Steve How and Oli Hudson, of the Wilmington Healthcare Consulting Team, explore how the procurement towers plan to reduce unwarranted variation in the NHS supply chain.
The 11 new procurement category towers are tasked with delivering significant cost and efficiency savings within the NHS’s vast and complex supply chain, where value for money is being re-defined.
Reducing unwarranted variation in the price that different trusts pay for the same goods and services is the key priority for the tower contract owners who are expected to ultimately manage 80% of all goods and services procured by the NHS.
However, there are many barriers to achieving this, not least the fact that different trusts have different ways of doing business with their suppliers, which can be hard to quantify, and they are not legally required to procure via the new towers.
Achieving consistency in price within the NHS is hard to measure, when for a given product such as stents, some hospitals will have service contracts, some will have rebates, and some will have discounts; while others may be involved in risk sharing agreements that might see them relying on certain suppliers.
Some trusts have already complained that centralised purchasing by the NHS increases the cost of certain items. This may be due to existing contracts where there is loss leading on some items to support market entry of others. If this item is then purchased independently through the tower, even economies of scale across the NHS may not compensate.
Similarly, some companies’ products span a number of towers which means that the market place does not sustain coupled discounts.
The Purchase Price Index and Benchmarking (PPIB) is a key tool currently being used to help reduce unwarranted variation across suppliers, categories and products. However, the towers are often having to correlate PPIB with other datasets such as direct hospital purchasing records and HES procedure counts to ensure accuracy and consistency.
Another difficulty for the towers is the vast range of goods available to the NHS. When looking at stents, for example, there are more than 400 different options in terms of size or type. The NHS wants to reduce them to about half a dozen or so main lines. To achieve this, the towers need clear evidence that a particular type of stent is being successfully used by trusts. They must also clinically evaluate all the different types of stents available. This can be difficult when, for example, evidenced-based activities such as double-blind trials are not commonplace in the medtech industry.
When evaluating products, clinical groups will be looking at best practice scenarios as defined by NHS RightCare, which maps out patient pathways and measures the cost of optimal care versus sub-optimal care. They will also be taking account of the findings of Getting it Right First Time (GIRFT), which is reviewing around 40 surgical and medical specialties.
Although consistency in pricing is the primary goal, the towers will be incentivised to reduce total spending within the whole NHS system. To understand how this can be achieved, they must engage widely with clinicians involved in different stages of the care pathway to see for example how an innovative complex abdominal wall repair product, might be more expensive to buy but could achieve significant cost-savings in the long run if it required fewer medical interventions further down the care pathway.
When a whole integrated system is involved in purchasing it can realise the benefits of the savings for reinvestment within the transformation agenda. System level engagement between procurement teams and integrated care systems that look at the wider implications of using some products is only just starting to happen, but the implications are immense.
Engaging with tower leaders
Understanding the challenges that the new procurement tower leaders face and how they plan to tackle them is key for medtech companies looking to build relationships with these key stakeholders. To help answer some of the medtech industry’s questions, Wilmington Healthcare will be hosting a free webinar on Thursday, February 7 at 12.00pm at which Mark Hart, director of Tower 6, which deals with goods for cardiovascular conditions, radiology, audiology and pain management, will be the guest speaker.
Mark and Steve How, of Wilmington Healthcare, will look at the implications of the procurement towers for medtech companies of all kinds.
This will include targets that procurement towers must meet and the impact of PPIB; the rise of managed service contracts, framework agreements, the role of SMEs, plus top tips and good practice advice for engaging with the towers.
The speakers will also advise on the type of value-based evidence that potential suppliers should submit to prove how their goods will reduce the total cost across patient care pathways – rather than just the unit cost – as the NHS focuses on integrated care. To register for a place, click here
Join our free MedTech webinar: How should MedTech engage with procurement towers? on 7th February 12.00 – 12.45pm – click here to register