Responses to feedback on our proposed approach to market share procurement of hospital medical devices
Responses to feedback we received about our proposed approach to market share procurement of hospital medical devices.
PHARMAC sought feedback on our proposed approach to market share procurement (MSP) for hospital medical devices in April 2015 so that we could develop a well thought out MSP process, mindful of the implications for patients, clinicians, DHBs and suppliers. We issued a discussion document in April 2015.
The submissions reflected support for the proposed approach for market share procurement with some reservations and suggestions for improvement. Some of the key themes that were raised during this consultation were similar to those received for previous consultations. All submissions we have received to date regarding our medical devices work will be taken into account as we look to progress our MSP work.
We have provided responses to key themes that were identified in the submissions in the table below. While we have not addressed individual questions or comments that were raised in all submissions, they will be taken into account as part of developing and refining our approach for MSP. Where appropriate, we will also seek additional information and clarification from those who provided feedback.
Our next step is to develop a MSP process for a limited number of wound care products. This is likely to take the form of a Request for Proposals (RFP) which we expect to release in September 2015.
We expect to engage with relevant stakeholders, such as DHB staff (management, clinical and procurement), suppliers and other interested parties as we progress through this process.
We appreciate all of the feedback that we received and acknowledge the time people took to respond. The feedback received will prove invaluable as we start to develop and refine our approach to MSP. A summary of the key themes that were raised in the submissions and our responses are provided below:
Q1. What other market share models should PHARMAC consider and why?
The majority of respondents across submitter groups supported a multiple supplier or a percentage of market share model (80:20).
Some suppliers preferred a dual supplier model as long as both suppliers had a comprehensive range of products.
One device supplier proposed an open market model, in which suppliers that meet mandatory technical specifications are eligible to supply the market.
An age and price banding model was suggested for larger orthopaedic devices.
A clinical respondent suggested that the type of market share model should depend on the seriousness of the safety issues associated with the device in question.
The appropriate number of suppliers for any given market will need to be assessed on a case by case basis taking account of a range of issues, many of which were raised in the submissions.
We acknowledge that the risk of safety issues associated with a medical device is important. We expect to take into account the Risk Classification of Medical Devices(external link) as part of our evaluation and supplier selection process.
PHARMAC is interested in generating greater competition between medical device suppliers for the benefit of the public health system. We expect that the best way to do this while meeting DHBs’ quality and range requirements will differ in different therapy areas.
Q2. What do you see as the key risks/benefits of the market share models described above?
Submitters across groups suggested numerous risks and benefits for all models, had a number of questions about the implementation of particular models, and commented on many factors that should be taken into account.
With reference to the percentage of market share model, a large number of respondents pointed out that it would be difficult to administer and implement (eg, measuring and enforcing compliance).
Dual supply may offer lower prices and a degree of standardisation but carried the risk of others withdrawing from the market, a lack of flexibility, and limited access to new technology.
Suppliers considered that with a sole supplier model there was likely to be greater savings achieved and a greater likelihood of standardisation; however, submitters across groups noted that sole supply had a number of risks associated with it, such as:
• low quality product
• reduction of services provided
• supply risks
• stifling of innovation and local competition
• lack of clinical choice and inability to use new and innovative technology.
With respect to the ability to monitor and enforce compliance in DHBs, we expect to have systems in place that would allow us to monitor purchasing for each individual DHB in product areas where this is required. We also intend to engage and work closely with DHBs so that any change decision can be successfully implemented and maintained throughout the life of the contract.
While we appreciate the concerns raised around sole supply and dual supply models, we note that, in appropriate cases, these types of arrangements have been successful in providing access to high-quality products at competitive pricing. From our past experience, we have found running open competitive processes for sole/dual supply increases the level of competition in the long-term, rather than reducing it.
As part of any MSP process, we expect to outline key specifications and quality requirements for medical devices and associated services. We would welcome proposals from reputable suppliers with high-quality products.
PHARMAC is interested in innovation aimed at improving the efficiency of the health system and/or improves patient outcomes. We do not expect MSP processes to negatively impact on innovation.
As outlined in the Discussion Document, we understand that some product choice is important to accommodate for patients that sit outside the usual standard of care. We expect to assess the different applications of products on a case by case basis with advice from relevant clinicians, before making decisions in the appropriate range of products in an area. We also expect that there would be some discretion allowed outside of these decisions.
