Looking ahead to 2020: economics, health care policy and pharmacy
In this fourth article in a series leading to a consultation among members about the Royal Pharmaceutical Society's Pharmacy 2020 project, Clive
Smee, former chief economic adviser at the Department of Health, looks at economics and health care, particularly in England
The central economic problem for any society is how to reconcile the
conflict between people’s almost limitless desire for goods and
services, and the scarcity of resources available to produce these goods
and services. Economics has been defined as the study of how society
decides what, how and for whom to produce.
Looking ahead to 2020, what
can be said about the drivers of what (and how much) the pharmacy profession
will produce, how it will be produced and for whom?
Pharmacy is an important component of the health care sector and their
futures are intertwined. In considering each of the “what” (including
how much), “how” and “for whom” questions it
is, therefore, appropriate to look first at the drivers for the health
care sector as a whole and then to turn to the probable influences on
the pharmacy sub-sector. What will be produced at what cost?
Health care services In the past seven years, the health services in
the UK have enjoyed the biggest increase in resources in their history.
Between 2000 and 2007, NHS funding increased by around 7 per cent per
annum in real terms raising total health expenditure from 7.3 per cent
of GDP to about 9.2 per cent. Although there continue to be pressures
from health care’s long-term cost drivers — new pharmaceuticals
and other technologies, rising public expectations and demographic
changes — these rates of growth cannot and will not be maintained.
“Securing our future health: taking a long term view” (the
Wanless review, 2002) was the most authoritative forecast of the need for
health
care funding. It assumed that after 2008 the required rate of increase
in NHS expenditure would fall to between 3.2 and 4.3 per cent per annum
in real terms, about the rate of increase from 1954 to 2000. The lower
rate of 3.2 per cent could be achieved by the “full engagement” of
society in responsible health choices. This is assumed to require a major
expansion in self care and in public health. Even at these lower rates
of increase, Wanless projects health care costs rising to 10.6 per cent
of GDP by 2020.
The UK, like many other countries, funds its health services from a combination
of tax, social insurance and private insurance. A major slowing in the
rate of increase in tax funding, as seems almost certain, might in theory
be offset by a growth in private insurance or private out-of-pocket payments.
But history suggests the offset is likely to be small. Moreover there
is a fairly broad consensus among commentators and the main political
parties that tax remains the most efficient method of revenue collection,
the most effective way of controlling expenditure and the most equitable
way of sharing health risks.
It seems reasonable to conclude that up until 2020 the increase in health
service funding will depend primarily on the buoyancy of tax revenues,
and hence of the economy, and on the priority governments give to health
relative to education, the environment, security and defence, and the
other demands on public budgets. Even on the most optimistic assumptions
over most of this period resources are likely to be much tighter than
they have been over the past five years.
Aware of these pressures the Government is attempting to manage demand
for publicly funded heath services through investing in self care and
prevention, and to move health service resources away from the most expensive
part of the health care system — the hospital — into primary
and community care. Pessimists will point out that such shifts, particularly
the latter, have been on the agendas of both major parties for the past
25 years with, in general, only limited success. Optimists can retort
that the present plans are more robust, better informed, more adequately
funded and supported by stronger incentives.
Anticipation (and experience) of tighter resources can also be expected
to strengthen the drive for evidence-based medicine and policies. The
establishment of the National Institute for Health and Clinical Excellence
in 1999 marked political acceptance of the need for health interventions
to be not just clinically effective but also cost-effective.
The role
of NICE has already expanded enormously from the appraisal of new technologies
to the appraisal of existing technologies and from health service interventions
to public health interventions. As resource constraints drive wider
recognition of the need for prioritisation and for maximising value for
money in
health care, the role of NICE (or any successor organisations) can
only expand. Services that cannot be shown to offer value for money will
be
increasingly targeted for scrutiny and possible contract exclusion.
Greater public consciousness of safety and quality is another trend
that is affecting public expectations of health care services. Increasing
information on health care outcomes is highlighting unacceptable levels
or variations in quality and safety. Addressing these may require investment
up front but in the longer term this could reduce overall health care
costs.
