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4-Traders Homepage  >  Equities  >  London Stock Exchange  >  Smith & Nephew    SN.   GB0009223206

SMITH & NEPHEW (SN.)
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“Performance-led Procurement: Why innovation should be front and centre” says Paul Trueman, VP Market Access at Smith & Nephew

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06/21/2018 | 11:58am CEST

Opinion-editorial published by MedTech Innovation magazine featuring our VP Market Access, Paul Trueman

Last month Lord Hunt, former Chief Executive of the NHS Confederation, drew attention to the substantial costs and outdated practices related to managing wound care.1 An estimated £5.3bn is spent on treating wounds by the NHS every year, which exceeds the costs of obesity treatment.2 A recent study, led by Professor Julian Guest, found that the average Clinical Commissioning Group (CCG) spends in excess of £40m managing wounds every year3. With the prevalence of acute, chronic, and other unspecified wounds increasing at a rate of 9 - 13% per annum, this figure is predicted to increase year on year.3 Against this background, Lord Hunt has called for innovation and a clear leadership strategy to save costs, but also improve clinical outcomes and quality of life.

Clinically sub-optimal and labour-intensive wound management methods have become embedded within many healthcare providers, which are now struggling to reduce the financial burden of wound care. 'Healing takes far too long; diagnosis is not good enough; and inadequate commissioning of services by CCGs compounds the problem,' explains Baroness Margaret Wheeler. 1

Professor Guest describes how wound care delivery appears to be 'patchy and disparate'3 at best and promotes a major rethink on the issue, including a greater focus on prevention and active management with the intent of healing wounds.4

Factors driving the cost of wound care are well established. Caroline Dowsett, Tissue Viability Nurse at East London Foundation Trust confirms that, 'Healing time, frequency of dressing change and incidence of complications are the three main cost drivers.'5 Appropriate use of innovative and clinically proven wound management technologies can help to alleviate some of these pressures.

An estimated 2 million people are living with a chronic wound across Europe and an estimated 15% of all chronic wounds remain unresolved after a year of treatment6. This falls well below best practice when there is technology designed to improve healing rates, overall cost, and prevent or reduce complications readily available, but not adopted because of the current procurement strategy based on cost-per-unit.

Procurement practice relating to wound care often adopts a narrow, cost-per-unit focus which promotes dressing selection based on cost rather than patient need. Whilst this may reduce the supply cost, it may have an adverse effect on the total cost of care, if it results in sub-optimal treatment choices. Adopting a total cost of care approach to procurement is likely to result in more appropriate use of advanced treatment options with proven effectiveness where these can deliver better outcomes and reduce the frequency of nurse visits and expensive complications. There is a growing body of evidence to support the use of 'care pathways' incorporating criteria for the use of innovative wound technologies that have been shown to deliver improved outcomes at lower total treatment costs.5

Take, for example, surgical site complications; infections and dehiscence (re-opening of the wound) often occur post-discharge and create a significant burden on community nursing services.7 A study has suggested that around 40% of wounds treated by community nursing are acute, such as surgical, wounds.3 Where complications occur, this results in extended treatment costs and excess morbidity for patients8. Evidence indicates that many of these complications could be avoided through improved management of the surgical wound in the immediate post-operative period.9,10 Studies of PICO, a single-use negative pressure wound therapy device, illustrate a potential 50% reduction in surgical site complications.10 Despite this, adoption of this pioneering, single-use negative pressure wound therapy device remains limited, largely due to concerns over the unit cost compared to standard care. The fact that it has been shown to deliver improved outcomes and reduce the total costs of care may not be adequately taken into account in the procurement process.

Infections are a common recurring theme of longer-term chronic wounds too, extending the duration of the wound and increasing the potential risk of hospitalisation.5,11 Detection of infection largely relies on clinical judgement. Given that the majority of wounds are treated by non-specialist nurses (as opposed to dedicated Tissue Viability Nurses) there can be inconsistencies in judgement. Innovative technologies, such as MolecuLight i:X, a handheld device that measures the surface area of a wound and visualises the presence and distribution of fluorescent bacteria, can contribute to earlier and more consistent detection of wounds at risk of infection. 12,13 More accurate detection of infection may lead to more appropriate use of antimicrobial dressings, which at present are often restricted from use in community nursing settings due to concerns over their cost and inappropriate use. Furthermore, accurate diagnosis can also contribute to improved stewardship of antimicrobials and antibiotics thereby reducing concerns about resistance.

