The £4 billion rip-off

It's like putting Enron in charge of the power grid. That's how US businessman Phil Zweig describes the privatisation of NHS procurement.

November 1, 2006
5 min read


Alex NunnsAlex Nunns is Red Pepper's political correspondent. He tweets at @alexnunns

It was a big day for the NHS on 27 September. At the Labour Party conference the unions won a vote condemning the marketisation of the health service. Outside the conference hall striking NHS Logistics workers protested at their jobs being handed over to a private company in a £4 billion privatisation.

None of this worried health secretary Patricia Hewitt, who combines Cameronite optimism with a degree of detached composure that recalls Margaret Thatcher. Hewitt is almost unflappable. But for a few short minutes that afternoon, at a smart fringe meeting of New Labour’s favourite think-tank, the Institute for Public Policy Research (IPPR), she was well and truly flapped.

It happened like this. After a typically banal speech on the subject of ‘Can the NHS meet rising expectations?’ Hewitt took questions from the floor. The microphone was passed to an American businessman, who asked why she was handing over NHS Logistics, the health service’s supplies organisation, to a ‘criminal organisation’. It was difficult to tell what he was saying, because as soon as his question began to sound critical the chair, Richard Brooks of the IPPR, declared he wouldn’t take it. The microphone man tried to grab the mike back, but the questioner hung on heroically and managed to shout the rest of his enquiry, which Hewitt refused to answer.

The American wasn’t satisfied with that.

When Hewitt got up to leave for another meeting, he got up too, and chased her. At which point, all the journalists in the room got up and chased them both.

Michael Dixon, chair of the NHS Alliance, whose speech followed Hewitt’s, had to watch as a third of his audience ran off. Moving at pace towards the exit, Hewitt was definitely flustered.

The pursuing American was Phil Zweig, who had come to the UK to warn of the folly of handing over NHS procurement from NHS Logistics to US giant Novation.

NHS Logistics bought and distributed health equipment to hospitals. It was an award-winning non-profit organisation, reinvesting its surpluses in the NHS. Faced with a glaring example of public sector success, the government decided to outsource it to the German delivery firm, DHL, and its sub-contractor, Novation, which is to carry out the crucial role of procurement with control over £4 billion of NHS money.

According to Zweig, Novation is ‘the largest and easily the most corrupt US hospital group purchasing organisation’ (GPO). ‘Your government will be in bed with a rogue organisation that is currently under criminal investigation by the US Department of Justice,’ he told Red Pepper.

This investigation centres on whether Novation is guilty of bribery and defrauding US public health schemes.

Novation has also endured four hearings before the US senate antitrust subcommittee, investigations by the Connecticut attorney general, and critical studies by various US government agencies.

In the late 1990s Zweig’s company, Retractable Technologies, developed a blood collection device that protected nurses from HIV and hepatitis. These could be produced for 27 cents a time, but Novation suggested adding their private label and inflating the price to a dollar, splitting the extra profits. The deal didn’t go through, and Novation and other GPOs allegedly attempted to block the product from the market. In the ensuing legal action Retractable Technologies received a $155 million settlement.

Zweig is involved in a campaign, Stop GPO Kickbacks, working to change the corrupt supplies industry. He is ‘appalled’ that just as campaigners are making headway in the US, the UK government has decided to import some of the worst features of the US system.

‘It works this way,’ he says. ‘Giant multinational healthcare suppliers pay kickbacks of up to 20 per cent, disguised as administrative fees, marketing fees, prebates, rebates and the like, to Novation and the other GPOs to ensure that their products have exclusive access to hospitals.

In return, these monopolies get sole source, multi-year contracts that make it virtually impossible for a small, innovative company with a better pacemaker, syringe, or even surgical gloves to market its products.’

But, Patricia Hewitt might have said if she hadn’t been running out of the door, Novation will be able to save the NHS £1 billion over 10 years by bulk purchasing (a figure apparently plucked from the air, as no business case has been provided). Zweig disagrees: ‘Novation has no incentive to save money for hospitals, because higher price and higher volumes translate into bigger fees. Putting Novation in charge of NHS supplies is like appointing Jack the Ripper to run your neighbourhood watch. Or to use a more recent analogy, hiring Enron to operate your power grid.’

But that is what has happened – DHL/Novation took over on 1 October. Zweig believes Novation may imminently be indicted in the US, leaving the UK government in an embarrassing position.

Hewitt seems to have decided this is a price worth paying – indeed, that any price is worth paying – in the relentless privatisation of the health service. The week before the party conference she made a speech saying that there would be no limit to private sector involvement in the NHS.

