The Department of Health has agreed to withdraw and revise the current secondary legislation on competition in NHS commissioning.

New regulations, tabled in Parliament a month ago, appeared to give Monitor the power to enforce private sector tendering of virtually all NHS services.

Following protests from the Academy of Medical Royal Colleges (AMRC) and over 1,000 GPs, the DH has claimed any difference between this and the former regulations was purely “inadvertent”.

Allowing CCGs to decide which services would be put out to competitive tender was one of the modifications to NHS reform agreed following the ‘listening exercise’.

However, the new secondary legislation appeared to override the ‘discretionary’ powers of CCGs and enforce competition in all areas of care, potentially driving the contracting out of most NHS services to the private sector.

Monitor would be empowered to enforce competitive tendering except where only one qualified provider existed, which is rarely the case.

Last week, a letter signed by over 1,000 GPs was sent to the Daily Telegraph urging a full Parliamentary debate on the new regulations, which will become law by default unless actively opposed.

This weekend, the AMRC wrote to Health Minister Earl Howe expressing “considerable concern” that the regulations disregard assurances formerly given by the DH and would drive a “dangerous” fragmentation of the NHS.

The situation recalls former Health Secretary Andrew Lansley’s statement that the listening exercise had not significantly altered any aspect of the NHS reform.

However, following the protests, Health Minister Norman Lamb (pictured) said the DH had “inadvertently created confusion and generated significant concerns”, and would revise the secondary legislation to show that it was in line with existing rules.

The revised version will be “fully in line with the assurances given” to the medical professions, he said, and will confirm the power of CCGs to decide which services go out to tender.

Shadow Health Secretary Andy Burnham said the revision of the secondary legislation, less than a month before it comes into force, shows that “Coalition policy on competition in the NHS is in utter chaos.”

The new DH draft requirements for commissioners make the maintenance of a ‘level playing field’ for competing providers from all sectors mandatory.

Published for consultation, Securing best value for NHS patients proposes legal requirements that CCGs must observe “choice and competition” and must make their tendering processes and decisions transparent.

Commissioners would be banned from “preventing, restricting or distorting competition” unless it was “indispensable” to achieving patient benefit.

The document states that the reason for making this competitive framework statutory is that CCG autonomy will preclude its enforcement within the NHS: only making it a legal requirement will ensure compliance.

The DH says the “most important task” of CCGs is to “secure best value from limited resources”. It wants commissioners to “have flexibility”, but needs to ensure that they “carry out an objective assessment of different options”.

The draft requirements describe Monitor’s new role as the enforcer of these regulations. The watchdog will not be involved in every tender process, but rather “investigate possible breaches of the regulations”.

The DH intends to prohibit commissioners from treating independent or voluntary sector providers “less favourably” than public sector providers.

To ensure transparency, commissioners must “maintain appropriate records” showing how they have reached their decisions.

Protection of patient choice (as defined by the NHS Constitution) is also proposed as a mandatory principle for CCGs.

Finally, the document states that where a conflict of interests arises, it must be managed “effectively and transparently” by the commissioner.

The consultation will end on 26 October 2012.

Together with its health reforms, the UK Government has developed a programme to accelerate the uptake of innovative therapies in the NHS that is not only ambitious but concrete and immediate. Thoreya Swage examines the new innovation agenda and what it offers to the pharma industry.

Although the main focus of Government health policy is reform, the development of new commissioning processes and structures and saving £20bn of annual NHS spend, the powers that be at the top at the NHS are still keen on accelerating the adoption of innovation in healthcare.

With that in mind a document, Innovation Health and Wealth, was published in December 2011 by the DH to speed up the process by establishing a set of measures to support change in the practice of healthcare and to identify a timetable for implementation. Unlike similar exhortations in the past to ‘speed up innovation’, this document has a sense of urgency, with a requirement to start immediately and build the actions set out in the report in the planning cycle for 2012–13.

