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Through the looking glass

Proposed changes to the NHS will create opportunities for pharma, but it is important for marketers to keep an eye out for unexpected developments

It's been a year of major change in the NHS. A new health service reorganisation programme was launched this summer (July 28, 2005) with the publication of the departmental guidance, entitled Commissioning a patient-led NHS.

This paper makes provision for the planned reconfiguration of Primary Care Trusts (PCTs), a process that is now underway with proposals submitted by Strategic Health Authorities (SHAs) to the NHS Executive on October 15.

It also contains a few surprises. The separation of commissioning and provision at PCT level is one such recommendation that not only caught a few in the industry off guard, but created a furore at many PCTs.

Furthermore, a letter (August 26) from group director of Health and Social Care Services Delivery, John Bacon, was issued to all SHA chief executives. It only hints at the extent of the change that shorter timescales for the reorganisation and the future changes in PCTs' provider responsibilities have created in the NHS.

Bacon makes two key points in the letter:

'Firstly, this is an opportunity for local health economies to design structures that they need for the future. I do not have a template for the size that PCTs should be, nor the exact correlation with local government boundaries. There is not a one-size-fits-all rule that needs to be imposed.

'All I would say is that if you stick to small PCTs, you will need to show how powerful commissioning can be delivered; if you take the large PCT approach, I will want to see how you are proposing to maintain close integration to local authorities and provide support to practices.

'Secondly, it's clear that the issue of PCT service provision has generated considerable feedback, notably among front line staff. It is very important to separate the proper consideration of organisational structure for commissioning from decisions about the provider functions,' he stated.

In short

What are we to make of these guidelines, and what are the implications for pharma? First of all, how we assess the impact of these proposals will depend, in part, on the wider context of the guidelines and the style of their delivery.

This missive is one of the new breed of letters from the Department of Health (DoH) that, in style, is short and to the point. Some of us in the industry, who may be more accustomed to the long, rambling type of guidance, may find the new approach a little strange, but these new shorter versions are to be preferred.

If we want a DoH that sets the direction of travel after shifting the balance of power then, when it comes to guidance, keep it brief: take responsibility at the front line and develop this policy in a way that suits local needs and circumstances.

Asking the DoH to provide yet more detailed guidance only encourages micro-management and should be avoided. However, it does mean that, as an industry, we have to take the core principles outlined by the DoH and put some meat on the bones ourselves - both inside and outside the NHS.

The main proposals are as follows:

1. Merger of PCTs: we can expect the number of PCTs to be reduced to between 120-150 in total by the end of the review process, with each PCT assuming a dual role of both strategic commissioner and performance manager. Cynics might argue that this move is a return to the old District Health Authorities (DHAs) under another name, but this interpretation does not take account of the fact that the new bodies will have different roles, both `holding the ring' and supporting practice-based commissioning in the future. Indeed, if the new PCTs turn out to be the DHAs of old, then the objective of this change will have been missed. All PCT reorganisations are expected to be completed by October 2006, although some will be in place as early as April 2006.

2. Reduction in SHAs: the existing 28 SHAs will be reduced to around nine - probably to match the existing Government Offices for the Regions. Curiously, the SHAs will, in all likelihood, continue to operate, but how long this will last is unknown.

We may well see the SHAs absorbed into the Government Offices for the Regions at some point in the next five years. SHA mergers should be completed by no later than April 2007.

3. Practice-based commissioning (PBC): this must be 100 per cent implemented by the end of 2006. Of course, there is some ambiguity about the definition of PBC and, therefore, whether the 2006 target is realistic or not very much depends on your definition of what it is. As such, we're talking about something that could be easy or hard to achieve. The DoH has not yet released full information regarding whether by PBC it means real budget-holding or simply information provision to practice level. At its most extreme, PBC as the full delegation and control of budgets to practices seems very difficult to achieve. As an industry, we should probably hedge our bets and expect the target to be interpreted in a less demanding way.

