Forget Sir Humphrey – Sir Jeremy Brings Home the Bacon As Pharma Firms Pay Up

Well, we do hope that Sir Jeremy Heywood (the real-life "Sir Humphrey" for fans of Yes Prime Minister) negotiated himself a “share of savings” deal for his negotiations with the pharmaceutical industry, reported in the Times last week (behind the paywall).

Apparently, he threatened big pharmaceutical firms that they would face new price caps on NHS spending if they did not volunteer additional funding to help the health service through its ongoing cash crisis. Now all procurement professionals know that this sort of blunt instrument, “win : lose” power-based negotiation rarely works well. However, Heywood walked away with £250 million, if the report is to be believed.

Heywood, who is the Cabinet Secretary and head of the UK civil service, managed to secure the additional cash  for the NHS by the tactic, deployed at a meeting with trade body the Association of the British Pharmaceutical Industry last November. As the report says, this will help cover a £400-500 million 2017/18 shortfall in the NHS budget.

David Watson, an ABPI director, told The Times the organisation had “agreed to meet them halfway” on the demand for extra finances. “We’re aware that we’ve got a new industrial strategy coming along and there is a lot up for grabs about regulation after Brexit that we want to be working on as partners with government,” he said.

As a taxpayer, one has to say “well done”, but it does raise rather a lot of questions. Just how much less might the government be paying if we had more commercial skill on the NHS negotiation side permanently? We already know that there have been some serious exploitation of weak policies and commerciality around generic drugs, as we reported here. So perhaps it should be £500 million, not £250 million. Or a billion or two, who knows?

We also have to wonder about the ABPI tactics. I think I might have been tempted to call the government’s bluff, to be honest. The industry has some power too; threatening to move high pay and status research jobs out of the UK is a tactic it has used previously with some success. Might giving way to this just encourage a tougher line from the government?

Could this also make other government buyers think about using this approach? How about MOD getting some money back from the big defence contractors to plug the inevitable holes in the equipment budget?  Or let’s just find the firms who supply the public sector that have the biggest profit margins and / or the highest paid Board and demand a few million from each of them. It all helps!

It all comes back to power really. Maybe Brexit has actually put the UK government in a stronger position with the pharma industry because they know the Westminster government will be the one setting the rules for the country shortly, rather than much of the pharmaceutical regulatory framework coming from Brussels. Perhaps that actually helps get a better deal – maybe this is an unexpectedly positive consequence of Brexit!

Well done to Heywood anyway. I feel a CIPS Honorary Fellowship coming on … although we do wonder whether he did this all by himself. Was the government Chief Commercial Officer, or his team, involved we wonder? Should we be sharing the credit and buying someone else a beer or two?

Voices (3)

  1. Bill Atthetill:

    Let’s not get too excited. Big Pharma must deliver a rebate every year as part of the PPRS model and I fear that this was simply a top-up on the rebate (if it was a top-up at all).

    Seriously, do you think Big Pharma would hand over £250m, over the table, without previously budgeting for it (ie off their bottom line)? Or without any concessions?

    If Bill Crothers delivered this, we would believe that it was complete bollocks.

    Ask Jeremy for the documentation/correspondence. I’m confident that he would be happy to demonstrate that it is, without doubt, ‘new money’

  2. Sam Unkim:

    I would guess the incumbent Premier Foods suppliers had all ready gone through a very competitive selection process and subjecting them to a “Scotty, I need Warp Factor 11 now” edict was unfair & unwarranted.

    Global Pharma, has never really had its pips squeezed in the same fashion.

    GSK’s training centre for example
    http://www.rhpartnership.co.uk/assets/uploads/documents/PN_-_North_Mymms_Park.pdf

    Trump, after years of “getting away with murder” bluster, has just bottled out (31st Jan) and is now offering tax breaks and relaxed fast track regulation of new drugs.
    http://uk.reuters.com/article/us-usa-trump-drugpricing-idUKKBN14V24J

    Dan Poulter made some interesting points in the Daily Mail recently
    “That is why they started lobbying the Government at the highest level when I put forward the plan to have a price-transparency clause inserted in all NHS supplier contracts.
    The big medical suppliers are using this price secrecy to divide and rule individual trusts
    In quiet conversations, they implicitly threatened to cut investment in Britain’s life sciences industry if we forced them to come clean on prices.
    I believed this was a largely empty threat, but to my intense frustration we failed to make progress in delivering the price transparency that could save the NHS so much money
    It’s a great shame. Because as the NHS struggles to meet the demands of our growing and ageing population, it can ill afford to swell the coffers of a cosy cartel of companies.”
    http://www.dailymail.co.uk/debate/article-4238558/This-cosy-cartel-NHS-suppliers-ripping-off.html

  3. Secret Squirrel:

    Haven’t seen this but isn’t this much the same as, for example, the Premier Foods approach which you rightly excoriated them over? Buyer needs money and demands it from supplier?

    http://spendmatters.com/uk/premier-foods-demands-cash-from-suppliers-is-it-blackmail/

    http://spendmatters.com/uk/premier-foods-demanding-money-with-menaces-from-suppliers/

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