Grand Committee

Wednesday 25th January 2017 Grand Committee

Wednesday 25 January 2017

Health Service Medical Supplies (Costs) Bill

Committee: 2nd sitting (Hansard): House of Lords
Wednesday 25th January 2017 Grand Committee

Committee (2nd Day)

Relevant document: 12th Report from the Delegated Powers Committee

15:45

Clause 6: Provision of information to Secretary of State and disclosure

Amendment 32

Moved by

[Lord Lansley]

32: Clause 6, page 5, line 32, at end insert—
“(4A) In connection with the requirements in subsection (2), the Secretary of State may serve a notice (an “information notice”) to a UK producer in order to require the person to supply the specific information required.(4B) An information notice must include particulars of—(a) the form in which the information must be supplied;(b) the date by which the information must be supplied;(c) the purpose for which the information is required;(d) with whom the information may be shared; and(e) the right of appeal under this section.(4C) A UK producer to whom an information notice has been served may appeal to the Upper Tier Tribunal against the notice.(4D) Regulations may make provision for, and in connection with, the determination of appeals under this section.”

[Lord Lansley (Con)]

It is a pleasure to start this, the second and concluding session in Committee. We have reached Clause 6, which relates to the provision of information. In the 2006 Act as it stands, there is a wide-ranging requirement to provide information under the statutory scheme for medicinal products. However, in the Bill the Government have resolved to go rather wider in the scope of the information-gathering power. We will come on to some of the reasons why I think that process of gathering information more rigorously is necessary and why I support it.

Happily, we are in this Bill discussing legislation that is, in principle, supported by the industry—it recognises the importance of securing a good relationship between the Government and the industry in determining the right pricing structure. This is particularly true because, in the past, under the voluntary scheme and statutory scheme, the information-gathering capacity was built into the schemes themselves.

In addition, there is the issue of gathering information relating to the reimbursement of pharmacies under what I think is known as scheme W. I completely understand why it is necessary. I remember that, back in about 2006—I am not sure which of our noble friends, if I may be so bold, was in ministerial office at that time—the issue that arose with pharmacies was the lack of contemporaneous data that enabled the gap between the wholesale purchasing and the reimbursement price on dispensed drugs to be determined accurately. At that time, I was the shadow spokesman, and whistleblowers came to me to tell me that the pharmacy industry was taking anything up to £500 million a year more, by way of its margin over its purchasing of drugs, than was allowed for in the global sum negotiated with the department. That was investigated by the National Audit Office and the whole system was tightened up.

We are, however, still not where we should be. On Monday, we debated the idea that if one ends up hearing about purchasing only from large organisations, one will get it wrong because one might leave out the fact that small pharmacies cannot necessarily purchase at quite so fine a price. However, unless I am very much mistaken, and contrary to that, if you gather information only from small pharmacies—even if they have a collective purchasing operation—and leave out the very biggest pharmacy chains, the chances are that you may be overestimating the wholesale price. Of course, there are some integrated operations, and getting that information from an integrated supply chain is extremely difficult.

The starting proposition for this debate is that there is a need to broaden the information-gathering power. Amendment 34, in my name, is consequential, but Amendment 32 is about what happens once one goes down the route of gathering quite so much information, potentially. I do not seek to amend the purposes that are set out, as the Committee will see, in Clause 6(3).

In Clause 6, there is a long list of the reasons why the Secretary of State might wish to gather information and the purposes required for that. It is potentially necessary for the information to be gathered. As a consequence, I do not wish to change all that list but at the moment, compared to most of the analogous information-gathering requirements for government laid upon industry, there is no safeguarding process. There is no process which, in itself, requires the Government to be much clearer about the information they require, the purposes for which they require it, the character of the use to which it will be put or, since there is a power to share information, with whom that information will be shared. Amendment 32 sets out to do this.

Under the voluntary or statutory schemes, there can be a scheme for gathering information that does not necessarily require information notices. Amendment 32 essentially says that in any circumstances where the Secretary of State does not receive the information the Government are looking for under a scheme, including presumably scheme W and others, there should be a power for the Secretary of State to issue an “information notice”. But where a notice is to be issued to somebody, it would then have to say some very specific things: what is required, in what form, by when, for what purpose, with whom it will be shared and about giving a right of appeal. There may inevitably be circumstances where there is a belief on the part of industry that the information being sought is not required—that the Government are unnecessarily hoovering it up, as it were. It may have a particular set of reasons of its own to try to resist this.

This amendment would give industry an opportunity to seek appeal if the Government are being disproportionate. Of course, it would have a right to judicial review but it would be much easier if this were governed under statute by way of simple appeal to the General Regulatory Chamber, as happens in a number of other areas where there is a requirement to gather information from people. I hope that the Minister will be sympathetic to an understanding that, notwithstanding the general support of industry, concerns have been properly raised about the scope and extent of the information-gathering power the Government propose in the Bill. I hope he will recognise that the amendment would reassure the industry that it would be properly informed about what information is required, and would have some recourse if it objects to that information being taken. I beg to move.

[Lord Hunt of Kings Heath (Lab)]

My Lords, I want to express some sympathy with the remarks of the noble Lord, Lord Lansley. I am not sure whether he has got the terms of his amendment right; my noble friend Lord Warner has an amendment in the next group which, in a sense, covers the same ground.

The noble Lord, Lord Lansley, knows that I am sceptical about whether these powers should be extended to non-medicines but the issue here is that they are very broad, as he says. As far as I can see, there are absolutely no safeguards regarding how these powers will be used. The safeguards are not in the Bill or the 2006 Act, and certainly not in the draft regulations as far as I can see. We are looking for the Minister to table amendments on Report to build in thresholds or safeguards to stop the department simply undertaking fishing expeditions. That would give us some sense of proportionality. I am not sure whether the noble Lords, Lord Lansley and Lord Warner, have got their amendments quite right but I am certain there will be a consensus for building in some safeguards over the use of these powers.

