The impact of the NHS Reforms, Health and Social Care Bill on the healthcare industry: Part 3

29 June 2011

The NHS Future Forum recently published its recommendations after evaluating the ‘listening exercise’. The government published their responses to these recommendations on 23 June.

The Bill still stands but a number of amendments are to be made and debated by the Public Bill Committee for the Health and Social Care Bill. The amendments clarify roles better, ensure accountability from the top down and focus on clinical care and patient feedback throughout the NHS system from the bottom up.

The NHS is a complex body with a plethora of stakeholders. The reforms have been evaluated from different viewpoints such as the effect on healthcare staff, voluntary organisations, local authorities and the NHS structure as a whole. The extent of the possible privatisation of services is an issue for many, but so far the impact on companies that sell their products and services to the NHS has not been fully evaluated.

MackSense intends to conduct both quantitative and qualitative market research on these reforms. Our research will help pharmaceutical, medical device, private health insurance and healthcare service providers understand this issue and we will deliver insights into the strategy required for continued market access to the NHS.

Sign up for MackSense’s White Paper: The impact of the Health and Social Care bill that is coming out soon by filling out our contact form.

Overview of June 2011 Bill Amendments

Parliamentary accountability is confirmed

The NHS Commissioning Board and the Clinical Commissioning Groups (the new name for GP Consortia) will promote and uphold the NHS constitution. The Secretary of State will again become accountable for securing the provision of services, although he will not secure those services directly and will report annually on the health services. The Secretary of State will also have the power to intervene if there is a failure on the part of the NHS Commissioning Board, the Care Quality Commission, HealthWatch, NICE and the Information Centre. Ministers will also have a ‘duty to keep health services functions under review’ and hold all the relevant bodies to account. This change will be a welcome one for groups concerned that there would be no parliamentary accountability for the management of the NHS.

The role of the Clinical Commissioning Consortia is clarified

There is also greater clarification on the role of the Clinical Commissioning Consortias, who must have NHS in their title and clear reference to their locality, which is to be within local authority boundaries. The consortias will publish their constitution to show how they are set up and run, but more importantly will have to publish details of how their payments have been used. They must obtain advice from a wide range of professionals on the ‘prevention, diagnosis or treatment of illness’ and follow guidelines and accountability from the NHS commissioning board on their function.

They will have responsibility for all the potential patients in their local area, not just those registered at GP practices and will provide Accident and Emergency and ambulance services. They will also have a duty to promote research, best practice and innovation. Clinical senates will be held with key clinical experts and hosted by the NHS commissioning board to facilitate best practice across the NHS.

The Wellcome Trust is pleased with the focus on research, because they spend over £600m a year on research each year, but have found that the NHS in the past has failed to make the most of discoveries for preventing, diagnosing and treating disease .

New duties and obligations for Health and Wellbeing boards and Monitor

Health and Wellbeing boards (made up of clinical commissioning groups and local authorities) must now involve their local HealthWatch authorities in decision making to ensure a patient voice and a carer’s voice, in order to include the social care element of healthcare. Clinical Commissioning Groups must now have a governing body, with the ability to audit their activities; this body has to be made up of two lay members, one registered nurse and one doctor with secondary care experience.

Monitor’s new role as independent economic regulator for all health and adult social care includes price setting and promoting competition. However, the focus of promoting competition as an end in itself has been removed after the listening exercise and now its core duty will be to protect and promote patient’s interests. Monitor will be responsible for creating public and patient involvement and taking clinical advice, rather than just promote competition. Prices will be set for a range of procedures and services based on clinical complexity, so that difficult procedures are as appealing in terms of profit . This latest development will be welcomed by the Royal College of Nursing and the British Medical Association who requested this change .

Greater powers for Foundation Trusts

All NHS trusts were set to become Foundation Trusts (FTs) by April 2014, but this has been amended to about 2016 and will based on the NHS trusts’ clinical readiness for this transition. Foundation Trusts will remain governed and accredited by Monitor until 2016.

FTs are set up in the form of community-oriented co-operatives in which anyone can become a governor and hold the board of directors to account . The Foundation Trust Network greatly welcomes this bill because it will infer them freedom of borrowing powers, approval of significant mergers and acquisitions. Most importantly it will lift the private patient income cap, which was previously set at very low limits.

FTs will have the power to make money and capitalise on private health treatments and will be competing with each other for patients. The rhetoric of ‘cherry picking services’ coming from the left of politics is derived from this. In the future, performance in hospitals will no longer be measured against waiting times, but on care outcomes, such as how well someone who has suffered a stroke has been able to live independently.

Increased voluntary and private sector involvement in NHS care provision

In 2007 the Labour government lifted NHS restrictions and allowed patients to have non-urgent operations privately. Now some 16,000 such operations are taking place on a monthly basis. There are also regular cases of the NHS paying for patients to have surgery privately. In the winter 2009 The Brighton and Sussex University Hospital NHS Trust was overloaded with patients and reasoned that it was actually cheaper to make ‘one off’ payments for private operations at the local Nuffield Hospital than keep their own hospital theatres operating over the weekends.

