How would you contract for branded medicines?

Peter SharottChairman, Pharmaceutical Market Support Group

peter.sharott@btinternet.com

Subjects Covered

• The Commissioning Context for Medicines• NHS Medicines Expenditure Estimates &

Trends• Developing a National Strategic Approach

to Medicines Procurement• London Procurement Programme • Potential for National Branded Medicines

Contracts• Raising the Game

Commissioning Context for Medicines (1)

• National Specialised Commissioning Group– Enzyme deficiency disorders– Eculizumab – Pulmonary hypertension

• SHA Commissioning Groups – London:

• Managed entry of new drugs,• Exceptional treatments request procedures

• SHA Specialised Commissioning Groups – London:

• Bone Marrow Transplantation: high-cost antifungals• Haemophilia – blood clotting factors• HIV/AIDs – antiretrovirals • Intravenous Immunoglobulins

Commissioning Context for Medicines (2)

• PCT-Led Commissioning at sector/hub or pan-London level– London:

• Cancer – new high-cost chemotherapy• Hepatitis C – peginterferons and ribavirin• Ophthalmology – Age Related Macular Degeneration drugs• Renal – ESAs• Thalassaemia – iron-chelating agents

• PCTs– High-cost, PbR-excluded drugs– Exceptional treatment requests

• Practice Based Commissioning Groups

Drug Expenditure Estimates 2008/09• UK - primary & secondary care

= £8 billion

• England – secondary/tertiary care

– Branded £2.5 billion

• Homecare £500m +

– Generics £350m

• London – primary care

– All drugs £1 billion

• London – secondary/tertiary care

– All drugs £1 billionHospital Drug Expenditure is rising by about 12% p.a.

High-Cost PbR Excluded Drugs account for 50 - 60% of expenditure

London NHS Trusts - Annual Drug ExpenditureBasic NHS Prices ex. VAT

£0

£100,000,000

£200,000,000

£300,000,000

£400,000,000

£500,000,000

£600,000,000

£700,000,000

£800,000,000

£900,000,000

Mat-Sep. 2006 Mat-Sep. 2007 Mat-Sep. 2008

Excludes homecare expenditure not processed through pharmacy computer systems and FP10 (HP) expenditure

+10.5%

+13.9%

London NHS Trusts - High Cost Drug Exclusions (Basic NHS Prices ex VAT)

£169

£100

£75

£50

£24

£20

£17

£16

£11

£11

£11

£5

£3

£3

£3

£3

£2

£0 £20 £40 £60 £80 £100 £120 £140 £160 £180

Antiretrovirals

Cancer Chemotherapy

Haemophilia

Anti-TNFs

Immunosuppresants

Immunoglobulins

Antifungals

EPO

Hepatitis C

Anti-CMV

Growth Stimulating Factors

Pulmonary Hypertension

Hepatitis B

Iron Chelators

Botulinum Toxin

Age-Related Macular Disease

Somatostatin Analogues

£m

Excludes homecare expenditure not processed through pharmacy computer

systems and FP10 (HP) expenditure

Discounted Prices Achievable

London Cancer Drug Expenditure - Drugs Covered by NICE Chemotherapy Appraisals

£0

£10,000,000

£20,000,000

£30,000,000

£40,000,000

£50,000,000

£60,000,000

£70,000,000

Totals £11,006,527 £13,970,935 £23,732,375 £33,335,287 £42,838,036 £48,159,437 £55,573,718 £62,884,785

2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08

NB: Expenditure covers use in all indications, including those covered by NICE chemotherapy appraisals,

but excluding some homecare supply.

London HIV Providers - Antriretroviral Drug Expenditure Trends (Hospital prices ex VAT)

£0

£20

£40

£60

£80

£100

£120

£140

£160

£180

£200

£m

Actual Prices Paid (£m) £36 £43 £52 £59 £70 £78 £88 £107 £112 £123 £139 £157 £177

1998/99 1999/2000 2000/2001 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 Proj. 2009/10 Proj. 2010/11 Proj.