[The Parliamentary Under-Secretary of State, Department of Health (Lord O'Shaughnessy) (Con)]

My Lords, it is nice to be back with you again today to finish the Bill’s Committee stage. I am grateful to my noble friend Lord Lansley for tabling his amendments, and for his support for the Bill’s ultimate purpose: more rigorous gathering of data to support voluntary and statutory schemes and pharmacy reimbursements. That support is very welcome. I have huge sympathy with his argument. It is because we agree with the need properly to set out the information powers that we have published two sets of illustrative regulations to help Parliament scrutinise the information powers in the Bill. Reflecting on those, I believe that I can reassure my noble friend about the concerns behind his amendment.

I start by addressing the general proposition that a UK producer should be provided with an information notice every time the Secretary of State seeks to require information from that producer. Many noble Lords have expressed concerns about the regulatory burden the Bill might impose, and the amendment could exacerbate those worries. Regarding routine information collection, the Government already collect information on prices and volumes every quarter to support the operation of the PPRS and statutory schemes, and to inform reimbursement prices for community pharmacies. The Bill would expand routine collections to inform reimbursement prices to enable us—as my noble friend pointed out—to use data from more companies, to make the reimbursement of community pharmacies fairer and more robust, and to set reimbursement prices for more products.

For the purposes of requiring information on a routine basis, the illustrative regulations clearly set out what information would need to be provided, the form in which it would need to be supplied, the period of time it would need to cover and the date by which it would need to be supplied. Where information is required on a non-routine basis, the illustrative regulations demonstrate that the Secretary of State would notify a UK producer of that request. The regulations set out the notice that the Secretary of State would give a UK producer, the form in which the notice would be given and the type of information that would be required. The regulations would also require the Secretary of State to inform UK producers of the time period the information would need to cover and the time within which the information would be required.

Turning to the purposes for which information can be required and the persons to whom confidential and commercially sensitive information can be disclosed, I reassure the Committee that the Government take these matters very seriously. We have sought clearly to set out in the Bill the limited purposes for which information can be required and the persons to whom confidential or commercially sensitive information can be disclosed in relation to those purposes. The Bill makes it clear that information can be required for only three purposes: first, to reimburse community pharmacies and GPs; secondly, to support the PPRS and the cost-control provision in the NHS Act 2006; and thirdly, to ensure that healthcare products provide value for money.

The information that we would collect under the first two purposes would generally involve routine collections, to operate the reimbursement system and our voluntary and statutory schemes. However, assuring ourselves that products or the supply chain provide value for money would be done through ad-hoc collections. This is where we get to the critical issue of thresholds. Those collections would be triggered by evidence from existing data that there may be an issue with pricing—for example, when the reimbursement price we set in primary care is increasing without obvious reasons—or patients, clinicians, commissioners or the industry raising concerns, for example about price rises without obvious reasons or access problems. I hope that that makes it clear that this is not intended for fishing expeditions, to use the expression of the noble Lord, Lord Hunt.

[Lord Hunt of Kings Heath]

Have I missed this? Are those qualifications for the use of the provisions set out in the Bill?

[Lord O'Shaughnessy]

They are not. I am using this opportunity to set out on the record the reasons why information would be sought.

The Bill is also clear about with whom confidential and commercially sensitive information can be shared. This is restricted to other Government departments, the devolved Administrations and specific NHS bodies and persons providing services to any of these bodies. The information can be disclosed to these bodies only for the purposes set out in the Bill—which I just reprised. The Bill also enables the Secretary of State to share information with trade bodies, and Regulation 11 of the illustrative regulations sets out the trade bodies with whom the Secretary of State might want to share information, and the type of information that he would want to share with them.

The illustrative regulations currently limit the information that we can share with trade bodies to aggregated data that cannot be led back to a specific company. Furthermore, the Bill enables the Government to prescribe in regulations any other person to whom the Secretary of State can disclose information. The flexibility provided by this regulation-making power allows the Secretary of State to disclose information to other persons who may become involved in payment or reimbursement for health service medicines, medical supplies or other related products, including, for example, in circumstances of regional devolution. Again, it would be possible to disclose confidential or commercially sensitive information to these persons only for the purposes set out in the Bill. We will have further opportunities to discuss these powers of disclosure when we discuss the amendments relating to the report of the DPRRC. In summary, we would not be able to disclose information to bodies not listed in the Bill or prescribed in regulations, so the legislation will restrict to whom we can disclose information.

16:00

Appeals were a key part of my noble friend’s amendment. The second aspect of the amendment would enable companies to appeal against any request for information or information notice. The Bill already includes a right of appeal for UK producers in relation to enforcement decisions, which I think is what my noble friend is talking about—not so much requests, but enforcement when information was not forthcoming after requests for information. Where a UK producer refuses to comply with a routine or non-routine requirement for information, the Secretary of State has the power, as amended by the Bill, to make an enforcement decision against that UK producer. The UK producer would have the right to appeal that enforcement decision if there were any concerns with the request, as has been set out in both sets of illustrative regulations. As the Bill and the regulations are now drafted, if the manufacturer or supplier did not provide us with the information, we would issue an enforcement decision that could be appealed through the tribunal established by the Health Service Medicines (Price Control Appeals) Regulations 2000.

I hope that my explanation of the Bill and the two sets of illustrative regulations has clarified that the Government have carefully considered the issues of disclosing confidential and commercially sensitive information by restricting in the Bill the purposes for which information can be required and to whom information may be disclosed. I hope that I have also clarified that there is an appeal mechanism in place, albeit in a slightly different manner than that proposed by the amendment. On that basis, I ask my noble friend to withdraw his amendment.