The term ‘Any Qualified Provider’ (AQP) is a model that accredits providers offering services to the NHS. The soon to be disbanded Primary Health Care Trusts (PCTs) used to commission contracts in this manner, on top of directly providing their own services.

In the past AQPs were usually accredited for routine elective services, where demand was manageable. Costs were uniform and the services were relatively straight forward, e.g. hip replacements. However, PCTs will no longer be directly providing services. Instead a patient or doctor can now choose services offered by AQPs. For example a wheelchair user may find the best wheelchair on the market and ask their GP to provide it for them. This will result in more involvement of voluntary and private sectors in the NHS.

GPs as commissioners will have the power to choose private healthcare for their patients. The latest amendments to the bill show that the government is still committed to patients’ choice through the AQP provision, but the start date for this provision is now delayed until April 2012. The choice of AQP will be limited to services covered by national or local tariff pricing. This is to ensure that there will not be ‘cherry picking’ of more simple procedures, because pricing will be set on clinical complexity. For example a cataract operation will be set at a lower price than heart surgery so that both procedures are appealing in terms of profit for AQPs. The first focus for AQPs will be on areas where patients are already demanding more choice. It is now unlikely that acute care and A & E will be applicable to AQP provision.

Opportunities and challenges raised by the AQP model

The question will be whether GPs will opt for AQPs over NHS services (MackSense will ask this question in its forthcoming white paper). Patients will have much more say in the choice of their care in terms of both service and medical treatments. The government aims to make shared-decision making between patient and clinician the norm: ‘no decision about me without me. Cancer drugs will be made available to patients (when clinicians recommend them) via a new Cancer Drugs Fund, irrespective of whether NICE has approved the drug for NHS use.

Healthcare companies can take advantage of this shift by engaging with patient groups and commissioning quality market research to find out what patients’ needs are. They can use this information to design products and services that will ultimately influence GPs commissioning choices via the patients themselves.

A recent spanner in the works for healthcare firms has come from the Deputy Prime Minister, Nick Clegg, who is now calling for AQP provision in the bill to be re-thought or dropped. His response reflects distaste at the results of a recent survey carried out by The Parthenon Group on top private healthcare CEOs. This survey revealed the AQP policy was popular with private healthcare companies, who see a big market opportunity for securing some of the £120bn in NHS funding that will be available via AQP provision.

If the AQP provision remains intact, Pharmaceutical, medical device and healthcare tech sectors will have opportunities to interact with FTs, GP consortias and patients to tender for services like never before.

Marketing to the new NHS

The healthcare industry’s ability to sell new services and products is susceptible to the spending cuts proposed for the NHS.

A new marketing language with an accent on quality and patient-centered care will be required. Patient centered clinical methodologies focused on product innovation and efficacy of treatments will be paramount to market success. The challenge for this industry is working out the new structure and making business routes into it.

Value Based Pricing (VBP) is set to replace "the Pharmaceutical Price Regulation Scheme (PPRS), which has been in place since the 1950s. The government sees this as necessary because PPRS does not reflect wider economic impacts of health and does not incentivise pharmaceutical firms to invest in R & D for new products for more diverse diseases, but instead produces generic medicines for the most common diseases. The new Value Based Pricing (VBP) will incorporate the Quality Adjusted Life Year (QALY plus) approach in which NICE will evaluate the drugs and medical devices on their ability to reduce the burden of illness and therapeutic innovation. What does this mean? Basically drugs will have to be affordable, innovative and be able to treat chronic and more obscure disease thus easing the burden on the patient’s experience and the NHS spend on treating them. The problem is that drug pricing uncertainty may put the pharmaceutical industry off and they will expect prices to reflect what the going rate is in other countries they supply to."

At the most recent NICE conference, there was optimism about NHS/industry collaboration. Recognition that competing interests such as profit over value should be not discount steps towards drug innovation. Patrick Valance, Senior Vice President of GSK, stated that progresses in biomedical understanding had not been translated into new medicines and that both the industry and the NHS should work together to create new drugs for wider disease applications. The Association of the British Pharmaceutical Industry (ABPI) echoes these sentiments and generally welcomes the new bill’s commitment to patients. They are monitoring the changes to structural reform and view the life sciences industry as key to helping the NHS achieve favourable treatments through innovation.

The government is also consulting on a ‘patent box’ scheme for the Finance Bill 2012, which will give corporation tax relief to companies that register and develop patients in the UK. Healthcare leader GSK will be taking advantage of the scheme. GSK are planning to relocate a large bio-manufacturing plant from India to Montrose in Scotland. The staffing costs will be higher but CEO Andrew Witty has indicated the skill base and also the ‘patent box’ idea has been a factor in the decision.

It would seem product placement opportunities and success depend on how effectively this industry connects with patients and on GP consortia’s obligation to provide innovative and effective products. In order to do this effectively healthcare and medtech companies need to know what these groups are thinking. Both qualitative and quantitative market research will be required to get the tone of quality and patient care right. MackSense can provide this feedback and strategy insight for firms.

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