Public Sector

U.K. National Supply Chain Excellence Programme (SCEP) – Generic Drugs Procurement and Management

As part of the National SCEP programme, A.T. Kearney was engaged to deliver the national procurement of multi–source generic drugs for the National Health Service, a spend of some £320 million annually.

Challenge
The existing procurement mechanisms were through approximately 300 individual hospitals. The purchasing information (demand volumes, pricing, and supply-chain channels) was held across many different systems with, at the time, no meaningful national aggregation of the 3.2 million transactions.

Approach
The team’s first step was to identify (on an 80:20 basis) the main legacy systems employed and map to a common data set. Initial extraction of data was performed manually and procurement opportunities identified. Significant price variances complemented the expected leverage to be gained though volume aggregation.

The project then launched two streams of work:

One-off procurement of generic drugs based on aggregated volumes, pricing alignment, and national tendering. This work was instrumental in supporting the formulation of the “Category M” pricing system now used in the U.K. to govern pricing of generics. This sophisticated pricing mechanism compensates for pharmacy profits and other supply-chain issues to ensure a competitive market and viable supply-chain. The Category M pricing system is now widely regarded as a highly effective system for delivering some of the lowest generics pricing globally, while maintaining an effective and stable supply chain.
Design of a near-real-time data collation and supply-chain monitoring system that is used by the Department of Health to continue its procurement activities – monitoring the complex financial flows within the supply chain as part of the management of the Category M market. The system works by automated upload from existing legacy systems, real-time mapping of spend data, and a suite of performance reports. It links with other national systems to provide clinical indicators and trends, thus enabling, for example, the formulation of national clinical strategies.

Results
The success of the system was predicated on the agreement to build an “aggregation tool” rather than a costly, one-size-fits-all IT system mandated across all hospitals. In fact, this approach minimized interruption for the hospitals and maximized benefits – savings of ~21 percent.