Contract management improvement needed as NHS is ripped off on standard drugs

At this rate I am going to be eating humble pie, flagellating myself and asking forgiveness from Francis Maude and even (gulp!) from Colin Cram.

Although much of the UK Cabinet Office's work to increase collaboration in central government procurement is admirable, we've argued here that too much centralisation would be counter-productive and would not deliver the best results for public sector procurement.

However, it seems at the moment that there are all too regular news stories suggesting real weaknesses in procurement and contract management in government departments. It's getting to the point where, in my darker moments, the thought of putting it all under Mr Maude (Cabinet Office Minister) is actually quite enticing...

We had the whole G4S and Serco tagging story that we featured here and certainly appears to suggest contract management was not up to scratch in the Ministry of Justice. Then we had the NHS 111 non-emergency telephone service fiasco - however, that wasn't not just a procurement issue, and even Maude hasn't suggested Cabinet Office taking over all the activities of every health commissioning group's work.

Now we have another case that certainly at first sight looks like the public purse being ripped off in an absolutely unforgivable manner - and with apparently no-one on the contract management side being able to do anything about it.

A Daily Telegraph report into the cost of drugs to UK patients of the Health Service has found that a few pharma firms (not the large ones, we should emphasise) are producing standard products such as cod-liver oil capsules, but selling them for up to 40 times the price of the lowest cost alternatives. A pack of Cod-Liver Oil capsules is charged at £80, against £3 in the shops. Doctors are prescribing these products and pharmacists dispensing them. The NHS then pays the full inflated price.

It doesn't take Sherlock Holmes to work out that there must be a reason for the doctors and pharmacists to do this. Without making direct accusations, given my lack of libel insurance cover, the huge margins the manufacturers are making would certainly give them room for - let's just call it a "marketing budget" that might benefit the doctors and pharmacists involved.

Now, there are some very good people in procurement and contract management at the NHS Business Services Authority, who manage the pharmaceutical payments scheme. I could even name them. So this is not a failure of capability. I assume it is because the processes around pricing for drugs and the way the suppliers and pharmacists are rewarded just leaves the system open to this sort of exploitation.

But surely it isn't beyond the wit of the BSA and the Department of Health generally to stop this? Isn't there some sort of maximum price that could be imposed, at least where there is blatant profiteering? Or an obligation on doctors and pharmacists to use the cheapest product where there is NO medical difference between the options?

When you hear stories like this, you can see why Maude and others have a pretty jaundiced view of how suppliers exploit the public sector given half a chance, and why he feels that there is a lack of basic commerciality in the civil service. But I'd love to hear something - off the record if necessary - from the BSA on the issue. You have my email and LinkedIn details I think, and might like to defend your professional reputation here!

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Voices (3)

  1. Trevor Black:

    Wow! Shock! Horror!! The NHS being ripped of for the price of drugs! If anyone who has traveled extensively around Europe will discover the cost of drugs everywhere is significantly cheaper than the UK. It would therefore appear that those involved in the procurement of drugs in the NHS are either a) not aware of what goes on in the supply chain, or b) are quite content to accept this further example of living in the ripped-off UK, or c) don’t travel too well. I suggest a fact find tour of the EU at the tax payers expense would reveal some interesting results.

  2. Ben Glynn:

    Hi Peter

    Just a thought but maybe the NHS cod liver oil is from sustainable line-caught cod? Surely that would result in a premium but perhaps a 2667% premium is a little steep?

    Ben Glynn

  3. Jon Hughes:

    I’ve said before that Francis Maude reminds me of an enthusiastic CFO who thinks he “gets procurement”. Centralise it, leverage it, kick the proverbial out of a few suppliers. Job done. Colin Cram on the other hand should know better. I’ve lost track of how many times I’ve seen the pendulum swing violently in organisations across the centralisation / decentralisation debate. As the PASC has recently argued, the real need is for a properly balanced, top-down strategy that nails which categories, suppliers and transformational processes should be driven centrally, regionally or locally. It needs to be done both pre-contract and post-contract. Re-allocation of roles, responsibilities and authorities follows it, driven by the size of the defined benefit to service delivery and the taxpayer. Sorry to sound like I’m giving a lecture there. Without that, the risk remains of seriously daft decisions being taken because of half-baked personal credos and preferences.

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