Memorandum by the Department of Health
PUBLIC EXPENDITURE QUESTIONNAIRE 2001
Table 4.10.1
NUMBER AND NET INGREDIENT COST OF GENERIC
AND PROPRIETY PRESCRIPTION ITEMS DISPENSED IN THE COMMUNITY, 1992-93
to 2000-01
Notes:
1. Source: PCA, PPA, England. Figures
are for prescription items dispensed by chemists and appliance
contractors and dispensing doctors including items personally
administered in England, for financial years April to March. Note
that in addition to prescriptions written by GPs in England, this
includes those written by nurses, dentists, hospital doctors,
(and, up to March 1994, armed services doctors and dentists) provided
they were dispensed in the community. Also included are prescriptions
written in Wales, Scotland, Northern Ireland and the Isle of Man
but dispensed in England. The data do not cover drugs dispensed
in hospital or private prescriptions.
2. The net ingredient cost (NIC) is the
basic cost of a drug. This cost does not take account of discounts,
dispensing costs, fees or prescription charge income. All figures
are expressed at outturn prices.
3. Generic dispensing covers drugs that
are prescribed and available generically and the dispenser is
reimbursed at the Drug Tariff or generic price. It is possible
in some circumstances for a branded drug or parallel import to
be dispensed against the prescription.
3. The Department collects data on secondary
care prescribing through NHS Trust and Health Authority financial
returns. On an annual basis, these high level aggregate returns
enable it to monitor the pressure faced by local NHS organisations
and the aggregate cost to the NHS as a whole. More detailed information
is available to Trusts at a local level from hospital pharmacy
IT systems. This is primarily used to monitor local spending on
pharmaceuticals together with adherence to local policies aimed
at ensuring the cost effective use of medicines.
4. "Pharmacy in the Future", the
modernisation programme for pharmacy services in England made
a commitment to implement a self-assessment tool for medicines
management in NHS hospitals. The tool has been developed by the
Office of the Chief Pharmacist, at the Department of Health, with
the support of the Regional Directors of Performance Management
and Public Health and Regional Pharmaceutical Advisers. It was
introduced to NHS Trust hospitals in England through a roll-out
programme managed by the Regional Office (RO) network.
5. The self-assessment tool recognises that
achieving clinical and cost-effective medicines use is an organisation-wide
issue on which managers, prescribers and pharmacists need to work
together. The self-assessment tool provides an opportunity for
hospitals to examine their current arrangements.
6. Regional Offices are in the process of
organising meetings with Trusts to ensure action plans are in
place to improve performance.
4.10b Could the Department provide information
on (i) total Family Health Services expenditure on prescribing
for each year from 1992-93 to 2000-01, (ii) the average expenditure
per capita, (iii) the total number of items prescribed and average
number per capita, and (iv) the average cost per prescription?
Any commentary which the Department would wish to append would
be welcome, including an assessment of progress in meeting its
stated target of restraining the growth in the drugs bill to sustainable
and affordable limits?
7. The information requested is shown in
table 4.10.2.
Table 4.10.2
NUMBER AND NET INGREDIENT COST OF PRESCRIPTION
ITEMS DISPENSED IN THE COMMUNITY, 1992-93 to 2000-2001
Notes:
1. Source: PCA, PPA, England. Figures
are for prescription items dispensed by chemists and appliance
contractors and dispensing doctors including items personally
administered in England, for financial years April to March.
Note that in addition to prescriptions written by GPs in England,
this includes those written by nurses, dentists, hospital doctors,
(and, up to March 1994, armed services doctors and dentists) provided
they were dispensed in the community. Also included are prescriptions
written in Wales, Scotland, Northern Ireland and the Isle of Man
but dispensed in England. The data do not cover drugs dispensed
in hospital or private prescriptions.
2. The net ingredient cost (NIC) is the
basic cost of a drug. This cost does not take account of discounts,
dispensing costs, fees or prescription charge income. All figures
are expressed at outturn prices.
3. Population estimates are based on ONS
mid-year estimates/projections of the resident England population.
