Procurement in the NHS

Chris TheakerDirector, Pharmaceuticals

2 November 2006

Agenda

1. introduction

2.changes in NHS procurement: background

3.NHS PASA/Commercial Directorate developments

4.collaborative procurement hubs

5.NHS Supply Chain

6.engagement with pharmacists

Background

1. Gershon - public sector efficiency

2. Lyons - civil service accommodation

3. DH Arm’s Length Bodies - abolition, mergers, transfers

Arm’s Length Bodies review

1. reduction from 38 to 20

2. devolution to the front line / possible private sector involvement

3. reduction in staff numbers by 25%

4. saving of £500 million by 2008

5. procurement efficiencies highlighted

6. targets on headcount

NHS Purchasing and Supply Agency as at November 2006

1. established 1 April 2000

2. executive agency of the Department of Health

3. senior departmental sponsor: Commercial Directorate

4. centrally funded - £27 million

5. 265 staff

6. contract coverage £2.1 billion

7. location: Reading, Chester, Sheffield, London

Agency functions

NHS PASA was set up to:

1. improve purchasing and supply across the NHS

2. modernise the supply service

3. improve efficiency and reduce costs in the supply chain

4. raise the profile of purchasing and supply

5. encourage new and innovative suppliers

6. share best practice across the NHS

7. undertake national purchasing

NHS PASA changes

1.John Cooper Chief Operating Officer

2.Commercial Directorate and NHS PASA review

3.development of commercial strategy

Current activities

1.2006/07 business plan

2.development of category directorates

3.NHS Supply Chain

4.hub development

5. focus on compliance and uptake

6.commercial review

Commercial Directorate

• established 2003

• remit to cover all commercial activity of Department of Health/NHS

• Supply Chain Excellence Programme

– National Contracts Project

– collaborative procurement hubs

– supply chain efficiencies

– re-design of NHS PASA

– target saving £500 million by 2007/8

National Contracts Project

• ‘waves’ of activity 2004-2006

• thirteen sourcing groups identified in wave 1, £1 billion expenditure

• savings delivered £150m

• dedicated category teams – NHS PASA / consultants

• new / re-engineered contracts

• emphasis on benefits tracking

• wave 2 for non-pharma started April 2006

Collaborative procurement hubs - background 1. trusts to work together on a regional basis -

confederations

2.mainly based on the (then) 28 Strategic Health Authority boundaries

3. local management and modus operandi

4.aims:1.manage all non pay spend

2.contract for goods/services at intermediate level

3.obtain improved terms through commitment

4.share information and pool resources

Collaborative procurement hubs (1)

• confederations to hubs = more formal structure

• investment in three pathfinders – Greater Manchester, HPC, Lifesource

• further hubs developed 2005-06 – self-financing

• national coverage planned by 2008

• envisaged to coincide with 10 x SHA boundaries

Collaborative procurement hubs (2)

• coordinated/consistent approach

• sourcing and supply chain development

• value

• close links with stakeholders

• engaged throughout the whole commercial process

Collaborative procurement hubs (3)

• focus on SHA economy

• integrated teams working with clinicians

• links with wider pan-Government procurement

• supporting sustainability

NHS Logistics (as at 30/09/06) 1. six warehouses spread geographically

2. turnover £750 million p a

3. catalogue c 50,000 product lines

4. 98% plus service level

5. employed 1600 staff

6. electronic ordering and invoicing system

7. category purchasing support from NHS PASA

8. managed by the NHS Business Services Authority

NHS Supply Chain (1)

1. 10 year contract awarded to DHL with effect from October 2006

2. service to be called the NHS Supply Chain3. encompasses logistics and procurement elements

of up to £3.7bn of spend4. NHS Logistics/NHS PASA staff subject to TUPE

transfer5. DHL with Novation as sub-contractor6. contract incentivises contractor to grow – over 10

years7. procurement support from Novation8. savings of £1bn forecast over length of contract

NHS Supply Chain (2)

Categories covered by the contract:1. medical supplies2. food and kitchen3. print and stationery4. laundry and cleaning5. bedding and linen6. dressings7. uniforms and clothing8. patient appliances9. lab equipment10.furniture and office equipment

NHS Supply Chain –the contract (1)

1. NHSBSA keep title to stock

2. DHL will act as an agent for NHSBSA to:

1. negotiate contracts under OJEU

2. provide supply chain services and working capital management

3. minimum service supported by penalty regime

4. DHL fund investment and working capital growth

NHS Supply Chain–the contract (2)

1. NHSBSA, NHS PASA, DH cannot OJEU on defined categories – defined as ‘exclusivity’

2. new categories require NHSBSA approval

3. NHSBSA has full audit rights – information and data remains NHS property

4. at end of contract DH can:

1.take back assets, re-compete contract or bring operation and staff back in-house

NHSBSA – contract management

1. Retained Organisation (RO)

1. NHS Supply Chain Management Division of the Business Services Authority (NHSSCMD)

2. ‘To work with the Service Provider (DHL) to ensure that the outsource succeeds and that the benefits and services are delivered to all stakeholders in line with the contract and adjusted from time to time in line with DH policy requirements and customer needs’

3. RO is not a ‘go between’, but an escalation point

4. retain supply chain knowledge and capability in NHS

Pharmaceuticals

1.pharmacy team

2.stakeholder groups

3.homecare

Pharmaceuticals

1.Principal Pharmacist – Howard Stokoe

2.General (Medicines) – regional – Nickie O’Neill

3.General (Medicines) – national – Ian Allen

4.Specialised Pharmaceuticals – Natalie Howell

5.Vaccines – Alan Russell

6.Homecare – currently being filled

7.eCommerce – Judie Finesilver

Stakeholder engagement (1)

1.National Pharmaceutical Supply Group (NPSG)

2.Pharmaceutical market support group (PMSG)

3.Regional Pharmacy Purchasing Groups (PPGs)

Stakeholder engagement (2)

1. Pharmacy Business Technology Group (PBTG)

2. Joint Category Working Group (JCWG)

3. DH relationships

Stakeholder engagement (3)

1. The Association of British Pharmaceutical Industry (ABPI)

2. British Generic Manufacturers Association (BGMA)

3. British Association of Pharmaceutical Wholesalers (BAPW)

Pharmex (1)

1. developed for SCEP

2. extracted from trust pharmacy ordering systems

3. database exceeds 80% of pharmaceutical purchase information

4. Wave 1 2a and 2b annual benefits baseline posted to the NHS.net

5. trust transaction summary posted to the NHS.net

Pharmex (2)

Used for:

1. information to support contracting

2. ad hoc information requests from DH, Suppliers, OFT etc

3. identification of off-contract purchases

Home delivery of pharmaceuticals

1. £200 to £400m p.a.

2. work with national committee

1. pharmacists with a particular interest

2. standard documents and advice

3. sharing of best practice

3. NHS PASA developing role

Pharmaceuticals team

1. national agreements

2. regional agreements

3. strategic supply management

4. maintain and develop competition

5. securing stable supply of critical drugs

6. contracting support for NHS

7. support on a project basis for the DH

8. engage the experience and skills of strategic stakeholders

9. electronic data collection and trading

Conclusion

1. developing a successful team

2. working with pharmacists

3. supplier relationships

4. maintaining communications