Political and economic development of the English and Welsh Blood Service: On the edge of privatisation?

by Tim Sandle

Executive summary

The government's current proposal to part-privatise parts of the Blood Service form part of a social and economic debate about the location of the Service which has come to the forefront at various times since the national Service was formed.

Similarly the current proposal to reorganise elements of the Service and to reduce the number of blood centres and staff are part of a continuous process of cost reduction.

The successive reforms of the Blood Service have sometimes occurred ahead of the economic reform subsequently applied to the wider NHS. The Blood Service has often been a 'test bed' of political and economic reform by successive governments.

The way that the Blood Service is organised in England and Wales through the state is different to the way that Blood Services are organised in many other countries. This may increasingly expose the Service, as viewed by neo-liberal economists, as an anachronism to be reformed.

Coalition policy: part privatisation of the Blood Service

A question raised in the House of Commons by Labour MP Jim Dobbin in March 2011, concerning the proposal by the Coalition Government to privatise parts of the Blood Service in England and Wales, sits historically within a long-standing policy debate over both the size and complexity of the Blood Service and its relationship with the State.

The Blood Service has undergone several re-organisations in its existence. It is currently constituted as National Blood and Transplant, a health authority formed in 2005 through a merger of the National Blood Authority (which oversaw blood and tissues) and UK Transplant (which maintained the UK organ donor register).

The current proposal, which triggered the debate in the House of Commons, centres on a plan by the Government is to privatise the transport and logistics services of the blood service i and to reduce the number of laboratory operations across the different English regions. The proposal has met with opposition from the principal unions of the blood service: UNISON and Unite.

This article places the planned re-organisations of the Blood Service within the political-economic context of the relationship of the Blood Service with the State.

Social and medical importance of blood

Blood transfusions are of great medical importance for transfusing the blood of one individual (a donor) into another person is vital when the recipient has lost blood, as without the transfusion the recipient would probably die. The function of blood is to absorb oxygen from the lungs and transport it around the body. Through this process blood also carries nutrients, antibodies and hormones; in addition it provides warmth and collects the biological waste product carbon dioxide for removal through the lungs.

Short history of the Blood Service

The Blood Service for England has evolved, both scientifically and organisationally, over a sixty year period into its current formation as the NHSBT (due to different descriptors and acronyms having been applied since the formation of the organisation the term Blood Service will be used as a generic descriptor). The key product of NHSBT is blood, and blood components remain the only 'pharmaceutical medicine' which the NHS continues to ‘manufacture’ on a large scale. (Most medicines are purchased by the NHS from pharmaceutical companies.) The remit of the Blood Service is to collect and process around two million red cells and platelets from approximately 1.5 million voluntary blood donors per year and, following processing, to supply these to three hundred and ten NHS hospitals for use in blood transfusion and for other haematological purposes.

The UK’s first permanent blood service for England– the Blood Transfusion Service – was created on 26th September 1946 as part of the post-war reconstruction plan for healthcare. In 1947 the prefix ‘National’ was added to create the National Blood Transfusion Service (NBTS) for the whole of the UK; although the service remained, in practice for several decades, a series of loosely linked regional centres. The English Blood Service initially remained independent until control was transferred to Regional Hospital Boards in 1948 after the NHS was created. For a while the Service co-existed in competition with a Red Cross system until becoming a monopoly provider to the NHS in the early 1950s when the Red Cross withdrew its blood collection operation from the UK. The Blood Service grew rapidly during the 1950s, fuelled in part by advances in new surgical techniques, such as open heart surgery, which increased the demand for blood. For example, in 1948 the number of registered blood donors in the UK was 373,000; by 1957 it was 650,000; and by 1966 the number had increased to 1,178,000.

By the 1970s, the Service had expanded to comrpise fifteen separate regional blood centres overseen by a semi-independent regulatory structure. According to some health economists, the regional network was inefficient in that it often resulted in one centre having an oversupply of a blood type while another had a deficit. With blood collections, consideration of a national unified service was periodically revisited but not enacted until 1988, when the Department of Health formed a national directorship to ensure there were adequate blood supplies across all regions. This followed a report, undertaken at the bequest of the Conservative Government, which condemned the management of the national blood supply as “a fragmented and disorganised shambles”. The National Directorship was transformed, merging with the BPL blood products factory, into the National Blood Authority on 1st April 1993 and became a ‘single’ employer.