[Lord Lansley]

I am grateful to the noble Lord, Lord Hunt, and my noble friend for their response to this amendment. I can see from the illustrative regulations that, as I said earlier, there would be a general scheme for the collection of information, and I am not looking for the amendment to replace a general scheme with a requirement to issue individual information notices. That would be excessive and burdensome. However, under the illustrative regulations there is, in addition to the general scheme, what is effectively the restatement of the power for the Secretary of State additionally to require specific information from companies that breach the requirements of the general scheme—frankly, for any other purpose that the Secretary of State is looking for. That is in draft Regulation 19(2), which really just restates what is already in the legislation: that there is this general ability to say “just give me this information”.

I entirely understand the point that my noble friend is making about the appeal against enforcement, but there is no appeal against such a specific information notice. I may not have got it absolutely right, but in the case outside the general scheme of information, when the Secretary of State asks a company to provide specific additional information, I was proposing not an appeal against enforcement of request, where the company resisted, but for the company to be able to appeal against the information notice on the basis that it is an excessive use of powers; that is, rather than a judicial review, an appeal against that specific information notice.

My noble friend referred to the Delegated Powers and Regulatory Reform Committee’s view, which relates specifically to the question of with whom the information may be shared. The illustrative regulations really do not add anything from that point of view; they do not tell us, beyond what the legislation already states, with whom they may be shared. From any company’s point of view, there is little reassurance in the restrictions that the Minister has just referred to. The information could end up in all sorts of places. Remember, we are talking about an NHS body and, of course, all NHS bodies always behave absolutely properly in the use of information under all circumstances—I am being ironic.

From the point of view of a company engaged in selling these products, we are talking about a monopoly purchaser—a single payer—and a set of organisations with tremendous financial leverage in relation to the products that are being sold. If we are simply handing all the information over to the Secretary of State in the expectation that he could—I am not saying that he would—hand this information on to NHS bodies which are themselves the purchasers of these products, it could significantly skew what would otherwise be a proper commercial relationship between seller and buyer.

Companies must have a point at which they can cry foul, but I am not sure that we have yet given them the ability to do so at the appropriate stage when the information is being asked for. In a way, my amendment does that. I was rather comforted by the DPPRC’s report, in that it seemed to me that my amendment at least sought to make clear how the DPPRC’s recommendation in relation to the Bill might be met. I am implying in what I say that I can see how the amendment is not right; we could go further.

[Lord O'Shaughnessy]

I thank my noble friend for that clarification. I think that we are talking about the same thing, but we should have the opportunity to explore it between Committee and Report. Certainly, we will talk about the DPPRC issues. It is understood that the powers as currently set out need to be looked at.

[Lord Lansley]

I am again grateful to my noble friend. On the basis of what I have explained, there is a conversation to be had and I hope that we may be able to resolve this satisfactorily before Report. I therefore beg leave to withdraw the amendment.

Amendment 32 withdrawn.

Amendment 33

Moved by

[Lord Warner]

33: Clause 6, page 5, line 32, at end insert—
“( ) The Secretary of State may require information falling within subsection (4)(d) from a UK producer under circumstances where a specific health service product has significantly increased in price and where there are reasonable grounds to believe that the National Health Service is not receiving value for money.”

[Lord Warner (CB)]

My Lords, this amendment creates a trigger mechanism before the Secretary of State can require companies to submit to the new information requirements set out in this Bill. In effect, the Secretary of State has to be satisfied that a particular health service product has significantly increased in price and has reasonable grounds to believe that the NHS is not receiving value for money. In those circumstances, he can require the information falling within Clause 6(4)(d), on page 5 of the Bill.

It is possible of course, as the noble Lord, Lord Hunt, has mentioned to me, that I have been a shade too lenient with the Secretary of State and should have required this trigger to be applied to a wider range of products. I suspect that he may want to probe that area a little later on. However, I will explain the reasoning behind my amendment, which follows serious concerns expressed to me—strongly and convincingly—by the ABPI. From the concerns that were expressed, it is clear that the association supports the department’s intention to bring all information requirements under a statutory footing to ensure that the reimbursement system is run effectively. There is no dispute over that. However, it is very concerned, as has already been expressed in Committee, that the Bill will require information from all pharmaceutical companies, which is beyond what is required to fulfil this aim.

UK pharmaceutical companies already provide comprehensive information to the Government on profits they make at company level. The Bill would require companies to allocate profit figures to individual products. The sector believes that this approach is totally disproportionate compared to what is needed to fulfil the Government’s policy intention, for a number of reasons. First, the information requirements would extend to a company’s global business. Secondly, information on distribution costs of individual products is not currently recorded by pharmaceutical companies at product level. Thirdly, it would be extremely difficult for companies to share information at this level, with any information obtained likely to be estimated. Fourthly, such costs typically bear no relation to the cost of medicines to the NHS or reimbursement schemes. The Government have signally failed to convince the sector that what they are doing is both proportionate and necessary for their aims. I found the sector’s claims extremely convincing, which is why I have suggested a trigger mechanism of the kind set out in Amendment 33.

The Minister and the department have not got right the information provisions in the Bill and have signally failed to convince the industry that they have done so. Therefore, not only are the information provisions regulatory gold-plating, as has been suggested by the noble Lord, Lord Hunt, but they could be said to be rather ineffective and cheap gold-plating at that. The industry strongly supports a provision of this kind and I think it is perfectly prepared to sit round the table and discuss alternatives. Others may also want to apply this trigger to other parts of the Bill. I am certainly not a proud author, and if noble Lords want to try that, they can by all means go ahead.

