Health Committee, 20 Sep 2005

Meeting date: Tuesday, September 20, 2005

Official Report 317KB pdf

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Budget Process 2006-07

Agenda item 5 is consideration of the budget process for 2006-07, for which we have decided to focus on the Health Department's efficient government proposals. We will take evidence from Dr Kevin Woods, the head of the Health Department and chief executive of the NHS in Scotland. Dr Woods has already spent an exciting morning in front of the Audit Committee, so he is having a long, hard day. He is accompanied by Scott Haldane, the finance director for NHS National Services Scotland; Professor Bill Scott, the chief pharmaceutical officer; and Adam Rennie, head of the community care division. I invite Dr Woods to make a brief introductory statement, after which we will move to questions.

I thank the committee for inviting us. Efficient government is a substantial topic, on which I would like to make a few comments. I will try to be as brief as possible, but the subjects in which the committee is particularly interested are significant.

The aim of the efficient government approach is to release genuine efficiency savings—every pound that we save will be ploughed back into health services to supplement announced spending. Since the publication of the efficient government plan in November last year, the cash savings target for the Health Department has increased to £342 million by 2007-08. For time-releasing savings, the figure is £174 million, as announced on 6 September this year. The savings plans are subject to scrutiny and challenge by Audit Scotland, which is considering what monitoring work it will ask its auditors to carry out in 2005-06. However, responsibility rests with the department and the health boards. All the projects that were identified are now in progress, although some are in the early stages, and all are on target to deliver the intended benefits by the proposed date.

I understand that the committee would like to focus on three areas in particular.

There will be general questions, but the three particular issues are prescribing of drugs, efficiency savings in the Scottish Commission for the Regulation of Care and NHS logistics reform.

I will say a little bit about each, if that is okay, although if you would prefer to go straight to questions, I am happy to do that.

The consensus among members is probably that we should go straight to questions. You may be able to make some of your comments in answer to our questions.

Fine.

As Janis Hughes has to leave early, she can ask the first question, which will be on NHS logistics reform.

I will start with an issue that is close to my heart, which is NHS information technology facilities. For the past 20 years or so, there has been an ever-growing conglomeration of various systems that do not talk to one another. Some individual trusts or even units have their own IT systems that bear no resemblance to systems elsewhere in the NHS. That sort of situation is detrimental to the modern ways of working that we discussed with Professor Kerr and which we are considering implementing in the NHS as a whole.

In the rest of the United Kingdom, the NHS has signed up to a 10-year agreement for the whole of the service, which has provided benefits, not least in respect of the savings that have come from it. Why has that not been done in Scotland? What moves have you made since we last considered the budget to rectify the situation? Given that some of the changes that are to happen in the provision of care, particularly acute care, are heavily dependent on robust IT systems, can you assure us that the systems that will be put in place will be efficient?

I am happy to address that question. IT is important for some of our procurement projects. More generally, it is fair to say that since the days of trusts, which Janis Hughes mentioned, our approach to procurement of IT services has been turned on its head. We are now clear that we do not want parts of the NHS to go off in different directions and do their own thing with IT systems. We therefore promote either national contracts or collaborative procurement. For example, in the context of better procurement, we now regularly use e-auctions to co-ordinate purchasing of equipment. To give a small example, last week, an e-auction for personal computers and laptops saved £426,000.

Our ambition in the longer term is to move to a single IT system for Scotland, a measure that is flagged up as necessary in the Kerr report. We are committed to progressing procurement of that in the next two or three years. Between now and then, we will run a number of other national procurements for important systems to fill some of the current gaps. We believe that those measures will deliver important benefits to patients and clinical staff. An example of that will be our procurement of a picture archiving and communications system—PACS—for radiology, which will ensure that we have a very efficient system of high-quality digital images. We will be rolling that out over the next two years.

Similarly, we are developing national systems for information for accident and emergency services. We are also rolling out an emergency care summary record. That has been piloted so far in Grampian and in Ayrshire and Arran in order for it to become a standard feature. It will enable clinical data to be passed from general practice and primary care to out-of-hours providers so that they know something about patients who enter that part of the system.

In order to underpin all that—I hope that this is not too elaborate an answer—we are pursuing vigorously the universal adoption of the community health index number. The CHI number is important in enabling us to move to a single patient record, because we need to have a unique patient identifier. Our intention is to have it in universal use by June 2006.