The document recognises that by adopting innovation, the NHS can improve its own productivity – essential for achieving QIPP. It can also provide much-needed support to the life sciences industry at home and abroad through exporting new ideas and expertise, working in partnership with UK industry and generating new business for UK-based companies.

Of course, the ultimate outcome is to improve patient care.

What’s in store?

Innovation is defined in the document as “an idea, service or product, new to the NHS or applied in a way that is new to the NHS, which significantly improves the quality of health and care wherever it is applied”. The term covers a wide range of processes, technologies and uses of pharmaceutical products. The main thrust of the document is to ensure that change is disseminated throughout the NHS, and does not remain in isolated pockets in the more progressive parts of the healthcare system.

The listed barriers to the dissemination of new ideas are probably familiar to all in the pharma industry. They include:

• limited access to data and information

• lack of recognition of those who innovate

• inflexible financial levers that oppose change

• commissioners not having the tools or capability to drive innovation

• lack of consistent leadership to support change

• poor structure and processes to drive innovation.

The actions are highlighted to overcome these barriers are listed below.

1. Ensuring compliance with new ideas

In addition to introducing a value-based pricing structure for new medicines from 2014 – to ensure that patients can access effective treatments that reflect their value, the Government plans to set out in statutory form a NICE Compliance Regime that attaches funding to NICE Technology Appraisals in order to ensure rapid and consistent implementation throughout the NHS, so that patients receive the clinically and cost-effective technologies and medicines their doctors believe they need.

There will also be a requirement for all NICE Technology Appraisals to be added to relevant local NHS formularies, and a NICE Implementation Collaborative (NIC) will support timely implementation of NICE guidance. The NIC will be made up of the NHS Commissioning Board, NICE, the Chief Pharmaceutical Officer, the NHS Confederation, the Clinical Commissioning Coalition, the Royal Colleges and the life sciences industry. It will identify areas that require support and develop implementation guidance and solutions for the NHS, as well as helping pharma companies to improve their value propositions to NICE.

2. Improving information

There will be a single comprehensive web portal for innovation in the NHS, which, among other things, will ‘showcase’ and exchange ideas, and an ‘innovation scorecard’ to track compliance with NICE Technology Appraisals. Both of these will be available publicly.

The web portal will hold a database of case studies, implementation guides and tools, and e-learning programmes for clinical staff to support the introduction of new practice.

A later development will be the inclusion of the existing database of current clinical trials for drugs and medical technologies, which permits patients to participate in clinical studies. The aim will be to encourage more patients to get involved in research and so generate better data for new interventions.

Public awareness of innovations will be driven by consumer campaigns – developed by Which? – to promote effective new ideas in health.

A secure data linkage service will be set up by the Health and Social Care Information Centre by September 2012. ­ This will provide data extracts based on information generated by primary and secondary care and other sources, permitting an improved understanding of which interventions work best, when and why. A complementary secure data service, the Clinical Practice Research Datalink (CPRD) will be set up by the MHRA to support the needs of life science researchers.

3. Architecture for delivery of innovation

­This is a key action through which more robust relationships will be developed between academia, science and industry to develop solutions to healthcare problems and ensure the dissemination of ideas. A designated number of Academic Health Science Networks (AHSNs) will be established nationally, with the first to go live during 2012–13. Every NHS organisation will be affiliated to its local AHSN, which will act as a gateway for NHS professionals requiring help with innovation and provide industry with a point of access to the NHS. Details of the designation process will be published this spring.

The many existing organisations that have been set up to support innovation will be rationalised in a review of all DH/NHS-funded or sponsored bodies.

4. Incentivising innovation

­The funding structure of the NHS will be altered to allow savings yielded to be used for innovation, to prevent ‘silo budgeting’ and to permit cross-boundary working. Tariffs for healthcare will continue to be developed on the basis of outcomes, thereby promoting cost-effective approaches. At the local level, there will be opportunities to use existing tariffs flexibilities to improve care through the development of ‘Best Practice’ tariffs.

NICE will be responsible for stating which activities and tariffs should be decommissioned or reduced as a consequence of new and improved practice or medicines being introduced.