PROGRESS IN
RESTRAINING THE
DRUGS BILL
8. Since 1999-2000 funding for hospital
and community health services, prescribing and discretionary general
medical services has been brought together into a single funding
stream at Heath Authority and Primary Care Group level. Unified
allocations enable Health Authorities and Primary Care groups
to deploy resources flexibly to best meet the health needs of
their population. It is for Health Authorities in partnership
with Primary Care groups and other local stakeholders to determine
how best to use their funds to meet national and local priorities
for improving health, tackling health inequalities and modernising
services.
9. Average growth in the FHS drugs bill
over the last five years has been 8.1 per cent per annum. This
figure would undoubtedly have been higher had it not been for
the significant effort that was been put into managing the drugs
bill, for example through prescribing incentive schemes and the
provision of quality advice and support to prescribers. New and
innovative medicines often offer the most cost-effective form
of treatment so the Government does not necessarily view growth
at this level (or any other level) as a bad thing.
10. A new Pharmaceutical Price Regulation
Scheme (PPRS) was agreed in 1999 with the Association of British
Pharmaceutical Industry (ABPI). The scheme, which will run for
five years, began in October 1999, with all suppliers being required
to reduce the prices of all products covered by the scheme by
4.5 per cent. The price reduction is achieving savings to the
NHS drugs bill in excess of £200 million a year.
11. Progress has been made on other key
initiatives. Around 21,000 nurses have been trained to prescribe
from a limited Formulary of drugs and appliances and the signs
are that a total of up to 23,000 nurses will be trained in prescribing
by the end of this year. On 4 May 2001, Ministers announced their
intention to extend independent nurse prescribing to enable more
nurses to prescribe a wider range of medicines for a broader range
of medical conditions. Following training, independent nurse prescribers
under the extended scheme will be able to prescribe General Sales
List and Pharmacy medicines currently prescribable by GPs, together
with a list of Prescription Only Medicines. We plan to have the
amended regulations and a training programme in place by the end
of 2001, with the first nurses able to prescribe under the extended
scheme by the spring of 2002. The contribution of general practitioners
to quality prescribing is being recognised through additional
remuneration as part of the Sustained Quality Prescribing Scheme
announced in April (HSC 1999/107). Every practitioner in a practice
which qualifies for the payment, in accordance with a number of
benchmarks, among which is the requirement to use a formulary
or an increase in generic prescribing, will receive an additional
annual payment.
12. Measures have also been taken to improve
rational prescribing by GPs and towards eliminating unwarranted
variations in prescribing. The National Institute for Clinical
Excellence (NICE) has already begun to make key decisions, including
its first appraisal (the fast track appraisal of the flu drug
Relenza) was announced in October 1999. Progress continues to
be made on the PRODIGY roll-out and we estimate that around 30-40
per cent of computerised practices had access to PRODIGY at the
end of 1999. In broad terms this means that between 3,000 and
3,500 of the 9,000 GP practices should by now have access to PRODIGY.
Release 1 is being rolled out to general practitioners with the
aim of it being made available to all GPs by the end of 2000.
The National Prescribing Centre (NPC) and the Prescribing Support
Unit (PSU) have continued to provide support to medical and pharmaceutical
advisors via bulletins and through the provision of analytical
services.
13. Present and possible future measures
to secure value for money and security of supply of generic medicines
for the NHS are covered under paragraph 4.10c.
14. The PRODIGY programme of work continues
to be developed and make progress to improve rational prescribing.
15. A survey carried out in June 2001 estimated
that 80 per cent of practices have clinical systems installed
that could support PRODIGY. Of these GPs who could use PRODIGY,
14 per cent did so in order to support the care process, involve
patients in the decision-making, up-date their own knowledge—all
providing practical support for clinical governance. The education
and communication programme continues to support GPs in their
uptake and use of PRODIGY, demonstrating an increase in both awareness
and use in twelve months.