Pharmaceutical Procurement in England: Key Groups and

Players

PaSAChief Operating Officer

Pharmaceutical MarketSupport Group (PMSG)

Operational

National PharmaceuticalSupplies Group (NPSG)

Strategic

14 x Local Pharmacy Procurement Groups

Branded Medicines

6 x Regional SCEP Groups

Generic Medicines

Pharmacists(Procurement,

QA, Production, Medicines

Information,

and Clinical)

PaSAPharmaceutical

Team

Branded toGeneric Medicines

NHS Trust

PharmacyServices

andClinical

Services

PCTs

National Committees Specialists Procurement Groups Trusts

Patients: high quality, safe, clinically and cost-effective medicines, available when needed

Developing a National Strategic Approach to Medicines Procurement• Supply Chain Excellence Programme (SCEP) (2003)• A strategic framework to source pharmaceuticals for

the NHS in England (October 2005)

Developing a National Strategic Approach to Medicines Procurement

Organisational Roles and Responsibilities Defined for:

• National Pharmaceutical Supplies Group (NPSG)• Pharmaceutical Market Support Group (PMSG)• Collaborative Procurement Hubs & Procurement

Confederations• Pharmacy Purchasing Groups• NHS PASA• Specialist Procurement Pharmacists

Developing a National Strategic Approach to Medicines Procurement• Supply Chain Excellence Programme (SCEP) (2003)• A strategic framework to source pharmaceuticals for the

NHS in England (October 2005)• Joint Category Working Group (Pharmaceuticals)• Pharmaceutical Products and Services List

(November 2008)

Pharmaceutical Market Support Group (PMSG)

Pharmaceutical Products and Services

This document is intended to be used to support implementation of the Strategic Framework to Source Pharmaceuticals for the NHS in England, published in October 2005, and should be used by all NHS organisations and groups involved in the tendering and contracting for licensed medicines and other medicinal products and services. The table provides details on which organisations or groups may take responsibility for tendering for each of the listed categories of pharmaceutical products or services. Where specified in the final column, pharmacists and other clinicians must be consulted to ensure that all pharmaceutical and clinical considerations, including appropriate pharmacy quality assurance, have been taken into account in the tendering, contracting and adjudicating processes. Trust medicines management committees and procedures should be used to support this process. This has been agreed by the NPSG and the Joint Category Working Group for Pharmaceuticals, and will be revised on an annual basis.

Responsible for the tendering

Consultation/Involvement required by

Procurement Groups via

PaSA Tendering

Hubs/ Confederations

NHS Supply Chain

(note 7)

Trusts via local

tendering (note 6)

National Co-ordination

(PMSG)

Pharmacy Quality

Assurance

Clinical

1 Allergy Tests Pharmacy 2 Antiseptic solution e.g.

Povidone / Chlorhexidine

Pharmacy 3 Bone Cement/ Bone

Cement with Antibiotics

4 Branded Medicines (note 2) Pharmacy 5 CAPD Solutions Clinical

Pharmacy 6 Clotting Factors

(haematology centres)

7 Condoms 8 Contact Lens Solutions 9 Dental Cartridges Pharmacy 10 Diagnostic tests –

Blood/Urine

Pathology Pharmacy

11 Endoscopic Disinfectants Pharmacy Clinical

12 Enteral Feeds (note 5) Pharmacy Dietetics

13 Generic Pharmaceuticals (National Frameworks)

Pharmacy

14 Haemodialysis solutions Clinical Pharmacy

15 Haematology Products (misc, including Plasma Proteins)

Pharmaceutical Market Support Group (PMSG)

Pharmaceutical Products and Services

This document is intended to be used to support implementation of the Strategic Framework to Source Pharmaceuticals for the NHS in England, published in October 2005, and should be used by all NHS organisations and groups involved in the tendering and contracting for licensed medicines and other medicinal products and services. The table provides details on which organisations or groups may take responsibility for tendering for each of the listed categories of pharmaceutical products or services. Where specified in the final column, pharmacists and other clinicians must be consulted to ensure that all pharmaceutical and clinical considerations, including appropriate pharmacy quality assurance, have been taken into account in the tendering, contracting and adjudicating processes. Trust medicines management committees and procedures should be used to support this process. This has been agreed by the NPSG and the Joint Category Working Group for Pharmaceuticals, and will be revised on an annual basis.