Most of what you say is reassuring, but I am concerned that you are still two or three years away from having a single IT system throughout Scotland. I mention the example of Greater Glasgow NHS Board, because it is about to go into a major capital procurement programme for the ambulatory care centres at Victoria infirmary and Stobhill hospital. IT will play a crucial part in the design and work of those centres. IT's role is particularly important where there is split-site working, because people might be concerned about how their records will be accessed in two sites in different parts of the city. Can you assure me that discussion is taking place to allay people's concerns about IT operations in any pan-Scotland system that you negotiate?

I am not familiar with the precise details of the IT components of the hospital developments to which you referred, but I am confident that people's concerns will be addressed in a way that is consistent with what we are discussing here. That is important.

There is always an issue about when to stop procuring systems of a particular type and when to move on to another. That is something about which we are thinking carefully. However, our direction is clear: we want standardised systems that can communicate one with another. We have invested heavily in telecommunications infrastructure to make that possible. Many of the systems—PACS, for example—require the transfer of large quantities of data; networks that can do that are needed. We have already invested in that sort of thing.

I know that health boards are required to provide 25 per cent of funding for the best procurement implementation programme. Are the plans that have been discussed for a central distribution centre—in Lanarkshire, I believe—on course and will they be within budget? What long-term savings can boards anticipate as a result of such centralisation?

There are several related components in that question that are worth teasing out. It is probably helpful to think about them in connection with the supply chain. We are trying to use our collective buying power to reduce the cost of goods and services; that is what we call strategic sourcing. For instance, we secured savings of 30 per cent on procurement of protective clothing and uniforms through that approach.

We are trying, again using electronic communications, to make it easier for staff throughout Scotland to order goods and services from their workplace, thus eliminating some of the paperwork that has traditionally been associated with communications. We are also trying to streamline distribution of goods and services through, for instance, the creation of a national distribution centre, which is due to come on stream in 2006. When we add all those projects together, we aim to secure savings of about £70 million by 2007-08, and I understand that all those projects are currently on course.

Going back to the summary recommendations in the Kerr report, one of the recommendations is that electronic health records should be put in place within three years. You have said this morning that that will happen. I mean this afternoon—I have lost track of time.

I can assure you that it is the afternoon, sir.

Right. Let me start again. Will that three-year programme happen?

That is what we are aiming to do, yes.

Now I am getting confused. Will it happen or not?

All I am saying is that that is our intention and that is the timescale that we are working to, so it should happen.

So, on the basis of the progress reports that you have to date, you do not anticipate it not happening.

No.

If you are not sure about that—

If there is hesitancy, it is simply in my recognition that we are talking about a very large-scale procurement. We are talking about very complex systems.

Yes, but we are not talking about developing that system—we are talking about buying something off the shelf.

At this stage, we are examining the different possibilities for obtaining the system. There are different things that we could consider. Some people have suggested, for instance, that systems that are used by the Veterans Benefits Administration in the United States would be worth considering; that was discussed in the Kerr report's considerations. We are looking for different ways in which we might fulfil that, and then we shall go through a competitive procurement process.

Is there conflict? Do the people who have been involved for the past however many years in delivering new technology in the Health Department have views on whether they should be developing new systems or whether off-the-shelf material is available? Is there an issue?

There are bound to be different views about the best way to proceed. What we have in Scotland is an e-health project team—I happen to chair it—that is heavily populated by clinicians. One thing that has been clearly established over many years is that the key to success in the use of information systems is not just the system itself but the system's functionality and suitability, support for the system from clinicians in particular, and organisational change and training to support it. That is why some of our leading clinicians, who are heavily involved in information systems, are participating in the debate on how to proceed.

You started off by telling me that you were on schedule for the three-year timetable. Are you telling me now that you have not even agreed whether an off-the-shelf package is available? When will that issue be resolved? If the situation continues for much longer, will that affect the three-year timescale?

No. I am saying that the conversations that we are having at the moment are part of the plan that will unfold over that three-year period.

Could we get more detail about the plans, perhaps in writing?

That would be helpful.

I would be happy to provide that.

As well as being compatible within the health service, are we also looking at issues to do with the system's being compatible with local government?

One has to be careful about safeguards in relation to information and confidentiality—that is clearly an important consideration. We would not simply be designing in the easy flow of personal clinical information, but if we can secure appropriate linkages and provide appropriate safeguards, I am sure that that is something that will inform our work.

How significant is that in delaying the roll-out process? I accept that there is a significant issue about patient records and who has access to them.