I do not think that the Minister can get away with the argument that I suspect he may use, which is that the details of these arrangements can be sorted out in regulations and guidance. The truth is that the Bill gives the Secretary of State wide powers to require information, and it is the sweeping nature of those powers that I and others are challenging. It is also worth mentioning that one could regard the Government’s proposals as a recipe for gaming the system. If you make this stuff so complicated that it is very difficult to assure things, or you accidentally provide incentives to game the system, that is where you end up. I am not saying that on behalf of the ABPI, but I have been around in government a long time and have seen well-intended actions leading to very unexpected and unsatisfactory consequences. I am sure that most people will not do this, but if the Government choose to proceed with a disproportionate system of information collection, they should not be surprised if it happens.

The Minister mentioned in his response to the amendment in the name of the noble Lord, Lord Lansley, that the Government can give a range of assurances on how they will and will not use this information. I have to say to the Minister that we have been round this track on many pieces of legislation in this House. The warm words that one set of Ministers give about safeguards too easily get forgotten when they move on to other things and it suits a government department a little later in history to use the powers that are there. We have already seen with the Bill how the Government have found some inadvertent powers that no one can explain and which have been knocking around since 1977 with which to build an edifice in the Bill on information collection. Therefore it is not foolish to consider the possibility that the Minister’s assurances, which are not in the Bill, could still lead to abuse of this system later.

I still cannot see that the Government have made the case for this potentially massive increase in information requirements Bill that the Secretary of State can impose on the sector in the Bill. That is why we need to curb the Department of Health’s enthusiasm for this kind of collection of information, which could lead to fishing expeditions, no matter how the Minister tries to assure us in Committee. I beg to move.

16:15

[Baroness Finlay of Llandaff (CB)]

My Lords, I have some sympathy with the amendment of the noble Lord, Lord Warner. It strikes me that the information being asked for in the Bill requires a degree of detail that probably is not going to reflect reality. This is very often a global industry, so defining a “UK producer” will be quite difficult. If we make the information requirements too difficult, I see a risk of some of the larger companies deciding to produce more offshore rather than here.

The other difficulty with the pricing of any medical treatment that comes to market is that it has often had a very long lead time—over years. So the true cost of that particular item becomes almost impossible to disaggregate from all the other costs. Then, once it is produced and packaged, there are distribution costs, the mark-up at wholesale level and so on. I can see how a producer, in wanting to keep a cost high, could potentially move around its budgeting line to protect itself. But the problem is that if you do not have a trigger, you may get so much data that you cannot actually extract the true knowledge and the important information from them. I understand why you would want to have a lot of data to be able to move the cost and map it efficiently, but there is only any point in mapping it if it has accuracy attached to it.

I have a question for the Minister. In all these information requirements, how will a “UK producer” be defined, as distinct from an international producer from elsewhere? I may have missed it, but I could not find it defined in the Bill; I can see only products defined.

It will become almost impossible to know where the true cost is, but if a cost is going up, that becomes counterintuitive. Generally, for medication that is out there on the market, the cost should fall. Usually, production costs drop, because, for example, antibiotic production used to be incredibly expensive and is now very much cheaper because of efficiencies and the way that the science has moved forward. So you would expect, with bulk sales and technological advances, that the cost should come down. I therefore have a question for the noble Lord, Lord Warner, on the trigger mechanism. Is his price absolute—in pounds—or is it also considered relative to other products in that field that may be on the market? For example, we have seen some major discrepancies with ophthalmic products. Eye drops for glaucoma have been incredibly expensive compared to exactly the same substance that is being used in oncology and has been priced at a much lower rate. The question has to come up as to whether the price is being held and maintained inappropriately, rather than having gone up.

[Lord Warner]

In response to the noble Baroness’s point, I would not claim to have actually considered the detail of what level of pricing we will use. My point in this amendment is to try to establish the principle of a trigger mechanism, and I am happy to be advised on ways of improving it.

[Baroness Walmsley (LD)]

My Lords, the noble Lord, Lord Warner, is right that we need to have a trigger mechanism. This is gold-plating, and not very effective gold-plating. As the noble Baroness, Lady Finlay, just said, it will produce an absolute mass of information. The question is how to find, among that mass of information, situations where there is malpractice, abuse or unwarranted price rises. It is the same sort of argument as we had when the police wanted to collect everybody’s internet information. Really, it is like looking for a needle in a haystack. It is much better to have it targeted, where there is a reason to believe that there is something going on.

How will the department identify from this mass of information those situations that it needs to investigate further? Will it apply some sort of algorithm to the information at any point along the production or distribution line when there is an increase of more than a certain percentage or a certain percentage related to the average—or what? How is it going to be done? These companies have quite enough to tackle with Brexit coming along the track and do not need a further burden such as this.

[Lord Young of Norwood Green (Lab)]

I am not an expert in this area, but I am puzzled. If it is that difficult to identify, how come the Times managed it in its expose? It did not seem very difficult or complex. The Times found drugs that had come out of patent and were available on a generic basis and for which the company that bought the patent increased the cost by staggering amounts. You do not have to be Sherlock Holmes to alight upon that. I do not know which way to go on this debate. My noble friend worries about fishing expeditions, and he is right, but I am even more worried about the NHS being ripped off for inordinate amounts of money by people whose corporate responsibility polices omit the word “ethics”. I asked once before why none of the current audit processes inside the health service exposed this until the Times brought it to public attention. There may be a mass of information, but I would have thought that these things could quite easily be identified. I may be wrong because, as I said, I am not an expert in this very complex area, but those points need to be answered. The problem was identified. We have this Bill because we know that the current system is not working. Even though people in the various systems in the NHS were reporting their concerns, no action was taken for quite a long time. It certainly justifies the legislation. The Delegated Powers Committee expressed its concerns about whether the legislation is right, and I do not profess to be qualified to rule on that, but my major concern is about the ability of some companies to rip off the NHS.