Responsible for the tendering

Consultation/Involvement required by

Procurement Groups via

PaSA Tendering

Hubs/ Confederations

NHS Supply Chain

(note 7)

Trusts via local

tendering (note 6)

National Co-ordination

(PMSG)

Pharmacy Quality

Assurance

Clinical

1 Allergy Tests Pharmacy 2 Antiseptic solution e.g.

Povidone / Chlorhexidine

Pharmacy 3 Bone Cement/ Bone

Cement with Antibiotics

4 Branded Medicines (note 2) Pharmacy 5 CAPD Solutions Clinical

Pharmacy 6 Clotting Factors

(haematology centres)

7 Condoms 8 Contact Lens Solutions 9 Dental Cartridges Pharmacy 10 Diagnostic tests –

Blood/Urine

Pathology Pharmacy

11 Endoscopic Disinfectants Pharmacy Clinical

12 Enteral Feeds (note 5) Pharmacy Dietetics

13 Generic Pharmaceuticals (National Frameworks)

Pharmacy

14 Haemodialysis solutions Clinical Pharmacy

15 Haematology Products (misc, including Plasma Proteins)

Pharmaceutical Market Support Group (PMSG)

Pharmaceutical Products and Services

This document is intended to be used to support implementation of the Strategic Framework to Source Pharmaceuticals for the NHS in England, published in October 2005, and should be used by all NHS organisations and groups involved in the tendering and contracting for licensed medicines and other medicinal products and services. The table provides details on which organisations or groups may take responsibility for tendering for each of the listed categories of pharmaceutical products or services. Where specified in the final column, pharmacists and other clinicians must be consulted to ensure that all pharmaceutical and clinical considerations, including appropriate pharmacy quality assurance, have been taken into account in the tendering, contracting and adjudicating processes. Trust medicines management committees and procedures should be used to support this process. This has been agreed by the NPSG and the Joint Category Working Group for Pharmaceuticals, and will be revised on an annual basis.

Responsible for the tendering

Consultation/Involvement required by

Procurement Groups via

PaSA Tendering

Hubs/ Confederations

NHS Supply Chain

(note 7)

Trusts via local

tendering (note 6)

National Co-ordination

(PMSG)

Pharmacy Quality

Assurance

Clinical

1 Allergy Tests Pharmacy 2 Antiseptic solution e.g.

Povidone / Chlorhexidine

Pharmacy 3 Bone Cement/ Bone

Cement with Antibiotics

4 Branded Medicines (note 2) Pharmacy 5 CAPD Solutions Clinical

Pharmacy 6 Clotting Factors

(haematology centres)

7 Condoms 8 Contact Lens Solutions 9 Dental Cartridges Pharmacy 10 Diagnostic tests –

Blood/Urine

Pathology Pharmacy

11 Endoscopic Disinfectants Pharmacy Clinical

12 Enteral Feeds (note 5) Pharmacy Dietetics

13 Generic Pharmaceuticals (National Frameworks)

Pharmacy

14 Haemodialysis solutions Clinical Pharmacy

15 Haematology Products (misc, including Plasma Proteins)

Pharmaceutical Market Support Group (PMSG)

Pharmaceutical Products and Services

This document is intended to be used to support implementation of the Strategic Framework to Source Pharmaceuticals for the NHS in England, published in October 2005, and should be used by all NHS organisations and groups involved in the tendering and contracting for licensed medicines and other medicinal products and services. The table provides details on which organisations or groups may take responsibility for tendering for each of the listed categories of pharmaceutical products or services. Where specified in the final column, pharmacists and other clinicians must be consulted to ensure that all pharmaceutical and clinical considerations, including appropriate pharmacy quality assurance, have been taken into account in the tendering, contracting and adjudicating processes. Trust medicines management committees and procedures should be used to support this process. This has been agreed by the NPSG and the Joint Category Working Group for Pharmaceuticals, and will be revised on an annual basis.