I do not believe that it is a significant factor in any delay, and I want to reassure you that there is no delay. I am trying to tell you that we have a programme that will take us the next three years to design, procure and implement. That is what we are doing. To my mind, there is no reason at this stage to think that the project is delayed in the way you seem to think it is. I hope that that is not your impression, because that is not what I am saying.

No, I am just concerned by the use of words such as "design" when we know that other health bodies throughout the world already deliver such services. After all, when people feel that they have to design something, we usually get an expensive flop at the end of the process. I am attracted by things that are bought off the shelf.

For the reasons that you indicate, we are looking hard at the risks in the process. We are commissioning detailed work on mitigating and managing the risks effectively in order to avoid the situation that you described.

Page 235 contains a summary of recommendations from the "Electronic Health Record" through to "Tele-medicine". Can we have an indication—

Dr Woods, Mr McNeil is referring to Professor Kerr's report.

I was wondering which page 235 we were on.

Page 235 of the report, which contains a summary of recommendations, says that the NHS

"needs a single information technology system"

blah, blah, blah. Will you indicate the progress that has been made on each of the recommendations on page 235? When are the recommendations likely to be delivered?

I am very happy to submit that information to the committee.

That would be useful.

Of course, we will say more about some of the recommendations when the Executive's response to Professor Kerr's report is released in due course.

I want to clarify with my colleague whether, when he envisages a single IT system that would include local authorities—which might well raise eyebrows elsewhere—he is referring to the authorities' role as providers of much community care and so on.

Yes.

Dr Turner also has some questions about logistics reform.

Is the NHS thinking about buying drugs and appliances in the same way that one might buy spare car parts? For example, are you considering which drug is the best, which drug is the cheapest and so on?

I ask Mr Haldane to answer that question.

Throughout Scotland, we have what are known as pharmacy zones where groups of pharmacists come together with procurement experts and buy drugs according to the approved formulary for that region. We intend to work more closely with pharmacists from a national perspective to ensure that we get the best possible leverage for the spend of public money on pharmaceutical products.

That would make sense for a country with 5 million people.

We have one major warehouse at St John's hospital in Livingston, which at the moment stores—

I realise that there is a big difference between primary and secondary care, which will probably require more discussions with community pharmacists. Many consultants want general practitioners to prescribe drugs. However, drugs are expensive, and it is sometimes more expensive to prescribe them in the primary care setting than in the secondary care setting.

It might be helpful if I invite Professor Scott, the chief pharmaceutical officer, to say a little more about the cost of pharmaceuticals and some of our initiatives to secure effective purchasing.

Perhaps we should hold off on that until we come to our questions on improved prescribing. It might work better in that section.

As members have no other questions about logistics reform, I return to the area of questioning that I was going to take first. Shona Robison will ask questions of a more general and strategic nature.

I will begin with a general question. If the scale of the cash and time-releasing savings is as Dr Woods has alleged, why have they not been made before?

For many years, the NHS has been seeking year-on-year efficiency savings and the custom and practice has been to identify locally ways of releasing additional cash for services. However, with its efficient government programme, the Executive has made it clear that it wants to take a more concerted and determined approach. Members will see from my examples that such an approach, particularly with regard to procurement, logistics and so on, brings very significant benefits.

Should not officials in your department be looking constantly to make savings on the scale that has been suggested? Surely at some point over the past six years they could have told the minister that such savings could be made.

I was not around then but, in general, you are right. There has been a continuing interest in securing efficiency and cash-releasing savings, because they add to the totality of available resources. The procurement initiatives that we are now pursuing in this orchestrated way have their origins, in part, in some work that is being undertaken by procurement officers on some NHS boards. Mr Haldane could give you more detail on that.

I re-emphasise that it is not as if people have not been looking for efficiencies in the past. They have and they have often succeeded; for example, in dealing with backroom functions and trying to secure services more efficiently. We are now trying to capitalise on collaborative working using the added purchasing muscle that comes from pulling together all NHS organisations in Scotland.

Let us consider how robust some of the alleged savings are. I am interested in the discussions that went on between officials in your department and Audit Scotland in advance of the suggested savings being put forward. The Executive's comment was:

"Audit Scotland … are content with our detailed plans."

However, that is not really borne out when we read what Audit Scotland had to say about the plans. It said:

"the tools to measure time-released savings are ‘rarely in place' … there is ‘uncertainty about targets' … some claimed efficiencies are only ‘proxy' savings and cannot be properly measured … assumptions on inputs and outputs, the key test of efficiency, are ‘often untested'."