In the 2000s the UK blood services were again re-configured. In England, the NBA was abolished, as part of the Labour Government's phased reduction of the number of Special Health Authorities, and NHS Blood and Transplant (NHSBT) formed following a merger with UK Transplant on 1st October 2005.

The Blood Service of 2011 operates from a mix of major blood centres, smaller static clinics, and has a fleet of mobile donor collection vehicles. The Service typically collects 2.3 million blood donations from approximately 1.3 million voluntary donors at 23,000 donor sessions. Hospitals in England and Wales use around 10,000 units of blood per day. The processed blood is delivered nationally, with some 200,000 deliveries made each year.

Reorganisation of the Blood Service: the historical context

The Blood Service has never sat comfortably within the NHS: it markets a service to the general public, produces a product and 'sells' the product to hospitals. The question of whether the Blood Service should remain in the public sector or be privatised was debated several times during the 1960s in Parliament. Here arguments of economic efficiency pitched against matters of social ethics. The influence of the social researcher Richard Titmuss on the social ethics of the altruistic 'gift' of freely donated blood was arguably of great influence for keeping blood donation unremunerated and within the public sector. Titmuss argued that donors donate blood for reasons of altruism, reciprocity and duty and they would cease to do so if they were either paid or if the organisation collecting their blood was seen to make a profit. Other social researchers have subsequently concluded studies which support the basis of Titmuss’s theory that to consider paying donors would actually drive more people away than it would attract, hence reducing the donor population still further (an economic theory called the ‘crowding effect’ where, in a reverse of classical economic assumptions, an extrinsic motivation suppresses intrinsic economic effects). While not paying donors is central to the UK policy approach, it is not a universally held view.

Although privatisation was removed from the agenda for a generation the operation of the Blood Service nevertheless remained a subject of political debate during the 1970s. In 1978 a Labour Government was criticised by the medical establishment because Britain was not self-sufficient in blood products, due to lack of investment, and was reliant upon commercial imports to meet forty percent of NHS requirements. This later became the subject of an independent public inquiry (the Lord Archer Inquiry 2007-2009) as the reliance upon what had primarily been US imports, most of which were contaminated, had resulted in many haemophiliacs becoming infected with the human immunodeficiency virus (HIV)

Under the Conservative Government of 1983-1987 attempts were sought to introduce economic efficiencies into blood collection. The funding for the Blood Service was altered on 1st April 1984 to be partly met by the Department of Health and Social Security and partly by cross-charging hospitals for blood on a not-for-profit basis. Subsequent Conservative Governments attempted more radical reforms.

With the formation of the National Blood Service in 1993, the re-organisation coincided with the Conservative government’s introduction of an internal (quasi) market into healthcare, based on the design of the American neo-liberal Enthoven. The aim of the ‘market’ was to seek greater cost effectiveness; to challenge the idea of the NHS having a monopoly of hospital services and, also, to cut bureaucracy as summarised by Secretary of State for Health William Waldegrave in 1991: “The NHS is an administrative slum designed in the 1940s and needs to be updated” (quoted by Lee-Potter). These reforms resulted in:

A new national pricing mechanism for blood Division of the Blood Service into three competing zones (London and South East,

Midlands and South West, and Northern) A set of economic targets for the Blood Service management

The formation of the zones, and resultant abolition of the regions, resulted in some three hundred job losses (the ‘savings’ were estimated at £2.4 million). The creation of the zonal structure was unsuccessfully opposed by unions, medical staff and the Labour Party who believed the reorganisation was a smoke-screen for eventual privatisation.

Since 1993 industrial relations within the Blood Service has remained customarily tense and conflictual. The largest and most intense dispute in the Service’s history was in response to

redundancies stemming from the planned closure of the Liverpool Blood Centre. This strategy was first put forward by management in 1995 in order to save £5.69 million and was attempted in 1997 as part of a wider ‘modernisation programme’. The programme not only sought to close the blood centre. The objective was also to increase operations at the centre in Manchester and to import private sector management techniques (described as ‘Total Quality Management’), aimed at introducing a “cultural change” and to overcome what management described as “difficulties with [staff] performing jobs properly” (quoted by Harvey et al). The union counter responses from MSF (Manufacturing Science and Finance), TGWU (Transport and General Workers Union) and UNISON took the form of a joint campaign against the likely job losses and service disruption, which included days of industrial action and demonstrations. The union campaign culminated in the dismissal of the NBA Chairman (Sir Colin Walker) by the Secretary of State for Health (Frank Dobson) and the Liverpool centre was saved from closure following an additional inquiry (the Bellingham Report).

