Funding the Future: What does it mean for NHS procurement?

The government has set out three shifts it wants to see happen: treatment to prevention, hospital to community, analogue to digital. 

HealthTech has a crucial role in supporting the delivery of all three. But using technology to help deliver these changes requires procuring the technology, and when all the noise is about there being no money, how is the NHS actually going to do that?

In this guest blog, Luella Trickett, Executive Director, Medical Devices, Value & Access, at The Association of British HealthTech Industries (ABHI), explores this issue. 

The challenge  

It’s no secret that the evolving current landscape is challenging for everyone in the health system. The financial strain on the NHS is well documented, and for suppliers, the pressures are mounting. As our annual business survey details, ongoing supply chain disruptions, rising inflation, and increasing business costs continue to create significant hurdles. Added to this is the complexity of the cost to serve the NHS – a challenge shaped by both the intricacies of the NHS itself and evolving government requirements. Even national procurement processes do not result in a single, unified cost to serve, further complicating the landscape for suppliers. 

We cannot overlook the broader geopolitical landscape, which continues to create uncertainty for businesses worldwide. The potential escalation of tariff wars is a particular concern, with significant implications for the manufacturing and supply of HealthTech products. HealthTech supply chains are inherently global, with raw materials and components often sourced from multiple countries before reaching their final point of manufacture. Even if finished products qualify for zero tariffs upon import, tariffs imposed at various stages of the manufacturing process can significantly increase overall costs, adding further strain to an already pressured industry. 

In the consumer market, cost increases are typically passed on to the end customer. Selling to the NHS, however, operates under a very different model. Suppliers often secure contracts through framework agreements that can last several years, four years being typical, with prices submitted up to a year before the framework begins. This means suppliers must predict costs at least five years in advance. The DPS launched by NHS Supply Chain helps this, but only covers some areas. 

In today’s volatile economic environment, accurately forecasting costs over such a long period is incredibly challenging. With limited flexibility to adjust prices mid-framework, suppliers may be forced to factor in risk upfront, leading to higher initial prices. 

A more balanced approach, allowing for index-linked price adjustments over the life of a contract, could provide a fairer mechanism for managing costs for all parties.  

Right now, the NHS is pushing suppliers to reduce prices at every opportunity. Alongside this, there is a prevailing mindset that “just good enough” is acceptable, as long as the products are cheap. This approach has serious consequences for patients, clinicians, and the overall productivity and efficiency of the NHS. And though it may deliver short-term savings, it also introduces long-term risks. Squeezing suppliers out of the market reduces competition, weakens supply chain resilience, and ultimately drives future price inflation as fewer suppliers remain. Worse still, it discourages companies from bringing innovative products to the UK altogether.

Our latest business survey highlights the impact of these pressures – 22% of HealthTech suppliers reported having to remove a product from sale because their selling price fell below cost due to inflation and the NHS’s refusal to accept a price increase. Furthermore, nearly a third of respondents said they had chosen not to bid on an NHS tender due to restrictive procurement requirements. These findings underscore the real consequences of cost-driven procurement decisions, which risk limiting patient access to high-quality, innovative technologies and weakening the UK’s HealthTech ecosystem. 

Taking a collaborative, localised approach 

The NHS, therefore, needs a competitive, multi-supplier landscape where procurement decisions prioritise both value and performance, ensuring that the health system can operate at its best, both now and in the future. 

Suppliers recognise the financial pressures facing the NHS and are committed to supporting its objectives. However, this requires a far more collaborative approach than we often see today. The NHS must engage in meaningful pre-market discussions to fully understand how to unlock the value of new technologies. This means assessing not just the upfront cost but also the outcomes these technologies deliver, thus eliminating unwarranted variation, uncovering hidden costs, and ensuring informed purchasing decisions. 

Whilst national procurement has its advocates, in many cases, a more localised approach can be more effective, particularly when coupled with strong clinical involvement. Crucially, monitoring the impact of procurement decisions should not be seen as optional, it must be a fundamental part of the process. 

Celebrating savings and incorporating them into a Cost Improvement Plan is only meaningful if those savings are actually realised. The key question must always be: is the product delivering the same outcomes, using the same NHS resources, at a lower price? Or is it a false economy that ultimately undermines efficiency and patient care? 

Unlocking the full potential for HealthTech 

The Department of Health and Social Care is advancing a Value-Based Procurement (VBP) methodology to help the NHS assess the full value of what it buys, moving beyond a narrow focus on price alone. This approach is being developed collaboratively and iteratively, with the aim of creating a more systematic and transparent way to evaluate the real impact of technologies on the NHS and its patients. 

There is optimism that VBP will help shift procurement decisions away from simply choosing the lowest-cost option, ensuring that technologies are assessed based on their overall contribution to patient outcomes, efficiency, and long-term value. 

The value of HealthTech often lies in its ability to transform care pathways, improving productivity, efficiency, and patient empowerment. It can unlock system-wide cost savings and optimise resource utilisation, delivering benefits beyond just the initial purchase price. 

NHS England’s Value & Savings methodology provides a framework to articulate these benefits and help the NHS better account for value in procurement decisions. Expanding its use and broadening the scope of non-cashable savings, such as efficiency gains and improved patient outcomes, would be a significant step forward in recognising the full impact of HealthTech. 

If the NHS embraces the new flexibilities within the Procurement Act 2023, it could create a more dynamic procurement landscape – one that moves away from locking suppliers out of the market for years through rigid framework agreements. The Act also offers suppliers greater visibility of the procurement pipeline, enabling better planning, and streamlines access to supplier information. 

However, it is important to acknowledge that though increased transparency brings benefits, it also comes with added administrative burdens for contracting authorities. Balancing these trade-offs will be key to ensuring the Act delivers on its potential to create a more open and effective procurement system. 

As these shifts unfold, a stronger regional approach could offer a more manageable and sustainable model, one that fosters healthy competition while ensuring the supply chain remains resilient and diverse. Maintaining a plurality of suppliers is essential to meeting the NHS’s needs, and we will be watching closely to see how these changes shape procurement in the years ahead.