That does not make it sound as if Audit Scotland really is "content". I am interested to know what discussions you had with Audit Scotland and what Audit Scotland said about the proposals that you put forward.

What is being said there is that we are dealing with often complex issues. For example, what is the baseline, and how are we going to develop information systems that can track things better? We have published detailed notes setting out how we are to do that. For instance, we have issued detailed notes on the reduction of absences, which would be a time-releasing saving. Those notes must be cleared with Audit Scotland so that everyone is satisfied that we will have effective measures of the savings that we are pursuing.

Has Audit Scotland effectively missed the tools to measure time-releasing savings? It is saying that those tools are "rarely in place". Are they in place?

Yes, I believe they are.

So why does Audit Scotland not know that?

I am not entirely sure to what you are referring when you make those quotes.

In her letter to Peter Russell, Caroline Gardner says that the tools to measure time-releasing savings "are rarely in place". In the same letter, she goes on to discuss "uncertainty" about targets and "proxy" savings, and says that assumptions on inputs and outputs are "often untested". Are those fair concerns to raise or not?

I am not familiar with the detail of the dialogue between Peter Russell and Caroline Gardener, which probably reflects the complexity of measurement in some of those areas. I mentioned reducing sickness absences. We are implementing a new workforce information system in Scotland, which will be very important for some of that measurement. The comments could be referring to something like that.

Where does Peter Russell sit in the scheme of things?

Peter Russell does not work in the Health Department; he works in one of the central departments of the Scottish Executive, and has an overview on efficient government in all—

So he has a key role in the efficient government initiative, does he not?

Yes.

Let me move on to some of the specifics regarding sickness absence, which you have mentioned, and regarding the consultant contract. You have stated that there is to be a 20 per cent cut, going down to an average sickness absence level of 4 per cent by 2008. Is that right?

What we have said is that we want to move from the current average level of sickness absence of 5.35 per cent to 4 per cent, which is already being achieved in some places.

I emphasise that we want to go about that by being a good employer. There has been speculation that we will approach the matter in an unhelpful way by singling out people for special treatment. However, that is not at all the case. We are trying to develop good, high quality occupational health services and good health and safety practices, which will contribute to ensuring that the NHS is a safe and healthy place in which to work.

The challenge is quite large, because the sickness absence rate is going up. Two years ago, the rate was 4.64 per cent and it is 5.35 per cent now. However, there are a lot of variations. If you are saying that the target is 4 per cent, you are telling Greater Glasgow NHS Board that it must make a 37 per cent reduction in its sickness absences. If it does not do that, what happens?

We expect all NHS organisations to undertake careful analysis of patterns of sickness absence in order to try to understand what the factors might be and so that we can consider the variation across places of work, departments and so on. We want organisations to develop policies, practices and plans that are consistent with our human resources procedures. I think that you are familiar with the guidance that we issue in relation to staff governance, partnership information network guidelines and so on, which is a significant advance in Scotland. Furthermore, collective work is being done in area partnership forums and so on to bring the figures down.

It is pertinent to mention at this point that the minister and I have been undertaking annual reviews of NHS wards. One of the things that we do in that context is meet staff and management locally. We have been encouraged by the recognition that a positive approach to absence management, as I have described it, is supported.

You ask what will happen if the target is not achieved. We are working on the basis that it will be. We will be working through the progress that individual boards are making. I do not know whether members of this committee have had the opportunity to catch up with announcements that were made at the end of July about how I am reorganising part of the Health Department to establish a delivery group to engage in a proactive dialogue with boards about the achievement of key targets. The target that we are discussing is one that will be in our sights.

Just to be clear, if NHS Greater Glasgow does not deliver a 37 per cent reduction in sickness absences by 2008, the savings will have to be found elsewhere.

The savings are time-releasing savings and, in the situation that you describe, NHS Greater Glasgow would not have the benefit of the time that would be released.

Would the savings have to be found elsewhere?

The shortfall might be compensated for if someone can achieve more savings somewhere else.

The answer to my question is "Yes", surely.

We expect NHS Greater Glasgow to deliver its share of the overall savings.

On the consultant contracts—

Shona, can we move this along? We have quite a lot to get through.

Okay, I will ask only one more question on the consultant contracts. There is an assertion that there will be a 1 per cent time-releasing saving as a result of greater productivity. How will that be delivered? What leverage exists within the consultant contract to deliver that?