Pharmacy How far will the trends expected to affect
health services in general also have an impact on pharmacy? Historically
the growth of
community and hospital pharmacy has been closely tied to the growing
role of pharmaceuticals in health care. Pharmaceutical expenditure was
12.8 per cent of total UK health expenditure (public and private) in
1980 and 15.8 per cent in 2004.
Although the number of pharmacists under
contract to the NHS has barely risen in recent years there has been a
sustained increase in the number of prescriptions dispensed per pharmacy,
from 42,500 in 1994 to 65,100 in 2004, according to the OECD, the Organisation
for Economic Co-operation and Development.
However the rise in pharmaceutical
expenditure was not reflected in a similar rise in dispensing fees: between
1994 and 2004 pharmacy income from dispensing fees fell from 18 per cent
to 12 per cent of total expenditure on general pharmaceutical services,
according to the Office of Health Economics, though this may have been
offset by a rise in income from margins.
Will trends in pharmaceutical expenditure buck the expected slow-down
in the growth of overall health service expenditure? In the 1990s they
did, but it is possible that the 1990s will come to be seen as exceptional.
Since 2000 pharmaceutical expenditure has been growing more slowly than
total health expenditure.
In Australia it has recently been argued that
growth over the next decade or so could be much slower because of government
action to achieve large price cuts in pharmaceuticals, the introduction
of higher co-payments, a decline in block busters and growth concentrated
in products (eg, oncology products) that are not dispensed via community
pharmacists. In the UK only the second of these factors would seem to
be currently ruled out by Government policy.
Other Government policies may offer pharmacy, particularly community
pharmacy, opportunities to escape from the tighter constraints on health
service expenditure as a whole. A raft of recent Government policy statements
has identified opportunities for pharmacy to expand its role in self
care and public health. Other statements have urged it to play a larger
role in the planned build up of “closer to home” primary
and community services. Moves in both these directions have been supported
by the new community pharmacy contract. While the development of new
services or “products” has so far been relatively slow there
are already reports that fees from medicines use reviews (MURs) are making
a significant contribution to pharmacy profits.
How far pharmacy can exploit these new opportunities will depend on a
number of constraining factors. Some, such as opposition from GPs and
the ignorance of primary care trusts, may be difficult for the profession
on its own to overcome. Others, such as the current lack of evidence
on the effectiveness and particularly the cost-effectiveness of many
potential advanced and enhanced services, are more within the profession’s
control provided it is willing to sponsor the necessary evaluation and
research. The action required is now urgent: viewed through the eyes
of primary care trust commissioners the profession starts at a major
disadvantage relative to the services of traditional suppliers for which
there is often much better information on value for money. How will it be produced?
Health care services Since the founding of the NHS the bulk of health
service provision has been through public monopolies or through highly
regulated private providers. Direction and control has been centralised
at the national level. Competition has generally been discouraged between
providers and between professions. In some sectors, including pharmacy,
the public has always enjoyed choice but for many services it has not
been encouraged or even permitted.
Remuneration systems have been linked
primarily to hours of work and skill level, and have usually avoided
explicit links to performance. Where there have been links to individual
productivity or performance the link has invariably been to activities
or outputs, not to quality of service or outcomes.
Beginning with the Conservative’s “internal market” in
the 1990s there have been halting steps towards giving market incentives
a greater role in the NHS, both in the “product” market and
in remuneration systems. The current Government believes competition,
or at least contestability, and choice can make an important contribution
to improving service access, quality and efficiency. The private sector
has been allowed into service areas that were previously public monopolies
and patients have been offered choices across an increasing range of
suppliers, public and private. Some of the barriers or distinctions between
professions are also being broken down: prescribing is a good example.
In the labour market the new GP contract amounts to a major experiment
in tying remuneration to quality of care. In order to ensure that authority
is based on the best-quality information, commissioning decisions are
being decentralised (formally at least) in England to PCTs and practice-based
commissioners.
