Why Government are poor customers...

According to reports, HM Government is paying far too much for basic prescription drugs for use in the NHS - to the tune of a possible £500m a year.

It doesn't suprise me.

You'd think that if you were the country's largest buyer of "standard" drugs, stuff like pain killers, blood pressure tablets and indigestion pills, then you'd have the clout to extract the goods from the worlds largest drug companies at the world's smallest prices - buying in bulk, massive bulk, would surely give you a huge negotiating hammer to beat them over the heads with - then offer them some of their own headache tablets when they've agreed the deal.

But no, the contract that the NHS have with the major drug companies is not based on how much money per box they pay, but how much profit the drug companies are allowed to make on the deals.

And that is the problem with allowing Government to negotiate deals with huge global companies - there is a massive hidden agenda.

The Global Drug Company PLC approaches HM Government to sell it 180 million headache tablets and straight away its on the offensive with a deal to base some of the production of those tablets in this country, employing 2000 workers in an area of high employment and paying a few million in corporation taxes every year, and suddenly HM Government isn't thinking "how much per tablet" any more but "we could win more votes in that area of high unemployment".

And so the contracts that the NHS sign with the drug companies reflect the amount of profit that they can make from an agreed base rate price - profit should not come into a negotiation with a client, the profit margin is for the supplier to know and no-one else, the job of the buyer is to screw the last drop of margin out of the supplier and not stop at a pre-determined marker that a politician has set with one eye on his votes for the next term.

We came across something similar some years ago when we supplied goods to the organisation that purchased equipment for all of the schools in Yorkshire, ours was a small contract and they approached us for a price for the goods required, we told them our "standard" price, the price that everyone else paid befor etalking of discount for quantity, and they accepted our standard price even though we were expecting them to negotiate a bit of discount.

Not only did they accept our "standard" price but when the order came through it contained a clause requiring us to add ten per cent to the order value for their overheads - everything that was purchased by that HM Government department has ten per cent added to it to pay for that HM Government department - we'd have easily accepted a ten per cent discount off our standard price if they'd only asked.

It was lazy, inefficient civil service bollacks, not only were they not doing their job as procurers but they had created a whole new level of jobsworth bureaucracy to administrate, warehouse and then deliver the goods themselves in their own branded fleet of vehicles to the hundreds of schools in Yorkshire who actually thought they were getting a good deal from the service.

HM Government needs to shake off the civil service approach to everything commercial (sit here and wait for your pension to come) and look at how all of the major businesses manage their purchasing, having dealt with supermarkets and their purchasing departments for 25 years then I'd suggest that HM Government could do worse than use them as a blueprint for buyers.