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Finding the right NHS partner

Published on 23/03/05 at 02:16pm

Pharma companies want to work with the NHS and the NHS wants to work with pharma companies. There is lots of talk of 'partnership' and there are many successful one-off collaborative projects, but when it comes to trying to formalise the relationship into a long-term arrangement, reluctance to 'commit' gets in the way.

In VIA's annual PCO Account Management survey of PCT decision-makers, over the last three years, almost one third of respondents said they would like to form long-term (defined as any formal arrangement of collaborative working that is planned over more than 12 months to help the PCT meet its objectives and priorities) alignments with pharma companies.

However, the number of such relationships remains very small, at less than 10%. So, there is clearly a gap between the level of relationship PCTs desire with the industry, and those they achieve. What are the reasons for this gap and will it narrow and are expectations about relationships realistic?

In our discussions with pharmaceutical companies about this gap, they have responded that they have undertaken successful one-off projects with PCTs, but found it difficult to translate these into formal longer term relationships. They are willing to invest in long-term relationships but they need to have some corresponding commitment from PCTs to justify the increased investment.

Increasing levels of commitment

We conducted a survey of 25 PCT decision-makers throughout England (13 Pharmaceutical advisers and 12 Chief Executives or Directors), holding in-depth interviews in which we explored the potential for long-term alignments and tested scenarios of differing levels of commitment from each side. A range of elements were explored for each side that might comprise a long-term alignment.

We explored five scenarios, each requiring a higher level of commitment from each party to the arrangement, testing at each level whether the decision-maker would value the offering from the pharma company, and whether they would be prepared to commit the PCT to certain things in return. A number of key findings emerged:

  • PCTs are attracted to the benefits
  • PCTs willingness to offer something in return is limited
  • Pharmaceutical advisors and chief executives have different views
  • PCTs are risk averse about pharma companies

PCTs attracted to the benefits

Most respondents believe there is the opportunity for long-term alignments that represent a win for the PCT, a win for pharma companies and a win for patients. They see major benefits for the PCT coming from being able to undertake projects that they would otherwise not be able to afford, or would do more slowly. PCTs value most highly:

  • Financial support for projects and programmes
  • Access to value-added services and expertise from within the company
  • Influence over how the pharma company promotes and sells its products in particular reducing promotion of products that they do not recommend

Paradoxically, whilst PCTs are very interested in exerting influence over how companies promote their products in the PCT's geographic area, they showed little interest in having access to company information and plans, or in accessing company decision-makers.

PCTs unwilling to commit to certain programmes

PCTs are willing to use established mechanisms to encourage prescribers to follow guidelines that are in the interests of patients, PCT and the pharma company, but they are less willing to commit to switch programmes.

When asked about product endorsement they are willing to commit to increasing levels of incentives and product-specific messaging, but unwilling to commit to the highest level of endorsement programmes that encourage product switch. PCTs reluctantly undertake any action which may be interpreted as challenging GPs' clinical independence.

PCTs will also offer to share information, provide access to decision-makers and undertake joint planning activities, although they show concerns about spending time on these activities and a reluctance when asked to provide preferential treatment over that offered to any other pharma company.

PCTs know that pharma companies are in the business of maximising sales of their product, and are content to work with them in partnerships to achieve this where the PCT see it as being in their interest and in the interest of their patients. However, there appears to be a lack of commercial awareness and understanding that in order to justify the investment required for a formal long-term relationship, the pharma company must be able to demonstrate commercial benefits.

Different views

Pharma advisors were less willing to countenance a PCT commitment than were chief executives. One PA refused to consider any formal relationship, others were very reluctant to consider any preferential arrangements even though they acknowledged the PCT would be getting more in return. Of the five levels of relationship considered, the majority of PAs would not progress beyond the third level, whereas chief executives would go to Level 4 which does involve significant levels of PCT assurances. Chief executives also sought more in return from pharma companies.

Risky business

PCTs have commercial relationships with many supplier organisations, and they feel comfortable in formalising multi-year contracts with telecoms and IT suppliers, for example. However, when it comes to any formal commitment with a pharma company they are much more risk averse. Indeed, many of the respondents indicated that the concerns associated with any such relationship are one of the major obstacles to their formation, namely:

  • Probity of exclusive relationships
  • Probity of selection process
  • Fixed term of relationships
  • Association with the partner brand

The first area of concern is the exclusivity of any relationship. PCTs would prefer to form partnerships with a number of companies. Some have managed to persuade pharma companies to take part in jointly funded one-off projects and would like to extend this principle to longer term relationships.