The short answer is that there is better job planning, which is an important component of the consultant contract. On 1 July, I distributed to the NHS a circular on realisation of benefits from pay modernisation. We discussed and agreed the contents of the circular with our partners in the Scottish partnership forum and the human resources forum and with staff representatives.

Importantly, medical directors have also indicated that they support the initiative and believe that it can be delivered through better job planning of consultant contracts in order to secure changes. We will monitor the situation through SWISS, the Scottish workforce information standard system, which I described earlier.

Mike Rumbles wants to come in at this point. When he has asked his initial question, I want him to move on to the care commission.

My question is on the totality of the figures, Dr Woods. On NHS procurement, you give savings of £50 million by 2007—that is a nice, round figure. On improved prescribing of drugs, there is another nice, round figure of £20 million. On NHS support service reform, there is a nice, round figure of £10 million. On NHS logistics reform, there is a nice, round figure of £10 million. With all the other things, that makes a total saving by 2007 of 5 per cent, which is up from 2.5 per cent this year—both nice, round figures.

I am trying not to be cynical, but the information that was produced for us gives me the impression that somebody told you, "I would like a 2.5 per cent cut in those areas this year and a 5 per cent cut in 2007. Go away and find out where those cuts can be made", rather than—if this were a true efficiency programme—saying to you, "Go away and really work hard to find out where efficiencies are in these departments and present the savings." Which of those two approaches was used?

They are not cuts; they are efficiency savings.

Will you answer my question: which of those two methods was used?

Perhaps I will illustrate—

It is a simple question.

I will ask Mr Haldane to take you through how we approached the procurement line. Underpinning procurement and logistics are detailed business cases.

I am sorry, Dr Woods; I do not want to be rude—I am trying not to be—but I asked a very simple question: which of the two methods was used?

I am trying to illustrate the detailed bottom-up work through the procurement initiative and the business-planning process that has been used to inform the savings that can be delivered in relation to logistics, procurement, strategic sourcing and so on. I was merely suggesting that Mr Haldane might elaborate on that.

I do not want any elaboration; I would just like to know which of the two methods was used.

I am saying that generally, those areas are underpinned by bottom-up analysis of the savings that could be achieved.

So the minister did not say to you, "I want a 2.5 per cent saving by 2005-06 and a 5 per cent saving by 2007." He did not indicate that that was what he wanted.

The minister did not say that to me. Everybody is aware that we need to be more efficient, and ministers have been clear that that is what they want us to do.

I want to know what the direction was—what method was used. I will try asking the question again, but in a different way. Did you and the department say to the minister, "These are the efficiencies that we want to produce because we are good civil servants and have worked out where to make the savings", and then come up with the figures? I would have been very surprised to discover that they were such round figures. Alternatively, did the minister responsible for the department say to you, your predecessor or your staff, "These are the savings or cuts"—I use the terms interchangeably—"in your department that I want: a reduction of 2.5 per cent this year and 5 per cent next year"? The figures speak for themselves; they are so round that they are almost unbelievable.

I am trying to convey is that there is clear ministerial interest in securing efficiencies. That is a main plank of current policy. To that extent, ministers are clear that they want savings to be made. However, reaching a view on what the level of savings should be is informed by detailed work undertaken in the NHS. I referred to Mr Haldane's work because his organisation—NHS National Services Scotland—runs many of the projects on our behalf and on behalf of NHS boards, and it has undertaken that detailed work. He might be able to assist the committee in understanding the business cases that demonstrate that the savings are genuine and that real investments are required to liberate the resources.

Well, you certainly have not answered the question.

Yes. This could run and run, but we are not getting anywhere.

He has not answered the question.

Mr Haldane, you have your hand up to speak. Are you going to be succinct? We have a lot still to do.

There is one very good example that I hope will answer two questions. The largest sum that Mr Rumbles cited was the £50 million of procurement savings. That figure originally came from a review that Audit Scotland commissioned into buying practice across the NHS in 2003, which gave a spread of potential savings opportunities. We then brought in experts who have a clear understanding of the supply chain to consider the NHS spend profile and to extrapolate what might be our actual savings potential. That work gave rise to the figure of £50 million. It was truly a bottom-up process.

Okay.

I could cite other examples.

I think that you have answered the question as much as you can. Mike Rumbles also wanted to ask about the care commission.

