The £25,000 to £35,000 Answer
Why the Price of Zero Tariffs will be Paid in Blood
Two days ago, NICE confirmed that its long-standing cost-effectiveness threshold will finally be raised. After two decades at £20,000–£30,000 per QALY, the range will move to £25,000–£35,000 from April 2026. Most headlines have focused on this point. But the threshold increase is not the story. It is the least important part of a much larger political settlement, one that has profound implications for the NHS, population health, and health inequalities.
The catalyst for the change was not an evidence-led review of opportunity cost. It was a trade negotiation. The UK and US have agreed a zero-tariff deal for pharmaceuticals, protecting UK exporters from substantial new import duties that were due to hit in January. In exchange, the UK has committed to pay more for new branded medicines – roughly 25% more, according to widespread reporting – and to cap the rebate rate under the Voluntary Scheme for Pricing, Access and Growth (VPAG) at 15%. These two commitments, not the QALY threshold, are what matter for the public finances.
In our previous blog, we argued that the apparent stability of NICE’s threshold masked a “quiet drift”, driven by numerous of workarounds: the Cancer Drugs Fund, Highly Specialised Technologies, severity modifiers and now the Innovative Medicines Fund. The problem was not that the threshold was too low, but that the system had evolved a patchwork of exceptions that weakened transparency, equity and efficiency. Our proposal was simple: if the threshold is to rise, let it do so explicitly, linked to GDP per capita, and accompanied by the retirement of these ad hoc mechanisms.
None of that has happened here. The threshold increase has been delivered, but as a political artefact rather than the outcome of a principled economic review. Indeed, the threshold is largely irrelevant to the deeper shift now underway. The real mechanism raising NHS drug expenditure lies in the VPAG reform: a sharp reduction in the repayment rate (from more than 20% in recent years to a hard cap of 15%) combined with a commitment to pay higher net prices for very new drugs (which are not subject to rebates in the VPAG scheme for the first three years). This removes the principal tool that ensured overall affordability.
Independent analysts are already warning that this package could add around £3 billion per year to the NHS drugs bill over the coming decade. There is no published plan for how this will be funded. NHS Providers have made clear that there is no slack in current budgets to absorb a shift of this magnitude, and neither the Department of Health & Social Care nor the Treasury has committed to meet the cost centrally. Expectations are forming that the NHS will simply have to absorb it.
If that happens, the consequences are stark. An NHS already in fiscal distress will have to reallocate resources away from high-value services to fund higher-priced branded drugs. This is not a matter of ideological preference or framing: it is basic economics. Money spent on high-cost, marginal-benefit therapies must come from somewhere. It will come from community care, mental health services, elective recovery, primary care access and preventive programmes – the very areas that generate the largest health gains per pound. Population health will fall, not rise.
And we should be honest about who will suffer. The losses will fall on people who rely most heavily on the everyday functions of the NHS: those with chronic conditions, those in deprived areas, those unable to pay privately to fill the gaps. Rationing, when forced through budget compression, does not fall evenly. It falls on the poorest and those least able to advocate for themselves.
Supporters of the deal argue that raising the threshold and reducing the rebate will “boost innovation” in the life sciences sector. But in our earlier piece we argued – and still maintain – that the threshold is a poor instrument for industrial strategy. The empirical link between willingness-to-pay and global R&D investment is weak, and the UK already has better tools at its disposal: tax credits, research funding, and targeted industrial policy. Using the NHS budget to underwrite sectoral competitiveness is neither efficient nor equitable.
There is, however, a sensible way forward. If the government believes that avoiding US tariffs is necessary to protect an important export sector and importantly secure inward investment, then it should fund that choice openly. The Treasury should commit now to providing the NHS with the additional £3 billion per year that these reforms imply, in full. Better still, the principal beneficiaries of the deal – UK pharmaceutical manufacturers – should contribute to that settlement, ensuring that the costs of tariff protection do not fall on patients. There will still be opportunity costs; public money is finite. But those costs need not fall on the NHS front line. They need not translate into longer waiting lists, reduced access to GPs, or widening health inequalities. That outcome is a political choice, not an inevitability.
After twenty years of drift, NICE’s baseline threshold has finally moved. But the price of that movement has been to fold the threshold into a trade negotiation, blurring the line between health-value assessment and industrial diplomacy. This is not an economically grounded recalibration. It is a political settlement, and unless the government steps in with additional funding, it will reduce population health and increase inequality.
The health economics community must not let the threshold serve as convenient camouflage. We should insist on transparency about the true fiscal mechanisms at play, about who gains and who loses, and about the opportunity costs imposed by this deal. If we do not, the losers will once again be those least able to bear it.