SNOMED ‘Highly Unlikely’ to Generate Revenue for NHS

Expected revenues from the NHS’ collaboration on SNOMED Clinical Terms (CT) have not been realised and the financial formula used to calculate them is unlikely to generate any revenues for the service in the future, according to a strategy document commissioned by the NHS Information Authority and seen by E-Health Insider.

This is despite the investment by the NHS of over $9m and a contribution of valuable intellectual property in the form of Read Codes v3, developed at significant cost to the NHS. The original business case for SNOMED approved by HM Treasury was partly based on the NHS realising a share of revenues from future sales of SNOMED.

The document described as “a strategic outline case (SOC) for change in the proposed implementation of clinical terminology in the healthcare in England”, was written by bbd Consultancy Services and circulated in December 2002.

It appears to answer the central question posed by E-Health Insider last week: whether the $32.4m deal announced by SNOMED CT’s owners, the College of American Pathologists (CAP), will yield any financial reward for the NHS, which collaborates on and invests in SNOMED CT. The NHSIA itself has declined to answer directly the question, repeatedly put to it over the past two weeks, stating that details of the contractual relationship with the CAP are “commercial and in confidence”.

The contract signed with the US National Library of Medicine will make SNOMED CT available, royalty-free, across the US to both non-profit and profit organisations from January 2004. The contract between the NHS and the CAP makes SNOMED CT available royalty-free to the NHS only. The SOC document says the licence will run for 20 years.

The CAP declined to answer questions sent to its media office about revenue shares. The NHS Information Authority, which manages SNOMED work programmes for the NHS, did not respond directly to the question about revenue shares but instead issued a statement saying that the collaboration with the CAP was mainly based on pooling expertise within the Read Code and SNOMED CT teams to build a strategic world-class terminology to which the NHS could have access.

However, the paragraph of the December 2002 strategic outline case relating to revenues appears to contradict this downplaying of the importance of revenue shares. It says: “An important assumption made in the original business case [drawn up in 1999 when the collaboration with CAP was negotiated] was that revenue would be generated through the globalisation of the recommended solution and, through the formula agreed as part of the NHS/CAP contract, the NHS would receive some of this revenue to offset their investment.

”Subsequent studies (external to this SOC) have shown that these anticipated revenues have not been realised and that, given the formula in use, the NHS is highly unlikely to receive any income in the future.”

Asked to respond to the SOC’s strong statement about revenues, the NHSIA issued a second statement saying: “The original NHS Business Case (1998-99) for SNOMED CT concluded that the joint development was – in any event – the best value option for the NHS. The possibility of SNOMED generating substantial income from global marketing was considered, as was the possibility of no revenue whatsoever.”

The statement continued: “Details of the Department of Health’s 1999 agreement with the College of American Pathologists are “commercial in confidence” but the NHS position under both these eventualities is provided for, without adversely affecting the Business Case.”

The opaque nature of the contract with CAP makes it all but impossible to independently verify what the revenue expectations were. The fact remains that the consultants who wrote the SOC understood revenues were expected from the deal.

The NHSIA said the SOC “also revisited the 1998 assumptions and took into account information on the rate of uptake of SNOMED CT since its initial release in January 2002.” There is no further information on the rate of uptake, but the lack of revenue suggests a response below expectations.

One source E-Health Insider spoke to suggested the SOC might have been used as a lever with the CAP to make SNOMED CT more freely available, giving it a chance to become more widely used.

The 75 page document drawn up by bbd Consultancy Services covers far more than financial issues. It states its purpose as being to describe and justify the case for change with regard to the proposed implementation of a clinical terminology throughout healthcare organisations in England.

It shortlists six future options only two of which include SNOMED CT. Furthermore, it says that those two options can only be considered if SNOMED becomes an “open” standard, something which seems to have been achieved – at least partially – with the new US contract.

The document also discusses the possibility of terminating the SNOMED contract but recommends that the NHS should wait to see whether SNOMED becomes an international standard.

The sceptical tone of the SOC document contrasts sharply with a 2001 press release from the NHSIA which stated: “The NHS commitment to SNOMED CT as its preferred clinical terminology is such that it is recommended by the NHS Executive in the policy document ‘Building the Information Core. This states that “By March 2003 – clinical information systems start to use SNOMED Clinical Terms.” Building the Information Core Section 1.7”

While the bbd document clearly reflects concerns around the NHS about SNOMED, publicly the service appears to be contractually committed to remaining silent on difficult questions.

At the same time, the SOC reflects that the need for a common and appropriate clinical terminology remains high and will increase as more electronic records come into being. Its analysis finds that “SNOMED CT is a feasible terminology/classification system for use within the NHS in England”, but it lists other feasible options – notably Read Codes Version 2 and 3.