Monday, 28 November 2011

The vaccine purchasing strategy

Today's Times carries a fascinating claim from a potential provider to the NHS that "The NHS would save £100m per year" if vaccines used elsewhere in the world and also in UK private clinics were also used by the NHS.  The potential provider is in a position to be listened to as they currently provide half the worlds vaccines by volume. The example is provided that the potential seller would sell measles vaccines at 12p per dose while the same vaccine in the UK costs £10.  Of course it doesn't necessarily follow that all the providers various vaccines are required in the UK but the claim does justify further investigation.
There appear to be two barriers was to why the UK can't access the £100m per year saving.  The first is that although the vaccines are approved by WHO, Unicef and 130 governments, they are not licensed in the USA, UK or any other EU country.  The second is that existing providers' pricing strategies are based on "according to the countries' income and ability to pay, as well as by the volumes of vaccine purchased" - apparently a pricing strategy adopted in the 1980s and applied ever since!

In defence the UK DH spokesman said the UK observed stringent rules on purchasing vaccines "the UK buys vaccines through open competition, ... vaccines must be licensed through either the European Medicines Agency or the Medicines and Healthcare products Regulatory Agency.  There is nothing stopping any company bidding for any of our contracts as long as their products meet our requirements."

Well there something very obviously stopping companies bidding; a clear barrier to entry stopping the potential £100m saving - it's 'the NHS standard'!

Last week we heard so much rhetoric on revolutionising public purchasing, a shift to commissioning (which wrongly defined commissioning as solely) speaking to the market pre-procurement, and even a crusade by the Cabinet Office Minister to the EU to sort out all our procurement woes.  (see previous blog).    

It strikes me there is comparatively low hanging fruit here which should be explored quickly.

So what should happen?

  1. The focus on outcomes in procurement should be extended to outcomes and risk management in pharmaceutical accreditation. 
  2. Category management in pharmaceutical purchasing, particularly market shaping, needs to be critiqued.
  3. Steps should be taken to proactively identify barriers to entry into the pharmaceutical supply chain and a strategy put in place to accelerate the accreditation process, especially when WHO and Unicef approvals have already been gained. 
  4. The NAO should investigate the claims and report on the VfM of the existing purchasing strategy to the PAC.
  5. Assuming that when the Cabinet Office say they are in dialogue with the UK's largest suppliers they are in discussion with the pharmaceutical companies concerned, they should ask for and critically appraise a comprehensive breakdown of the pricing structure and a comparison of prices charged in other countries.
  6. The OFT should investigate the claims that existing suppliers are adopting a differential pricing strategy which disadvantages the UK NHS.
Source: Pagnamenta, R. (2011) 'NHS 'wasting millions' in deals with drug giants', The TImes (Business), 28 November, p.35. 

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