Finance: Funds revamp - just what the Dr ordered?

With the right carrots for GPs the Government's new NHS white paper could further reduce the nation's drugs bill. Paul Gosling finds the paper has been well received, but what of the future?

One of the real successes of general practitioner fund-holders has been the way they have cut their drugs bills. But the Government's "The New NHS" white paper, published last month, heralds the end of fund- holding, and concern has been expressed that these savings will be lost. The Department of Health and doctors' leaders hope that, to the contrary, all GPs will soon be prescribing more carefully.

A study by the Audit Commission found that fund-holders typically saved almost 10 per cent of prescribing expenditure compared with non-fund holders. This was achieved by switching from expensive branded drugs to cheaper generic medicines, not prescribing drugs of limited clinical value, and becoming more reluctant to prescribe antibiotics. Fund-holders also monitored more closely patients' use of expensive drugs, such as inhaled steroids for asthma, to ensure an improved cost-benefit.

Not all of these benefits can be put down to fund-holding. GPs who were sympathetic to budget control were more likely to apply and be selected for fund-holding. But the financial incentives, allowing GPs to retain in their practice some of the savings achieved, were clearly the most important factor in cutting drugs bills.

Under the New NHS white paper, fund-holding will be replaced next year by primary care groups that bring together in each area GPs and community nurses, supported by the health authority. As well as taking a strategic role in improving local health care, they will also be able to choose from four options involving them in the management of local primary care. Those that operate at stage one will advise the health authority on care commissioning. Stage two care groups operate as part of the health authority, taking devolved responsibility for budget management. Stage three members will be free-standing bodies, accountable to the health authority. And members of stage four groups will have the added responsibility for the provision of community health services.

The British Medical Association expects most fund-holding practices to opt for stage three or four status, and non-fund holders to prefer the options of stage one or two.

Both the BMA and the National Association of Fund-holding Practices say that the new structure will bring the stricter financial controls operated by fund-holders to all GPs. "It is going to be fund-holding with another name," says Dr Kenneth Scott, president of the NAFP. "The problem will be that GPs will have budgets that they may have difficulty in living with." But he believes the system will work provided the incentives available to GPs are appropriate.

Dr John Chisholm, chairman of the BMA's GP committee, is also positive. "Under the white paper's proposals there will be an analogue with fund- holding, carried into the primary care groups. There will be an opportunity for [GP] self-government. Those who incur unacceptably high prescribing or referring costs will be called into question. It will put pressure on doctors to behave in accordance with the best research evidence."

Dr Chisholm points out that GPs are now armed with much stronger research material to help them identify which treatments are most effective. And GPs are advised how their prescription use compares with the national average, the local average and the average for their type of practice.

The pharmaceutical industry, too, welcomes the white paper as it could, paradoxically, see GPs prescribing more drugs. Primary care groups will oversee budgets for hospital referrals as well as prescriptions, and may see medicines as sometimes more cost-effective than hospital treatment. The BMA says that the bad old days of drug company inducements to GPs to persuade them to prescribe expensive branded drugs are now largely a thing of the past, with an effective and strict code of conduct introduced by the pharmaceutical industry.

Darrin Baines is senior lecturer in health economics at Birmingham University, and co-author of the Office of Health Economics' recently published study, "Prescribing, budgets and fund-holding in general practice". He says there are good reasons to be optimistic about the white paper's proposals, but the Government needs to closely monitor the impact to ensure that the presumed benefits are achieved. But he adds that the significance of the changes should not be under-estimated.

"What we are seeing is the use of a different economic principle," says Mr Baines. "The last Government used incentives to improve problems. The new system's driver for change is co-operation, which will be backed by a statutory requirement. The key to the success of the primary care groups will be how the budgets are set." Mr Baines wonders what will happen to primary care groups that perform badly.

Savings, though, will become increasingly difficult to achieve. Many fund-holders believe they have already made all the obvious cost reductions. GPs might decide to call in patients with long-standing prescriptions of expensive branded drugs to see if they can be transferred to generic medicines - but this would be expensive in doctor time. But the alternative might be that GPs find themselves incurring patient anger by rationing drugs.

The white paper's warm reception may yet prove to hide serious reservations.