‘America’s healthcare system is the world’s most expensive and inefficient,’ Zweig warns. ‘If that’s what your government wants for its citizens, it has taken a major step in the right direction.’www.keepournhspublic.com

www.stopgpokickbacks.org


Alex NunnsAlex Nunns is Red Pepper's political correspondent. He tweets at @alexnunns


✹ Try our new pay-as-you-feel subscription — you choose how much to pay.

Secrets and spies of Scotland Yard
A new Espionage Act threatens whistleblowers and journalists, writes Sarah Kavanagh

#AndABlackWomanAtThat – part II: a discussion of power and privilege
In the second article of a three-part series, Sheri Carr reflects on the silencing of black women and the flaws in safe spaces

How progressive is the ‘progressive alliance’?
We need an anti-austerity alliance, not a vaguely progressive alliance, argues Michael Calderbank

The YPJ: Fighting Isis on the frontline
Rahila Gupta talks to Kimmie Taylor about life on the frontline in Rojava

Joint statement on George Osborne’s appointment to the Evening Standard
'We have come together to denounce this brazen conflict of interest and to champion the growing need for independent, truthful and representative media'

Confronting Brexit
Paul O’Connell and Michael Calderbank consider the conditions that led to the Brexit vote, and how the left in Britain should respond

On the right side of history: an interview with Mijente
Marienna Pope-Weidemann speaks to Reyna Wences, co-founder of Mijente, a radical Latinx and Chincanx organising network

Disrupting the City of London Corporation elections
The City of London Corporation is one of the most secretive and least understood institutions in the world, writes Luke Walter

#AndABlackWomanAtThat: a discussion of power and privilege
In the first article of a three-part series, Sheri Carr reflects on the oppression of her early life and how we must fight it, even in our own movement

Corbyn understands the needs of our communities
Ian Hodson reflects on the Copeland by-election and explains why Corbyn has the full support of The Bakers Food and Allied Workers Union

Red Pepper’s race section: open editorial meeting 15 March
On 15 March, we’ll be holding the first of Red Pepper’s Race Section open editorial meetings.

Social Workers Without Borders
Jenny Nelson speaks to Lauren Wroe about a group combining activism and social work with refugees

Growing up married
Laura Nicholson interviews Dr Eylem Atakav about her new film, Growing Up Married, which tells the stories of Turkey’s child brides

The Migrant Connections Festival: solidarity needs meaningful relationships
On March 4 & 5 Bethnal Green will host a migrant-led festival fostering community and solidarity for people of all backgrounds, writes Sohail Jannesari

Reclaiming Holloway Homes
The government is closing old, inner-city jails. Rebecca Roberts looks at what happens next

Intensification of state violence in the Kurdish provinces of Turkey
Oppression increases in the run up to Turkey’s constitutional referendum, writes Mehmet Ugur from Academics for Peace

Pass the domestic violence bill
Emma Snaith reports on the significance of the new anti-domestic violence bill

Report from the second Citizen’s Assembly of Podemos
Sol Trumbo Vila says the mandate from the Podemos Assembly is to go forwards in unity and with humility

Protect our public lands
Last summer Indigenous people travelled thousands of miles around the USA to tell their stories and build a movement. Julie Maldonado reports

From the frontlines
Red Pepper’s new race editor, Ashish Ghadiali, introduces a new space for black and minority progressive voices

How can we make the left sexy?
Jenny Nelson reports on a session at The World Transformed

In pictures: designing for change
Sana Iqbal, the designer behind the identity of The World Transformed festival and the accompanying cover of Red Pepper, talks about the importance of good design

Angry about the #MuslimBan? Here are 5 things to do
As well as protesting against Trump we have a lot of work to get on with here in the UK. Here's a list started by Platform

Who owns our land?
Guy Shrubsole gives some tips for finding out

Don’t delay – ditch coal
Take action this month with the Coal Action Network. By Anne Harris

Utopia: Work less play more
A shorter working week would benefit everyone, writes Madeleine Ellis-Petersen

Mum’s Colombian mine protest comes to London
Anne Harris reports on one woman’s fight against a multinational coal giant

Bike courier Maggie Dewhurst takes on the gig economy… and wins
We spoke to Mags about why she’s ‘biting the hand that feeds her’

Utopia: Daring to dream
Imagining a better world is the first step towards creating one. Ruth Potts introduces our special utopian issue

A better Brexit
The left should not tail-end the establishment Bremoaners, argues Michael Calderbank


3