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3 July 2007 : Column 206WH—continued
If the Minister intends to persist in describing all that the NHS supply chain is purchasing for the NHS as commodities—we have had all sorts of examples, such as syringes and toilet paper, and various things can be thought of as commodities—what is the remit for a product council? Surely the only question is price, not quality—other than a minimum assurance.
If, however, NHS supply chain is to procure unique medical supplies—perhaps the product that the hon. Gentleman mentioned from his constituency experience—is there not a role for a body akin to NICE, as was argued earlier, if not NICE itself? What do the product councils add to the cost-benefit mechanisms already available in the NHS?
The point has been made repeatedly that there are no mechanisms in NHS supply chain to consult patient groups and include their views and needs or those of the public in product councils and taskforce evaluations. Does the Minister support that, or does he regard his new appointment as a grand opportunity to have a jolly good, thorough review to ensure that we do not go down another cul-de-sac? We would thoroughly support him in that.
In December 2003 the chief medical officer announced the establishment of the rapid review panel to assess new technologies in the fight against hospital-acquired infections. In August 2004 the panel was set up, following criticism of the delay from the National Audit Office. In December 2004 the panel announced its first set of results, including a top-level recommendation 1 for Bardex IC, which was mentioned earlier. Nevertheless, despite a favourable cost-benefit analysis from a departmental economist, the product was not even listed by the NHS Purchasing and Supply Agency until September 2005. Two and a half years after the panel’s recommendation 1, the net effect has been modest uptake of technology. I am putting that as generously as I can. It is patients who suffer from the delay.
Will the Minister tell us why NHS supply chain is not required to comply with the evaluative decisions of NICE, the Medicines and Healthcare products Regulatory Agency and the Centre for Evidence-based Purchasing to ensure that clinicians have access to the best equipment and medical technology and that patients are empowered to choose the treatment that benefits them most?
On savings and benchmarks, the Department of Health has given NHS supply chain a clear remit to make £1 billion of savings in NHS procurement. That is the basis on which its success will be measured, and all of us will be thinking about it. What year-on-year targets has the Department set—goodness knows, it likes targets—and what savings has DHL delivered thus far?
Is the Minister, although new to his brief, in a position to deny the widely held understanding, which I share and which makes sense to me from my commercial experience, that the Department of Health signed up to all this in a rush, just before we all came back, to avoid our being in session? The vast majority of the £1 billion that is promised over a 10-year period is projected to be saved only in the last two to three years of the contract. Who will be accountable? Will the Minister still be in position? His predecessor who made the original claim is not. If Parliament is to have genuine accountability,
we need to ensure that we have benchmarks and milestones along the way. Otherwise, it will always be a promise for the future and never delivered.
Mr. Havard: Consistency across time is absolutely vital. As the hon. Gentleman says, the individuals who are making promises and are involved in the process now will be well gone, I suspect, in 10 years’ time. The Ministers involved will doubtless have rotated, if no one else. Given his commercial experience—I find it interesting that, as a member of the Conservative party, he knows the difference between price and value, and I suspect that he is one of the few—how does he think the contracts should be structured, and what processes should be run to ensure consistency over time?
Mr. O’Brien: I am grateful to the hon. Gentleman, who shows that my speech must at least have a thread of logic to it. The very next words in my prepared script are to ask the Minister whether he agrees that a counterbalance that measures both value and the competitive strength of the market is needed to make savings sustainable, and whether the performance of DHL is being measured in that way. To gain something just in price does not give sustainable supply for the future, nor necessarily best value for patients.
I shall give an example from way back that we can all remember. When Freddie Laker set up his airline, my goodness it was the cheapest price, but where did he get his pilots? From among those who had been through the expense of being trained by what was then British Overseas Airways Corporation and British European Airways. They were trained at those companies’ expense and then poached by Laker. It was not sustainable, because over time a business owner must fuel the business and reinvest in it. Value requires the recognition that price cannot simply mean the cheapest contribution to the margin at the time of supply; the full lifetime costs must be recognised.
Mr. Havard: Would the hon. Gentleman apply the same logic to the further privatisation of the NHS, which I understand his party might want to do if it ever got back into government?
Mr. O'Brien: At this point, the hon. Gentleman and I completely part company—he has obviously not been listening. Even if there had been any credible suggestion that there was any wish to do that on the part of anybody in the Conservative party, which I deny, the dropping and scrapping of the so-called patients passport policy, which some suggested would mix the sources of funding, should give him all the assurance that he wants that he has nothing to fear from the arrival of a Conservative Government, within, I hope, the next couple of years. The health service will be much safer in our hands, as the public polls have been telling us in the past 18 months.
I wish to mention a couple of botched procurements. It is always helpful to see what has gone wrong to ensure that one knows how to do things right. The Department’s commercial directorate issued its original consultation on the revision of part IX of the drug tariff in the autumn of 2005. It covers items such as incontinence appliances that cost the NHS about £631
million a year. Various consultations are yet to report, but in the meantime, product prices are frozen and will remain so until 2008.