Responsible for the tendering

Consultation/Involvement required by

Procurement Groups via

PaSA Tendering

Hubs/ Confederations

NHS Supply Chain

(note 7)

Trusts via local

tendering (note 6)

National Co-ordination

(PMSG)

Pharmacy Quality

Assurance

Clinical

1 Allergy Tests Pharmacy 2 Antiseptic solution e.g.

Povidone / Chlorhexidine

Pharmacy 3 Bone Cement/ Bone

Cement with Antibiotics

4 Branded Medicines (note 2) Pharmacy 5 CAPD Solutions Clinical

Pharmacy 6 Clotting Factors

(haematology centres)

7 Condoms 8 Contact Lens Solutions 9 Dental Cartridges Pharmacy 10 Diagnostic tests –

Blood/Urine

Pathology Pharmacy

11 Endoscopic Disinfectants Pharmacy Clinical

12 Enteral Feeds (note 5) Pharmacy Dietetics

13 Generic Pharmaceuticals (National Frameworks)

Pharmacy

14 Haemodialysis solutions Clinical Pharmacy

15 Haematology Products (misc, including Plasma Proteins)

Developing a National Strategic Approach to Medicines Procurement• Supply Chain Excellence Programme (SCEP) (2003)• A strategic framework to source pharmaceuticals for the

NHS in England (October 2005)• Joint Category Working Group (Pharmaceuticals)• Pharmaceutical Products and Services List (November

2008)• Next Steps: National Strategy for Managing Branded

Medicines (2009)– Led by Peter Sharott– PMSG and NPSG– SHA Senior Pharmacy Managers’ Networks– ABPI Supply Chain Group

Principles for Contracting Branded Medicines

• Collaborative approach, usually at SHA Pharmacy Procurement Group level, but may be more appropriate at sector or network level

• Contracting at individual NHS Trust level reduced to a minimum – must comply with EU procurement regulations

• Tendering and Contracting undertaken by NHS PASA• Full compliance with contract Terms and Conditions both

by the NHS and the suppliers• Contracting decisions need to take account of potential

impact on primary care prescribing and costs and may actually be driven by the needs of PCTs

• Close engagement and involvement of clinicians and commissioners

Contracting at NHS Trust LevelIssues to be considered

• NHS Foundation Trusts– Competitiveness with neighbouring trusts

• Pharmaceutical Companies– Preference for local rather than collaborative contracts

• Transparency of contract terms and conditions– Compliance with EU procurement regulations– Relationship between price and volume across organisations– Value added services

• Commissioning agenda– Collaborative commissioning at SHA and sector level– Equity of access to medicines – PCTs increasingly interested in relationship between prices paid

and charged by NHS Trusts– Visibility of value added services

Product Categorisation• Procurement-driven

– National Procurement – Generic medicines• oral products• hospital-only oral products• Injectables• Transitional, branded to generic medicines• Generic biosimilars?

– Pharmacy Group Procurement • Branded medicines• Branded biosimilars

• Clinically-driven– Pharmacy Group-led

• Therapeutic rationalisation and tendering• Framework agreements – market share

Identified advantages of therapeutic tendering

• Allows additional leverage to NHS in key branded markets

• Achieves higher levels of discount compared to ‘traditional tendering’ methodology

• Suppliers have a commitment from NHS to manage volumes and grow market shares

• Allows suppliers the opportunity to improve market share if they price incentivise.

• Regular contract reviews allows effective contract management for both parties

Features of Framework Agreements

• Prices directly linked to committed volumes• Lowest prices and maximum savings are not

automatically available• Direct involvement of clinicians in the decision-

making process• On-going dialogue with the participating

companies is essential• Expect protracted timescales both for

development and full implementation

Market Share Matrix

Market Share

10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Drug A £20 £19 £18 £17 £16 £15 £14 £14 £14 £14

Drug B£22

£21 £20 £19 £18 £17 £16 £15 £14 £13

Drug C £24 £23 £23 £22 £22 £22 £22 £22 £22 £22

Aiming for a win/win for supplier who offers better price for increased market share.

