Outsourcing Pharmacy Services
Mike Cross
Managing Director
Hambleton Medical Ltd
Outsourcing Pharmacy Services
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Overview of the concepts of strategic management
Outsourcing dispensing
Strategic choice
Aims
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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
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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
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– 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.