After a quiescent period, the government embarked on further change with the Lyon and Gershon reviews of the public sector, both of which had the remit to increase ‘efficiency’ and to reduce costs. One outcome was the reorganisation of the Blood Service as the NHSBT (which reduced two existing Special Health Authorities down to one). Almost immediately, the new organisation embarked upon a review of the number of blood centres in 2006 and this triggered a similar bitter union-management dispute. The resultant outcome was the closure of blood centres based in Plymouth and Southampton and the construction of a so-called 'Super Centre' at Filton near Bristol. The union concerns were centred on jobs and the perceived risk to the public. With jobs the unions were concerned with both a reduction in jobs and with 'labour substitution', in that many of the jobs offered in the new centre to existing staff were at a lower pay grade.

Global organisation of blood services

Notwithstanding the market reforms of the 1990s the English Blood Service operates differently to the services in other countries, which more commonly fall in the private or voluntary sectors. Most blood services operate in Europe and North America for technological costs make blood collection and processing prohibitively expensive for much of the developing world. Thus many countries are dependent upon imports from multi-national pharmaceutical companies. Within Europe, the English Blood Service is a medium-sized ‘producer’ based on the number of red cells issued

In terms of the global organisation of blood collection and supply there are three basic models: state run; voluntary sector or private sector. Where the market model dominates, the ‘blood business’ equates to ‘big business’ in terms of potential revenue (with blood typically sold at a net profit of fifteen percent). Globally between seventy-five and eighty million units are sold commercially worldwide. The US market for blood is, in particular, highly competitive and driven by price competition. It is also the largest market where 13 million units of blood per year are collected. The cost of entry into the blood market is high, primarily because the cost of the raw material accounts for 70% of direct manufacturing costs (which compares with 19% for typical pharmaceutical production).

Until the 1980s the sale of blood and blood products outside national boundaries was relatively rare. However, as technological innovations improved product stability and as large multi-nationals like Baxter and Bayer began to acquire US blood banks, by the 1990s “the blood services complex had become an interlocking network that mingled the blood and plasma of millions of people who lived thousands of miles apart” (Starr). Those countries in which the private sector dominates include Australia, Brazil, Italy, Switzerland and the USA. Here there are few players, to the extent that the US companies, represented since 1947 by the American Association of Blood Banks, have been accused of operating as a cartel and there is a tendency towards the monopolisation of supply (through mergers and acquisitions) to the degree that the market, worth $5 billion in 2005, is oligopolistic. Nonetheless there remains a competitive dynamic to drive production costs down and to increase the price for products. Thus a company like Baxter will continually seek profit maximisation through various means: by cost reduction through reducing operating costs; increasing yields; reducing waste; increasing productivity and economies of scale. With reference to blood donation originally being established as a ‘social good’ in the 1920s, Starr describes this ‘blood market’ as representing “everything wrong with American-style capitalism”.

In other countries blood is provided by the voluntary sector, including South Africa, Nepal, Canada, Finland, Japan, Switzerland and the Benelux countries. Voluntary organisations are either companies supported by government grants or they are charitable bodies, such as, the Red Cross / Crescent. Those countries which maintain a form of public sector blood service include France, Hungary, Ireland, Cuba, Kenya, Iran, New Zealand and the UK. For blood services run by the state, this organisational model may be seen as in decline with countries like Australia and Germany moving from a state run service to a fully commercial one during the 1990s. However, in France the service was re-nationalised in 1993 following a series of HIV infections (“l’affaire du sang contaminé”). The economic advantage of state owned blood services are that they allow resistance to the “vagaries of the international market place” and the variability of plasma processing itself, where yields, volumes and quality of

i Anon. "Blood service privatisation criticised in Commons", Health Service Journal, March 2010: http://www.hsj.co.uk/news/acute-care/blood-service-privatisation-criticised-in-commons/5027242.article (accessed 20th April 2011)

the product can be difficult to determine. These different forms of organisation can be considered with the policy recommendation of the World Health Organisation: that blood donation remains voluntary, unremunerated and freely distributed.

Globally the economic model of the English and Welsh Blood Service- relying upon voluntary donations from unremunerated donors; and then redistributing a ‘product’, at a fixed price, as a monopoly provider at a fixed cost within the NHS - is not widespread. This has at times exposed the Service to economic scrutiny from neo-liberal economists (as with Enthoven). Given the economic models favoured by the Coalition Government of 2010, the modus operandi for the Service stands a strong chance of being reviewed.