Clearly multi-company relationships are less attractive to pharma companies, and the level of investment and commitment from them would be reduced to reflect differing levels of commitment from the PCT. Exclusive relationships are not a problem in the supply of other goods and services, but seem to be a major source of concern with pharma companies because they are seen to have a more direct link to patient outcomes.

PCTs want to form relationships with companies which have a product that is featured in their prescribing guidance or formulary. They appear adamant that decisions about prescribing guidelines or formularies are to be made on the basis of cost-effective prescribing and are independent of any partnership arrangements.

They also want an open and transparent process of selection for a partnering arrangement; ideally a process in which a number of companies are invited to submit proposals of how they would work with the PCT in the chosen therapeutic area. These could then be scrutinised and compared in the same way as for any other public procurement process.

This is akin to the tendering processes used in other areas of business. However, the separation of the formulary decision from the selection for partnering introduces the danger of sub-optimisation, because the potential benefits to the PCT and its patients of the projects and investments that would arise from a long-term relationship are not considered along with the product, price and evidence base.  

The third area of concern is the fixed term of a relationship. The PCTs expressed concern over being tied to a provider when another company might launch an improved product onto the market. More specifically, the PCTs wish to be able to terminate any partnership arrangement if their prescribing committee changes prescribing guidelines. This clearly does not provide pharma companies with the security needed to protect their investment.

However, given the quality of horizon scanning services and the normal time period between guideline reviews, it seems unlikely that a new, improved product will be launched without a reasonable period of prior knowledge by PCTs, or that prescribing committees will need to review guidelines more regularly than the length of any partnership agreement.

The circumstance that might result in a sudden change in guidelines would be a drop in price for a competing product. Under these circumstances the PCT might not be free to take advantage of the lower priced product, but this level of risk is no different to the risk they carry when entering into a three-year telecommunications contract.

The fourth perceived source of risk mentioned by respondents is being associated with a brand, should that brand be discredited for any reason. For example, if a pharma company product were to be subject to restrictions from any regulatory body, chief executives of PCTs would expect to be questioned by the local press and the Board about any formal relationship and the impact on patients.

This would not be expected to happen to the same extent with suppliers of other products or services. The potentially newsworthy nature of pharma products makes any formal long-term relationship more risky. As one chief executive said: "There would have to be really big gains for me to enter into something like that."

Meeting pharma demands

The findings indicate that many PCT decision-makers are attracted by the potential benefits of formal long-term relationships with pharma companies, but are reluctant to commit the PCT to delivering the returns that the pharma companies seek.

The commercial awareness shown around relationships with other suppliers is counteracted by the perceived risk associated with pharma companies.

If PCTs and pharma companies are to commit to formal long-term arrangements:

  • Pharma companies will need to understand and be sensitive to NHS concerns over probity and public accountability, and PCTs will need to understand and recognise the commercial realities facing pharma companies
  • PCTs will need to be prepared to be proactive and invest the necessary time in building relationships
  • PCTs will need to accept that a long-term alignment may require preferential treatment on both sides
  • PCTs will need to learn to trust pharma companies in the same way they trust other long-term suppliers through building on a history of successful one-off partnership projects
  • Both parties need to share a joint focus that shows that through co-operation patients, PCT and pharma companies can gain.

Conditions for successful relationships

In their research on key account management, McDonald et al (McDonald, Millman, and Rogers, Key account management - learning from supplier and customer perspectives, Cranfield Business School, 1995) identify a set of conditions for successful relationships:

  • Both parties acknowledge their relative importance to each other
  • Large number of multifunctional contacts
  • High volume of dialogue
  • High level of information exchange
  • Mutual understanding
  • Proactive rather than reactive
  • Prepared to invest time and money in the relationship
  • Wider range of joint and innovative activity
  • Joint focus for the future

Formal long-term relationships are not suitable for all PCTs, nor for all pharma companies, but they offer significant benefits in a number of cases. However, in order to realise these benefits both parties need to understand what is required of them and work to ensure that each of these conditions is met.

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