Achieving change will be slow – however, a few high-impact innovations are identified to kick-start this process. Most of these interventions are technologies, but the management of dementia in accordance with NICESCIE guidelines is highlighted.

From 2013, compliance with high impact innovations will be incorporated into the CQUIN requirements.

5. Procurement

Procurement processes will be smartened up, beginning with a procurement strategy that will be produced shortly to enable delivery of about £1.2bn of the £20bn savings required of the NHS. Among other priorities, there will be a focus on innovation and the emphasis will be on building partnerships with industry that deliver mutual value rather than just transactions.

6. Education and leadership

Innovation will be established as an integral part of clinical and managerial education, training programmes, continuous professional development and competency frameworks in the NHS.

A jointly funded industry and NHS training and education programme will be established to enable senior NHS managers and clinicians to work and train with their industry counterparts, together with a new industry and NHS CEO network.

An NHS Innovation Fellowship Scheme, drawing experts from different sectors including industry, will provide coaching and mentoring for senior NHS staff, conduct master classes and provide advice and support on innovation strategies.

An Innovation Pipeline Project to accelerate the adoption and dissemination of proven interventions will be established by the ABPI, the ABHI and the NHS Confederation. Between 15 and 20 joint working projects will be up and running by December 2013.

Chief executives of Clinical Commissioning Groups (CCGs) and the NHS Commissioning Board will be personally responsible for ensuring that research, innovation and adoption are taken up and are part of commissioning plans. This will be reinforced by a statutory duty on CCGs to seek out and adopt best practice.

What’s new for pharma?

Although much of the Innovation document is focused on medical technologies, there are a few key actions for the pharmaceutical industry.

A few more details are still required, but the action is starting now, with NHS commissioners prioritising the adoption and spread of innovation and good practice using the CQUIN mechanism of payment.

­The Government appears quite serious about forging closer links with the industry through joint training and joint working projects with the NHS, and this is a good a time as any to take the initiative.

At all levels pharma has an opportunity to engage with NHS colleagues to demonstrate how their products could streamline care and improve efficiency. The breaking down of budgetary barriers will make it easier to develop a business case, for example, for a particular medicine in primary care reducing the need for a service or intervention in secondary care.

For the first time, encouraging innovation will be put on a statutory footing for commissioners, and this will develop further as commissioning for outcomes becomes the norm. Another opportunity presents itself for the industry to put forward the argument that their products can improve outcomes, and to provide examples of excellence using the local best practice tariffs.

One greatly encouraging feature is the attention given to raising awareness of innovations among patients and the public. They can be the best advocates for the uptake of new interventions, and perhaps will be more willing to support research undertaken by the industry by getting involved in clinical trials.

This document provides the best direction so far on how the NHS and the pharmaceutical industry can work together for mutual benefit.

Dr Thoreya Swage was formerly an NHS clinician and a senior manager in various NHS organisations covering acute and primary care. She has expertise in commissioning health services and is currently working for a number of NHS organisations, including DH agencies, to develop a more commercial approach to the commissioning of healthcare.

Another counterfeit version of Roche’s cancer drug Avastin (bevacizumab) has reached US clinics via a UK-based distributor.

The fake vials reported by the FDA were labeled as Altuzan, the Turkish version of Avastin, and did not contain any active ingredient.

Most of the vials were shipped to the US by UK distributor River East Supplies, which purchased them from a wholesaler in Turkey.

The discovery follows that of a different batch of fake bevacizumab, labeled as Avastin, in the US healthcare system in February.

One of the distributors under FDA investigation for supplying vials from that batch is the owner of River East Supplies.

Altuzan is not approved for use in the US, but the availability of the fake product via Californian supplier Ban Dune Marketing – which sells cancer drugs at ‘confidential’ discounts – led doctors to purchase it.

FDA spokesperson Connie Jung commented: “What we’re seeing is a pattern of this risky practice of purchasing unapproved drugs from foreign suppliers.”