Yes, and the £1 million of savings—another nice, round figure.

We had a recent consultation with the people of Scotland in Perth, at which we considered the care commission and its financing. There was a lot of concern about the care commission's charges, whether it can run on the amount of money that it has got and whether it is self-sufficient. For example, one individual made a case for his organisation, which is based at Inchmarlo. He used to pay Grampian NHS Board £4,000 for regulatory services, but now pays the care commission three times that figure—almost £12,000. That is a theme that we have come across.

How did we suddenly come up with £1 million that the care commission does not need?

The efficiency saving of £1 million is derived from work that was done within the care commission. It has been achieved entirely in the area of the regulation of early-years services—childminding and day care services for children. The commission identified various ways of delivering that saving, of which I will mention three.

First, while ensuring the protection of service users, the activity time required to regulate childminders has been revised and modified. Secondly, there has been increased use of unannounced inspections of day care services, which saves time because there is less paperwork. That arrangement applies to day care services but not to childminders because, as was expressed at the Perth event, unannounced inspections of singleton childminders tend to be unproductive as they might not be available. Finally, the joint arrangement with Her Majesty's Inspectorate of Education for the regulation of certain small services has been changed. Services for fewer than 20 children will now be inspected by either HMIE or the commission, but not by both, unless an inspection by one regulator throws up something of concern that is then drawn to the attention of the other.

If there is going to be a reduction in the number of inspections carried out by the care commission—which there must be if the process is being streamlined and HMIE is doing some of the inspections—and if the care commission is supposed to be self-funding, the people who pay fees to the care commission can expect a reduction.

In the childminding sector, the reduction in the number of inspections applies to day care services for children. The regulation of the early-years sector is subsidised by the Executive, and that will continue. The policy of full-cost recovery does not apply to those services, so your point is not really relevant in that context.

Can you tell me how the figure came to £1 million, rather than £957,000, for example, and why it does not change over the three-year period?

It may well have come to £957,000, or £962,000, or whatever.

Can you get me the exact figure?

Certainly.

That would be helpful. I am very suspicious of round figures.

We tend to be urged to report things in rounded terms.

I am pursuing the matter specifically because I did not get an answer to my first question.

Nanette Milne has some questions on improving the prescribing of drugs.

Given the increase in the number of prescriptions and in the gross costs of prescribing in recent years, savings of £20 million over three years seems quite a tall order. Dr Woods, you said that you are on target to achieve savings in all the areas that we have discussed. Health boards have been given individual targets for savings in prescribing, but are all health boards on target to achieve those savings? I also ask Professor Scott whether he can tell us what action has been taken to date to try to achieve those savings.

I am not sure whether you would like me to answer the first question or to hand over to Professor Scott, convener.

If you feel that Professor Scott is the best person to answer—

You could answer the first question, Dr Woods.

Two savings issues relate to pharmaceuticals, the first of which is savings on drug purchases, which will yield £42 million through the UK pharmaceuticals price regulation scheme. The savings that we have secured already have brought down the year-on-year increase in drug costs from between 7 and 10 per cent to just over 3 per cent in the past year. Those savings are achieved.

As far as better prescribing is concerned—the £20 million to which the member referred—we have issued detailed guidance to individual health boards on the plans that we want them to produce, which will be associated with individual savings targets for each board. A number of strands of work will contribute to that—five strands in total, I believe—perhaps the most important of which is the use of generic rather than branded drugs. I am sure that Professor Scott can add more detail on that.

The saving of £20 million is in the context of a £900 million expenditure. This work is not new; it has been on-going for many years. We have had investigations into and reviews of prescribing and have looked at how we can improve the efficiency of drug use. Our intention—and that of clinicians—is that every pound that is spent on medicines is a pound that gives an optimal outcome. In 2003, Audit Scotland suggested ways in which we could improve prescribing efficiency. We have been working hard on that with our colleagues at the coalface—or the clinical face.

The first strand is to finish off our work on the Audit Scotland report, which suggested that savings of £14 million were still to be had from the drugs budget. We think that we can still tackle about £4 million or £5 million through better use of existing generics and drug swaps, from premium-price medicines in effervescent preparations to simpler formulas, for example, without affecting patient care. I stress that, throughout the programme, we are seeking to find methods of more effective prescribing that do not affect patient care. In fact, the savings that are released from the programme will go some way towards helping us to buy new technologies and fund even better patient care.