Utilise existing strong pharmacy networks (inter and intra trust) and links with clinicians

= Demand Management

London NHS Trusts - Therapeutic Group Framework AgreementPrescribing Trends by Volume

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08

Drug A Drug B Drug C

London Procurement Programme (LPP) Formation & Structure

• London Procurement Programme set in April 2006 with the formation of the new London Strategic Health Authority (NHS London) as a short-term alternative to a pan-London Collaborative Procurement Hub or similar arrangement

• Identify savings opportunities across trusts within NHS London and evaluate and implement accelerated savings initiatives

• Deloitte responsible for project management• LPP Steering Board – strategic board chaired by Malcolm

Stamp, CEO, London Providers Agency– Peter Sharott represents P&MM

• LPP Operational Board – Project Director, Heads of Procurement, Directors of Finance, PaSA and Deloitte.– Phil Aubrey represents P&MM.

• Pharmacy & Medicines Management Steering Group

Structure for Pharmacy and Medicines Management Steering Group

NHS Trust & PCT Pharmacy NetworksClinical Networks

Pharmacy Procurement Consortia

Project Lead

Steering Group Regional Specialist Procurement Pharmacists

Pharmacy Procurement Consortia Chairs Primary Care Pharmacy Specialists

Primary Care Lead

Clinical LeadsAntifungalsAnti-TNFs

CancerCardiovascular

ESAsMental Health

Unlicensed Medicines &

Specials Lead

Homecare Lead

Enteral Feeds Lead

Dietitians

Stakeholder Engagement

Trust LPP Pharmacy

Leads

Commissioners

FormularyPharmacists

ProcurementPharmacists

ClinicalPharmacists

NHS PaSA

Hospital Clinicians

/GPs

PCT Pharmaceutical

Advisors

P&MM Steering

Group

LPP Pharmacy & Medicines Management Work Programme (1)

• Procurement– Branded medicines contracts

• Therapeutic Tendering/Rationalisation– Identify opportunities to rationalise branded drug use and

tender on a volume commitment basis either within sectors or on a pan-London basis

– Framework agreements with market share targets– Manage value added services

• Prescribing Policies – Identify opportunities to influence local prescribing

policies to achieve:• shift from branded to generic drugs in secondary and

primary care• shift between therapeutic groups (e.g. A2RAs to

ACEIs)• Antivirals prescribing guidance for shingles and genital

herpes

LPP Pharmacy & Medicines Management Work Programme (2)

• Others– Homecare supply arrangements– Enteral feeds – demand management of sip feeds/tube

feeds– Purchase and supply of unlicensed “specials” and

unlicensed medicines and dose-banded cytotoxic drugs

London-wide benchmarking, comparative data, targets and monitoring

Build on local initiatives and guidelinesPrimary, secondary and tertiary care coverage

Division of LPP Contracting Arrangements

• Anti-TNFs• Anti-fungals• Antivirals• Aromatase Inhibitors• Bisphosphonates• EPO• Growth Stimulating

Factors• Gonadorelin Analogues• Hepatitis C• Urological Solutions• X-Ray Contrast Media

• Anti-platelet drugs

• Anti-psychotics

• Antiretrovirals

• Botulinum Toxin

• Cancer Chemotherapy

• Carbopenem antibiotics

• Growth Hormone

• Hepatitis B

• Immunosuppressants

• Low Molecular Weight Heparins

Therapeutic Rationalisation Branded Medicines Contracts

Issues and Lessons from LPP Work (1)

• Geographical complexity – large number of NHS Trusts and PCTs – optimising the benefits

• Engagement with primary and secondary care clinicians and carry through to delivery

• Timescales for achieving commitment and change• Prioritisation of work for practicality and deliverability• Willingness of pharmaceutical companies to

participate• Potential for both NHS Trusts and the companies to

undermine the Terms and Conditions of framework agreements

• Partial success in unbundling homecare service charges from drug costs

Issues and Lessons from LPP Work (2)

• Savings/Cost Avoidance– All savings attributable to the trust– Realistic and achievable and not guarantee– Based on optimum rather than maximum outcomes– Some individual projects will over-achieve, while others will

under-achieve– Full impact will be over more than one financial year and may

depend on up-front infrastructure changes and investment

• Benefits tracking – monthly reporting– IMS and Pharmex for NHS Trusts– ePACT for PCTs– Homecare suppliers– Data analyst from Croydon PCT

£18m estimatednew savings in

NHS Trusts from2006 - 2009

Working more closely with Pharma

• LPP P&MM initiatives results in closer relationships with Industry

• Suppliers need to be engaged from the onset and processes and tendering methodology explained in detail

• Extended lead-in times needed for pharmaceutical companies to understand and respond to therapeutic tendering initiatives

• Regular contract reviews underpin closer supplier relationships and effective contract management

Should there be National Branded Medicines Contracts?

