The NHS is increasingly focusing on getting value for money in all of its procurement activities - and the buying of medicines is no exception. The government recently announced that it wants to renegotiate the PPRS system which governs medicines pricing in the UK, but moves are also afoot at a local NHS level to drive a harder bargain.

In September 2006, the  logistics company DHL won a contract to manage a new unified procurement budget worth worth £3.7 billion, and this approach is being mirrored in local areas in England.

NHS organisations are now developing collaborative procurement strategies aligned with the 10 new strategic health authority boundaries.

It is very likely that the purchasing of pharmaceuticals will increasingly become a focus of these new groups and, therefore, it is a development that needs to be closely followed by the pharmaceutical industry and its commercial teams.

What is a collaborative procurement hub?

Collaborative procurement organisations within the NHS, generally referred to as collaborative procurement hubs (CPHs), or supply management confederations (SMCs), consist of NHS trusts and primary care trusts - normally within the same strategic health authority or regional boundary - collaborating to make the most effective procurement and supply chain decisions, in conjunction with the  Purchasing and Supply Agency  (PASA) and other organisations, in order to provide best value for stakeholders within their local health economies.

The Department of Healths commercial directorate launched the Supply Chain Excellence Programme (SCEP) in March 2004. Its objective was to restructure the NHS supply chain to gain efficiencies and improve the effectiveness of supply management in the NHS and it had four key strands:

* national contracts procurement

* collaborative procurement hubs

* NHS purchasing and supply agency organisational review

* NHS consumable supply chain and procurement service

The CPH model was initially piloted through three pathfinders;  Greater Manchester Supply Collaborative, Healthcare Purchasing Consortium (HPC) in the West Midlands, and Shropshire and Staffordshire Procurement Project (Lifesource CPH). The Department of Health's vision is to have one hub for each of the new strategic health authorities by the end of 2007/8 and there are now several hubs in existence, while work continues on establishing a complete network across the country.

In encouraging trusts to purchase together, the aim is to bring about a new culture in purchasing, take full advantage of NHS buying power and put money into frontline services. The hubs are a step-change from supply management confederations with greater investment to deliver more benefits and savings.

The CPH has responsibility for all spend involving a commercial transaction with a high degree of clinical and trust buyer interaction. The hub also provides a vehicle for cross-government regional procurement e.g. social care and potential commissioning.

Membership of the hub is not mandatory. It is financed by the member trusts and invoiced on a monthly basis at approximately £100,000 per month. The member trusts track their return on investment through the savings made and, in some cases, savings have been realised on a 4:1 investment ratio i.e. £4 million savings being made for a £1 million investment.  

How do hubs work?

The hubs purchase through a PASA-guided process with initial agreement sought by the trusts that they will abide with the purchasing decision. Once the agreement has been made, a clinical panel is set up to compile the tender document with the hub purchasing panel and an advert is then placed in the European tender journal inviting applications.

Interested parties request a tender pack and the hub/clinical panel may offer a meeting with interested parties or one may be requested of them, but this will vary. Once the tender documents are completed and submitted the clinical and purchasing panel review the tenders on the following criteria:

* whether the supplier abided by the requirements of the tender price

* additional added value.

Once a decision is made, the hub informs the trusts of the successful tender. Adherence to hub and PASA contracts form the basis of a performance indicator for the trust which sits within the chief executives objectives.

Breaking of contracts happens occasionally, and it is not viewed favourably. Repeated breaking of contracts is seriously frowned upon and will affect individual and hospital performance ratings and funding. If the trust has foundation status, adherence will go through Monitor, the independent regulator of NHS foundation trusts, which ensures they are well-managed and financially strong.

The CPH clinical function

The clinical function will be led by the clinical director and supported by a team of clinical procurement specialists, who will build and develop clinical and sourcing group networks and support NHS PASA clinical interface meetings. The clinical function will provide a lead point of contact for all clinical colleagues on product choice and offer advice and guidance on all matters associated with the evaluation, selection and utilisation of medical goods and services. This involves reviewing products, catalogues and suppliers to ensure opportunities to consolidate and aggregate expenditure are optimised.

Pharmaceuticals and CPHs

The procurement of generic pharmaceuticals currently remains as part of the supply chain excellence programme via six regional PASA offices and CHPs will initially focus on branded products. The hubs will concentrate on areas of high spend and look to increase competition in the market and identify opportunities to make savings. Pharmaceuticals currently account for around 7% of CHP procurement.

Inderjit Singh, Strategic Pharmaceutical Clinical Engagement Leader for the Healthcare Purchasing Consortium in Birmingham explains how pharmaceuticals currently feature within the CPH decision-making processes: "Drugs included in the workplan are decided upon after analysing current spend in the health economy and reviewing competitors in the therapeutic arena."

He advises companies to take a more holistic view when considering the value of their drugs and not restrict themselves to focusing purely on the acquisition cost. 

"Industry needs to be aware that hubs wish to create a collaborative approach with them. We are not looking to make bottom-line savings but to decrease costs across the breadth of the patient pathway. It is acknowledged that some therapeutic agents lend themselves to home administration or reduce admission times. As such, it is important to contextualise the savings being delivered to the health economy while not compromising patient care."

Each CPH will employ a specialist procurement pharmacist who will have a key role in the interpretation of data and providing credibility and engagement with clinicians. The role of the specialist procurement pharmacist will involve the benchmarking of the tenders and then ensuring contract compliance by all trusts via data analysis and audit.

Collaborative procurement hubs are now becoming fully established within each SHA region and will undoubtedly be focusing on the procurement of pharmaceuticals during their existing three-year business plans. All of the CPHs will have a strategic pharmaceutical procurement lead and professional advisory support from a lead pharmacist. The rise and spread of procurement hubs means   commercial teams in pharmaceutical companies should be building relationships with these new key customers.

Pharmaceutical companies must make sure they don't miss out on any opportunities or they could face becoming excluded from tenders in the future.

Sarah Kerr is a pharmaceutical adviser at Southampton City PCT and Andrew Platten is a director at HGS Consultancy. For more information visit: www.hgsconsultancy.co.uk