The procurement of new oxygen supplies in 2005-06 was another gross failure by the Government in which I got deeply involved. They failed to procure efficiently and effectively, leaving many users extremely worried about the security of their domiciliary oxygen supplies. It was only the great good will of community pharmacists like Ian Littler of the Tarvin pharmacy in my constituency, who were prepared to go out in the middle of the night to supply oxygen, despite having just been kicked in the teeth, that enabled many patients to proceed with their treatment.
The recent Association of British Healthcare Industry and Ernst and Young survey of small and medium enterprises in the medical device sector revealed that their UK sales growth was 2.2 per cent. in 2005-06, compared with export growth of 10 per cent. That has resulted in a fall in UK revenues as a percentage of total revenues from 66.9 per cent. to 65.2 per cent.—a significant fall. Of course that partly reflects the difference in health service needs between the UK and other countries, but it raises concerns about the continued appetite or ability of medical device manufacturers to continue to invest in the UK market. Losing our highly innovative SME base will damage the UK economy.
Sir Chris O’Donnell, whom I have not met, was quoted in The Sunday Times the day before yesterday as saying that his company’s investment is now going to America, Germany and Japan
“because the NHS is a slow adopter of innovation.”
It is not for the Government to interfere unduly in the health procurement market, which is an oligopsony, to use the technical term, but the NHS is by far the major buyer, rather than supplier. The Government must therefore take into account the future viability of the market. What appraisal has the Minister made of the impact on that market of NHS supply chain, as it is currently construed?
If the Government had had more respect for Parliament as they were putting together the outsourcing of NHS supply chain, the questions raised here today might have been settled before it took place. I submit that the process would have been the better for it. I believe that the Government were too embarrassed by the word “privatisation” and under too much pressure from many on their Back Benches and from the unions. They have been effective in keeping the matter away from Parliament—at times suspiciously effective—and in keeping manufacturing organisations roughly within their “big tent.”
Dr. Pugh: Does the hon. Gentleman agree that this is a prime subject for a future NAO report?
Mr. O'Brien: The arguments are on the record, and I dare say that such a report will now be considered. It would be a useful and helpful addition to the debate.
Perhaps the Minister, fresh from ducking badger problems and dealing with bovine TB in my constituency, could stamp his mark on his new job by being the first Health Minister with whom I deal who is open and transparent, not defensive, and who does not hide behind the false pretence of commercial confidentiality. On
23 January just this year, Her Majesty’s Treasury published “Transforming government procurement”, which explicitly recognises that good procurement is not just about driving down contract costs, but about championing the need for transparent processes that encourage innovation and take account of whole-life value for money.
The major question is around the lack of balance between value and price in the NHS supply chain set-up, which, of course, must be addressed. I hope that the new Minister will do so. I also hope that he has taken many clues from what I hope he will regard as constructive criticisms in this debate and that he takes account of the fact that perhaps a Government without any commercial experience should buy some in to ensure that the interests of NHS patients are properly and truly served.
12.10 pm
The Minister of State, Department of Health (Mr. Ben Bradshaw): I thank my hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Havard) for securing this debate and apologise to him and hon. Members in advance that they have a Minister who is so fresh in the job. Clearly, a lot has gone on in the past, and I undertake to look into it. I have discarded the speech that my officials prepared for me because my hon. Friend and the other hon. Members who contributed clearly have followed the issue closely and know much about the process that has brought us to where we are now.
I shall endeavour in a moment to respond to as many of the points and questions as it has been physically possible for my officials to give me advice on in the course of this sitting, but perhaps I could suggest a helpful way forward. Hon. Members who have not already availed themselves of the opportunity could come to the Department and get a detailed briefing from one of my officials at the appropriate level who has followed the process through from the start. If they then felt that there were still unresolved and unanswered questions, or if they still had criticisms of the process, they could come back and have a meeting with me in which I would try to address the issues.
I should like to say just one thing about the criticism that the hon. Member for Eddisbury (Mr. O'Brien) made about the parliamentary process. As he well knows, the Government do not control it. If hon. Members feel that there has been insufficient scrutiny and questioning on the subject, that is a matter of regret; but of course, the parliamentary process and the timing and selection of debates is a matter for Mr. Speaker, quite rightly. It is my understanding that there have been many debates, including several in Opposition time, on the health service in general, and they would have provided an opportunity for hon. Members on both sides of the House to scrutinise and question the decisions that were made. I should like gently to rebut his criticism.
I shall try to deal with as many of the questions that were raised as possible. As I said, I will look again at the process that has taken place, and if hon. Members remain dissatisfied after meeting with my officials to sort through the matter, I will endeavour to meet them and/or write to them and respond to their points.