16. The clinical content in PRODIGY continues
to be updated and new guidance topics developed to ensure clinicians
have up-to-date clinical evidence on their desktops. Updated guidance
has recently been released on thirteen topics including acute
otitis media, wax in ear, acute sore throat, menopause, chest
infection and obesity. PRODIGY includes approximately 130 sets
of guidance, covering 200 of the most common conditions seen in
general practice. Collaborations with the National Institute for
Clinical Excellence are in place to ensure the Institute's guidance
is disseminated through the PRODIGY system.
17. A research phase, testing a revised
prototype which helps clinicians manage patients with chronic
diseases (such as heart disease), also continues in partnership
with GPs, practices and the suppliers of clinical computer systems.
18. The contribution of general practitioners
to quality prescribing is being recognised through payment of
the Sustained Quality Allowance. This allowance is paid when all
of seven benchmarks are achieved, including increase in generic
prescribing or the use of a formulary. Currently, the NHS employs
around 800 prescribing advisers, mainly pharmacists, in health
authorities and primary care organisations, having a common aim
to encourage and secure rational and cost-effective prescribing.
4.10c Could the Department explain the
measures being taken to control NHS expenditure on generic drugs
in primary care following the price increases in 1999-2000?
19. The Department has acted to control
the prices of generic medicines. Following consultation, a statutory
scheme setting maximum prices for the main generic medicines was
put in place in August 2000. The scheme is operating effectively.
Prices have remained stable since its introduction and the NHS
has saved some £240 million in 2000-01 compared to prices
before the scheme was proposed.
20. EU legislation requires a review of
price controls to be started within 12 months of their introduction.
The Department launched a review on 23 July 2001 and has consulted
on a proposal that the present scheme should remain in place,
unchanged, pending decisions on longer term arrangements for generic
medicines.
21. On 23 July 2001 the Department also
issued a discussion paper on its proposals for the supply and
reimbursement of generic medicines to the NHS in the community
for the longer term. The paper draws on the fundamental review
of the generics supply chain carried out for the Department by
OXERA (Oxford Economic Research Associates). The paper puts forward
two main options for the future:
(i) Reform of reimbursement arrangements,
so that the price the NHS pays for generics is based on the price
at which they are sold by the manufacturer plus an amount for
the wholesale distributor.
(ii) Changing the system of purchasing generic
medicines so that, instead of them being bought by community pharmacists
and the NHS reimbursing them, they would be bought centrally by
the NHS through a system of competitive tendering, using its purchasing
muscle.
22. As a further option, the paper assesses
the possibility of keeping in place the existing maximum price
scheme over the longer term.
23. Discussion of the proposals with interested
parties is under way and will last till 22 October 2001. Ministers
will then reach a decision on the way forward, taking account
of views expressed. Formal consultation on the Government's preferred
option will then follow.
4.10d What progress has been made in
getting the pharmaceutical industry to reduce drug costs by 4.5
per cent (as agreed in the PPRS)? Could the Department comment
on issues such as volume, price and substitution? Has the lack
of reliable data to monitor spending led to a breakdown in cost
control?
24. At the start of the 1999 agreement all
companies with sales of branded prescription medicines to the
NHS of more than £1 million a year were required to reduce
NHS list prices by 4.5 per cent. All companies required by the
scheme to reduce prices by 4.5 per cent from 1st October 1999
have done so.
25. Companies were allowed to achieve the
reduction either by an across the board reduction or by modulation
(variable reductions to the prices of different products provided
that the overall effect was a price reduction of 4.5 per cent).
Companies that chose to modulate the list price of some or all
of their products to deliver the price reduction have to submit
independently audited outturn data (net sales revenue and quantities
sold to the NHS for each product). The Department has analysed
the audited data for the periods 1 October 1999 to 31 December
1999 and 1 January 2000 to 31 December 2000 to ensure that companies
are delivering the required level of savings. Companies that have
delivered less than a 4 per cent price reduction have made a payment
to the Department for the shortfall and remodulated prices so
that 4.5 per cent reduction is achieved for the rest of the agreement.