The FDA has advised doctors not to use any products purchased from Ban Dune Marketing or its sister companies Richards Pharma, Richards Services and Warwick Healthcare Solutions.

The new incident will strengthen concerns about the use of complex global supply chains for drugs, the security of high-cost cancer drugs and the economic incentives for clinicians to sidestep procurement regulations.

The new UK life science strategy and NHS innovation review, launched by the Government this month, has been praised by the UK medical technologies sector for its promotion of innovative research and the rapid uptake of high-value technologies.

The NHS Chief Executive’s review Innovation, Health and Wealth: accelerating adoption and diffusion in the NHS outlines a number of measures the NHS will take to work in partnership with industry in order to implement effective new medical technologies throughout the NHS.

The document draws in attention, in particular, to the potential of telehealth systems to improve the management of long-term conditions, reducing hospital admissions and GP visits and so reducing the overall cost of care while improving patient outcomes, as demonstrated by the recent Whole Systems Demonstrator project.

Other areas of medical technology highlighted by the innovation document include the use of fluid monitoring in acute care and the use of assistive technologies, including wheelchairs, to improve the access of disabled people to working and other everyday environments.

Peter Ellingworth, Chief Executive of the Association of British Healthcare Industries (ABHI), the leading UK medtech trade association, said: “I welcome the Government’s focus on the life science industry. As highlighted by the Prime Minister our sector is part of ‘the virtuous circle of health, wealth and well-being’ – a real growth area for the Government as well as having the potential to make a difference to patients through the innovation we bring.

“Measures such as reform to the tariff system, enforcement of NICE guidance and the development of a procurement strategy, if done properly, could make a real difference to the medical technology sector.

“ABHI will work with the Government to make sure that the measures outlined in the Innovation Review are translated into firm actions. The measures could make a real difference to the SMEs in our sector and it is crucial that we are able to take advantage of them and continue to grow.”

Doris-Ann Williams MBE, Chief Executive of the British in Vitro Diagnostics Association (BIVDA) and a member of the Innovation Review’s External Advisory Group, commented that the Government’s announcements “represent a crucial opportunity for the life sciences sector” – and that the life science strategy and the innovation review in combination “will reinforce a genuine partnership between industry, the NHS and government.”

“To accelerate the use of innovative technologies to benefit patients and the NHS, tangible and realistic proposals were needed,” she added. “The NICE Implementation Collaborative, an innovation scorecard and a commitment to examine reimbursement mechanisms for diagnostics will all help the IVD industry to do what it needs to do to turn the vision into reality.”

Tony Davis, Chair of health technology business support organisation Medilink UK, noted that the new life science strategy “sets the stage for telehealth and telecare technologies to be made available to every person with a long-term condition or in need of care in the UK, helping them manage their health while maintaining their independence.”

“Medilink UK has been working with industry, other trade associations and the Department of Health to accelerate the roll-out of telehealth and telecare services in the NHS and social care, which will enhance the lives of three million people over the next five years,” he concluded.

Increasing competition and budgetary pressure on the provider side are the biggest challenges facing the medical technology industry in Europe. Joerg Kruetten and Carlos Meca discuss the findings of a new industry survey.

Nobody would dispute that the medtech industry is a bastion of strength compared to many other industry sectors in the current economic turmoil. With an ageing population and an increasing prevalence of chronic and prosperity-related diseases, the EU market for medical technology products is and will continue to be a key place for the industry, with growing demand for efficacious and efficient prevention, diagnosis and treatment methods. The industry’s overall business expectations for 2011 are positive.

Rising pressure

However, a second and deeper look at the EU markets shows that the environment has become significantly more challenging in recent years. Stricter reimbursement controls by payers, which increasingly often are bound up with health technology assessments and/or case-based funding across the EU, are putting significant budgetary pressure on caregiver institutions. In response to cost pressures, many caregivers are focusing on the procurement side as a comparatively easy area to cut operating costs. This has increased the influence of procurement departments and reduced the influence of clinical staff on product and therapy choice.

