Budget cuts could bring an acceleration in the adoption of private sector service providers. Mike Sobanja and Andy Etheridge ask whether the industry has the skills to influence these new customers.
As senior decision makers across the NHS are now considering the implications of expected budget cuts from 2011, probably in tandem with a new political agenda resulting from the forthcoming general election, it is essential that pharma companies recognise the potential impact on prescribing practice. Both political change and a need to deliver upwards of 3-6% savings per annum is likely set to accelerate the process of using private sector organisations to deliver services in both primary and secondary care across England. Furthermore, strategies such as the delivery of care closer to patients’ homes are expected to be reinvigorated and re-budgeted. However, whilst it is essential to understand the organisational motivation and practices of different private sector organisations, from the commercial to the social enterprise companies, pharma companies must not forget the underlying goal. The objective is not simply to understand behaviour but to deliver the right messaging, in the right way to achieve quantifiable behavioural change.
Is the pharmaceutical industry ready for the forthcoming changes set to sweep the NHS – at least in England? Whilst much of the structure of the NHS has changed significantly in recent years, it is fair to say that some expected changes, such as the growing adoption of private sector service delivery in both primary and secondary care and the move to deliver more patient care at home, have failed to materialise to the expected degree. Indeed, the question remains as to just how committed this government has been to using the private sector as an alternative source of supply. Has, in fact, the strategy been simply an opportunity to leverage the market and provide stimulus to mainstream NHS providers within the health service? Or, is it that the evolution towards greater adoption of private sector services has been constrained by the imbalance of power between commissioners and providers – particularly hospitals? With the NHS now facing a massive budgetary financial challenge for 2011-2014, it is reasonable to assume that many organisations will be taking a much closer look at the economics of private sector service delivery – especially if backed by a change in government to one far more commercially focused. The latest formal position from the Department of Health states that during the three years from 2011, the NHS will make a contribution to the Treasury of £15-£20 billion. This will create pressure to squeeze efficiency to attain around 3% efficiency savings, which is expected to result in an escalation in private sector service delivery.
Of course this private sector opportunity only applies within England – Scotland has now outlawed the use of private companies to provide services, such as General Practitioners, whilst Wales and Northern Ireland are not encouraging the strategy. In England, however, it is likely that there will be an acceleration in the adoption of private sector service providers. To date, some 150 general practitioner practices have been let to the private sector, ranging from organisations such as Aetna Healthcare and United Healthcare, to a wave of traditional NHS practices that have opted to move from the traditional GP partnership to become limited liability partnerships or private companies. In addition, there are a growing number of social enterprise organisations, including Community Interest Companies (CICs), all operating under different models, including not for profit. This latter model, in particular, is likely to grow as a result of government support and stimulus to market conditions and contract terms. For pharma companies the fast evolving mix of private organisational types opens up a raft of new business practices and operational models to understand – all of which are very different to the traditional NHS model and culture. The one size fits all approach to dealing with the customer has now become even less relevant. Understanding both organisational drivers, which range from the highly commercial to socially oriented, and that the types of people involved in these organisations will also differ considerably to traditional NHS GPs is essential. It will also be key to track the changing attitudes to prescribing: while these providers are not accountable to either politicians or the Department of Health, each will have a contract with commissioners that will specify compliance to PCT policies, including formularies.
Private sector organisations, including pharma companies, may also have a growing part to play in delivering patient care outside hospitals and within the community. Whilst, again, this is a strategy that has yet to achieve serious adoption, there are clear demonstrations of its value – in some areas upwards of 95% of Type II diabetes cases are now managed in the community, for example. There is also evidence that care pathways are being redesigned to organise care around patient needs, which could result in a reduction of on outpatient visits within some PCTs. However, there is also evidence that providing care closer to patients’ homes is not necessarily cheaper, due to the loss of economies of scale in hospital and the changes to payment structures which have escalated the cost of GP visits. As the pressure on costs grows, local NHS commissioners will probably revisit the cost/benefits of community-based care and assess the role of private providers. And a number of pharma companies are exploring potential service provider models. However, given the expected strong resistance to private sector involvement from both providers and communities in many areas, it is likely that pharma companies will do better with a less competitive model. By aligning with an existing provider and delivering essential business skills, as Sainsbury’s has achieved with GP surgeries by providing back office services, or SpecSavers for independent ophthalmic opticians, organisations can gain a foothold in this marketplace. This strategy has far more chance of success than any attempts at entering the market independently.
It has been evident for the last couple of years that the pharma industry has got to stop treating the NHS as a single organisation. Now, as budgetary pressure and potential political change come into effect, those organisations failing to understand the range of bodies that operate within it could discover the customer base has moved very radically and is behaving in very different ways. However, the emphasis must not just be on understanding the changing behaviour but on influencing that change to achieve objectives. Understanding the NHS customer supply chain, identifying both customers and that customer’s customer is key to not only identifying the chain of influence but also to being more sophisticated about following those chains of influence to affect behaviour and prescribing practice.
Andy Etheridge is Commercial Director for Direct Marketing at Cegedim Dendrite. Cegedim Dendrite has over 35 years experience in providing value added information, CRM and Marketing solutions to the pharmaceutical industry. Mike Sobanja is Chief Executive of the NHS Alliance – the independent body that represents NHS primary care. Values-based, the NHS Alliance is the only organisation that brings together PCTs with GP practices, clinicians with managers and board members, and NHS primary care with its patients. The NHS Alliance membership and its national executive are fully multi-professional.