26. The price reduction is achieving savings
to the NHS drugs bill in excess of £200 million a year.
27. Following turbulence in the generics
market in 1999-2000 the Department of Health put in place a statutory
maximum price scheme covering the main generics in August 2000.
This has brought stability to the market. The response to question
4.10(c) gives further information about recent developments in
relation to the supply and reimbursement of generics.
28. The problems in the generic market in
1999-2000 also led to prescription processing problems at the
Prescription Pricing Authority (PPA). This led to delays in the
availability of up-to-date prescribing information. The PPA introduced
a recovery strategy to reduce the delays in current information
and are on track to be back to a normal processing timetable by
October 2001.
29. Data available for monitoring prescribing
spend during 2000-01was not as up-to-date as required due to the
delays in prescription processing. The production of prescribing
data will return to normal during 2001-02, improving the information
available for monitoring spend.
30. The volume of prescription items (for
both generic and branded prescription items) increased in 2000-01
by 5.0 per cent. The average growth over the previous three years
was 3.1 per cent.
4.11 Allocations to National
Specialist Services
What was the total allocation in 1999-2000
and 2000-01 to each of the supra regional services and what is
the planned allocation for 2001-02; and what significant changes
have there been in the overall pattern of expenditure?
1. The expenditure on each of the supra
regional/national specialist services in 1999-2000, 2000-01 and
the service agreement value for 2001-02 is given in the table
below.
2. The National Specialist Commissioning
Advisory Group (NSCAG) was established in April 1996 to advise
Ministers on the identification and funding of services where
central intervention into local commissioning of patient services
was necessary for reasons of clinical effectiveness, equity of
access, and/or economic viability. NSCAG superseded the Supra
Regional Services Advisory Group.
3. Two new national services are to be centrally
funded from 1 April 2001:-
Paediatric Bladder Exstrophy
4. This service was designated from 1 April
2000. It will be centrally funded from 1 April 2001. The service
provides for the management and initial surgery of children under
14 with bladder exstrophy, primary epispadias and exstrophy variant.
These are a group of very rare, but disabling, conditions, which
are very difficult to manage. Two units , Great Ormond Street
Hospital and Newcastle upon Tyne NHS Trust will provide the service.
Rare Neuromuscular Disorders
5. This diagnostic service combines the
specific expertise of four centres in different forms of rare
neuromuscular diseases. These groups of disorders comprise:
The limb-girdle muscular dystrophies (led from
Newcastle NHS Trust).
The congenital muscular dystrophies (led from
Hammersmith Hospitals NHS Trust).
The congenital mysasthenias ( led from the Oxford
Radcliffe NHS Trust).
The ion channel disorders of skeletal muscle
(led from the Institute of Neurology, London).
6. One service will have its service costs
funded through NSCAG while undergoing final evaluation:-
Paediatric Ventricular Assist Devices
7. Two units, Great Ormond Street Hospital
NHS Trust and The Newcastle NHS Trust have been designated to
undertake this service whilst it is undergoing evaluation. The
aim of this evaluation will be to assess the effectiveness of
provision of Ventricular Assist Devices to children. There is
convincing evidence that for infants and children there are sufficient
hearts to meet demand, however in view of the very small numbers
on the waiting list when an organ becomes available there is often
no suitable patient. These devices will provide a bridge to transplant
in this small group.
8. There have been no other significant
changes to the overall pattern of expenditure.
Table 4-11-1
SUPRA REGIONAL SERVICES AND CENTRALLY COMMISSIONED
SERVICES 1999-2000, 2000-01 AND 2001-02
* Payments will be made as and when transplants
occur.
** Remapping between commissioners has taken place.
*** This money was paid to the Henderson Hospital and
then split between the three Trusts.
4.12 Management and Administration
Costs
Could the Department provide a commentary
on the progress it has made in defining management costs in PCGs,
Health Authorities and NHS trusts? Could the Department update
Table 4.11.1? Does the Department intend to develop a definition
of NHS administration costs?