This new organisational paradigm is still not fully worked out. Some
elements will doubtless work better than others but, looking ahead to
2020, it is difficult to see a reversal of the trends towards more contestability
and choice in service markets, more overlap between professions, more
emphasis on quality and outcomes in remuneration systems and greater
decentralisation in commissioning. Pharmacy Through a series of policy papers, the 2005 relaxation of entry
controls and the new contractual framework for community pharmacy, the
Government has signalled that it is changing the organisational arrangements
for pharmacy in ways that mirror the changes in other parts of the health
sector. The intention has been to make community pharmacy services more
accessible and patient friendly, to enable pharmacists to offer an improved
range of services and to make better use of pharmacists’ skills
and expertise.
It is early days to judge how well these objectives will be met. The
relaxation of entry controls has clearly had consequences that were not
anticipated: in January 2007 ministers asked for a review to ascertain
how PCTs could be given the power to ensure there are adequate pharmacy
services in deprived and rural areas. The new contractual framework appears
to have been a greater driver of change with progress reported on repeat
dispensing of prescriptions, the expansion of MURs and the growth of
local enhanced services.
Nevertheless progress has generally been slow
and early evaluation points to few innovative services and little change
in relationships with GPs or integration with primary care. However,
the contract can be expected to continue to evolve, particularly in the
direction of linking payments to quality of care (similar to the quality
and outcome framework for GP remuneration).
In the longer term the new contractual framework offers community pharmacies
a much richer range of business alternatives than they have enjoyed in
the recent past. In particular they can choose to remain as dispensers
or they can move into the supply of a range of primary and community
care clinical services that have normally been associated with doctors,
nurses or public health specialists (when they have been provided at
all). The choice may be assisted by continuing downward pressure on the
dispensing fee as the Government tries to ensure that pharmacy delivers
the same year-on-year efficiency gains as it expects from the rest of
the NHS.
These choices could well lead to different ownership structures. Independent
ownership of community pharmacies has been declining rapidly. Between
1990 and 2005–06 the percentage of community pharmacies in contract
with the NHS that were independently owned fell from 66 to 43 per cent.
Some forecasts see this figure falling to 25 per cent by 2015. Should
pharmacists retreat into a narrowly defined drug supply role this trend
could be accelerated. On the other hand those pharmacists who choose
to focus on extending their clinical roles could see their independence
strengthened as they work either on their own or with family doctors
or in primary care organisations.
New delivery technologies present another challenge to the organisation
of community pharmacies. The development of integrated IT systems is
clearly essential for inter-professional working. Optimists in the profession
will also see the internet, mail order, telephone consultations, medical
help lines and interactive video consultations as complementary services
that provide patients with increased choice. Pessimists may view them
as direct competition. Either way most of these “new” technologies
are likely to be much more in evidence by 2020. For whom will it be produced?
Health care services The market for the NHS will remain the whole population.
But the Government has signalled that it wants to do more to tackle
inequalities and improve access to community care, to improve prevention
services and to give more support for people with long term needs
Pharmacy With 94 per cent of the population visiting
a pharmacy every year and more than a fifth of people reporting that
they would like to
receive information and advice on health from their pharmacist in the
future, community pharmacists should be well placed to respond to the
Government’s signals.
The new contractual framework and the local
pharmaceutical services scheme provide incentives and mechanisms
for reaching those least active in self care: the most elderly, the deprived
and those from ethnic minorities.
However expanding outreach to these
groups will not be easy and may require a reversal of recent trends:
a recent Mintel lifestyle survey found that the proportion of the
public
consulting a pharmacist when suffering a minor ailment fell from
40.5 per cent in 1994 to 39.4 per cent in 2004. In the absence of a
good evidence base pilot projects are needed to identify the best way
to
make
progress. Conclusion
The slowing of the growth of health service expenditure from 2008 will
present all health service with significant challenges. But the Government’s
strategic responses of encouraging prevention and self-care and moving
services “closer to home” provide major new opportunities
for pharmacy. Increased attention to safety is another opportunity.
The new (and evolving) contractual framework should supply the incentive
to respond to these new market opportunities. But the evidence base
still needs to be tackled. |
The
Pharmaceutical Journal