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Board games

As the NHS considers its new game plan, how can pharma position itself to win?

An NHS version of the board game MonopolyDuring the current financial squeeze, the NHS has been designated as a 'protected' service. But just how true is this, and what exactly is the nature of this protection?
In spite of previous pledges, the protection certainly isn't financial. In real terms, this Parliament will have a reduced health spend because, over the coming years, the NHS budget will not grow as much as it has over the previous decade.

Any growth in funding will, presumably, be in line with general inflation, despite the fact that health inflation costs run much higher than general inflation.

In addition to slowing overall funding growth, the Government has signalled that it wants a 30 per cent reduction in NHS management costs this year.

Times ahead look tough. The NHS, which has an overall budget of £110bn in England, is now preparing to find savings while simultaneously maintaining productivity.

So what of the future? The Tories had promised no wholesale restructuring of NHS management, but much is going on by stealth. In England, the NHS landscape is, in fact, set to change radically.

I doubt there will be too much appetite for structural change in Scotland, Wales and Northern Ireland, where health is in the hands of devolved governments. Scotland has just piloted elections to their health boards, with a lot of public interest. Wales has its own arrangements, and Northern Ireland has just gone through a major change in structures. Regardless of the strategy adopted, however, health budgets in the devolved governments will still be stretched to the limit.

NHS independence?
In terms of changes we should expect to see in England, the Government's first big idea is to put in place an independent board of governors for the NHS by 2012. We have yet to see the detail, but the idea is that day-to-day NHS operational matters will be run under the auspices of this new board, putting the service at arms' length from politicians.

The BBC is run along similar lines, so the principle is sound, but are the NHS and broadcasting actually comparable? The NHS budget is huge and dwarfs that of the BBC. Public broadcasting is important, but surely not as vital as the NHS. And just how independent could the NHS board be?

I assume that board members will be drawn from the great and the good and appointed by the Privy Council, but you can bet your boots that the list of prospective members will be vetted heavily by ministers and mandarins. Those who laud the model of governance at the BBC need to remember the fate of Greg Dyke, the BBC director general, who resigned swiftly when he upset Alistair Campbell and Tony Blair over the war in Iraq; Gavyn Davies, the BBC chairman, fell on his sword at more or less the same time.

The public expects the Secretary of State for Health to be accountable to Parliament for the business of the NHS. Could a new board ever change that accountability and the party politics of health? We shall see. The NHS chief executive will presumably be appointed by and report to the board, so we can expect to see interesting turf wars between the board of governors and the civil servants in the Department of Health, which will itself have to be slimmed down considerably to meet the costs of the NHS board.

Does less mean more for commissioning?
At the other end of the spectrum are the Primary Care Trusts (PCTs). PCTs are currently in the midst of divesting themselves of all direct service provision so that their only purpose will be to get the best deal for the taxpayer from health providers. What might the future hold for them?

At present 114 of these outfits control commissioning of services in the NHS for their own populations, but they vary in size and some, especially those in London, serve very small populations. As finances become tight I suspect that the number of PCTs will be markedly reduced. I have heard some commentators predict that we will need no more than 38 to 40, and that these fewer and larger PCTs will allow GPs and other clinicians to handle a large swathe of the commissioning of bread-and-butter services at a local level.

For certain conditions bigger PCTs could be good news. At the moment services for the people with learning disabilities, old people and vulnerable children are poorly commissioned in many areas. It is also common for smaller PCTs to leave the commissioning of mental health services to Mental Health Trusts. These Trusts have no real incentive to market test their own services against other providers and have remained immune to any real competition.

Because PCTs are relatively small in their current incarnation, their ability to tackle the all-powerful and high-spending Acute Trusts is limited. As a result, the time and attention given to non-acute commissioning has been severely restricted, and the NHS internal market has been something of a shambles in these services.

New, larger PCTs will, therefore, be better equipped, both to become intelligent buyers of non-acute services and to challenge poor standards more effectively through the commissioning process.

The new PCTs will not want to leave their powers in the hands of providers of mental health and other non-acute services. This will increase the plurality of provision greatly, with private sector and third sector providers moving in to challenge NHS monopoly providers.

The third sector in mental health, learning disabilities and social care has proved to be very flexible in responding to people's needs. In specialist niche markets, such as eating disorders and medium secure mental health care, the private sector is already a major player. As PCTs become more knowledgeable and adept as buyers of non-acute care, the NHS market is likely to become a lot more competitive.

The future of SHAs
Ten Strategic Health Authorities (SHAs) have, until now, been running the NHS in England. If commissioning in the NHS is to be in the hands of better-focused PCTs with a new NHS board at the helm, what is the point of the SHAs in this brave new world?

The new NHS CEO will need staff to ensure the policies of the NHS board are implemented, but the idea that the SHAs in their current format will fit the bill is not credible. Additionally, with reduced finance, the pressure on the board from the Treasury to keep structures lean and mean will be huge.

I predict that the life expectancy of the current SHAs will be short.

Private sector vs quangos
What happens to national NHS quangos such as NICE, MONITOR, NHS Direct, NHS Professionals, The NHS Litigation Authority, The Blood and Transplant Authority, The Care Quality Commission and many more, under the new NHS board? All have boards of executive and non-executive directors, many sit in corporate headquarters in some of the most expensive real estate in London, and all have armies of staff.

Will the NHS board absorb and streamline these national functions? Will the new Government put some of these services out to open tender, allowing the private sector in to see if they can provide such services more effectively and at less cost?

Watch this space, but I cannot see this Government retaining the status quo.

Building a new future
In short, between now and 2012 we will see major structural change across the NHS at a time of financial constraint. What might it mean for the pharma sector? As ever, good intelligence at local, regional and national levels will be vital. As new structures take shape, the power brokers will change.

The new NHS board is certainly going to wield immense power. How will the industry relate to the new board and ensure its voice is heard? The new commissioning-only PCTs will certainly influence health spending at the regional and local level, increasingly so in non-acute provision. If, as I suspect, more services are opened up for greater competition, can pharma companies build strategic alliances with third sector partners and bid for NHS contracts in mental health and long-term conditions?

In the medium term, GP and other clinical commissioners will emerge and are likely to control real budgets. Until now the appetite for GP commissioning has been mixed, with inconsistent take up. This was because many PCTs would only give notional budgets, which did not provide real incentives for GPs. Bright GPs will be likely to take on commissioning when real money is involved.

At a local level companies will need to identify GP leaders and seek to build relationships with them to understand local markets and trends.

Finally, the NHS will see many able managers made redundant. There will be a pool of talent with good NHS knowledge that will be available for recruitment. The trick will be to spot the best and avoid the weak.

The Author
Ray Rowden is a health policy analyst and former special adviser to the House of Commons Health Committee

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13th July 2010


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