Transcript Document

The UK Approach to
Procurement and Innovation
Six Countries Programme – Innovation and Procurement
Wednesday 16 November 2005
Margaret Horton
Head of Research and Innovation
What I am going to talk
about……
• UK Government policy
• The NHS and innovation
• The NHS supply network
• A little bit of theory……
• Key NHS changes
• Barriers to Innovation
UK government taking
strong interest
•
Ex DTI SoS Patricia Hewitt met stakeholders Sept 2003 to discuss
ways of opening up public procurement (PP) to encourage creativity
from suppliers. Key issues emerged:
– Better forward planning
– Greater transparency
– Increasing professionalism of those involved in PP
– Building in scope to encourage innovation
•
DTI Innovation Report December 2003
– Called for action across the public sector to boost innovation
– Stressed the vital role PP can play as a lever for stimulating and enabling
supplier innovation
– Tasked OGC to develop guidance that identifies ways in which govt can
stimulate innovation from suppliers through the procurement process
•
Patricia Hewitt chairs the “Innovation in the Knowledge Economy”
x-govt group to drive report forward. Immediate focus is on
breaking down the £109bn spend to identify the opportunities
“Capturing Innovation – nurturing
suppliers’ ideas in the public sector”
OGC guidance 2004
• Challenges govt procurers to “think innovation” and
become intelligent procurers
• Innovation should be encouraged throughout but greatest
potential arises from the earliest stages:
– When policy is being formulated
– When programmes and projects are being shaped
– In the formulation of procurement strategy
“Capturing Innovation – nurturing
suppliers’ ideas in the public sector”
OGC guidance 2004
• Why we don’t capture innovation:
–
–
–
–
Inadequate warning
Risk aversion
Client capability shortfalls
Regulation
• What we can do to capture innovation:
– Challenge (ESI, procurement strategy, SME involvement,
output/outcome specifications, acceptance of variants, contract
management)
– Channel (communicate long-term plans to the market, unsolicited
proposals, early design contests and IPR)
– Reward (cost and value for money, incentives, risk and reward
sharing, payment not the only reward, ownership of IP
WHAT HAPPENS IN THE NHS?
Mainly reacting to ‘push’
Extent of
NHS use
Development
Diffusion
SBRI?
DH NEAT
programme
DTI
funding
Research Innovators
Councils
Early
adopters
Early
majority
Time
Innovations pushed from industry
Innovation
Basic Applied
research research
Basic
research
Targeted
development
Applied
R&D
Industry
funded
First
human
use
Clinical Early
Late
trials adoption adoption
Clinical investigation
and testing
Late
majority
Diffusion
Accepted
practice
(or disuse)
Extent of
NHS use
The adoption dilemma
When is the best
time to buy?
When is the best
time to evaluate?
Innovators
Early
adopters
Early
majority
Late
majority
Time
Development
Diffusion
Innovation
Basic Applied
research research
Basic
research
Targeted
development
First
human
use
Clinical Early
Late
trials adoption adoption
Accepted
practice
(or disuse)
Requires a time series approach to
evaluation
procurement
Applied
Clinicaland
investigation
Diffusion
R&D
and testing
But how does the NHS
respond?
“the UK is a ‘late’ and ‘slow’ adopter of new technology, compared with ‘early’
and ‘rapid’ adoption of technology in the US. Australia, Canada and France tend
to be classified as ‘late’ adopters of technology, but once they start to adopt, they
do so rapidly”
Derek Wanless, 2002
“new technologies currently present themselves to different parts of the
NHS in seemingly random order and there is much scope for inconsistency,
duplication and delay
To negotiate such a system requires either a well-resourced commercial
sponsor or a resolute innovator!”
Professor Kent Woods, 2002
How does the NHS respond?
(Co-map report)
“Multiple entry routes – central versus local: which is the appropriate entry point
for sales effort? PASA, HAs, Acute Trusts, PCTs or social services?”
“Multiple entry routes – clinician versus accountant: what purchasing decisions
are driven by clinicians and what by management? How do clinical preferences
get incorporated into management purchasing policy?”
“OJEC driven tender process tends to enshrine yesterday’s solution”
“NHS purchasing decisions are perceived to be driven by lowest
price tenders which results in bias towards old technology and a
consequent reduction in longer term benefits to the NHS”
“Budgetary silos appear to prevent purchasing decisions which are justifiable in
terms of clinical and cost effectiveness and care pathways but cut across
organisational boundaries”
“There are problems with health economic methodology used because of perceived
focus on relative cost of ‘like for like’ replacement products in current systems of
practice rather than looking at benefits that may come from change of practice”
WHY DOES IT RESPOND
LIKE THIS?