In recent years, the focus on cutting procurement costs has also led to a high and growing prevalence of different forms of pooled purchasing in the EU member states through private provider chains, group purchasing organisations, national or regional public tenders or international distributors.

As a result of these developments, the industry is facing increasing price pressure and business risks as well as decreasing customer commitment and room for competitive differentiation. The impact of these procurement trends, however, largely varies with the complexity and maturity of a product or product category. Whereas purchasing department influence and pooled purchasing are very common for simple medical supplies, they are less prevalent with new and complex surgical procedures or capital equipment, where the purchasing/adoption decision is still predominantly influenced by the clinical and technical staff at the institution level.

Low-cost competitors

A second unfavorable trend for established industry players is the emergence of new low-cost competitors, threatening their market position with good-quality and predominantly me-too products at very attractive price points. These low-cost companies strongly embark on the trend of caregiver institutions focusing on cutting procurement costs. Compared to established players that are driven strongly by innovation and have high R&D as well as sales and marketing expenditures, the new competitors follow different business models. Three types of new low-cost competition can be observed in the EU marketplace:

• Asian ‘broad liners’ who are still focused on R&D but benefit from lower personnel costs, scale on the procurement side, favorable currency fluctuations and lean sales and service models.

• ‘Copycats’ who are copying established products by intelligently circumventing existing patents, and are comparatively small in size and lean on the administration and sales side.

• ‘One-stop-shop’ distributors who benefit from procurement and sales scale and offer their own private label products in addition to established brands.

Besides these new competitors, further low-price competition can be found among established players who offer basic and/or mature products at high discounts to protect the remaining part of their business or offer a low-price product/brand alternative to their premium product by keeping an old-generation product on the market.

Major firms face trouble

These market trends were largely confirmed by the MedTech Barometer 2011, an industry survey conducted by global strategy and marketing consultancy Simon-Kucher & Partners. More than half of the 70 respondents, who are senior decision makers in globally leading medical technology companies with European business responsibility, stated that tight budgets on the customer side and increasing price competition are the biggest commercial challenges they currently face in the European marketplace.

The respondents saw a clear mid-term trend in Europe of increasing competitor price aggression in the fight for higher market shares. On the customer side, there is a clear expectation that purchasing department influence and the pooling of purchasing power will strengthen in the coming years.

60% of the respondents expect a ‘tighter to much tighter’ reimbursement and funding environment in the future, driven by the uncertain fiscal climate and forecasted revisions of reimbursement prices and rates in the EU member states. Close to 60% expect overall market prices to be ‘worse or much worse’ in the near future.

In response to these unfavorable commercial trends, the surveyed managers give first priority to increasing sales force effectiveness in order to deal with consolidation of buying centers and non-clinical procurement stakeholders. The second stated priority is the launch of new and enhanced products and services to increase competitive differentiation. In terms of other business goals, winning competitor accounts and increasing market share were prioritised over raising prices or slowing down price erosion.

50–60% of the respondents mentioned that they already face strong pressure from low-cost competitors and that this pressure is expected to increase in most sectors. The diagnostics sector in particular has been heavily exposed to low-cost competition: all respondents representing this sector have already been affected. Whereas the equipment and supplies sectors expect pressure from low-cost competition to increase, the device side expects the pressure to remain significant but stable.

Increasing innovation, enhancing customer service and processes, and better customer segmentation and prioritisation are believed to be the most effective responses to low-cost competition. Very few respondents believe that trying to match the price points of these competitors by reducing their own prices or introducing low-cost offers/brands is a commercially viable option.

Ready for the fight

In summary, the political framework and the demographic developments will continue to make Europe an important, growing and innovation-friendly market environment for medical technology products in the foreseeable future, despite the ongoing economic turmoil. However, the market climate for established industry players has and will continue to deteriorate due to stricter reimbursement controls and increasing purchasing professionalism and power on the customer side coupled with consistently strong and increasing competitive dynamics.