[Lord Hunt of Kings Heath]

My Lords, my noble friend is right because he goes to the heart of the argument about this Bill. I think we have all said that we support the core aim, which is to deal with branded products becoming generics and the issues that were identified. The question is whether the Bill is a proportionate response to that and what impact it will have on future investment in this country.

I have been wracking my brains to puzzle out why this was first legislated for in 1977. My noble friend will remember that that was the time of the prices and incomes policy. Lady Williams of Crosby and my esteemed noble friend Lord Hattersley were Secretaries of State for Prices and Consumer Protection. I would not be at all surprised if it had something to do with that. I have to say that it was not altogether successful as a policy, and I am not sure that it is a great precedent for the Minister to rely on now. Certainly, in 1979 the electorate did not think that it was a very successful policy, that is for sure.

The only point I want to put to the Minister is this: I think there is a consensus in the Committee that there needs to be some trigger mechanism. We have had elements of that. The noble Lord, Lord Lansley, proposed an amendment that included appeals. He suggested what would trigger action, which was very helpful. In his amendment, my noble friend suggested another approach. The Delegated Powers Committee is concerned about the general terms of this clause. It said:

“We consider the general power to be inappropriate unless the Minister is able to explain why it is not feasible to specify the further bodies to whom information may be disclosed on the face of the Bill, and why it is not feasible to limit the kinds of bodies to whom disclosure may be made”.


That picks up the point raised by the noble Lord, Lord Lansley, and I agree with him about NHS bodies,

The question is this. The only satisfactory safeguards will be in the Bill. This House has no influence on regulations. The Minister will know that only six or seven statutory instruments have ever been defeated, so regulations in themselves provide very little safeguard. This is our only opportunity to provide safeguards in the Bill. Essentially, the choice for us is to press on with amendments at Report or to come to some agreement with the Government about what is appropriate. That we need something in the Bill is not in doubt.

[Lord O'Shaughnessy]

I thank noble Lords for that very good debate, which has again got to the heart of why we are all here. While we are reflecting on the 1970s, we have an industrial strategy again, so who knows? The wheel turns.

I am grateful to the noble Lord, Lord Warner, for his amendment and understand that he seeks to minimise the burden on businesses; we agree with him on that aim. However, the amendment would have serious unintended consequences. I will set out why I believe that to be the case and in doing so, I hope to respond to other noble Lords’ questions.

The amendment would restrict the circumstances under which the Government could ask for information on revenues or profits accrued in connection with the manufacturing, distribution or supply of UK health service products. We have been clear throughout that the information that we seek for routine data collection does not go beyond that which would be required for tax purposes. That is the reassurance that we provide on the overall burden and how it would affect businesses. I appreciate that there is a separate question about non-routine data collection, which I will come to, but the overall intention is not to create any additional burden.

The amendment would restrict the information-gathering powers to where a specific health service product has significantly increased in price and where there are reasonable grounds to believe that the NHS is not receiving value for money. However, it would prevent us operating our cost and price control schemes. The reason for that is that the Government collect information on revenues from companies as part of the various cost and price control schemes to be able to determine the sales of those companies to the health service. This enables us to identify the savings achieved through price cuts and which, in our reformed statutory scheme, would be a prerequisite for calculating the payments due from individual companies.

The Government require this information at product level to satisfy ourselves that the terms of the scheme are being applied correctly. As noble Lords know, this model has been in operation through the PPRS for many years, and we have not heard concerns from industry about the burden that it places upon it. Indeed, it is precisely this mechanism which demonstrated to both the Government and the ABPI that the current PPRS was not operating as expected during 2016—something to which the noble Lord, Lord Hunt, referred during our previous sitting.

We had constructive discussions with the ABPI during 2016 about why the spend measured by the PPRS and used to calculate payments under the scheme had fallen, compared to the real growth in NHS spending on branded medicines, which continues to rise. Joint analysis of company data by the ABPI and the Department of Health shows that the NHS is spending more than ever on branded medicines, with spend growth in 2016 likely to be around 5.3% of the budget.

It became clear that the cap mechanism was not capturing significant areas of branded medicines spend—in particular, parallel imports. Also, some companies left to join the statutory scheme, or divested individual products from the voluntary to the statutory scheme, but this growth was not captured by the PPRS methodology. Without action, this would have led to a significant drop in income from the scheme while branded medicines spend continued to rise, which is obviously against the spirit of the agreement. After a short period of very constructive negotiation just before Christmas, we agreed a new deal with the ABPI to cover the last two years of the scheme, details of which I set out in a Written Ministerial Statement published last week, I think—it has been only three and a half weeks, but it feels longer. This shows how well industry and the Government can work together to develop and maintain voluntary arrangements, but we can do so only with the right information available.

We have provided illustrative versions of both the information regulations and the statutory scheme regulations. I emphasise that these regulations show that the Government have no intention of routinely collecting information on profits. They do, however, set out the circumstances in which the Government might want to collect information about profits.

First, the illustrative regulations set out that we would be able to ask for information related to products where a company asks for a price increase under the statutory scheme regulations. To agree such an increase, the Government require assurance that the product is no longer profitable at its current price. Information on profitability is therefore crucial to determine this.

16:30

Secondly, we would be able to ask for information related to profits when we have concerns about unwarranted prices for unbranded generic medicines. I think we are all agreed on the need to have that power. The information regulations demonstrate that we would ask for the cost of manufacture, the costs of R&D and non-recurring operational costs related to the product. This would help us determine whether the price is based on the actual cost or has been unduly inflated. On that point, I thank the noble Lord, Lord Young, for his support for the Bill in relation to stopping the NHS being ripped off; it is precisely the powers in this Bill that will enable us to do that for the kind of medicines he is describing.