Q3. How does your DHB currently weigh up the costs and benefits to decide when it is favourable to make a change (eg changing suppliers)?
Weighing and measuring up the cost of change is a difficult task, done in various ways depending on the item in question.
The majority of respondents noted a multi-factorial approach to weighing up the cost of change. DHBs may use formal evaluation committees however one respondent noted a DHB that does not use scientific methods (eg, HTA) in making the decisions around change in the majority of cases. Suppliers noted that the cost of implementing change in supply is underestimated by DHBs.
PHARMAC notes and acknowledges that there are currently no standard methodologies, algorithms or thresholds that DHBs use to decide when it is favourable to make a change (eg changing suppliers).
As part of PHARMAC’s approach to MSP, we expect to utilise a multi-factorial approach to evaluating the cost of change. This will include understanding the direct financial and clinical costs/benefits (eg cost of the medical device, any specific transitional costs, improvement in health outcomes) and also the indirect costs/benefits (eg additional/less nursing time, use of additional consumables).
Q4. As a wound care supplier, what are the key issues you can identify with the proposed approach to market share procurement for the wound care category?
Clinical submitters suggested that the function of the wound care device needs to be clarified.
DHBs want good information and education on how to implement products. Access to alternative products may be needed for some patients.
There must be a process in place for reviewing new products so the suppliers do not go directly to the DHBs, and the work of the Wound Care Advisory Group needs to be made available to DHBs as part of the change process.
Device suppliers challenged the assumption there is a high level of interchangeability between wound care brands. Suppliers considered medical devices, including wound care products, to be inherently different to pharmaceuticals.
It was noted that suppliers will cease to provide products where there is no commercial benefit, and that a new technology clause must be added to contracts. Device suppliers asked that accurate figures for the total market size are made available during the procurement process so that realistic pricing can be offered by any respondent. Issues raised include the proposed model affecting a company’s ability to address issues relating to dressing performance.
While PHARMAC notes that there are some benefits of categorising wound care products by function, we note that many wound care products have multiple functions and could therefore be classified under multiple subcategory headings. This makes it difficult to be clear which products are which for the purposes of our procurement activity. It is possible that information resources could be developed to support those looking at the category based on function.
In order to clarify the type of products that sit under the selected wound care subcategory headings, we expect to provide detailed information on the product specifications, examples, and where appropriate, a short description of the main function.
The clinical advice we receive from the Wound Care Advisory Group (WCAG) is currently being published and available on our website. We will continue to make these freely available as we progress to MSP.
PHARMAC acknowledge that there are differences between wound care products and medicines. We understand that there may be clear cases where price may affect quality, and therefore affect the overall performance. To make sure that we take this to account, we intend to outline key product specifications, review evidence and obtain clinical advice to make sure that the right comparisons are made before making any decisions.
Q5. How appropriate are the wound care subcategories proposed for market share procurement?
Most respondents agreed that the wound care subcategories selected were narrow, but appropriate for market share procurement. However, clinical submitters considered the list needs refining as it is currently a mix of suppliers and actual dressing products. It was suggested that dressing functions may be a more useful way of sorting out subcategories. Device suppliers also considered that the categorisation of wound care should be aligned with the indication or condition.
We note that the majority of respondents considered the wound care subcategories selected for MSP were narrow, but appropriate for the initial MSP work.
As noted above, PHARMAC note that there are some benefits to sorting out wound care subcategories by function or indication. However, for the purposes of running a MSP process, we consider it more appropriate at this stage to categorise by universally understood product descriptions. The ranges of products provided in the Discussion Document are examples of brands which we have currently contracted. We expect to provide more detailed descriptions of the range of products we are seeking proposals when we issue an MSP document.
Q6. What would be the preferred market sharemodel for the subcategories described above and why?
The majority of suppliers recommended having two or three suppliers per category. This was on the basis of as much standardisation as practicable, without risking supply issues.
DHBs considered that the model would depend on the product – a single provider could be used in most cases; however there is a need to consider occasions where different products are clinically indicated. A monopoly supply should be avoided.
