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'Monopoly' fears over £350m scans contract

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The decision to award a 10 year contract covering more than half of England’s PET-CT imaging service to a single company has created a ‘monopoly’ that could damage NHS interests, LGC’s sister title Health Service Journal has been told.

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NHS England awarded the £350m contract that covers an estimated 53-58 per cent of the country to Alliance Medical last month. It came less than a year after one of the national body’s own experts said the domination of the market by one company “could potentially have negative effects for patients”.

Last year Alliance Medical completed the acquisition of two of the three companies in England that produce the radioactive isotope FDG, which is injected into patients as part of the imaging process. The Competition and Markets Authority approved the acquisition of IBA Molecular UK in August, and Alliance Medical took over Erigal in July 2013.

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PET-CT scanning requires patients to have a dose of a radioactive isotope

The approval and the NHS England contract, which begins on 1 April, will give Alliance Medical majority control of the provision of PET-CT imaging services to the NHS for at least a decade, as well as majority control of the commercial production and supply of FDG.

NHS England said when it announced the deal that it would lead to an investment of £87m to improve PET-CT services at 30 sites, and new machines in Bath, Bristol, Carlisle, Lincoln and Truro. It also pointed to an 18 per cent reduction in the cost of scans.

A spokesman for Alliance Medical said: “The CMA confirmed that IBA was a failing business and that the market would be more competitive if it was saved.

“The PET-CT tender was fair, transparent and competitive. The price for the service is fixed and inclusive of the isotope, which derisks NHS England as the commissioner. As a result of this contract, the price to the NHS is coming down.”

Wai Lup Wong, consultant radiologist and chair of NHS England’s PET-CT clinical reference group, gave evidence to the CMA inquiry last April.

A summary of his evidence said: “Dr Wong was concerned that if one company undertook both scanning and the production of FDG… it could potentially have negative effects for patients.”

However, in a statement this week, Dr Wong said the changes would help improve cancer services, adding: “This is very positive news for patients.”

Peter Harrison, managing director of Siemens Healthcare, the only remaining competitor for the production of FDG in England, told HSJ: “I fear that the resultant lack of longer term competition will be of significant detriment to the market, and ultimately to the NHS.

“Such an award would seem to present something of a monopoly both in terms of PET-CT service provision and radiopharmaceutical supply. I am both surprised and concerned that NHS England would award this to a single supplier with no apparent regard to the impact this would have on the competitive market landscape.”

Alliance Medical was awarded all four regional lots of the PET-CT contract, managed by the East of England strategic projects team, beating InHealth Molecular Imaging which was left with just one site in Nottingham. The remainder of PET-CT services are provided by individual trusts, charities and partnerships.

A report by the PET Research Network produced for the CMA inquiry warned the current price of FDG was “very low and not sustainable in the long term”.

Sources close to the CMA inquiry told HSJ a dose of FDG in England costs about £130, whereas in Northern Ireland, where there is a single supplier, doses cost up to £450.

David Owens, partner at law firm Bevan Brittan, told HSJ: “There is certainly an argument for saying this is poor market management. There is a legitimate concern that, by creating a market where there is no longer effective competition and you have a dominant player, you run the risk in the future that that could have an adverse effect, either in terms of prices or the ability to leverage further quality improvements.”

An NHS England spokesman told HSJ it was aware of the CMA inquiry and it rejected claims a monopoly had been created. It said the costs of FDG would not rise during the contract and future market trends should not be pre-judged.

He added: “This was a fair and robust procurement process, which included independent evaluation of all bids by an expert group, including patient representatives and the relevant royal colleges.”

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