In response to the issue about the Times investigation, the department was already aware of the practice and had been working on it with the Competition and Markets Authority. High-price generics were also the subject of the consultation on the statutory scheme that was published in December 2015. I want to dwell briefly on the point about the CMA investigation and the questions about UK or global. Technically, what is meant by a UK producer is any organisation that manufactures, supplies or distributes products required for the purposes of the UK health services—it is not necessarily about where it is domiciled, but its operational purpose. Clearly, it must be possible to ascertain information; otherwise, the CMA would not be able to carry out the investigations that it does. Through the Bill, we are aiming to have a set of powers that enable us to intervene before the CMA process is reached, which may produce fines quite a long time down the line, as happened with Flynn, which has now lost its appeal. We are trying to stop that happening upstream and stop that kind of behaviour.

It is possible to carry out such analysis. Whether there is a big data solution, I do not know. Because we are talking about the non-routine collection of data, they would not be producing masses of information. The mass of information would be the routine collections that are going on in order to carry out the main purposes of the Bill, which we have discussed and I will not go over again.

I hope that I have been able to explain under what circumstances we intend to ask for additional information relating to revenues and profits, as set out in the regulations and the Bill. I hope that I have reassured the noble Lord, Lord Warner, and other noble Lords that we are not seeking powers that will allow us to interfere unduly in the operation of businesses serving the health sector in the normal way. The amendment as it stands would make it impossible for us to run the current cost and price control schemes. On that basis, I ask the noble Lord to withdraw it.

[Lord Warner]

I am grateful to the Minister for his detailed explanation, although I am not totally convinced. The intention was to apply my amendment to the new information requirements, not the existing routine collection. That is a drafting issue rather than an issue of principle. If I got the drafting wrong, we can sort it out.

I still think we need some kind of trigger safeguard in the Bill. I am not particularly wedded to this provision. I am quite attracted to a trigger mechanism, linked to the information notice and appeal idea suggested by the noble Lord, Lord Lansley. I am certainly very happy to discuss with the Minister and other colleagues on the Committee how we might improve this.

The Minister cited the example of abuse of the PPRS system, but if there were such abuse and the Government or the department were aware of it, nothing in my amendment would stop them intervening. Those would be the reasonable grounds for expecting abuse which this trigger mechanism provides. Therefore, it would not be that the Government’s hands would be tied behind their back when they had some reasonable grounds for thinking that the NHS was being abused. The trigger mechanism does not stop intervention when there is evidence; it just requires the Secretary of State to have some prima facie evidence that some kind of abuse is going on that requires the collection of more information. That is where the ideas of the noble Lord, Lord Lansley, fit in rather well. You would then specify exactly what you need to deal with the abuse you suspect is going on, but which you do not have enough information to prove. That would enable you to act way before a case came to the CMA. You would need only some reasonable grounds for issuing the kind of information notice that the noble Lord, Lord Lansley, wanted to see what was going on.

The Minister mentioned the consultations with the ABPI, but if those were such a success, why does the ABPI come to people like me and say that it is highly dissatisfied with the system that now appears in the Bill? The messages must have got lost in the night somewhere along the way, because the Minister certainly did not convince it to be comfortable with what is proposed in the Bill.

We need some kinds of safeguard, whether it is this trigger mechanism or a blend of that and the idea of the noble Lord, Lord Lansley—

[Lord Hunt of Kings Heath]

It seems from this debate that you could put together into an amendment the appeal mechanisms suggested by the noble Lord, Lord Lansley, the general thrust of the amendment in the name of the noble Lord, Lord Warner, and the three examples the Minister gave of what would trigger the investigation. The Minister clearly has “resist” on every briefing for every amendment. However, this is the House of Lords and basically, we are either going to put an amendment through ourselves, which will win on Report, or the Minister will sit down with us to try to agree something. If the Minister is not able to give way on anything, frankly, it is pretty hopeless and departs from what your Lordships’ House is about. That is what I find frustrating. It is quite clear that there is a broad consensus that we need to see a trigger mechanism of some sort in the Bill. We would like to work with the Government, otherwise we are left with no option but to construct something ourselves.

[Lord O'Shaughnessy]

On that point, two separate issues are in play here. One is about the information required to be routinely collected for the purposes particularly of community reimbursement, but also for the operation of the schemes. It is welcome that that information will be put on a statutory basis and there is clarity about the kind of information that might be required. In doing so, it will provide for better information and better pricing. Then, there is the separate discussion that the noble Lords, Lord Hunt, Lord Warner, and other noble Lords have alighted on: the collection of non-routine data. Effectively, the question is, what are the circumstances under which that kind of non-routine collection would be justified? Assuming I have interpreted that correctly, I would be happy to talk to noble Lords about how we do that, as I committed to doing during the last sitting. My desire throughout is to make sure that, despite the fears of the noble Lord, Lord Hunt, the Bill is proportionate in its efforts to achieve our aims.

[Lord Warner]

Those interventions from the noble Lord, Lord Hunt, and the Minister were helpful. It certainly should not be difficult or beyond the wit of man for the department and the industry to have an agreed set of routine information collections. What goes on top is the issue, as the Minister rightly said. I would be very happy to participate—as far as I can, because I shall be away on holiday tomorrow, although I am sure my representatives on earth will be able to cover this very satisfactorily. If we can make progress on this issue, it would avoid our having to table amendments on Report. In the meantime, I beg leave to withdraw the amendment.

Amendment 33 withdrawn.

Amendment 34 not moved.

Amendments 35 to 48 not moved.

Amendment 49

Moved by

[Baroness Walmsley]

49: Clause 6, page 7, leave out line 9

[Baroness Walmsley]

My Lords, the next two groups of amendments relate to the concerns expressed by the Delegated Powers and Regulatory Reform Committee in its 12th report of the 2016-17 Session. Amendments 49 and 51 refer to Clause 6, which inserts a series of new sections into the NHS Act 2006 authorising the Secretary of State to disclose information provided by suppliers of health service products. New Section 264B(1) lists the bodies to which information may be disclosed. It also allows the Secretary of State to prescribe in regulations further persons to whom information may be disclosed. We have already heard from the noble Lord, Lord Hunt, about Parliament’s inability to have much effect on that.