There was some preference for 80/20 market share contracts. Nationally, there would need to be a panel of suppliers (minimum of three) as DHBs have different views on what is fit for purpose.
Clinical submitters’ views varied: one supported dual suppliers as long as they have a comprehensive range of products; the other suggested multiple suppliers in order to offer choices.
We note that there are a number of views on the preferred market share model and that this preference is largely dependent on the wound care product selected for MSP.
Q7. As discussed in Part 2 of this document, what level of clinical choice (if any) would you consider clinically appropriate for the wound care subcategories proposed for market share procurement?
Submitters supported clinical choice being at the centre of product selection; however, the level of clinical choice would vary, depending on the nature of the product being considered.
There was some submitter agreement that choice for low risk products should be limited. Some submitters detailed the level of clinical choice that could apply in various scenarios.
We acknowledge that some level of clinical choice is important to appropriately manage care for different patient groups and we note that the range required will be dependent on the product area being considered.
Q8. What is the rationale for the level of clinical choice outlined in Question 7?
Q 9. How does your DHB currently balance the need for clinical choice and the benefits of some market exclusivity for suppliers
in the wound care subcategories listed above?
Most respondents noted that there was an evaluation committee that made a decision on any changes to clinical suppliers. Decisions were balanced on a number of factors including cost, clinical outcomes, supply chain considerations, impact on existing assets (if appropriate) and consistency across the organisation.
We note that some DHBs currently have various processes in place to manage the level of clinical choice available in DHB hospitals. For our MSP process, we expect to work closely with DHBs and clinicians to make sure that we get the right balance. As part of this process, we will consider a number of factors as outlined in some of the submissions, including costs, clinical outcomes, supply chain considerations, consistency and impact on existing assets (if appropriate).
Q10. What other wound care subcategories should PHARMAC consider progressing to market share procurement? Why?
A number of respondents across submitter groups suggested other subcategories such as: alginates, occlusive dressings, negative pressure wound therapy, castings, securement tapes, calcium alginate dressings, tubular bandages on a roll, gels, absorbent pads, hydrocolloids, swabs (sterile and non-sterile) and tapes, antimicrobial dressings, and chemical debriding agents. Several submitters considered that including further subcategories should be driven by consultation with the sector.
We appreciate the suggestions made with respect to the other wound care subcategories PHARMAC should consider progressing to MSP. We expect to work through this list and identify opportunities to progress to MSP at a later stage.
Q11. What other key issues or properties should PHARMAC consider when evaluating products in the subcategories listed in Table 1?
Submitters across different groups suggested a wide range of key issues that PHARMAC should consider when evaluating products in the subcategories. These issues encompassed general principles relating to the evidence based use, having broad input, costing change, cost effectiveness, patient outcomes, and the ability to introduce new technologies, as well as very specific suggestions related to particular wound care products.
We acknowledge that there are a wide range of issues that need to be considered when evaluating wound care products. We expect to use this information to develop a robust evaluation process, with detailed product specifications and minimum requirements as part of the MSP process. Where available, we expect to utilise clinical evidence and best practice guidelines for our evaluation process.
We also expect to draw on other specialist advice if that is considered necessary to complement the advice from the WCAG.
Q12. Who would you consider important to have on a wound care user testing panel for the products listed in Table 1?
Submitters across groups suggested that representatives should be involved from across the product use spectrum and clinical indications, and a good cross-section of DHBs throughout New Zealand. Stakeholders include clinicians, and other DHB staff, and should include frequent patient users. One DHB submitter suggested that a table top evaluation may be suitable initially to assess the products due to the interchangeability they have. Another submitter noted that ‘user testing’ is not currently a means of obtaining good quality comparative data.
We note that there are different views on the requirement for user testing in order to obtain good quality comparative data. PHARMAC’s goal is to ensure its decisions are supported by good advice and clinical input, and products that meet clinical need are selected.
Where appropriate to do so, we expect to draw on specialist advice from various disciplines to complement the advice we receive from the WCAG. We note that the WCAG is currently made up of well recognised and respected wound care specialists from different DHBs. Most members currently hold key positions in their respective DHBs, with some members already involved in product evaluation processes in their own DHBs.
We expect to assess the need and method for user testing on a case by case basis, once PHARMAC has undertaken an initial assessment of the proposals received and the potential impact of any change.
