely affect population health than in health systems where there is greater budgetary flexibility

Nice advises its committees to consider new drugs as offering value for money to the NHS if they cost less than £20,000 to £30,000 per additional year of full health gained.

Prof Naci added: “After more than a decade of underinvestment in the NHS, it may no longer be justifiable to have a Nice threshold that doesn’t reflect the amount the NHS needs to spend to generate health.

“Lowering the threshold would allow the NHS to negotiate better prices for new medicines, taking into account not only the benefits to patients receiving these drugs but also the impact on other NHS users who may lose out due to resource reallocation.”

Irene Papanicolas, professor of health services, policy and practice at Brown University, said the findings, published in The Lancet, “are reflective of the tight budget of the NHS”.

“In this environment, offsetting funding from existing services to pay high prices for new drugs can more adversely affect population health than in health systems where there is greater budgetary flexibility,” she added.

Beth Woods, senior research fellow at Centre for Health Economics at University of York, said: “This work shows that there is a need to reform pharmaceutical pricing policy in England to better serve the health needs of all patients served by the NHS.”

Without Nice’s input, funding decisions would be taken locally, leading to inequitable patient access - the ‘postcode lottery’ - and potentially higher costs, because multiple local negotiations with pharmaceutical companies may not drive best value for the NHS

A spokesperson for Nice said the spending watchdog’s role is “vital” and helps prevent a postcode lottery.

“Spending money on new medicines does create an opportunity cost, displacing services elsewhere in the health system,” they said.

“That’s why Nice’s role is vital: we carefully evaluate new treatments and recommend only those that offer value-for-money for the taxpayer.

“This is especially important during times of significant challenge to the NHS. Every pound of the NHS budget can only be spent once.

“If Nice had not recommended these innovative new medicines, they almost certainly would have been used within the NHS anyway.

“Without Nice’s input, funding decisions would be taken locally, leading to inequitable patient access – the ‘postcode lottery’ – and potentially higher costs, because multiple local negotiations with pharmaceutical companies may not drive best value for the NHS.”