There are two powers: a specific power to prescribe bodies which appear to represent manufacturers, distributers and suppliers of health service products and a general power to prescribe any other person. In his Amendment 50 the noble Lord, Lord Hunt of Kings Heath, has attempted to place in the Bill the specific organisations that represent UK producers. This is reasonable enough, although I know that Ministers hate having lists in Bills. However, it is the general power that the Delegated Powers Committee objects to. As the noble Lord, Lord Lansley, said a few minutes ago when talking about Amendment 32, disclosure under new Section 264B may involve confidential and commercially sensitive information, even though the purposes for the disclosure are limited by subsections (2) and (3). The committee felt the general power to be inappropriate. No explanation of the need for this power was provided to the committee in the memorandum.

Amendment 49 therefore seeks to delete the general power in subsection (1)(l) of new Section 264B to enable the Minister to justify why the Secretary of State would need such a broad and wide-ranging power. Amendment 51 is consequential. Can the Minister say why it is not feasible to specify in the Bill the further bodies to which information may be disclosed, or even the groups of people or organisations? After all, in subsection (1)(k)—in lines 7 and 8—the Government specify representative bodies of producers. Why not specify other groups at the end of the subsection? This appears to me to represent a power too far, and the committee feels the same. What is this power for and how is it to be used? I beg to move.

[Lord Hunt of Kings Heath]

My Lords, I have a little list, which is a bit bigger than the Minister’s list.

[Lord O'Shaughnessy]

Have you seen it?

[Lord Hunt of Kings Heath]

Indeed so. In following the remarks of the noble Baroness, Lady Walmsley, this is really a probing question. Lists are generally avoided in primary legislation for the obvious reason that you need flexibility. I can see why a list of bodies has been put into paragraph (11) of the draft regulations. At this stage, I am just puzzled to know why those organisations which are in the list have been chosen and why others have not.

First, I see that the BMA is in the list. I assume that is because it represents dispensing pharmacists, but I would be grateful to have clarification. I think that may have been clarified. For instance, why is the British Healthcare Trades Association not in the list? Clearly, its membership, although sometimes the same, is rather different from the ABHI. There are other organisations that I have put down to probe how the department has come to that list. When we know that, we can then come back to the general principles that the noble Baroness has so rightly raised.

16:45

[Lord O'Shaughnessy]

I thank the noble Baroness, Lady Walmsley, and the noble Lord, Lord Hunt, for these amendments. As both have set out, it is clear that they have been tabled in response to the report of the Delegated Powers and Regulatory Reform Committee. I am very grateful to the committee for its consideration of the Bill and for providing its report. The committee has concluded that the general power in new Section 264B(1)(l) to describe in regulations any other persons to whom information may be supplied is too wide and not justified at present. I assure noble Lords that I am considering these comments very carefully, and the views expressed by the noble Baroness, Lady Walmsley, and the noble Lord, Lord Hunt, have been helpful in explaining the issues.

The amendment in the name of the noble Lord, Lord Hunt, would put in the Bill the industry representative bodies to which the Secretary of State can disclose information. The Government would prefer to prescribe these bodies in regulations and have done so in the illustrative regulations—albeit the current version includes only a limited number of such bodies and they are given purely as examples rather than as an attempt to be exhaustive. By prescribing a large number of representative bodies in primary legislation we would, as I think the noble Lord, Lord Hunt, admits, lose the flexibility to be able to add new representative bodies, if needed, in regulations.

In its report, the DPRRC was satisfied with the way the Bill was drafted in this area, and it considered the power to prescribe bodies that appear to the Secretary of State to represent manufacturers, distributers or suppliers to be a specific power. The committee thought, however, that the general power to prescribe any other person was too general and suggested that the Government limit the kinds of bodies to which disclosure may be made, as is done with the power to prescribe representative bodies. Like the DPRRC, I believe that the power to prescribe representative bodies is sufficiently specific, while still allowing some flexibility. However, we are giving serious consideration to the general power.

As noble Lords are aware, there is a balance to be struck between ensuring clarity in primary legislation and, at the same time, giving sufficient flexibility to enable arrangements to change in response to external changes to ensure that, in the future, we have flexibility to work with the right stakeholders without requiring primary legislation to do so. I once again reassure the Committee that I am considering these recommendations very carefully and will respond to the DPRRC shortly. I expect, subject to the appropriate procedures, to bring forward proposals on Report. On that basis, I ask the noble Baroness to withdraw her amendment.

[Baroness Walmsley]

My Lords, I am most grateful to the Minister, and I look forward to, I hope, being copied in to his reply to the committee. I certainly understand what he said about the representative bodies being in regulations and that it is just an illustrative list that we have before us. If the list is in regulations, it is much easier to add a new representative body. It is reasonable to assume that, some day, perhaps one or more new bodies may be set up. However, the general power is another animal altogether. I look forward to hearing from the Minister after he has considered the matter. I beg leave to withdraw the amendment.

Amendment 49 withdrawn.

Amendments 50 and 51 not moved.

Clause 6 agreed.

Clause 7: Provision of information to Welsh Ministers and disclosure

Amendments 52 to 57 not moved.

Amendment 58

Moved by

[Baroness Walmsley]

58: Clause 7, page 9, line 18, at end insert—
“(5A) Any penalty provided for under subsection (5) may be—(a) a single penalty not exceeding £100,000, or(b) a daily penalty not exceeding £10,000 for every day on which the contravention occurs.(5B) Welsh Ministers may by regulations increase (or further increase) either of the sums mentioned in subsection (5A).”

