The Private Sector and the NHS

Posted on September 4, 2009. Filed under: Arm's length providers, GP-led health centres, News stories | Tags: , , |

Pharmaceutical Field | 4 September 2009

The demands of world-class commissioning will mean increased collaboration between the NHS and the private sector. To stay ahead of the game, pharma companies need to be engaging with the private sector on a local level, argue Duncan Alexander and Mike Sobanja.cover


Despite many initiatives and government policies, the private sector has yet to play any major role within the NHS – especially outside England. Yet with escalating cost pressures and the very real prospect of a new government in 2010, there is little doubt that Strategic Health Authorities (SHA) and Primary Care Trusts (PCT) will begin to look more closely at opportunities for commercial partnership.

Indeed, while there is limited national consensus today, private sector initiatives continue to succeed at a local level. Given the current economic climate, pharma companies cannot afford to ignore these pockets of opportunity. It is only by understanding the very real differences in private sector/NHS collaboration at a local level that organisations will be able to respond effectively to the implications of strategic change, from world-class commissioning onwards.


Increasing competition

Since the Labour government came to power in 1997, there have been many grand statements and initiatives designed to increase performance and productivity across the NHS by introducing private sector competition.

Indeed, in January 2002, Alan Milburn, former Secretary of State for the NHS heralded the introduction of the private sector into the NHS, saying: “Our reforms are about redefining what we mean by the NHS. Changing it from a monolithic, centrally-run monopoly provider to a values-based system where different health care providers – in the public, private and voluntary sectors – provide comprehensive services to NHS patients.”

However, fears that such a strategy could lead to back door privatisation of the NHS certainly appear to be unfounded, with a number of initiatives failing to deliver real change or private sector involvement. And certainly across Wales, Scotland and Northern Ireland there is a clear move away from any private sector co-operation or collaboration.

But the changing economic environment will undoubtedly have a significant impact on NHS strategy over the next few years, especially in England, where the sheer volume of demand places huge cost pressures on PCTs and SHAs. Combined with an expected change of government in 2010, it is very likely that the NHS will be tasked with meeting clear targets for the use of private sector organisations to deliver services in a more competitive and cost effective manner.


Poised for change

Indeed, while the Virgin Group announced it had effectively put on hold its ambitious plans to take over and run GP surgeries in 2008, the company remains ‘very committed’ to entering the sector and will review the situation when the economy improves. 

Furthermore, the Department of Health remains bullish about the private sector’s role within the NHS, a spokesman recently asserting: “PCTs are expected to stimulate and shape the market, including a number of providers from voluntary, NHS, private, local government sectors and others.”

And private sector involvement with the NHS is occurring – albeit on a fragmented basis and at a local, not national level. Some 25% of contracts for the ‘Darzi centres’, for example, the GP-led health centres required to be introduced by all PCTs across the country, have been awarded to the private sector so far – although these include NHS hybrids that are simply relabelled organisations.

The Department for Health has also let a contract for the support of the development of practice-based commissioning, with five companies/consortia vying for contracts to give PBC a shot in the arm.


Defining opportunity

It is this highly fragmented response that is creating huge challenges for pharma companies today. And a fundamental issue to address is the speed with which PCTs respond to the demands of world-class commissioning, under which PCTs must become two separate organisations – the Commissioner and the Provider – by April 2010.

While the PCT’s commissioning side will not require many changes, it will be the establishment of the provider unit that will be of most interest, becoming as much as 80% of the PCT as it currently stands. The Department of Health has set a clear timetable for PCTs to undertake this huge change, with three stages – Arms Length Status (April 2009), Direct Provider Organisation (October 2009) and complete independence (the externalisation of the provider arm) by April 2010.

However, every SHA and PCT is progressing at its own pace – with early adopters and clear laggards. According to the latest figures from Cegedim Dendrite, 6% have achieved Arms Length Status by April 2009, 13% are significantly ahead of target and are already Direct Provider Organisations (DPO), with 66% on target to achieve DPO by October 2009.

Furthermore, different regions have adopted different strategies, with London splitting into five Commissioning Collaboratives (specialist commissioning groups) and six PCTs currently taking part in a national Community Foundation Trust Pilot Programme, under which they will be no longer be assessed by the SHA after a year’s operation and assuming the required level of governance and financial expertise.

The challenge for pharma companies is to assess and understand the progress of these individual NHS organisations in embracing world-class commissioning and understanding the implications for new business development.


Building for the future

While the private sector involvement in the NHS will undoubtedly remain small – at least until the next election, pharma companies cannot afford to ignore the opportunity. Indeed, the continued perception that both the NHS and, by association, pharma companies will be unaffected by the current economy is, quite frankly, ridiculous. With the escalating levels of public debt any government will be forced to claw back funding over the next few years. Should a Conservative government take over in 2010, the NHS is likely to experience a massive policy shift that will force SHAs and PCTs to work far more closely with the private sector.

Pharma companies cannot operate in an information vacuum. This private sector/NHS co-operation will continue to be introduced on a piecemeal, local basis. In this climate it is essential to maximise opportunities, operate efficiently and, furthermore, build relationships with key individuals who will be increasingly involved in defining the NHS/private sector model.

Without up to date information on changes in attitude and adoption at a highly granular – preferably PCT – level, pharma companies simply will not be able to respond effectively to any new commercial opportunity.



Duncan Alexander is OneKey Director at Cegedim Dendrite, where he is responsible for managing the existing client base and the co-ordination of all UK commercial activities. Cegedim Dendrite has over 35 years experience in providing value added information and CRM solutions to the pharmaceutical industry and healthcare professionals.

Mike Sobanja is Chief Executive of the NHS Alliance – the independent body that represents NHS primary care. Values-based, the NHS Alliance is the only organisation that brings together PCTs with GP practices, clinicians with managers and board members, and NHS primary care with its patients. The NHS Alliance membership and its national executive are fully multi-professional.


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