“Absolutely Terrifying”: What the NHS Funding Overhaul Means for Pharma, Medtech and Device Companies

When the chief executive of NHS England stands up at the King’s Fund conference and says the financial changes now under way are “absolutely terrifying”, it’s worth paying attention.

Because Sir Jim Mackey wasn’t being dramatic. He was being honest.

He described something most in the system haven’t yet grasped – the NHS is changing the plumbing of how money flows. And when you rewire the plumbing, every assumption about where care happens, who delivers it and how organisations survive gets put back on the table.

The NHS is no longer quietly tinkering with incentives. It’s dismantling and rebuilding the funding logic that has shaped hospital-centric care for decades.

And if you’re in pharma, medtech or devices, the implications are profound.

This isn’t merely a commissioning change. This is a market access rewrite.

Read my blog – Tariff Tinkering Won’t Save The NHS – But Financial Literacy Just Might – by clicking here.

It’s the end of the NHS block contract era

The key shift is that the NHS is moving away from the block contract, particularly for non-elective hospital care.

For years, block contracts were like weighted blankets:

• You were paid the same, regardless of how much activity happened.
• Hospitals didn’t have to prove the value of everything they did.
• Community providers were effectively disincentivised.
• Innovation struggled because the money never followed the work.

Block contracts allowed the NHS to keep going, but they also hid inefficiency, masked unmet need and locked services in the past.

Unbundling the block means exposing what services actually cost and what value they actually deliver. It means systems will know where care is needed and where it’s wasted. And it means poorly performing pathways won’t hide anymore.

The new funding system is already emerging

By 2026–27, non-elective care will be funded via:

• A blended model with a fixed core payment for stability.
• A variable activity-based element where value must be demonstrated.

And crucially, funding will be allowed to flow out of hospitals into community services if those services prevent avoidable admissions.

This is the first time the NHS has created a payment model designed to enable true prevention at scale.

What this means for pharma, medtech & device companies

Companies have spent years trying to make the case for prevention, early intervention or pathway change, all while operating in a system that financially rewarded the opposite.

Now the incentives are shifting toward the exact behaviour many innovations claim to support:

• Earlier diagnosis.
• Faster access to effective treatment.
• Condition stabilisation.
• Avoiding deterioration.
• Self-management support.
• Remote models of care.
• Community-based treatment.

The questions you will be asked now are:

• What does your innovation stop happening?
• Who does it allow to see fewer patients?
• How does it free capacity?
• Where does it shorten the pathway?
• How does it reduce hospital touchpoints?

If you can answer those clearly, your value is rising.

If your value story is still focused on clinical benefits alone, you’re going to struggle.

Why this is happening now

The NHS cannot continue to fund activity without understanding its impact or value. Demand is up, waiting lists are rising and workforce pressures continue.

The logic is shifting:

• If something in the community can prevent a hospital admission, the money should follow it.
• If something helps patients stabilise earlier, it should be funded.
• If something allows care to shift closer to home, the contract should allow it.

The biggest risk is doing nothing.

Companies that keep selling into hospital endpoints will find decisions slow down, budgets tighten, and business cases get blocked at ICB level.

The conversation is shifting upstream. If the NHS is changing how it sees value, industry must change how value is presented.

Three practical shifts to make now

1. Reframe your value story around system outcomes.
2. Don’t sell products. Sell pathways.
3. Identify the early adopter systems and go deep.

How to navigate the new ways of working

Shifting funding out of hospitals is politically, clinically and culturally difficult. Success will require capacity in primary, community and voluntary sectors, and industry support that is practical and grounded.

We are entering a period where the NHS will reward demand reduction, service-wrapped offerings will outperform standalone products, and the winners will be those embedded in pathways, not those trying to bolt products on afterward.

This is the moment to rewrite your value narrative, identify your early adopter systems, develop your service model and gather as much real world pathway impact data as you can.

If you’d like support with that, that’s where I can help – through training, mentoring and workshops for your team.

I help pharma, medtech and device companies get their innovations into NHS pathways and keep them there.

Send me a message. Let’s get ahead of the shift, not be overtaken by it.

At www.scottmckenzieconsultancy.com, we work directly inside the NHS, supporting provider collaboratives, commissioners and system leaders to implement real change. We then help pharma, medtech and device companies interpret what’s happening, so they can engage the right stakeholders, align with NHS priorities and get their innovations embedded into care pathways.

With more than 20 years working within the NHS and Pharma, medtech and devices companies, Scott brings a unique dual perspective, now captured in his book, Embedded: How Pharma, MedTech, and Device Companies Can Get Their Products into NHS Pathways and Stay There, which distils everything he’s learned into a practical playbook. Whether you’re launching a new product or trying to unlock stalled adoption, Embedded shows you how to reframe your offer, align with NHS priorities and make change stick.