1. How would you contract for branded medicines?
Peter Sharott
Chairman, Pharmaceutical Market Support Group
Thank you for the opportunity to speak to you today.
I’m going to talk to you about how I see medicines procurement in the NHS developing over the next few years, especially with regard to branded medicines
We are seeking to work much more closely with all pharma companies to achieve win-win situations.
Our relationships with companies vary enormously from those that work vary closely with us on a regular basis, and those that never show any willingness to meet.

2. 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
Need to emphasise that some of the things I’m going to say are based on my personal opinion and not necessarily represent current policy
These are the main topics I should like to discuss.
Probably trying to cover more ground than is feasible in the time allocated to me.
Some of the more detailed information on the slides, particularly relating to the national medicines procurement structures and the London Procurement Programme is intended for you to refer to after this event if you are interested in understanding more about what is happening in medicines procurement.

3. 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
Bone Marrow Transplantation: high-cost antifungals
Haemophilia – blood clotting factors
HIV/AIDs – antiretrovirals
Intravenous Immunoglobulins
World class commissioning all the rage.
Conducted at different levels within the NHS with increasing complexity

4. 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

5. 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
Total London medicines expenditure in order of £ billion
In NHS Trusts, PbR excluded high cost drugs can now account for 50-60% of total drug expenditure.
Increasing burden to keep records of all dispensed drugs in order to secure re-imbursement through PCT arrangements.
Hospital drug expenditure rising at least 10% year – branded medicines in developing markets
PCT expenditure not rising as fast, but it is important to recognise the need to gain continuing investment in new medicines in the hospital sector.
Joined up working between primary and secondary care is becoming increasingly important.
Hospital Drug Expenditure is rising by about 12% p.a.
High-Cost PbR Excluded Drugs account for % of expenditure

8. Example of rapid growth in cancer chemotherapy, driven by NICE guidance.
Not everything that NICE does has a negative impact on medicines usage.
Medicines procurement needs to be underpinned, by good quality, evidence-based prescribing.

9. Growth in antiretroviral drug expenditure: in London currently arround 12% p.a.
New patient growth – 8-10% per year.
Early treatment for patients – 72% increasing to 85 to 90%
New drugs produce undetectable viral loads, have fewer side effects, are available in combination formulations, are safer, cause fewer adverse effects – but are up to three times more expensive than the older drugs.

10. Pharmaceutical Procurement in England: Key Groups and Players
National Committees
Specialists
Procurement Groups
Trusts
NHS
Trust
Pharmacy
Services
and
Clinical
PCTs
PaSA
Chief Operating Officer
6 x Regional
SCEP Groups
Generic Medicines
PaSA
Pharmaceutical
Team
National Pharmaceutical
Supplies Group (NPSG)
Strategic
Branded to
Generic Medicines
Simplified diagram of how Medicines Procurement is currently managed in England.
Scotland, Wales and Northern Ireland have their own arrangements but we work very closely with them.
SCEP – Supply Chain Excellence Programme
Price is not necessarily the main driver.
Generic medicines account for only about £300m of actual hospital drug expenditure. The approach for to generic medicines is very well structured and refined and works on a national basis.
Branded medicines (and homecare supply) represent a much greater challenge and where current and future effort will be concentrated.
Pharmacists
(Procurement,
QA, Production,
Medicines
Information,
and Clinical)
Pharmaceutical Market
Support Group (PMSG)
Operational
14 x Local Pharmacy
Procurement Groups
Branded Medicines
Patients: high quality, safe, clinically and cost-effective medicines, available when needed

11. 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)

12. 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
Strategy launched in October 2005 following consultation with the DH Commercial Directorate, PaSA and the recently-formed Collaborative Procurement Hubs.
Although the CPHs are responsible for all non-pay expenditure on behalf of their trust members ,at an early stage they began to take an interest in medicines, believing they would be a rich source for meeting their savings targets.
There was a need to ensure that the existing groups and structures continued to operate effectively, particularly at a clinical level.
8 out 10 SHAs now have a CPH, the exceptions are London and the South West, which have less formalised arrangements.
The LPP has been set up as a short-term substitute and more about this later.

13. 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)

15. 15

16. 16

17. 17

18. 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

19. 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

20. Contracting at NHS Trust Level Issues 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

21. 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
Breakdown of products by category, showing the differences in approach at national and local level.

22. 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

23. 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

24. Market Share Matrix = Demand Management Market Share Drug A £20 £19
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Drug A
£20
£19
£18
£17
£16
£15
£14
Drug B
£22
£21
£13
Drug C
£24
£23
The market share matrix is a framework agreement which places the onus on the NHS to determine which drug or drugs within a therapeutic group it wishes to use.
The aggregated volume commitment for each drug determines the price that will be paid.
Prices paid will vary with time and the lowest price for some drugs may not be achieved.
There should be an overall saving to the NHS without completely restrict clinician choice and patient need.
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

25. Example of achieving shift in market share; lower two bars.

26. 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

27. Structure for Pharmacy and Medicines Management Steering Group
Project Lead
This is an inclusive arrangement based on a multi-disciplinary team approach.
NHS Trust & PCT Pharmacy Networks
Clinical Networks
Pharmacy Procurement Consortia

28. Stakeholder Engagement
Stakeholder engagement is the key to success.
It’s a “hearts and minds” approach which takes time to develop.

29. 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

30. 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 guidelines
Primary, secondary and tertiary care coverage 30

31. Division of LPP Contracting Arrangements
Therapeutic Rationalisation
Branded Medicines Contracts
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

32. 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
Before going on to talk specifically about the LPP, it’s worth just reflecting on the underlying principles which distinguish generic medicines procurement from branded medicines procurement.

33. 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
Before going on to talk specifically about the LPP, it’s worth just reflecting on the underlying principles which distinguish generic medicines procurement from branded medicines procurement.
£18m estimated
new savings in
NHS Trusts from 33

34. 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
Working with pharma has its challenges.
Silo working in some companies sometimes makes it reach the right people.
Need to meet with senior accounts mangers, who may or may not be the decision-makers.
We know that some companies almost have an aversion to meeting with us and to tendering for contracts.
This may be very short-sighted. As we get more experienced and sophistocated in our approaches, there is will risk that some companies will be left out of contracts and will see their business diminish.

35. 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

36. Examples of Current National Contracts
Vaccines
Blood clotting factors for Haemophilia
Immunoglobulins

37. 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

38. 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

40. 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

41. 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?