Despite the commercial challenges that established players in Europe are facing, the business outlook for the coming year remains positive. The respondents across the different sectors expect their operations to grow by 5–10% in terms of revenue, with device and diagnostics companies expecting the highest growth rates. At the same time, the surveyed companies expect to increase their market shares moderately in the area of 3%. The companies’ average selling prices are expected to remain stable. In essence, new product launches are compensating for price erosion among established products.

With increasing budgetary pressure at the payer level and economic uncertainty in the EU member states, it is however very likely that the commercial climate in the medical technology sector will deteriorate further. Stricter reimbursement controls, health technology assessments and cost-cutting pressure on the provider side, combined with strong competitive dynamics, will further increase pressure on prices and margins; the adoption of new products and technologies is likely to slow down. The automatism of continuously compensating for negative developments among established products with new product launches may come to an end at some point.

A lot will depend on maintaining innovation, and the European market is sure to remain an innovation-friendly environment. Companies that launch true innovations with convincing clinical and/or health economic benefits will continue to have great market opportunities. Still, the vulnerability of companies that only launch regular gradual improvements of existing products and companies with a high exposure to very mature product categories will continue to increase. The long-term success of established players in the European marketplace will largely depend on having a strong innovation pipeline and controlling the price erosion of established products.

Strategies for success

Long-term business success in Europe will thus require strategic and tactical adaptations by established firms. European medtech companies are still in general very R&D-orientated. Successful innovation will be key to developing competitive differentiation and limiting the exposure to increasing price pressure. However, European companies – which are often extremely good at selling technical and clinical benefits to clinical users and technicians – need to become better at selling clinical and health economic benefits to commercially-driven purchasers.

This means focusing primarily on the following areas:

• Prioritising and steering R&D projects early on according to reimbursement and price potential.

• Producing better clinical and/or health economic evidence to support positive reimbursement and adoption decisions when launching new products.

• Resources, skills and engagement models for interacting effectively with national or regional payers, as well as procurement managers and financial administrators.

• Balancing market share and profitability goals, differentiated by business area and according to a product’s life cycle stage and the level of competition.

• Offering service support areas to payers and providers that measurably help to drive their organisational efficiency beyond simple price cuts.

• Offering new and intelligent contract models to providers that limit upfront investment burden or ensure budget compliance while securing customer commitment.

• Pursuing a structured and defendable pricing policy rather than making opportunistic and spontaneous pricing decisions.

A management summary of the MedTech Barometer 2011 is available on request. Please contact Claudia Schulz at Simon-Kucher & Partners: claudia.schulz@simon-kucher.com, tel. +49 228 98 43 372.

Joerg Kruetten is Executive Vice-President at Simon-Kucher & Partners, a global consulting firm focused on Smart Profit Growth, and is head of the company’s international medical technology competence center. Dr. Carlos Meca is a senior consultant at Simon-Kucher & Partners.

Government responds on procurement of consumables

As the Houses of Parliament slipped into the summer recess dominated by the phone hacking scandal, much of industry will have missed the Government’s response to the Public Accounts Committee (PAC) report on the Procurement of Consumables by the NHS, published in May. The remit of the PAC is to scrutinise Government spending, focusing on “value-for-money criteria which are based on economy, effectiveness and efficiency”.

The May report highlighted that £4.6bn is spent by the NHS on ‘medical supplies and other types of consumable goods’ and that each trust had control of its own purchasing. There was acknowledgement that the Department of Health (DH) is engaged in its procurement strategy, but there were also questions about how close the DH’s theoretical model of a ‘pyramid’ structure for procurement (procurement at national, regional and local levels depending on the product) is to the ‘current complex reality’, which has a ‘profusion’ of bodies involved in the procurement process.

The report goes on to question how effective this landscape will be following the NHS reforms, which will give Foundation Trusts increased autonomy and less incentive to co-operate. Also highlighted are the problems faced by the DH as, despite being responsible for procurement across the NHS, it “has no control over the actions of the individual trusts”. This situation is described as having “produced a great deal of waste”.