• Potential candidates– Products only available at Basic NHS Prices, although may be subject to

wholesaler discounts– Products only available at standard hospital discounted prices

• Potential benefits– Compliance with EU procurement regulations– Rationalisation of tendering and contracting workload– Stimulation of new discounts, available to all NHS Trusts

• Potential disadvantages– Difficult establish links between prices with committed volumes– Remote from local decision-makers and clinical influence– Lack of sensitivity to new opportunities for therapeutic rationalisation

through SHA Pharmacy Procurement Groups– Need to judge when national contracts should be discontinued in favour

SHA pharmacy Procurement Group contracts

Examples of Current National Contracts

• Vaccines

• Blood clotting factors for Haemophilia

• Immunoglobulins

Immunoglobulins – A model for the future? (1)

• Started with a global shortage due to increasing demand and insufficient fractionation capacity

• IVIg is a high-cost drug exclusion funded by PCTs, generally without restriction on use (i.e. budgets not capped)

• Branded generic market with restricted opportunities for switching patients• Manufacturers reluctant to sell into the UK because higher prices obtainable

elsewhere• National procurement strategy introduced to manage supplies (NHS

PASA/PMSG)– Suppliers wanted volume commitments from all NHS Trusts with expectation

that there would not be a shortfall or greater demand for the product– Suppliers expected to keep buffer stocks of around three months’ supply

• Demand strategy developed by DoH– Clinical guidelines introduced defining priorities for treatment and reducing

clinical indications for which immunoglobulins could be prescribed– NHS Trusts required to have a committee to manage compliance with

guidelines and to manage future shortages – National patient register introduced: all patients must be registered by April

2009– SHAs required to commission the service, usually through Specialised

Commissioning Groups

Immunoglobulins – A model for the future? (2)

• Outcomes– During the shortage - a significant reduction in

prescribing, followed by an increase as supply situation improved

– Recent introduction of clinical guidelines has halted growth and use now may be declining again

– Prices have risen and there is little variation between companies

– There is no current shortage of product– Commissioners will expect tight expenditure control

and will require justification for increased budgets• Future considerations

– Reduce the number of companies on the contract?– Stimulate greater price competition – Aim to cover increases in clinical activity within

existing budgets

London - Intravenous & Subcutaneous Intravenous Immunoglobulins - Moving Annual Usage (G)

400,000

420,000

440,000

460,000

480,000

500,000

520,000

540,000

560,000

580,000

600,000

G

Intravenous Products Subcutaneous Products

Excludes Homecare & Pathology Supplies not processed through

Pharmacy Computer Systems

The NHS needs to raise it’s game by…..

• Placing more emphasis on managing branded medicines through identifying opportunities for therapeutic rationalisation

• Prioritising clinical engagement and consultation, underpinned by tendering and contracting activity

• Generating savings to release funding for new drugs where the clinical evidence supports their use

• Obtaining more resources, including the establishment of full-time specialist procurement pharmacist posts in all SHAs, to emulate the work undertaken in London and other parts of the country

• Working collaboratively across primary and secondary care• Working with commissioners at different levels• Working more closely with the industry and recognising the

need for longer lead times for therapeutic rationalisation and establsihment of framework agreements

And, so does the industry by ….

• Recognising that the shifting emphasis towards branded medicines and the development of framework agreements

• Engaging with the tendering and contracting process and recognising the risks associated with non-participation

• Engaging more regularly with Pharmacy Procurement Groups and Specialist Procurement Pharmacists to generate an on-going dialogue and better understanding of each others needs

• Thinking more creatively about the opportunities for reducing prices as volumes increase (i.e. ensuring that price alone does not inhibit product uptake and limit the opportunity for treating more patients within capped budgets

A Win-Win for All?