The Government’s decision to award the contract for the purchase and delivery of almost a third of NHS products to a US firm and its German partner has been derided in the British press. On Target looks at the media coverage of the controversial Novation/DHL deal.
When a news item takes up valuable space in the acclaimed satirical rag Private Eye, you can be sure that it has been honoured with a degree in notoriety. Step forward the Government’s latest plans to resist privatising the NHS – by flogging its equipment supply chain and purchasing services to a German parcel firm and an American Group Purchasing Organisation currently the subject of a US senate investigation.
Make no mistake: this is a big story, affecting thousands of NHS jobs, hundreds of medical device manufacturers and their employees, and the health of patients across the UK. But it has been drip-fed to the media in such a way that it seems to have escaped the full force of public scrutiny.
News of the Department of Health’s decision to outsource the work of the NHS Logistics Authority to DHL was officially announced on the same day that the national press were running ‘exclusives’ on the impending departure of Prime Minister Blair. A good day to bury bad news? Perhaps, although in this case it was at least at the expense of some better news.
Blair’s legacy will doubtless include the first meaningful steps in the privatisation of the NHS – an allegation strenuously denied by the Government. Health Secretary Patricia Hewitt has described the sell-off as the best move for staff and the health service, citing NHS savings of over £1 billion over 10 years. Suggestions that it is part of a wider plan to privatise the NHS were, she said, “absolute rubbish”. “The NHS has always been a mixed economy,” said Hewitt. “This is not driven by ideology. It’s driven by ensuring we continue to get the best care for patients and the best value.” One critic, writing in the Guardian, described the move as “privatising, at the stroke of a Hewitt pen, a 20th of the NHS”. The author viewed the announcement as another huge step away from Bevan’s integrated, public NHS in which everyone was on the same team.
Silent partner
Hewitt claims that NHS Logistics only provides around 10% of the 500,000 different products ordered by the NHS. However, opponents are not convinced; they point to the involvement of US purchasing giant Novation in the deal, which significantly increases the impact of the Government’s decision. Although they are not named in the announcement, it has been established that Novation will perform the vital role of procurement of NHS supplies under this agreement. According to the ABHI, this will give DHL and Novation control of almost one-third of a total NHS medical supplies and equipment market worth around £3.7 billion a year. In fact, the Department of Health makes it clear that DHL/Novation will be expected to increase that market share by as much as possible over the course of the 10-year contract.
“This is a bad day for patients and the NHS. A very efficient and collaborative supply chain partner stands to be replaced by a purchasing organisation which will be focused on price and will restrict choice for patients and clinicians,” said the ABHI’s Director-General, John Wilkinson. “The UK is already established as a ‘slow, late adopter’ of modern treatments and it is difficult to see how this transaction is going to improve matters. In most markets the competition authorities get uneasy when one player gets around 25% market share. Here we have a company which says that it has control of around 33% of the supply market to the NHS and is aspiring to achieve 80 to 90%. This will put DHL/Novation in a position of considerable power over hospitals and suppliers and could create a dangerously anti-competitive environment. This whole deal has been conducted in virtual secrecy with minimal consultation or parliamentary scrutiny, and with no evidence produced on how this new regime will benefit patients or the taxpayer.”
| On Target Quick Read |
•The Department of Health has confirmed the decision to outsource the distribution and procurement of NHS hospital equipment to German company DHL and (by implication) its partner, US group Novation.
•The new model of NHS procurement is defended by the DH as a cost-saving rationalisation, but has been widely criticised by the industry, the NHS and the UK media as monopolistic and restrictive.
•Novation is currently under investigation by the US Senate for alleged anti-competitive practices.
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Innovation will suffer
Crucially, it is the impact on patient welfare that causes most concern. Critics fear that innovative products will remain out of the reach of those who need them most. “In stating that innovation and clinical quality and choice will be encouraged by the establishment of ‘a dozen product councils’, the DoH shows it misunderstands the nature of innovation,” wrote Robin Wendt in the Guardian.
“Innovation is almost never centre-led and is the result of individual groups of clinicians and managers working at grassroots level to find better ways of treating patients. The DH claims £1bn will be saved over 10 years, and DHL’s expectation of £1.6bn profits means a saving of around 12% of the total NHS procurement budget will be necessary. It has not been made clear where these vast savings will come from, but if the buyers use their monopolistic power to drive prices down and push smaller suppliers out of the market, then patients will suffer from lack of availability of new technologies and poor support for training of healthcare professionals.”
“Plans to include essential lifesaving equipment in this scheme are particularly worrying: buying cheaper blankets is one thing, but cutting corners when buying complex medical devices that may be inserted or implanted into the body of a patient is a recipe for disaster.” John Wilkinson, Director-General, ABHI
Equally, there are concerns that basic patient requirements will suffer as a result of the efficiencies of the new deal. “Plans to include essential life-saving equipment in this scheme are particularly worrying: buying cheaper blankets is one thing, but cutting corners when buying complex medical devices that may be inserted or implanted into the body of a patient is a recipe for disaster,” said John Wilkinson.
The US story
As expected, the most tart-tongued critique belongs to Private Eye, whose commentary is worrying and characteristically provocative. It details how Novation’s reputation in the US has been blighted following disturbing allegations made by Medical Supply Chain, a Missouri company that develops software enabling hospitals to order supplies direct from manufacturers. Medical Supply Chain claims that Novation and Neoforma, a dot-com company in which Novation has a 50% stake, have conspired with manufacturers, distributors and suppliers to charge $100bn in excess costs to US hospitals since 2002. As the largest Group Purchase Organisation (GPO) in the US, Novation was also recently involved in a $420m anti-trust judgment in a Los Angeles federal court concerning its reluctance over several years to provide doctors with a new type of pulse oximeter – the new device was produced by Masimo Corp, but Novation had signed an agreement to purchase an inferior product from another company.
Private Eye said: “Hewitt’s decision is all the more surprising coming as US doctors are complaining that GPOs like Novation don’t save hospitals money and don’t always procure the equipment staff believe is of most benefit to patients. In addition, America’s largest trade union, the 1.6 million-strong Service Employees International union (SEIU), has also voiced concerns about Novation. Giving evidence to the US senate judiciary committee, the SEIU testified that it was ‘concerned that questionable practices by the nation’s largest GPO, Novation, lead to rising costs in the health care supply chain, while at the same time limiting provider choices in a way that risks the safety of both health care workers and their patients...’ Hewitt does know what she’s doing, doesn’t she?”
| Are you concerned about how the DHL/Novation deal will impact on your business? What will it mean for sales and marketing in the healthcare sector? Send your views to chris.ross@healthpublishing.co.uk |
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