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Some more ways to save money on the NHS

    The news that the Government is set to introduce a new £200 healthcare entry fee for non-EU citizens who come to the UK to work or study has been met with the usual hysterical reaction. Diane Abbott, for example, tweeted “What price xenophobia? Stigmatising foreigners accessing NHS creates a public health risk.” But so-called “health tourism” is known by both parties to be a problem – all the debate is over “how much of a problem” it is. But does scale matter above principle? It is becoming clearer and clearer that British attitudes to the welfare state are hardening, such that a record of contributions before the “benefits” of welfare and, it seems, healthcare is considered fair.

    Politicians like Abbott are behind the curve here. It’s easy to say “health tourism only costs £33 million to £200 million” when you’re talking about somebody else’s money. In an era where we are trying to identify ways of rectifying the fact we have been living beyond our means, every little helps. This is especially true with the demographics of an ageing population.

    Yet there are other areas where the politicians should be looking if they want to save some taxpayer money in healthcare. After my piece for the CPS on Baumol’s cost disease, several of you got in touch with ideas on improving the efficiency of spend for unchanged outcomes. Some of these were whacky, and some not practical. But there are two areas in particular where we think the proposals are inherently sensible and could save significant sums. That’s why we’ve submitted them as policy proposals to be looked at by backbench Conservative MPs.

    1. Rationalising medication prescribing by including patent expiry dates in BNF and NICE guidelines

    So, one of the issues identified has been how two medications of identical efficacy and cost may have very different lifecycle costs if one goes off patent before the other. The problem is that currently the patent expiry date is not known about by most clinicians and not taken into account in NICE guidelines. Once a patient is on one medication, whilst it is usually easy to switch them from a branded to generic version of the same underlying drug, it is technically difficult to switch to a different drug within the same class of drug. Therefore patients get locked into a particular drug type and the NHS is unable to benefit from the cost savings afforded by the appearance of generic medications when patents expire for those patients who are taking an equivalent medication whose patent has not yet expired. An example from a CPS member might be illustrative here:

    “The NICE hypertension guideline 34 (2007) stated “use an ARB”. The two most commonly prescribed ARBs were losartan and candesartan, with equivalent efficacy and cost. By 2011 losartan had gone off patent with athprice of £6.47 per month for generic losartan vs £16.13 for candesartan. The 2011 annual ARB spend was £250m per year1. Although the updated NICE guideline 127 (2011) stated use a “low cost ARB”, this would primarily be for patients newly initiated on ARBs. The vast majority of patients would already be on therapy and would not be switched (as it can be difficult to match dose exactly and there can be clinical instability during the switchover). Therefore if the NICE 2007 guideline, or the BNF, had indicated the preference of losartan over candesartan based on earlier patent expiry, the 2011 ARB saving would have been significant.”

    So, a simple policy response might be: include drug patent expiry dates in the British National Formulary, and change NICE guidelines such that they take into account different patent expiry dates, rather than base their cost analyses on the costs current at the time of the actual NICE appraisal. Savings would thus be made as the total prescription cost over the lifetime of the drug therapy would be lower. Of course, thought would need to be given to ensure prescription of drugs with later patent expiry date in circumstances where they might be advantageous. And there’d be a lot of lobbying against it from the big pharma companies. But wouldn’t this be a simple way of making savings?

    2. Rules surrounding medical negligence

    The cost of hospital litigation and defensive medical practise is high and now runs at £18bn per year, i.e. over 50% higher than those “savage cuts” that George Osborne announced in the Spending Round for 2015/16. If a compensation award is made, the costs are based on what it would cost in the private sector and assumes the patient will purchase this care from the private sector. This ironically was a compromise introduced to overcome opposition from doctors to the 1946 National Health Service Act who feared loss of private income. But the level of rehabilitation and home support now available is incomparable to that in 1946. Most patients therefore receive their support from the NHS. However, they still receive the cash compensation as if they buying private care themselves. For example, a baby born with cerebral palsy will receive extensive home care and hospital support, appropriate to their level of disability, provided for by the state. A baby born with a similar level of disability but from an obstetric mishap would now get a £6m payout, but their home care and support would still be provided for by the state. If the lawyers agreed that there was a 50% chance the disability was due to a mishap, 50% due to cerebral palsy, then a £3m payout might be agreed. Should we be paying £6m to the child with a genetic form of cerebral palsy too ? i.e. what is the purpose of the financial payout given that the state provides the care anyway? To a certain extent, we’re suing ourselves. And lawyers are getting extremely rich in the process.

    Now, I understand that some Conservatives raised this issue during the last time of Tory majority government and one suggested a move away from this system towards a model of administrative justice. As well as saving on the NHS litigation budget, this would potentially lead to larger savings from a change in mind-set from less defensive medicine. NHS organisations could still be financially penalised, but the money would stay in the NHS (or go to the Treasury), and disciplinary procedures for staff would remain. Given the amount of money involved here, surely it is time this was re-examined?

    Ryan joined the Centre for Policy Studies in January 2011, having previously worked for a year at the economic consultancy firm Frontier Economics.

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