1. Integrated guidance on the definition
of management costs in Health Authorities and Primary Care Groups
was issued in March 2000. The definition continues to have effect
in the current financial year. It is based on and updates previous
guidance issued in March 1999.
2. The definition of HA costs incorporates
expenditure on management of PCGs. Unless specifically listed
as an exclusion, all HA and PCG staff and non-staff expenditure,
including non-recurrent expenditure, is included in HA management
costs.
3. Specific areas of exclusion from HA management
costs relate to payments to health care providers in respect of
health services, activities related to improving health and promoting
effective health care, and time-limited exclusions in respect
of pilot or developmental activities.
4. The definition of PCG management costs
continues to draw a distinction between the activities that are
primarily concerned with the management and administration of
the PCG's budget and its responsibilities as a commissioning body
and those activities that are the clinical responsibilities of
PCG members.
5. On this basis the costs of support staff
that directly contribute to the clinical processes and arrangements
for patients-such as receptionists and practice managers and whose
responsibilities are to individual practices rather than the PCG
continue to be excluded from PCG management costs.
6. Guidance on the definition of management
costs in NHS Trusts was also issued in March 2000. The definition
also has effect in the current financial year and is based on
and updates previous guidance issued in March 1999.
7. The definition of management costs in
NHS Trusts covers the staff costs of management activities, including
contracted out services and consortia arrangements. In line with
previous practice the definition allows for exclusion of costs
related to specific pilot or developmental activities on a time-limited
basis.
8. The definition includes the costs of
all staff required to support the board and corporate functions
of the NHS Trust as well as the costs of senior and other managers
of clinical, operational and support services functions. Where
appropriate it allows managers to apportion their time between
managerial and clinical responsibilities, ensuring that clinical
duties are not counted towards management costs.
9. Guidance on the definition of management
costs of PCTs was issued in March 2000. The guidance makes no
distinction between the definition of management costs of PCTs
at level 3 and level 4, except that at level 4 it is widened to
include provider functions. The definition is based on the existing
definition for NHS Trusts but also takes account of the functions
of PCGs.
10. Table 4.12.1 shows trends in NHS management
costs since 1996-97 at 1998-99 prices [alternative table also
provided at 2000-01 prices].
11. Steps have already been taken to reduce
NHS management costs significantly. Reductions since 1997-98 to
2000-01 mean that an estimated £843 million has been redirected
from management towards patient care.
12. Final savings of £20 million planned
last year in order to reach the £1bn target by the end of
2001-02 have been set although these may not be required if indications
that savings are ahead of schedule prove to be correct. Savings
that are required will be targeted at NHS Trusts with proportionately
higher management costs and those NHS Trusts undergoing mergers.
13. There are no plans to require further
net reductions in HA/PCG costs nationally in the current year
but there will be continued emphasis on the need to maximise value
for money from management investment and redeployment of resources
within the overall cost envelope.
14. In terms of management costs the introduction
of PCTs will be cost neutral overall and the transition from existing
PCGs to PCTs will be accompanied by complementary reorganisation
of HAs and NHS Trusts as functions are devolved or transferred.
This provides an opportunity for a fundamental consideration of
how management functions are best delivered including increased
scope for sharing services and pooling functions across the local
health economy. In March this year the Secretary of State announced
the next stage in the reform of the NHS will see the centre of
gravity move from Whitehall to the front line NHS and that as
a result of these changes £100m would be released for patient
care.
15. There is no single accepted definition
of NHS administration costs and the Department has no current
plans to develop such a definition. Figures on expenditure against
NHS management costs are based on clear definitions and are available
from audited accounts of HAs and NHS Trusts. They provide the
most reliable indicator of the cost of administration in the NHS.
16. Paybill costs of staff in senior management,
management, and administrative and clerical grades may be used
as an alternative, approximate measure of NHS administration costs.
These costs include the salaries of large numbers of staff providing
support to clinical services and exclude the costs of medical
staff working in management roles, as well as other costs such
as contracted out services. They provide a less precise indicator
of the true cost of administration as they fail to differentiate
between managerial and clinical.
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