4. PCTs to lose provider functions: some PCTs are big employers, running not only community services but also some hospitals. These services are to be separated off into new bodies (the re-emergence of community Trusts?), or perhaps even the private sector. In any event, community services will be subject to contestability, which in reality means market testing. This has produced perhaps the most widespread reaction, with some saying that the separation of commissioner and provider functions at PCT - but not practice-level - is intellectually incoherent. In reality, it is about focusing PCTs on their main task, and should be welcomed. In any event, separation of commissioning and provision becomes increasingly illogical the nearer to the patient the organisation is. Regardless, we should focus on what works and not intellectual neatness.

5.All NHS Trusts to gain Foundation status: the proposals suggest that by 2008 all NHS Trusts should have Foundation status.

6. Reduction in ambulance trusts: ambulance trusts will be scaled down and indications are that the proposals will result in the creation of 11 merged ambulance trusts.

The real driver across this whole process of change is to make a reality of commissioning which, nearly 15 years after being introduced into the NHS lexicon, has failed to deliver the goods.

Many in the industry will feel comfortable with changes designed to end provider capture, focusing instead on what patients and populations need, enabling commissioners to lead the NHS. The rest then follows and is consistent with the previous policy, resulting in a full-blown market for the NHS. We can also probably predict with some confidence that Primary Care is next.

Great expectations
What effect will these changes have on the challenges facing pharmaceutical marketers and NHS liaison and development teams? In the short term, the effects are pretty straightforward. Things will take time to work through the system however, and when examining the medium and longer-term pictures, it's important that marketing and development teams are flexible enough to react to unexpected consequences of the planned changes. The new customer environment, in particular, is likely to include some themes and characteristics that few, if any, could have predicted.

Mergers in the public sector create uncertainty, just as they do in the private sector. As a key account manager, you may well find that your best contacts and prospects are suddenly more interested in self-preservation and consolidating their internal position than meeting you to discuss new products and services.

This is natural, and it will pass, but it will also have a short-term impact on the success of your campaigns. With personal survival brought to the fore, buyers become more risk-averse, and the `IBM factor' (no one ever got fired for buying IBM) may kick in.

This will benefit the big brands in the sector at the expense of the lesser-known and newly-launched ones.

Marketing and development teams need to prepare for a customer environment that becomes increasingly inward-looking in the short term, with individuals' concern being set on personal survival.

Access from, and attention to, external organisations will become more limited. Mitigating the effects of this phenomenon requires careful planning and resource management.

In the long run
It's not difficult to see that the fragmentation of commissioning presents a real challenge to those who seek to influence those who commission. Marketers and NHS liaison teams are facing a much more complex prescribing market. The sophistication of prescribing patterns varies widely, and the picture is only going to get more difficult to assess as a result of these changes.

There are increased opportunities with more and new customers; however, these new customers will have different requirements and policies, which require alternative approaches, different CRM methodologies and systems, and new types of support to fulfil their roles effectively.

As such, we can expect to see more varied providers. These will be made up of a variety of traditional NHS and independent sector providers, with varying needs and different prescribing patterns. Treating these disparate audiences as a single customer is clearly not going to work.

Those pharmaceutical companies that enter the market by positioning themselves as service providers, rather than drug sellers, are likely to capitalise on the new opportunities created.

What other changes will the new merged PCT structure engender? With greater specification of services will come more standardisation of treatment and prescribing.

Like any standardised public sector service, this will suit you if you've got an approved product on the market. On the flipside, if you haven't, it's going to be pretty limiting.

New customer environment
The new customer environment is likely to be a lot more focused on costs. It will be driven by tariffs and legally binding contracts, with real competition being a key feature of the new market.

As pressure on costs bites, the market's providers will look increasingly to reduce their own cost bases in order to remain competitive; this includes prescribing costs.

On a more positive note, the proposed changes will create opportunities for the industry to bring offerings to customers that build on their own expertise of business and business models. There are going to be changes in information handling, supply chain management, performance management and so on.

Pharmaceutical companies have the expertise to make real progress in delivering these value-added services to the NHS in addition to the products they have supplied historically.

The health service is going to be hungry for those techniques that it has (often) previously ignored.

There's going to be a real need to stay in touch with the rapidly changing environment over the next few years. The need for customer market information and understanding has never been greater.

2nd September 2008

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