The hon. Member for Eddisbury suggested that the inclusion of purchasing and supply in outsourcing was not made clear at the time of the outsourcing. My
understanding is that the original advertisement in the Official Journal of the European Union that invited suppliers to bid for the service clearly included purchasing and supply. What was not clear was the scale, which became clear only in the negotiations that happened subsequently.
The hon. Gentleman asked what our current estimate of the DHL market share is. I am advised by officials that the national health service spends £17 billion a year on goods and services. Initially, DHL took on £800 million of consumables listed in the old NHS Logistics Authority catalogue, plus £800 million of direct delivery contracts previously managed by the NHS Purchasing and Supply Agency, so that amounts to £1.6 billion. The intention is to grow that to £3.7 billion by the end of the 10-year period.
The hon. Gentleman also asked how much the DHL contract has saved. The estimates are £6 million so far this year. He said that it was a year after the Bardex catheter device was given a recommendation 1 by the rapid review panel that it was listed in the catalogues. My understanding is that, although the RRP gave the product a recommendation 1 for clinical evidence, it was not clear whether it was cost-effective. The new centre for evidence-based purchasing has been working with the NHS to undertake further research studies to establish the evidence. It has become clear from that episode that the industry itself is not always as good as it might be in providing good evidence to support innovative products. It is important that we are convinced by the evidence before a product gets widespread adoption by the NHS.
Mr. O'Brien: Will the Minister give way?
Mr. Bradshaw: I shall give way, but I very much doubt that I will be able to give the hon. Gentleman any more information than I already have.
Mr. O'Brien: I ask the Minister to give way because it is helpful to get some figures, and perhaps his officials will be able to pass him a note to confirm whether this is correct. As I understand it, the £6 million saving so far appears to have come from one contract, which is for the NHS antenatal foetal anomaly ultrasound screening programme. The savings relate to only one programme.
Mr. Bradshaw: I cannot give that clarification, but I undertake to write to the hon. Gentleman after this debate.
The hon. Gentleman also asked about part IX of the drug tariff. My understanding is that it has not been reviewed for more than 25 years, but a review is being undertaken with full consultation. On home oxygen, it is true that there was an underestimate of demand for it in the early days of the contract—we accept that.
My hon. Friend the Member for Merthyr Tydfil and Rhymney asked about accountability. Members of Parliament will be able to monitor performance in very much the same way that they can monitor the performance of the current service providers: the logistics division of NHS Business Service Authority, or BSA, and the NHS Purchasing and Supply Agency, or PASA. Like now,
both PASA and the BSA and their divisions will be subject to an annual audit by the National Audit Office.
Senior officials in my Department sponsor the BSA and PASA. The officials report ultimately to the permanent secretary and to Ministers. Both PASA and the BSA will lay their respective reports and accounts before the House of Commons each year, and the Department of Health, BSA and PASA will continue to answer parliamentary questions. I hope that that reassures my hon. Friend somewhat. I shall reflect on his request for an ombudsman process. Unfortunately, on my second day on the job I cannot give him the assurance that he seeks—I hope he will accept that that is reasonable—but I shall certainly reflect on the issue and discuss it with my officials and ministerial colleagues.
My hon. Friend also raised questions about the accountability of DHL and the contract. The contract sets out clear key performance indicators, and the BSA will be responsible for managing the contract and reporting on the performance to my Department. Financial penalties will be charged to DHL if it falls short of the minimum service levels required, and the contract between DHL and the NHS has built-in failsafes, particularly for any action that could be deemed to be in breach of contract. A sustained breach of contract could result in the operations being brought back in-house.
I was asked by my hon. Friend and by the hon. Member for Eddisbury about the progress that is being made on setting up the product councils, and exactly how transparent the process will be. My information is that the first two councils are expected to be established in the autumn. They are intended to provide a forum through which DHL can interface with the NHS.
It is intended that such councils will be open and transparent in several ways. First, DHL will arrange contracts using public sector processes and will be subject to normal EU public procurement rules and probity. Secondly, the councils will engage key customers in the NHS to ensure that decisions are based on what the NHS needs and wants. Thirdly, it is my understanding, contrary to what was suggested during the debate—I cannot remember by whom—that the names of council members will be in the public domain.
Mr. Havard: I am grateful to the Minister for explaining that there will be accountability through the usual processes of scrutiny in the House and that no one will act outside the law. Frankly, I would not expect anything different. The latest information that I have is that the advertisement has gone out for one of the first of the product councils in relation to nursing. In the advertisement, there is no description of how the stakeholders that he mentions will be actively involved. As I explained earlier, it seems that there is an open self-nomination process, yet the advertisement states that the nurses who will be appointed through that process by the supply chain, not by anyone else,
“will represent the views and interests of the NHS by acting as a reference, resource and sounding board to the NHS supply chain”.
Frankly, I do not know what that means—other than what it says on the paper as a piece of English. I fail to understand how someone who is self-nominated and has been chosen by the supply chain can represent the NHS.
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