Not nice, not rational

What's the point of the National Institute for Health and Clinical Excellence? This story makes me ask:

Two new targeted therapies for bowel cancer should not be used in the NHS, the country's cost-effectiveness watchdog NICE said on Monday, a decision branded by one charity as scandalous.
Both Avastin and Erbitux are widely available in the United States and much of Europe.
The National Institute for Health and Clinical Excellence (NICE), however, decided the high cost of the medicines meant their use was not "compatible with the best use of NHS (National Health Service) resources".

This judgment is almost certainly irrational. If cost-benefit analysis is to have any meaning, it must apply over all government spending - not just the NHS, and certainly not just the NHS drugs budget.
The reason for this is simple. If we assume total government spending is fixed*, then the £17,666 cost of a course of  Avastin is £17,666  that could not be spent elsewhere.
The question then is: is the value of five months of life of a bowel cancer patient worth more than the benefit society would get from the lowest-valued £17,666 of other government spending?
if the answer's yes, then this other spending - which might be upon some bureaucrat, agricultural subsidies or whatever - should be cut and the cash transferred to spending on Avastin.
This follows from the basics of utility maximization - that we should spend when the marginal benefit of doing so exceeds the marginal cost.
Now, it's just inconceivable to me that the lowest-valued current use of £17,666 of government spending has a value greater than five months of  someone's life, even if it is impaired.
So, Avastin must be cost-effective in the context that really matters - which is all of government spending.
But NICE was not asked to make this judgment. It  could only consider Avastin in the context of the NHS's drugs budget. How can this be meaningful?
I suspect NICE's role here is doubly pernicious. Not only does it deny people life-increasing treatment, but it gives the wholly misleading impression that government is careful and rational about the use of tax-payers money.
* For the sake of argument, I'm ignoring libertarian objections to socialized medicine.

Comments

[james higham]

"The question then is: is the value of five months of life of a bowel cancer patient worth more than the benefit society would get from the lowest-valued £17,666 of other government spending?"

Playing devil's advocate, what if the lowest valued was, say, equipment for a school for the hearing impaired? But the point does stand though. Prioritization is everything.

[Tim Worstall]

The subsidy to the catering facilities of the Palace of Westminster is 5 million a year. Parliament sits for some 280 days (including the Lords that is) a year, so I hear.
Thus the cost of 5 months of life is that of one day of subsidized browsing and sluicing by our Lords and Masters.

[Rob]

Notwithstanding Tim's comment, surely part of the problem here is that there are costs to working out exactly what is the least well spent £17,666 of government money.

[dearieme]

Aren't you advocating letting the excellent be the enemy of the good?