Irrespective of questions of politics and ideology,, a longer-term challenge to the blood industry is posed by the possible emergence of artificial blood and recombinant blood products from biotechnology companies. The future impact of artificial blood is difficult to estimate as technology like a ‘plastic’ (porphyin) based blood is at the early development stage but this is another reason why further debate on the unusual English Blood Service is likely.

Policy implications

The reorganisations of the Blood Service are not just of relevance to the Service and its relationship with hospitals and patients. Both historically and recently, many of the reforms to which the Service has been subjected have occurred prior to the implementation of essentially similar measures across the wider NHS. Thus the extensification of private sector economic models within the Blood Service arguably serves as a model for what may happen to other parts of the NHS. This is indicated by a more detailed examination of the recent developments within the Blood Service.

Since 2003, the financial strategy of the Blood Service centred on three areas. These have been:

To reduce the dependency of its blood products division on government subsidies To re-configure the Service to meet the Department of Health requirement that the

price of blood charged to hospitals is reduced To respond to the decline in the demand for red cells To increase the number of blood donors.

To fulfil the first three of these four financial strategy goals the most straightforward action for the Service was to dispose of its blood products manufacturing unit (employing around five hundred staff). In January 2011 the Bio Products Laboratory was taken over by a company called Plasma Resources UK (of which the Department of Health, through the Commercial Directorate, is the sole share holder) in a move to prepare for its eventual privatisation.

In relation to the price of red blood cells, despite attempts to control the price more safety tests and growing operating costs contributed to almost a 70% increase in the price at which red cells are sold to hospitals during the period 2001 – 2008. This led to concerns being voiced by hospital managers over the internal cross-charging structure.

The number of blood cells collected by the Service declined from 2000 (by approximately 15% during the period 2001-2006). This was part of a Department of Health strategy implemented partly on the basis of scientific consensus and partly to meet government

economic objectives. The scientific arguments related to the various complications which arise from blood transfusions (for instance the annual mortality rate for those undergoing transfusion is 2%). A scientific review concluded that with better clinical procedures much less blood and blood products could be used while maintaining efficiency and outcomes. The economic reasons were two-fold. Firstly the Department of Health, seeking improved inventory control, issued a directive that required hospitals to reduce the amount of blood purchased and held for emergencies. . Secondly, a government funding review required that the Blood Service management improve the efficiency and capability of the processing and testing network, because it was believed to be operating unnecessarily at 'excess capacity'.

Paradoxically, with collection costs rising and the number of red cells collected declining, the number of British citizens willing to volunteer as blood donors fell faster than the reduced demand for blood. The need to recruit new donors, in addition to retaining existing donors, had a considerable impact upon working practices. By seeking to reduce waiting times, the Blood Service management increased shift work for blood collection and processing workers as well as increasing the use of mobile blood units (‘bloodmobiles’), sent out to shopping centres and workplaces with the intention of hosting more donor sessions outside of ‘9 to 5’.

Further cost pressures on the Service arose from the government-commissioned Arm’s Length Body Review report of 2004 (issued by the NHS), which aimed for lower costs through a reduction in NHS “bureaucracy”. The report required NHSBT to reduce its operating costs by £15.06 million (or 3% of total expenditure for 2005-2006). In order to move the Service in this direction the government reduced direct funding of the NHSBT by £11 million for 2006-2007. As the Service has limited influence over the price charged to hospitals for blood, which is set by the Department of Health, the response by NHSBT management has been to seek savings through the pooling of services; aim for tighter management control; search for procurement savings; and for a reduction in the number of blood centres. The reduction in blood centres formed part of a plan to construct so-called ‘super centres’. The first phase, as described earlier, included the closure of centres in Southampton and Plymouth with the replacement of these with one larger centre at Filton. Central to this plan were job losses, primarily targeted at two occupational groups: Donor Carers (one hundred and fifty workers) and Biomedical Scientists (three hundred workers), which were implemented between 2007 and 2010. The NHSBT has also attempted to diversify and has developed a range of cadaver tissue products (stem cells, bone, skin, tendons and valves). This expansion into tissues was described, by Martlew, as making the service “almost a ‘spare parts’ facility”.

