Impact of Lord Carter’s Review of NHS Procurement: what are suppliers’ options?

25.07.2016

Efficiencies and cost reduction are the overriding priorities of the NHS’s procurement strategy. In this article we consider what this means for suppliers and the routes to challenge unfair or anti-competitive purchasing decisions.
In February, the Labour peer Lord Carter produced a report for the government that reviewed what could be done to improve efficiency in hospitals in England. The report estimated that the NHS could save £750 million per year through better procurement and efficiency savings of 2-3% per year. This is an effective real term cost reduction target of 10-15% to be met by April 2021.
The report also estimates that if all NHS Trusts aimed to achieve the NHS average cost, then the total pharmacy costs could be reduced by £800 million. The wholesale partnership in Avon, Gloucester and Wiltshire is cited as an example of how these savings could be made. This is a partnership between six Trusts and the largest pharmaceutical wholesalers in Europe to provide better discounts and supply chain consolidation, and to reduce stock holding.
In particular, the report recommends that the Department of Health’s Commercial Medicines Unit undertakes regular benchmarking exercises in the UK and internationally to ensure that the NHS price of hospital medicines continues to be competitive.
In order to achieve these ambitious targets the NHS can be expected to employ a range of different procurement strategies. These are likely to include the increased use of: parallel frameworks to ensure hospital pharmacies have access to generic or therapeutic equivalent drugs as soon as they come on the market; range reductions for drugs and medical devices; and the award of contracts solely based on price, rather than evaluating price and quality (i.e. most economically advantageous tenders).
Given that the NHS procurement environment is becoming increasingly challenging (and arguably even hostile) for suppliers, it is important to remember there are a number of routes for challenging procurement decisions.
The basic grounds for challenge is that the public authority has not acted in a fair, transparent, or non-discriminatory manner. It is crucial that suppliers seek legal advice as soon as a potential procurement law breach comes to light, as the Public Contracts Regulations 2015 (the ‘PCRs’) only allow a challenge to be brought within thirty days of when the claimant knew, or ought to have known, that it had a claim.
The rules allow for two specific remedies in the event of a successful procurement law challenge: (i) before a contract is awarded, a supplier can apply to the court for an automatic suspension of the contract award; or (ii) after the contract has been awarded, they can apply for a ‘declaration of ineffectiveness’, which renders the contract award ineffective. In each case damages are also available.
It may also be possible for suppliers to bring a claim for judicial review, which provides for a wider range of legal arguments than under the PCRs (including competition law principles), together with a more relaxed time limit for bringing a claim: promptly, or in any event within three months.
In our experience, launching a procurement challenge is often a cost effective strategy for persuading the NHS to review a contentious procurement decision and potentially negotiate a different solution with bidders.
Finally, and as discussed in our Brexit articles, the broad contours of the UK’s procurement law regime is likely to remain fairly similar, whatever the final outcome of the UK’s negotiations over its exit from the European Union.