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All things Pharma

An NHS in crisis

By Michaela Dyer, Director of NHS Services, TP Medical

The recent and forthcoming NHS reforms mean new challenges for the pharma industry for medical sales professionals to work in partnership with healthcare providers.

NHS in financial trouble is by no means a new headline. For a number of years now, PCTs have struggled to stay within budget – and general practices have seemingly viewed budgets as more of a guide than a definitive ceiling, resulting in overspends in the majority of cases.
This, however, has had very little impact on the pharmaceutical industry: apart from the obvious prescriptions pricing authority reviews of drug prices and the creation of a more reactive and efficient drug tariff, pharma companies have continued to increase the market shares of their products, breaking sales targets and records in the process.
At the representative level, despite the effects of medicine management policies, the traditional sales model – combined with effective targeting – has brought its familiar success, since the behaviour of the customers has remained unchanged. Until now, GPs have remained a largely disparate group: the most that the pharma company has had to do in recent years is to amend its targeting focus from individuals to practices.
So will the new financial crisis and the prospective NHS reforms require anything more than a slight tweak to the sales model to ensure continued success? Or will the new emerging market economy within the NHS require the pharma industry to overhaul every component of its sales and marketing models? In order to answer this question, we need to understand the current range of reforms within the NHS and the financial pressures these reforms have caused.

Finances in free fall

Since the New Year, the NHS has attracted more than its usual share of media coverage. January figures revealed that despite record investment under the present Government, the NHS is forecasting a deficit exceeding the £800m mark. The resignation of Sir Nigel Crisp on March 7 as both NHS chief executive and the Department of Health’s permanent secretary confirmed the evident DoH concern at the crisis in the NHS’s finances. Since then, there have been a series of announcements of job losses and service cuts by cash-strapped NHS Trusts. To date, almost 5,000 job losses have been announced by 15 Trusts, with warnings of more to come.
The following table shows the scale of the NHS job losses announced for March and April 2007:

Too much confusion

So what has gone wrong? There are many reasons for the current financial crisis. Years of inexperienced and ineffectual management, significant miscalculations of the costs of new consultant, GP and staff contracts (to the tune of approximately £1.3bn) and a focus on delivering targets regardless of budgetary constraints have contributed to the financial woes. The recent pace and depth of reforms have added to the problems.
The key policy document Commissioning a patient-led NHS, published in July 2005, signaled a radical streamlining of PCTs and Strategic Health Authorities (SHAs) during 2006: it has been announced that the number of PCTs will be more than halved from 303 to 152. Under the strain of constant change, managers’ morale took a steep dive at a critical time in the Government’s reform programme. Crucially, these policies placed too much emphasis on structural change, with insufficient focus on the need to understand and change the culture in the NHS. If the NHS is to regain financial control, the combined efforts of a much wider group of stakeholders will be necessary.
Enter practice-based commissioning (PBC) – which directly incentivises GPs to become directly involved in the commissioning process, and as a consequence to become more responsible for their budgets. At a senior level, the NHS is crossing its fingers and hoping this is the solution to all of its financial problems.

Working in partnership

PBC is a key reform that, coupled with the scale of the financial crisis in the NHS, will have a critical impact on the approach of the pharmaceutical industry.
Notably, PBC and the introduction of a competitive market have forced once-disparate groups of GPs to cluster together – not only to provide the necessary economies of scale, but for their very survival. Locality groups have emerged, with around 10 practices working together in each group to commission – and in some cases provide – services, with a level of cohesion not seen before.
Successful PBC and the realisation of tangible financial incentives depend on the economical management of resources, and the primary focus is on making savings. Importantly for the pharma industry, drug budgets have been included within the indicative budget, and are viewed by GPs as one of the easiest areas in which to realise savings. Faced with more frugal consumers, how can pharmaceutical companies truly add value to their brands?
The industry must recognise and respond to these changing drivers, and reconfigure its relationship with its customers. It must focus on working alongside localities to recognise their areas of financial pressure, their commissioning intentions and, most importantly, their plans for service provision.
The most effective account managers will identify the clinical leads in each of the localities, and seek greater understanding of the service and business objectives of each locality group. Individual representatives should respond to the growing enthusiasm for service provision by actively supporting their customers in developing and implementing new services.
There are opportunities to link service plans to key product areas. In addition, pharma companies should recognise the wider relationship benefits of supporting their customers to develop a whole range of new commissioning and management skills that are needed in the new NHS market.

Michaela Dyer is the new Director of NHS Services for TP Medical. TP Medical provides insight into NHS reforms and translates this into competitive advantage for NHS customers, private providers of health services and the pharmaceutical industry. TP Medical uses a network of consultants to provide solutions and planning support for customers trying to make sense of the new NHS. For further information, contact TP Medical on  01392 881602  01392 881602 or e-mail enq@tpmedical.com .
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