Conclusions

The recent proposal to reduce the number of laboratory staff and to privatise the transport and logistics operations of the Blood Service form part of a sequence of reforms and reorganisations of the Blood Service since it became a national service in 1948. The current Coalition Government policy is not, therefore, new and must be considered within the historical-economic context.

The direction that future reforms might take will be driven by further economic cost pressures upon the Service and the partial privatisation of services. A further risk arises in the way that the Blood Service is organised in England and Wales is generally different to the way that global Blood Services are organised. Whilst this uniqueness, in being bound into the NHS, may offer some protection, the differences also expose the Service to questioning by neo-liberal economists. Given the experiments with the privatisation of pathology staff in the past

ten years, the laboratory staff employed within the Blood Service appear as a relatively soft target. Given that Titmuss' ethical arguments about the superior efficiency of a system based on freely-donated blood have yet to be refuted (they are of course disputed by the more extreme neo-liberals, since they offend their ideological beliefs, but there is no convincing counter-evidence) and based on the likely public reaction, a series of privatisations which would lead to freely-donated blood (or even remunerated blood) being sold for profit appears unlikely. Nonetheless, piecemeal changes which will affect the relationship between the Blood Service and the State are likely to continue to be made and reorganisation of the Service is likely to continue to be a test space for continuing social and economic reform of the NHS as a whole.

Further Reading

Chapman, J.F. and Cook, R. (2002): ‘The Blood Stocks Management Scheme, a partnership venture between the National Blood Service of England and North Wales and participating hospitals for maximizing blood supply chain management’, Vox Sanguinis, 84, pp239-246

Department of Health (2006): ‘Self-Sufficiency in Blood Products in England and Wales: A Chronology from 1973 to 1991’, Department of Health, London

Frey, B. S. and Jegen, R. (1999): ‘Motivation Crowding Theory: A Survey of Empirical Evidence’, Working Paper No. 26, Institute for Empirical Research in Economics, University of Zurich, pp1-27

Hansard. HC Deb, 15 March 2011, c63WH: http://www.publications.parliament.uk/pa/cm201011/cmhansrd/cm110315/halltext/110315h0002.htm#11031560000318 (accessed 20th April 2011)

Harvey, E., Hewison, C., Nevalainen, D.E. and Lloyd, H.L. (1995): ‘Maintaining Quality in Blood Banking’, Blood Reviews, 9, pp15-24

James, J. D. (1958): ‘Practical Blood Transfusion’, Blackwell Scientific Publications, Oxford

James, V. (ed.) (2005): ‘Guidelines for the Blood Transfusion Services in the United Kingdom’, 7th Edition, The Stationery Office, London

Martlew, V. (1997): ‘Transfusion medicine towards the millennium’ in Titmuss, R. M. ‘The Gift Relationship: from human blood to social policy’, Original edition with new chapters, London School of Economics Books, London, pp41-56

Mollison, P.L., Engelfriet, C. P. and Contreras, M. (eds.) (1993): Blood Transfusion in Clinical Medicine, 9th edition, Blackwell Scientific Publications, Oxford

NHS (2004): ‘An Implementation Framework for Reconfiguring the DH Arm’s Length Bodies: Redistributing resources to the NHS frontline’, 265314, ALB/P&G/04/01, National Health Service, London, pp1-46.

Official Journal of the European Union (2003): ‘Directive 2002/98/EC of the European Parliament and of the Council of 27 January 2003: setting standards of quality and safety for the collection, testing, processing, storage and distribution of human blood and blood

components and amending Directive 2001/83/EC’, Official Journal of the European Union, 8.2.203, pp L33/30 – L33/40

Rivett, G. (1998): From Cradle to Grave: Fifty years of the NHS, King’s Fund, London

Starr, D. (1998): Blood: An epic history of medicine and commerce, Knopf, New York

Thomas, M. J. G. (2005): ‘Blood Letting and Blood Giving – A History of Blood Transfusion’ in Thomas, D., Thompson, J. and Ridler, B. A Manual for Blood Conservation, TFM Publishing, Shrewsbury

Titmuss, R. M. (1970): ‘The Gift Relationship: From Human Blood to Social Policy’, George Allen and Unwin, London (Reprinted by the New Press, (reissued with new chapters 1997, John Ashton & Ann Oakley, LSE Books)

About the author

Tim Sandle has recently gained a PhD from Keele University. This thesis, titled ‘XXX’, concerned wage determination in the public sector, using the Blood Service as a case study. timsandle@btinternet.com