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Elephant in the room

With escalating cost pressures on the NHS, pharma companies cannot afford to ignore government's impetus towards public-private partnerships

A close-up of a model elephant's faceDespite many initiatives and government policies, the private sector has yet to play any major role within the NHS – especially outside England. Yet, with escalating cost pressures and the very real prospect of a new government in 2010, there is little doubt that Strategic Health Authorities (SHA) and Primary Care Trusts (PCT) will begin to look more closely at opportunities for commercial partnership.

While there is limited national consensus today, private sector initiatives continue to succeed at a local level. Given the current economic climate, pharma companies cannot afford to ignore these pockets of opportunity. It is only by understanding the differences in private sector/NHS collaboration at a local level that organisations will be able to respond effectively to the implications of strategic change, from world class commissioning onwards.

Increasing competition
Since the Labour government came to power in 1997, there have been many grand statements and initiatives designed to increase performance and productivity across the NHS by introducing private sector competition.

In January 2002, Alan Milburn, former Secretary of State for the NHS heralded the introduction of the private sector into the NHS, saying: "Our reforms are about redefining what we mean by the NHS. Changing it from a monolithic, centrally-run monopoly provider to a values-based system where different healthcare providers – in the public, private and voluntary sectors – provide comprehensive services to NHS patients."

Fears that such a strategy could lead to back-door privatisation of the NHS certainly appear to be unfounded, with a number of initiatives failing to deliver real change or private sector involvement. Certainly across Wales, Scotland and Northern Ireland there is actually a clear move away from any private sector co-operation or collaboration.

However, the changing economic environment will undoubtedly have a significant impact on NHS strategy over the next few years, especially in England where the sheer volume of demand places huge cost pressures on PCTs and SHAs. Combined with an expected change of government in 2010, it is very likely that the NHS will be tasked with meeting clear targets for the use of private sector organisations to deliver services in a more competitive and cost-effective manner.

Poised for change
While the Virgin Group announced it had effectively put on hold its ambitious plans to take over and run GP surgeries in 2008, the company remains "very committed" to entering the sector and will review the situation when the economy improves.

Furthermore, the Department of Health (DH) remains bullish about the private sector's role within the NHS, a spokesman recently asserted that PCTs are expected to stimulate and shape the market including a number of providers from voluntary, NHS, private, local government sectors and others.

Indeed private sector involvement with the NHS is occurring – albeit on a fragmented basis and at a local, not national level. Some 25 per cent of contracts for the 'Darzi centres', for example the GP Led Health Centres that all PCTs across the country are required to introduce, have been awarded to the private sector so far – although these include NHS hybrids that are simply relabelled organisations. 

The DH has also let a contract for the support to the development of Practice Based Commissioning (PBC), with five companies/consortia vying for contracts to give PBC a shot in the arm.

 

Managing the pace of change

After nearly a decade of turmoil across the NHS, which has resulted in significant structural change, pharma companies could be forgiven for believing that they are entering a period of consolidation where key opinion leaders (KOL) will be easily identifiable and strong relationships built.

The reality, however, is very different. While structural change is no longer on the agenda, changes within PCOs continue apace. Indeed, with continuous requirements to meet efficiency drives, respond to changes in patient-centric care processes and reorganise service delivery, the pace of change is actually increasing.

Pharma companies must, therefore, not assume that individuals fulfilling specific roles will automatically assume KOL status. Instead, these organisations must identify and understand the underlying changes that are happening at organisational level. It is only by understanding both organisational change and the changing KOLs that pharmas can develop and deliver relevant local messaging.

For example, some PCOs are actively embracing the opportunity to work with one or more pharma company on joint ventures, often in the community, but, as yet, the jury is out on the long-term benefits of this approach. Critically, the pharma companies and NHS have yet to jointly define consistent measures of success. Whether such measures will be based on reducing costs in a particular disease area, increasing the number of patients treated, or delivering access to more effective technology remains to be seen, and until such measures can be agreed and measured, pharma/NHS collaboration will remain on the fringes of activity.

However, in the short term such joint ventures do provide pharma companies with an additional engagement opportunity within key areas of the NHS. It is, therefore, essential to understand which PCOs are actively embracing joint working and in which disease areas, in order to ensure that any approach is highly tailored and targeted towards the right organisation and individuals.

 

Defining opportunity
It is this highly fragmented response that is creating huge challenges for pharma companies today. A fundamental issue to address is the speed with which PCTs respond to the demands of world class commissioning, under which the PCT must become two separate organisations – the commissioner and the provider – by April 2010.

While the PCT's commissioning side will not require many changes, it is the establishment of the provider unit that will be of most interest, becoming as much as 80 per cent of the PCT as it currently stands. The DH has set a clear timetable for PCTs to undertake this huge change, with three stages – arms length status (April 2009), direct provider organisation (October 2009) and complete independence (the externalisation of the provider arm) by April 2010.

However, every SHA and PCT is progressing at its own pace – with early adopters and clear laggards. According to the latest figures from Cegedim Dendrite, 6 per cent had achieved arms length status by April 2009, 13 per cent were significantly ahead of target and had already direct provider organisations (DPO), while 66 per cent were on target to achieve DPO by October 2009.

Furthermore, different regions have adopted different strategies, with London splitting into five commissioning collaboratives (specialist commissioning groups) and six PCTs currently taking part in a national Community Foundation Trust Pilot Programme, under which they no longer will be assessed by the SHA after a year's operation and assuming the required level of governance and financial expertise. 

The challenge for pharma companies is to assess and understand the progress of these individual NHS organisations in embracing world class commissioning and understanding the implications for new business development.

Building for the future
While private sector involvement in the NHS will undoubtedly remain small – at least until the next election, pharma companies cannot afford to ignore the opportunity. Indeed, the continued perception that both the NHS and, by association, pharma companies will be unaffected by the current economy is, quite frankly, ridiculous. With the escalating levels of public debt, any government will be forced to claw back funding over the next few years. Should a Conservative government take over in 2010, the NHS is likely to experience a massive policy shift that will force SHAs and PCTs to work far more closely with the private sector.  

Pharma companies cannot operate in an information vacuum. This private sector/NHS co-operation will continue to be introduced on a piecemeal, local basis. In this climate it is essential to maximise opportunities, operate efficiently and, furthermore, build relationships with key individuals who will be increasingly involved in defining the NHS/private sector model.  

Without up-to-date information on changes in attitude and adoption at a highly granular – preferably PCT – level, pharma companies simply will not be able to respond effectively to any new commercial opportunity.

The Author
Duncan Alexander is OneKey director for Cegedim Dendrite and Mike Sobanja is chief executive of the NHS Alliance

To comment on this article, email pm@pmlive.com
 

28th January 2010

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