The next strand is the best-value scheme for dressings, which came from the service itself. The service suggested to us that there are more efficient ways to purchase wound management products, incontinence products and nutritional products—incidentally, that does not include stoma products. The boards have given us good examples and we want to spread good practice.

On the outliers in prescribing, some general practitioners could get more out of their drugs bill in certain areas of their prescribing. In each board, we have prescribing advisers who work with GPs to address those issues.

Optimal use of formularies has been recommended for some time in various UK-wide and Audit Scotland reports, and we will continue to look to formularies as one way of managing the drugs bill. Given that such a plethora of medicines is available to clinicians, it makes a lot of sense for them to sit down and rationalise their prescribing. There are also local initiatives that will save a small amount of money, which will be ploughed back into the service.

As Dr Woods said, however, the bulk of the savings relate to medicines that will come off patent in the next three years. Generic copies of those medicines will be manufactured, and by changing prescribing from the branded version to the generic we will release savings. I should say that, at present, GPs prescribe about 80 per cent of their prescriptions by generic name, so we are pressing against an open door. In hospitals, of course, all prescriptions are written and dispensed as generic. That is where we hope to make the bulk of the savings, and we are confident that we will do so, given the history of what happens when new medicines come on to the market.

You mentioned prescribing advisers who work with GPs on their prescribing habits. In the technical notes, the Executive states that in many areas prescribing advisers are supporting clinicians in achieving prescribing improvements. Are you monitoring the cost of those advisers? Do they cost the service a lot?

We do not monitor the advisers themselves but we monitor prescribing and the drugs bill, and we can see real gains from the employment of prescribing advisers.

Do you know how much they cost, offset against the savings?

I am sorry. I cannot answer that question.

Is it possible to find out?

I will try to get their wages bill.

Thank you.

I notice that Audit Scotland mentioned its concern that medical students nowadays might not get enough pharmacology training to understand medicines, their side effects, how they work and so on. Is that a factor? Can something be done about that?

As you will be aware, the way in which medical students come on to the course and are trained has undergone a revolution. The course now involves whole-systems approaches, so instead of studying pharmacology on its own, as you and I did, they learn about the systems and look at the overall drug effects. I understand that that approach is under review, but that rests with the medical education experts.

Audit Scotland clearly thinks that that is worth looking into.

Earlier, we talked about IT and electronic prescribing. When can we expect that to be up and running in all GP practices?

We have made good progress on IT and the development of links between community pharmacies and general practices. By March or April next year the N3 network will be connected to all community pharmacists. In England a few months ago, an electronic prescription sent by a GP to a community pharmacy was heralded in the pharmaceutical medical press. In Ayrshire, we have transmitted 1 million prescriptions in that way. It is not just the transmission of the prescription that is important; it is how that fits into the overall e-pharmacy and e-health scheme. We are continuing to develop those electronic links. We want to see them in place for the start of the new pharmacy contract in 2006 and developed through to 2007 and beyond.

In relation to the new pharmacy contract, you mentioned that you were excluding stoma appliance provision. You are probably aware that there was a lot of contention about the provision of stoma appliances when the Smoking, Health and Social Care (Scotland) Bill was going through. Is the new contract likely to result in savings or will it add financially to the prescribing burden?

It will be cost neutral. What is important is that we take an area in which there has been some confusion and put it on a footing by itself. We can take that provision out of the pharmacy contract—more than one player is involved—and build quality measures and indicators into it. Most of all, however, we can safeguard the patients who are affected and ensure that the nurses who are currently employed by the commercial companies involved have an opportunity to work within the NHS to develop the service into one of even better quality.

Presumably, the cost of the nurses will add to NHS costs if that cost is currently being met by pharmaceutical companies.

Part of the reason why we have efficiency savings is to ensure that we can plough those savings into improving the quality of patient care. I cannot say that I am sorry if there are additional nursing costs in the system. What I can say is that improving our prescribing and making it more efficient releases money to allow us to invest in such things.

I am sure that we and people outside will be watching this space.

Jean Turner had a question about procurement of drugs.

Something has to smooth out the boundary between primary and secondary care. You may not be able to answer this point right now, but it is important that it should not be cheaper for a hospital to pass the cost on to the GP. I do not know whether you have considered the idea of NHS Scotland manufacturing its own drugs when they have come out of patent. It would help to cut costs to some extent if, instead of buying drugs from manufacturers, we made them ourselves. The other point is that when drugs are procured cheaply, it is vital that patients—they are the important people—do not get different coloured tablets and different sizes of the same drug in one prescription because their pharmacist, in making up the prescription, has used different companies' preparations. I understand that cost is of the essence, but we should consider the patient.

