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Pricing and contract coverage

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Topics: Policy, Commissioning and ManagerialTrusts

Ensuring tendering opportunities are maximised to benefit patient care

This article forms part of a series
  1. An overview of Procurement of Medicines and Pharmaceutical Products and Services for NHS hospitals
    1. Procurement Structure
    2. Arrangements for Procurement of Medicines and Pharmaceutical Products and Services
    3. Procurement of licensed medicines
    4. "Tranche" branded medicines in a competitive market
    5. Procurement of unlicensed medicines and other services managed by CMU
    6. Net Zero and Social Value requirements in NHSE medicines tenders
    7. Pricing and contract coverage
    8. Collaborative Purchasing Organisations
    9. Procurement systems in Scotland, Wales and Northern Ireland

Competitive pricing and contract coverage

There are robust mechanisms to ensure the NHS obtains competitive prices for medicines whilst ensuring that the UK remains a commercially attractive marketplace for pharmaceutical companies.

Competitive strategies

Strategies employed to ensure that this balance is maintained include:

  • Biannual benchmarking of branded medicine prices by CMU, PMSG and the devolved nations
  • Use of a mid-contract CMU price review mechanism for branded medicines to match to the best price identified through benchmarking
  • Horizon scanning to ensure contracts are not awarded just before a significant change in the market price is possible due, for example, to imminent patent expiry
  • Contractual obligation for suppliers of generic medicines to reimburse Trusts if their contracted line cannot be supplied and as a consequence Trusts have to pay a higher price from an alternative supplier.
  • A procedure for managing off-contract claims for generic medicines has been agreed with the British Generic Manufacturers Association and ABPI.

Tracking framework effectiveness

Every Trust in England submits monthly purchasing  data to the CMU ‘Pharmex’ database. The data includes the drug description, pack size, price paid and volume purchased. This data is used to inform future and to monitor compliance and uptake of the frameworks. Every Trust receives a monthly contract variance report to identify if they appear to have missed any savings opportunities.

Missed tendering opportunities

All licensed medicines are tendered by CMU in England and via the national procurement organisations in the Devolved Administrations.

Management consultants and turnaround teams often ask for explanation as to why Trusts do not have 100% contract coverage for all the medicines purchased. The reasons may include:

  • No bid received
  • Bid received but the medicine fails on quality
  • Supplier withdraws their bid or does not accept an award
  • Supplier terminates an award because of production or other issues
  • CMU does not award when there is no economic advantage e.g. a supplier may offer 2% discount through direct supply in response to a tender but there is a better discount available through wholesalers
  • There is a confidential patient access scheme or other commercial arrangement with NHSE&I or NICE
  • NHSE&I does not commission the use of the product