Outsourcing Pharmacy Services Mike Cross Managing Director Hambleton Medical Ltd

Outsourcing Pharmacy Services Overview of the concepts of strategic management Outsourcing dispensing Strategic choice

Aims Understand the political and environmental factors affecting outsourcing Understand the key drivers Understand how strategic management concepts can be applied to outsourcing Understand the benefits risks and concerns in outsourcing outpatients dispensing Be aware of the key considerations in making a decision

Strategy – the fundamentals Learning curve effects Tight focus or integration and scale effects Philosophy The changing nature of large organisations Financial climate and politics

Strategy – learning curve effects Principal Example of Pharma and homecare Example of a Trust board

Strategy – tight focus, or integration and scale The importance of focus Integration Scale effects

Strategy – tight focus, or integration and scale The importance of focus Integration Scale effects

Strategy - philosophy Communism or capitalism Promoting vibrancy Remember – there are good and bad companies in both public and private

Strategy - philosophy Communism or capitalism Promoting vibrancy Remember – there are good and bad companies in both public and private

Strategy -the changing nature of organisations The availability of information The importance of governance The ‘factory’ provision

Outsourcing dispensing Strategic decision Benefits of outsourcing Concerns of outsourcing Alternatives

Outsourcing dispensing - strategic decision Complex Long term Risk – Changes to VAT rules – NHS not good at commissioning – Effects on future provision of pharmacy and structures

Outsourcing - benefits VAT saving Patient experience Reduction in headcount Scale effects Potential to increase the scope to some inpatients Applicable to a wide range of patients Focus – avoiding lost opportunity costs

Outsourcing - benefits VAT saving Patient experience Reduction in headcount Scale effects for a focussed provider Potential to increase the scope to some inpatients Applicable to a wide range of patients Provider access to capital Focus – avoiding lost opportunity costs

Outsourcing - concerns Long tie-in Market and skills underdeveloped Market intrinsically less vibrant Information Purchasing Contracts Thin end of the wedge Margin retreat As the market matures will the quality drop?

Alternatives to Outsourcing Homecare FP10 Reduction in hospital prescribing Social partnership Holding company structure

Making the Decision What is core? What capacity is there to deliver the core What is the ability to manage the contract How do the figures add up? How do the figures add up if the present is optimised? How realistic is it to optimise the present? What is you outpatients area like

Case history 1 One of the very best hospital pharmacy departments Low waiting times Excellent clinical service Excellent governance Teaching hospital Safety focussed Good management good staff Low residual op RX High use of homecare

Case History 2 25% saving on drugs budget Poor staffing levels and recruitment Historically poorly managed Underdeveloped clinical pharmacy Long op waits Awful waiting area

Summary Usual decision – Reduce opRx – Increase homecare – Increase clinical control of outpatient prescribing For others – Ensure you retain the benefits and maximise the opportunities – Manage it well The future?

In Conclusion -what is needed? An informed decision made with an understanding of the strategic context, based on the present and future capabilities to optimally deliver the core.