[Baroness Walmsley]

My Lords, I will speak to Amendment 58 and to the other amendments in the group. This group also reflects concerns expressed by the DPRRC in relation to Clause 7, which deals with information to Welsh Ministers. The substantive amendments are 58, 61 and 66; the others in the group are consequential.

New Section 201A of the NHS Wales Act 2006 will enable Welsh Ministers to require information from producers of health service products to be used in Wales. Subsection (5) of the new section allows regulations to be made for the payment of a penalty if a person contravenes these regulations. Noble Lords may have noticed that there are no equivalent provisions in Clause 6, which inserts new sections into the NHS Act 2006. There is no need, because the original Act already enables regulations to provide for the payment of penalties. However, if we look back at these provisions in the NHS Act 2006, we notice that there are some differences between the penalty sections there and those in the Bill. Specifically, under the NHS Act 2006, there is a limit on the penalty that can be imposed—I think that that is what we have been given in the illustrative regulations. Secondly, any increase in the penalty must be done by affirmative order. In Wales, we have no limit and no affirmative order.

Amendment 58 puts limits on the penalties in this Bill in line with those in the NHS Act 2006, and Amendment 66 changes the relevant bit of the NHS (Wales) Act 2006 so that regulations under new subsection 5B in Amendment 58 would have to be made by the affirmative order procedure. This provides us with consistency, because the provisions in the two pieces of legislation would be similar. I am not wedded to the actual penalty limits that I have laid down, but they are the same as those specified in Section 265 of the NHS Act 2006, so they would be consistent. However, as in this case they would apply to a narrower range of people, it may be appropriate to have a different limit. The main point is that there should be a limit.

Amendment 61 deals with a different issue but reflects what I was trying to do in Clause 6 with my Amendment 49 in the last group. It relates to new Section 201B of the NHS (Wales) Act 2006 on disclosure of information. As with Clause 6, the bodies to whom information can be disclosed are not specified in the Bill. Instead, these can be prescribed by Welsh Ministers. Since there has been no information as to why it is not feasible to specify these further bodies to whom confidential, commercially sensitive information can be disclosed, can the Minister explain why not? Surely it should be possible at least to limit the kinds of bodies to whom disclosure may be made. It seems to me to be a flexibility too far and beyond what is really necessary to ensure the purposes of the Bill. The Delegated Powers Committee regards it as “inappropriate”. Can the Minister convince us of the need for this very broad power?

[Lord O'Shaughnessy]

My Lords, I am grateful to the noble Baroness, Lady Walmsley, for her sharp eyes and even sharper suggestions with regard to these amendments, which are again in response to the report of the Delegated Powers and Regulatory Reform Committee. The committee concluded that the power in Clause 7, which enables Welsh Ministers to make regulations that make provision for payment of a penalty if a provider of pharmaceutical or primary medical services contravenes regulations requiring them to record and provide information about health service products that are required for the health service in Wales, should be consistent with similar provisions in the 2006 Act.

In particular, the committee recommends that the maximum penalty that may be imposed under what would be Section 201 of the NHS (Wales) Act 2006 should be set out in the Bill and that there should be a power to increase this maximum by regulations made subject to the affirmative procedure, as the noble Baroness set out. I assure noble Lords that, as with the previous set of amendments, I am considering these comments very carefully; the views expressed by the noble Baroness have been very helpful in highlighting the issue, for which I am grateful.

Noble Lords will understand that these provisions relate to the powers of the Welsh Ministers, and it is therefore necessary for me to seek the views of Ministers in Wales on this matter. However, I acknowledge the concern that, as drafted, the Bill does not impose a limit on the penalty which may be imposed by Welsh Ministers. Noble Lords will appreciate that, in the case of penalties, the powers in relation to Wales are different from those in relation to the UK as a whole, in so far as Welsh Ministers will be able to impose penalties only on providers of pharmaceutical and primary medical services. In contrast, the 2006 Act allows for penalties to be imposed on manufacturers and distributers, and the size of any penalty should reflect this. It would therefore be disproportionate if the level of maximum fine allowed for in the 2006 Act were to be replicated in the NHS (Wales) Act. I accept, however, that the framework governing the maximum size of any penalty and increasing that maximum should be the same.

Turning to the amendment which would remove the provisions allowing Welsh Ministers to disclose information to persons prescribed in regulations, this is a matter which I understand Welsh Ministers are content to reconsider in light of the DPRRC’s recommendations. I reassure the Committee that I accept the recommendations of the DPRRC regarding limits being placed on the penalties that can be imposed by Welsh Ministers and the need to specify in the Bill the further bodies to which Welsh Ministers may disclose information. I will respond to the DPRRC in due course with proposals once I have discussed them with Ministers in Wales. I intend, subject to the appropriate procedures, to bring forward proposals on Report.

As these will be my final remarks in Committee, I thank all noble Lords for a constructive and informative debate. It has been important to be able to draw on the wisdom of so many former Ministers in making sure that the Bill is properly scrutinised and best equipped to carry out the purposes we have set for it. I have committed to consider many of the issues raised before Report on 7 February, not that far away, and I will be holding as many meetings as I can in the short time available to aid that process. My officials and I are available to noble Lords should they have any other questions or concerns about the Bill, and I look forward to bringing forward any necessary proposals on Report. To conclude on this group, I ask the noble Baroness to withdraw her amendment.

[Baroness Walmsley]

My Lords, I am most grateful to the Minister for his assurance that these matters will be considered before Report. I look forward to hearing the result of his considerations. I am very happy to beg leave to withdraw the amendment.

Amendment 58 withdrawn.

Amendments 59 to 66 not moved.

Clause 7 agreed.

Clauses 8 to 11 agreed.

Bill reported with amendments.

Committee adjourned at 4.57 pm.