Q13. What other ways should be considered to approach user testing, taking into account the limited time and resources DHBs
and PHARMAC might have available?
Submitters across groups suggested using available information such as the HTA information on wound care products already available in the Cochrane Database. Clinical submitters and DHBs stated that user testing should be as short as possible; it should utilise the best team for it with the best coverage. Submitters across groups considered that user testing could be done at a regional level – specified DHBs could be nominated evaluation sites for subcategories to create efficiency with regard to user testing. It was also suggested that user testing could be an intrinsic part of the contract and noted that the approach to user testing depends on what size panel is offered.
Q14. What kind of support would your DHB require to implement a change for the wound care subcategories listed in Table 1?
Submitters considered that the support required would depend on the product.
DHBs and clinicians suggested a number of areas for support including: time to use up old stock, a thorough user guide explaining outcomes, and an implementation pack that includes a listing of product details. Support for staff using the equipment and support to collate feedback may also be needed. In some DHBs there will be implementation champions who are available for questions and support.
A clinical submitter noted that many services that use medical devices have no ability, currently, to capture and record data about device usage – this is a serious threat to monitoring implementation and conformity.
It was suggested that the need for support will be reduced if relevant clinicians are offered the opportunity to be involved in the specification and testing group.
We note that implementation support and resources required for change will depend heavily on the wound care product under consideration and the nature of any change.
As implementation and resourcing requirements are heavily dependent on the products under consideration and the nature of change (if any), we will evaluate our implementation options once proposals have been received and evaluated. As part of this process, we expect to engage with relevant DHB staff and suppliers so that transitions to new arrangements can occur as smoothly as possible without causing significant disruption to DHBs. We appreciate the need for lead times to allow DHBs to manage out of any lines that are being replaced, and allow staff to plan any change activity around their other requirements.
With respect to the ability to capture and record data about device usage, the DHB datahub data continues to improve, and provides reasonable visibility in most of the areas proposed for MSP in the discussion document. As part of providing support to DHB hospitals, we hope to provide regular purchasing reports to DHBs to assist with purchase forecasts and managing agreements.
We expect to use the feedback received in response to questions 14 – 17 to refine and develop specific implementation options further.
Q15. Would a change in any of the wound care subcategories listed above require additional resourcing? If yes, what are the resources required and
why are they needed?
Clinical submitters considered additional resourcing would not be required except in the case of more specialised dressings.
It was noted that categorising dressings by function would be more useful to the end user, and that more work is required in specifics for subcategories.
Most DHB submitters identified several areas for additional resourcing, depending on the nature of the change and the timeframe required before compliance was required. These areas included a wound formulary for DHBs to guide staff in purchasing, supplier support to provide education regarding the changes (if relating to a totally new application technique) and potentially educator support to provide this within DHBs.
Suppliers considered that a supportive change management process included: education, training and in-service to ensure appropriate product selection and use and to realise any cost savings; implementation planning and assistance; stock management planning; and personnel and financial support.
Q16. Regarding market share procurement for products in the wound care subcategories, what other implementation issues are important for PHARMAC to take into account for your DHB?
Clinical and DHB submitters stated a need for clear communication and timelines. DHBs want to have enough time to run down old stock and to have an adequate supply of product and be able to notify supply departments to ensure imprest item changes are updated and coded in departments. Submitters also queried what would become of existing stock, and whether there was potential for buy back of other product.
Device suppliers identified implementation issues around identifying which products are to be used in which areas, stock management, adherence to individualised implementation plans in consultation with key people from each DHB and suppliers, and sufficient time allocated for training on the products. One device supplier provided an extensive list of the broader issues around implementation and the key factors that may determine whether an implementation of a market share decision is successful.
Q17. What sort of transition timeframe, training, resources and other support would your DHB require to introduce new wound care
products into your DHB?
Clinical and DHB submitters suggested that the timeframe, training and resources required depended on product function and the size of the change. A simple product such as absorbent dressings may take two to three weeks; for more specialised products such as silver antimicrobials, four to six weeks. More time may be required for a more complex transition for some products given the wide diversity of departments using them and distribution methods. Submitters suggested as a general rule DHBs need at least two to three months’ notice to implement, and use up existing stock.
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