The shape of the NHS supply network
Other Govt policies
e.g. OGC, Sustainability, SMEs
DH and its ALBs
R&D
PASA
NICE
NPSA
MHRA
MPIG
MA
Healthcare Commission
28 Supply Management Confederations
12 NHS IP hubs
1.2 million staff
600+ organisations
300 Primary Care Trusts
300 Acute Trusts (with own procurement depts
20,000 suppliers
28 Strategic Health Authorities
£15 billion non-pay expenditure
How are purchasing decisions
made?
NICE
CAGs
PASA
• 300 staff
• Specialist buyers
• National contracts, DH initiatives,
geographical contracts, and
specialist support for Trusts for
‘bespoke’ contracts
Demand
MPIG
Supply Management Confederations
• Consortia within SHA boundary
• Mainly virtual
• Evolving structures – developing
expertise
NHS Logistics
• 7 distribution centres
• 40,000 Commodity products
• Supply chain expertise
Product user groups
Committees
Clinical procurement
specialists
Clinical preference
Drug Tariff
Trusts
• Board leads
• Supplies teams
• Generalists
• Local contracts
• One-off purchases
Levels of purchasing
activity and contract
workplans?
Not all purchasing is
undertaken by supplies staff
A perception of public
procurement ……….
• Historical reactive ‘end of the process’ role?
• More comfortable buying what has been bought in the past?
• Large procurement organisations can become remote
• Rigid adherence to EU procurement legislation – to point of using it
to justify existence!
• Do procurement staff understand their own business and what
really drives the NHS?
• Struggle to deal with ‘uncertainty of innovations’ – risk averse
• We must deliver Value For Money – whatever that means……
Understanding the ‘value’
in VFM
• Do procurement
staff understand
the ‘value’ of new
technology?
Two worlds of ‘value’
• Problem: how do you define ‘value’ in healthcare?
• For medical devices and pharmaceuticals it should be
clinical and cost-effectiveness?!?
BUT………
Clinical and cost
effectiveness (HTA)
HM Treasury VFM
Public procurement –
the comfort zone
• EU regulations based on ‘competition’
• Public procurers only comfortable when they have competition and
can test the market
• Public procurers therefore intent on ‘commoditising’
• Public procurers have little interest in innovation because public
services do not rely on innovation to survive/compete
• It’s the law to throw relationships up in the air every few years –
therefore little prospect of developing supplier relationships based
on innovation!
A BIT OF THEORY…..
Some of what I have said is
backed up by research
•
Public Technology Procurement (as opposed to regular procurement of
existing products where only price/performance are considered) doesn’t fit
with ‘auction theory’ of EU public procurement
– Reason: EU believe it creates national champions who are not necessarily
innovative
– The result is ‘perpetuation’: public procurers repeat what they have bought
before and create suppliers who become lazy & respond to public supply
contracts and do not look to innovate
Edquist et al, 2000)
(Irony: EU single market set up to strengthen member states rate of
innovation but in practice regime has followed a strictly economic &
competition approach to public procurement)
Public technology
procurement
•
Key aspect of PTP is dimension of time versus buyer competence
(Edquist et al, 2000) creates problems:
– Early & sophisticated demand – procuring agency needs to monitor
leading edge technology and needs to understand where innovation is
needed
– Being locked-in too early – into risky (uncertain) new technological
trajectories. Solution is to use PTP to support multiple trajectories to
allow choice and strategic alternation between them
– Buyers develop bargaining power by selecting the right specifications
at the right time (beware delays caused by bad organisation and poor
coordination of the procurement process)
WHAT IS CHANGING?
Healthcare Industries Task Force
•
Outcome 1: Device Evaluation
•
Outcome 2: Innovation
•
Outcome 3: Procurement Processes
9 KEY OUTPUTS
• Development of new Device
Evaluation Service (DES)
• Development of new NHS
Innovation Centre
• Procurement
• Building R&D capacity
• Work towards the
development of Healthcare
Technology Co-operatives
• Regulatory issues
• Export strategy
• Communication on
regulation & safety of
devices
• Training & education
Device evaluation
(1)
•
inform procurement decisions, and encourage and support the uptake of
useful, safe, innovative products and procedures used in health and social
care:
– Develop a new device evaluation service to integrate and strengthen
horizon scanning, and the assessment of value and effective
performance of new and enhanced healthcare technologies, devices and
related procedures
– Develop nationally accepted methodologies and toolkits for device
evaluation that can be used locally to ensure consistency of approach
whilst facilitating decision-making at the appropriate level
– Consider how best to ensure speed of evaluation, a ‘once-only’
approach and prompt sharing of outputs with stakeholders throughout
the health/social care system and industry
•
To help effect these changes existing DES will move to PASA w.e.f. 1.4.05
What will it be called and
what will its mission be?