An issue arose when Nanette Milne was questioning you. Would buying cheaper incontinence pads mean that there would be a let-up in efforts to limit the number of pads that patients receive when they are assessed? Sometimes people are restricted in the number of pads that they use—I am thinking of children as well as adults. It is quite stressful for patients to be restricted to a certain number of pads per day or per week—that does not always work for them. Can you assure me that you will ease up on some of those restrictions?

I am not sure whether you can answer some of those questions, Professor Scott, but please do so if you can.

I can answer some of them. First, through the judicious use of formularies between primary and secondary care, we eliminate the preferential pricing whereby a product is one price in the hospital sector but more expensive in the primary care sector, on the basis that the bulk of that product is going to be used in primary care. We have asked health board managers to be aware of the cost in both primary and secondary care.

Mr Haldane and Dr Woods referred to zonal purchasing in the hospital service, which is an efficient way of purchasing medicines through central tenders. Specialist centres use specialist products, and zonal purchasing encourages them to purchase together so that they have greater purchasing muscle.

In the community, it is slightly different, in that the NHS never owns the drugs. The medicines are purchased by and are the property of the pharmacists; they are dispensed to the patient and the NHS then reimburses the pharmacists. By using that method, the pharmacists take the risk in relation to how much they purchase, what they purchase and the safekeeping of those medicines. The Scottish Executive looks at the discounts that pharmacists get on those medicines and claws them back. For example, we clawed back £26 million in relation to generics last year; that money went back into the NHS. That was done through efficient purchasing by community pharmacists.

We must avoid creating a bureaucracy that would cost just as much as it does to purchase the drugs. Pharmacists form buying groups and have purchasing muscle, and we think that that is an efficient way to purchase the drugs. The situation was examined by an Oxford research group, which considered whether it would be better to tender for generic medicines. It concluded that there were some merits in such an approach but that, on balance, the community pharmacist approach should be used as our method of achieving the best price.

Dr Turner asked about manufacturing our own generics. Manufacturing drugs is quite a complex process that is regulated by both European and UK licensing authorities. It would be a high-cost business, because we would have to maintain the same standards as the GlaxoSmithKlines of this world. It would also involve continual investment, both capital and resource. I am not sure about the suggestion, but we continue to press for more efficient generic manufacturers so that we can get better prices.

On incontinence garments, our experience is that when continence nurses are involved, so that matters are not simply left at the supply of products, better-quality garments are used and the patient gets a better service. I agree that that is an issue in which we should involve health board tendering.

There is pressure on people to keep the number of pads down.

On the issue of non-drug prescriptions, Ken Macintosh had a members' business debate earlier in the year about people who suffer from alopecia. As we saw last week, Edinburgh-born lass Gail Porter suffers from the condition. One of the things that Ken Macintosh and I discovered was that every health board across Scotland uses a different method of prescribing wigs. It strikes me that that is an opportunity that you seem to have missed, and I wonder what you intend to do about it. There are discrepancies between health boards, and although cancer patients get their wigs free, patients with alopecia have to pay for them. Similarly, people who are over 60 get free prescription drugs but have to pay for wigs for the rest of their lives. It seems that there is a massive inefficiency there. It is not just about savings; the matter is dealt with in an utterly inefficient way.

I am not passing the buck, but wigs are not within my bailiwick.

A wig is a non-drug item, but, like incontinence pads and other items, it can be prescribed, so somebody on the panel must be able to answer the question.

I am not sure that anybody here can answer the question, but we are happy to write to you about that.

Thank you.

That is probably the best thing to do.

We do not have any more questions left, so if Dr Woods would like to make a closing statement, he may do so.

Helen Eadie's comments about differential practice reminded me of one thing that has been a great concern in relation to pharmaceuticals—postcode prescribing. We have not talked today about the important work that the Scottish medicines consortium does. It has been a big success in helping to manage the introduction of new technologies, and we would be happy to elaborate on that if that would be of interest.

I am not sure that it is central to the questions about the specific proposed savings that concern us at the moment, but that is not to say that we will not come back to the matter at some point.

I thank all the witnesses for coming along this afternoon. We have yet to hear from the minister on the budget. We shall be questioning him on 3 October, so you might want to keep an eye on that.

Meeting continued in private until 16:59.