Procurement can deliver £1 billion of NHS savings a year, says Lord Carter

Will Green is news editor of Supply Management
11 June 2015

A review of NHS productivity has found there are potential procurement savings of £1 billion a year.

Lord Carter, who was appointed NHS procurement champion last year, is working with 22 hospitals to identify efficiencies and savings opportunities.

In an interim report he recommends developing a single national electronic catalogue for products used by the NHS and creating four national “productivity collaboratives” to identify and share best practice, including one focused on procurement and one on workforce.

Carter also said the need for a new law should be explored, similar to the Sunshine Act in the US that requires all suppliers of drugs and equipment to collect, track and report all financial relationships with physicians.

Carter said a total of £5 billion savings per year in the NHS were possible by 2019-20, made up of £2 billion through controlling workforce costs, £1 billion from medicines optimisation, £1 billion from estates and £1 billion through procurement.

His report found £9 billion was spent on procurement each year, including around £2 billion on consumables such as dressings and syringes, approximately £3 billion on high-value devices such as artificial joints and around £4 billion on common goods and services.

“The values above are estimates because data on volumes and prices paid for products and services is patchy. We know this because we collected all accounts payable and purchase order data from the 22 hospitals for the last two years and only 18 per cent could be matched,” said the report.

Carter said global best practice for everyday health consumables was a catalogue of around 6,000 to 9,000 products lines with price variances of 1-2 per cent, but in the NHS there were as many as 500,000 lines and price differences sometimes above 35 per cent.

An example was given of a hospital using a soluble steroid tablet costing £1.50 each that cost just 2p for the solid version.

The report said: “Our research around the world has told us that the best way to control expenditure on products used in the delivery of healthcare is to have a tightly controlled electronic catalogue in place supported by strict policies so that employees and suppliers know there are no alternatives.”

Concerning the purchase of high-value items and the relationship between clinicians and salespeople, the report said: “Often times such decisions are made between clinicians and sales representatives from the medical companies without proper recourse to all the facts and evidence.”

Carter said one hospital was being targeted by 650 sales reps, with 65 on site at any one time.

The report also said better inventory management was required, with around £800 million worth of inventory held by the NHS and a further £500 million of consigned stock – goods provided by suppliers but not yet paid for.

Carter, who was asked to conduct a review by the secretary of state for health, said: “The challenge is to lift hospital efficiency to a consistently high standard in every area of every NHS hospital and, where we already perform well, innovate to improve further.”

A further report will be published in the autumn.

Andrew Coulcher, group customer solutions director at CIPS, speaking on The Jeremy Vine Show, said better inventory management was needed and there were "significant opportunities to consolidate and leverage spend". "There are significant savings to be made if you can go to the market with a single voice," he said.

The HCSA welcomed the publication of the report, and the challenge that patchy data presents when trying to improve decision making.

"The HCSA believes that the current procurement landscape in England requires greater investment at Trust level in order to deliver greater efficiencies in the short and longer terms. It is very concerned about the NHS’s ability to attract and retain the best procurement practitioners needed to deliver the future expectations of the NHS," it said. "The HCSA is also concerned that in order to fundamentally change the system within which procurement has to operate, NHS procurement will require strong support and leadership at national level which has been largely absent in England since the abolition of the NHS Purchasing and Supply Agency in 2010."

Edi Truell, CEO of Tungsten Network, said: “NHS procurement practices have been proven to be woefully inefficient and these poor spending decisions are adding up to a hefty bill for the taxpayer. It’s time for NHS bosses to address this dire situation."

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