“NHS PASA - Centre for Evidence-based
Purchasing”
• Underpin purchasing decisions and provide
objective evidence to support the uptake of
useful, safe, innovative products and related
procedures in health and social care
Innovation
(2)
•
Stimulate more innovation and encourage a more entrepreneurial culture in industry
and the NHS:
–
Work towards the development of a new Innovation Centre in an appropriate organisation to
promote and support the rapid development, dissemination and commercialisation of a
pipeline of innovations coming from the NHS, academia or industry. The role would be to:
• Coordinate and develop the activity of the existing network of NHS
Innovation Hubs
• Improve interactions and promote the exchange of knowledge between the
NHS , industry, financiers and others, utilising online knowledge
exchange/comms tools
• Play a brokerage role between industry, financiers and the NHS, fostering
partnership and collaboration opportunities
• Promote successes and facilitate innovation uptake in the NHS
• Introduce an ‘innovation fund’ to promote the development and exploitation
by the NHS of innovative products and procedures
• Establish collaboration between Med Devices Faraday Partnership and
others to deliver coordination, brokerage and routemap, and increase
translational research
National Institute for
Improvement & Innovation
Lord Warner said the NHS Institute will:
•
“work closely with clinicians, NHS organisations, patients, the public, academia
and industry in the UK and world-wide to identify best practice;
•
Develop the NHS’ capability for service transformation, technology and product
innovation, leadership development and learning;
•
Support the rapid adoption and spread of new ideas by providing guidance on
practical change ideas and ways to facilitate local, safe implementation;
•
Promote a culture of innovation and life-long learning for all NHS staff”
Procurement and Innovation
• Aim of combined strategies to provide over time:
– single market entry point to NHS
– clear pathway & support from early product development to
“ready for market”
– faster NHS uptake of innovation
– informed purchasing decisions
– stimulus for innovation
– better outcomes for patients
Outputs are interdependent!
Procurement processes
(3)
•
Embed modern approaches to procurement in the NHS to deliver better value
for the service of patients through :
– nationally agreed/accepted best practice models, including early
communication with industry on workplans, to provide clarity on levels of
market access and to ensure capture of innovative solutions
– A focus for regional procurement with significant clinician involvement to
provide the platform for an informed approach to procurement decision-making
– Ensuring that the role of procurement in supporting the timely uptake of new
technologies identified as providing benefit to patients is embraced
– The above to be incorporated into the redesign of PASA, the CPH model, and
continuing SMCs
– Ensure training and education for devices are covered
– Regular dialogue between NHS and industry to encourage input into
policymaking (PbR, NSFs)
Collaborative
Procurement Hubs
•
Pathfinders & Group 1
•
Deliver £270 million by 2007
Greater
Manchester
Lifesource
(Shropshire &
Staffordshire)
•
Improved support for clinicians and
clinical networks by increasing their
involvement in purchasing
•
Reduced clinical risk and enhanced
patient safety strategies
Healthcare
Purchasing
Consortium
•
Stronger partnerships with suppliers
through commitment to contracts and a
focused route into the health economy
Thames
Valley
•
Encouragement for innovation and
provision of support for R&D in emerging
treatments and technologies
•
Building a robust, sustainable
environment for procurement specialists
through improved career structure and
enhanced recruitment and retention
Trent &
Leicester
Northampton,
Rutland
North
Central
London
Hants & Isle
of Wight
So ……
Barriers to Innovation?
• Organisational boundaries
• Lack of forward planning & existing financial frameworks
• Understanding Value
• Incentives and measures
• Attitudes, behaviours and capability
• Ethos of public procurement – competition = innovation?
• Regulation - ‘One size fits all’ approach
Steps to overcome
barriers? (1)
•
Understand real business needs and match to procurement strategy
•
Create effective networks and clear pathways for innovation which
allow ‘pull’ as well as ‘push’
•
Create capability
•
Create intelligent ‘platforms’ for procurement
•
Define and understand value & communicate value definition
•
Develop procurement processes which encourage opportunities to
harness innovation throughout procurement life-cycles
Steps to overcome
barriers? (2)
•
Develop procurement toolkits which provide options to avoid ‘one size
fits all’ approach
•
Develop new measures for procurement which are focused on ‘value’
and which incentivise them to seek innovations to support business
needs
•
Create body of knowledge to underpin procurement decisions
•
Challenge organisational boundaries and financial systems which
restrict opportunities for Innovation