How would you contract for branded medicines?

1. How would you contract for branded medicines? Peter Sharott Chairman, Pharmaceutical Market Support Group peter.sharott@btinternet.com

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

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 • London: • Bone Marrow Transplantation: high-cost antifungals • Haemophilia – blood clotting factors • HIV/AIDs – antiretrovirals • Intravenous Immunoglobulins

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 • All drugs £1 billion Hospital Drug Expenditure is rising by about 12% p.a. High-Cost PbR Excluded Drugs account for 50 - 60% of expenditure

10. Pharmaceutical Procurement in England: Key Groups and Players National Committees Specialists Procurement Groups Trusts NHS Trust Pharmacy Services and Clinical Services 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 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

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)

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 LevelIssues 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

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 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

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 NHS Trust & PCT Pharmacy Networks Clinical Networks Pharmacy Procurement Consortia

28. Stakeholder Engagement

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

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

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

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 £18m estimated new savings in NHS Trusts from 2006 - 2009

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

35. 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 Should there be National Branded Medicines 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?