The report concludes that there has not been an efficient process for procurement in the NHS and that boards have lacked the data to challenge managers. There is a danger, it states, that trusts will fail to get to grips with this situation and waste money through poor procurement while making cuts to treatment of patients.

The Government responded to this report in July, and was broadly supportive of the recommendations made by the PAC. Following the PAC report the Government:

• Intends to “strengthen trusts’ accountability to their boards” and “strengthen the way hospital procurement is supported at national and regional levels”.

• Has proposed the establishment of a set of Key Performance Indicators to judge the improvements made by trusts.

• Has highlighted a new, joint DH and NHS procurement strategy that is due to be launched in April 2012 – there is little detail on this, however.

• Has highlighted the role of the National Procurement Council in helping trusts to effectively utilise the support offered by regional and national procurement organisations.

• Supports the move for procurement savings to be included in KPIs as a way of persuading trusts to monitor this area of saving better.

• Has agreed that better information on what trusts buy and the prices they pay is necessary.

• Refers to the announcement by Ministers in June that GS1 coding would be adopted as the standard product coding system for the NHS.

• Refers to the establishment of a Foundation Trust Network ‘price benchmarking club’ and the exploration of potential web-based solutions.

The Government does not, however, agree that NHS Supply Chain is not demonstrating value. Its response states that the DH has invested considerable time making the offer more attractive, but needs to do more to improve value. It goes further and argues that simply looking at the prices NHS Supply Chain charges does not give a true picture of the total cost of the service it provides. The Government makes a series of recommendations around publishing better evidence of areas where NHS Supply Chain represents best value.

The final part of the response deals with ‘regional purchasing structures’, describing them as confused and lacking transparency. The Department of Health agrees with the PAC that it should work with Foundation Trusts to ensure that they are “used wisely, adding value and avoiding duplication”.

While scrutiny of the procurement system is welcomed by ABHI, the Association is disappointed by the Government’s response to the PAC report. There is widespread acknowledgement of the failings of the system, describing it as “fragmented” and suggesting it that has led to a “great deal of waste” with trusts “ordering in inefficient ways” and recognition that there has been “limited progress towards more efficient procurement”. However, the report does not offer a clear view of how the system should work, referring only to a new strategy in spring 2012. Readers may recall the launch of Necessity not Nicety in 2009 as a previous such strategy, following a similarly critical review of DH procurement capability by the Office for Government Commerce.

Coming through the Department of Health’s response is a message that there will be more emphasis in future on NHS providers being able to demonstrate that they have taken the necessary steps to get better value for money from their supply chains. The DH “will explore with Monitor, National Audit Office and any emerging NHS Provider support functions in the system, ways in which this can be achieved... include the drafting and agreement of Key Performance Indicators which can successfully measure improvements made by trusts in the management of their non-pay spend, by April 2012.” All this will mean more emphasis on providing data to the NHS about available products and prices – which are currently highly obscured by the various intermediaries, and different trusts have highly varied contractual requirements. In this regard, the Department acknowledges a potential “market for software and web-based solutions for NHS procurement to increase penetration of tools and technologies which improve transparency of spend and price information.”

However, the response fails to explore fully the role of intermediaries and their related practices, such as NHS Supply Chain’s ‘Direct from Manufacturer’ programme or the increasing frequency of Activity Based Income charges that are levied by regionally based purchasing organisations which are increasingly competing with each other. These are key issues for industry, and only result in additional cost to serve.

ABHI will continue to work with Government and with NHS leaders. The aim must be a commercial landscape that allows the NHS to get the best that medtech can offer for patients at the best value, with a reduced cost to serve. This is a big challenge, given the complexity of logistics and support and the ‘just in time’ nature of much NHS activity. While the PAC report highlighted many of the issues we deal with every day, it is not yet clear from the Government’s response how the key elements of NHS procurement will work together in future and how the various trusts and intermediaries should interact. Through our involvement in the National Procurement Council and our contact with Government and the NHS, ABHI will continue to lobby for a more efficient procurement system in the NHS.

For more from ABHI visit: www.abhi.org.uk.