It has been estimated that there are 400,000 pressure ulcers per annum in the UK, at an estimated cost to the NHS of £1.8-2.6bn.2,4 Standard care with regards prevention requires considerable nursing input, in the form of active monitoring and regular re-positioning of patients. Recent evidence has indicated that implementing a multi-layer silicone adhesive foam dressing in pressure ulcer prevention, as part of a pressure ulcer prevention protocol, is an effective strategy.14

Such dressings are a relatively inexpensive intervention and require only modest nurse training, meaning that they can easily be integrated into existing workflows. Despite this, a number of wound care formularies continue to limit the use of such dressings for prevention.

These examples illustrate how the narrow cost per unit focus of procurement may restrict access to innovative treatments and increase the total costs of wound care. Focusing on the need to find the lowest priced intervention reduces the clinician's access to more advanced therapies, even where evidence exists to show that they can deliver improved outcomes and efficiency. Care pathways and protocols that provide clear guidance on the appropriate use of advanced technologies offer real potential to improve outcomes and reduce the costs of wound management.

As Baroness Jolly, Liberal Democrat Lords Spokesperson for Health, said, 'There are many voices and players in this discussion: the clinicians, the commissioners, industry, those who are trying to improve performance and save money by rationalising systems and processes, and of course the patients too.' 1 ​ All of these stakeholders have the common interest of delivering improved outcomes and cost effective wound care, incorporating the appropriate use of innovative technology. With an ageing population and ever-increasing demands on community nurses, it is vital that a national strategy is put in place to address the burden of wound care. Procurement practices need to embrace the potential of technology to disrupt the inefficiencies of current practice and enable sustainable care pathways that reduce the burdens on patients and the NHS.

References

About Smith & Nephew

Smith & Nephew is a global medical technology business dedicated to supporting healthcare professionals in their daily efforts to improve the lives of their patients. With leadership positions in Orthopaedic Reconstruction, Advanced Wound Management, Sports Medicine and Trauma & Extremities, Smith & Nephew has more than 15,000 employees and a presence in more than 100 countries. Annual sales in 2017 were almost $4.8 billion. Smith & Nephew is a member of the FTSE100 (LSE: SN, NYSE: SNN).

For more information about Smith & Nephew, please visit our corporate website www.smith-nephew.com, follow @SmithNephewplc on Twitter or visit SmithNephewplc on Facebook.com

Forward-looking Statements

This document may contain forward-looking statements that may or may not prove accurate. For example, statements regarding expected revenue growth and trading margins, market trends and our product pipeline are forward-looking statements. Phrases such as 'aim', 'plan', 'intend', 'anticipate', 'well-placed', 'believe', 'estimate', 'expect', 'target', 'consider' and similar expressions are generally intended to identify forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from what is expressed or implied by the statements. For Smith & Nephew, these factors include: economic and financial conditions in the markets we serve, especially those affecting health care providers, payers and customers; price levels for established and innovative medical devices; developments in medical technology; regulatory approvals, reimbursement decisions or other government actions; product defects or recalls or other problems with quality management systems or failure to comply with related regulations; litigation relating to patent or other claims; legal compliance risks and related investigative, remedial or enforcement actions; disruption to our supply chain or operations or those of our suppliers; competition for qualified personnel; strategic actions, including acquisitions and dispositions, our success in performing due diligence, valuing and integrating acquired businesses; disruption that may result from transactions or other changes we make in our business plans or organisation to adapt to market developments; and numerous other matters that affect us or our markets, including those of a political, economic, business, competitive or reputational nature. Please refer to the documents that Smith & Nephew has filed with the U.S. Securities and Exchange Commission under the U.S. Securities Exchange Act of 1934, as amended, including Smith & Nephew's most recent annual report on Form 20-F, for a discussion of certain of these factors. Any forward-looking statement is based on information available to Smith & Nephew as of the date of the statement. All written or oral forward-looking statements attributable to Smith & Nephew are qualified by this caution. Smith & Nephew does not undertake any obligation to update or revise any forward-looking statement to reflect any change in circumstances or in Smith & Nephew's expectations.

◊ Trademark of Smith & Nephew. Certain marks registered US Patent and Trademark Office.

Disclaimer

Smith & Nephew plc published this content on 21 June 2018 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 21 June 2018 09:57:03 UTC

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Financials ($)
Sales 2018 5 033 M
EBIT 2018 1 018 M
Net income 2018 665 M
Debt 2018 1 104 M
Yield 2018 1,98%
P/E ratio 2018 23,26
P/E ratio 2019 19,73
EV / Sales 2018 3,34x
EV / Sales 2019 3,16x
Capitalization 15 690 M
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Average target price 18,7 $
Spread / Average Target 3,0%
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Namal Nawana Chief Executive Officer & Executive Director
Roberto Quarta Chairman
Matthew R. Stober President-Global Operations
Graham James Baker Chief Financial Officer & Director
Vasant Padmanabhan President-Research & Development
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