Health Service Medical Supplies (Costs) Bill

Baroness Walmsley Excerpts

2nd reading (Hansard): House of Lords
Wednesday 21st December 2016 Lords Chamber

[Baroness Walmsley (LD)]

My Lords, I thank the Minister for his explanation of the Bill. However, while I have no problem with the Government’s intention of closing the loopholes identified in the statutory scheme for medicine cost regulation, aligning schemes and ensuring that medicines are reasonably priced and affordable to the NHS, I do have quite a lot of questions. I also share the concerns raised by the noble Lords, Lord Warner and Lord Lansley.

My first question is whether this is the right time to make these changes, with Brexit on the horizon. Some of the Bill’s provisions add further uncertainty to what is already a very uncertain time for the businesses affected by them. If trade between the UK and other EU countries becomes subject to customs duties, import VAT and border controls, it will increase costs to the life sciences industry and drive up costs to the NHS. This will certainly impact on patients. As the Minister has acknowledged, the life sciences industry is very important to our economy, and these changes could impact upon it very adversely.

There is no doubt that the medicines bill has risen over the past five years, but what evidence is there that this is just because of unreasonable price rises in the pharmaceutical sectors that are not currently controlled, such as generic medicines? We have heard a lot about increased demand in all areas of medicine and care, and this is usually attributed to greater longevity and a general increase in medical advances to treat more conditions better. So why do the Government think that the rise in the medicines bill is any different? Yes, of course, like other noble Lords I have heard of one or two particularly outrageous cases of enormous unexplained price rises in generic medicines, and this is suspiciously like profiteering. But is it really necessary to go as far as this Bill does in order to deal with just a few very unethical cases? I am a little surprised that the Government are acting before we see whether the current cases under competition law are actually going to deliver the right result. As I said, I accept there is a loophole for generic medicines sold by companies in the voluntary scheme, but what is the extent of the use of that loophole? How much is the NHS losing, and how much are patients suffering because of profiteering?

Clause 1 provides the Government with a much stronger enforcement mechanism for obtaining the payments rightly owed, but does this constitute an amendment to the current PPRS, and if so, does it require the agreement of all those involved in a future scheme? Will there be any discussion with companies that propose price rises? There are many reasons why prices sometimes rise, apart from a desire to make more profit. There should be some mechanism for finding out whether the price rise is justified and reasonable, rather than someone in the DoH just making an arbitrary judgment.

We have concerns that the traditional appraisal methods and notions of cost-effectiveness are no longer suitable for some modern medicines, especially for very innovative new drugs which will be suitable for only a very small population of patients. The NHS has been slow to respond to these changes and I would not want to think that the Bill could make things worse.

There is a need for much more clarity about Clause 3. The payment mechanism, which really amounts to a tax on net sales, will, we understand, be set somewhere between 10% and 17%, so it seems reasonable to ask how the Government will assess the impact of their chosen level on the availability of the medicine concerned. Will we know what percentage the Government plan to choose before the Bill completes its passage through your Lordships’ House? We would not want its unintended consequence to be shortages of certain useful medicines.

As we have heard, Clause 5 brings medical devices within the scope of price regulation. Is there really any evidence that there has been price abuse among suppliers of medical devices, as we have heard there is in relation to pharmaceutical items? With these items it is vital that there is a range of products for patients to choose from, as something that suits and works for one patient may be very uncomfortable for another. That is why driving down the cost of products will not necessarily save money in the long term. If a patient cannot get on with his or her life and contribute to society, an unsuitable but cheaper product could cost the economy more money in the long run.

Companies have told us that this section of the Bill is vague and does not make the Government’s policy intentions clear, so they need more reassurance. Nor are those intentions adequately covered in the Explanatory Notes or the impact assessment accompanying the Bill. That has prevented companies fully understanding how the provisions will affect their business. It is not very reassuring for the Government to say that they do not intend to implement all sections of the Bill immediately, because this uncertainty makes it impossible for businesses to plan when their main customer might be able to hold them over a barrel on price at some unknown time in the future. I certainly could not run a business in that sort of climate. Unsurprisingly, businesses are very concerned about this. Some clarity was offered during the Bill’s passage through another place, including, as I have just mentioned, the fact that the Government have no immediate plans to use the powers, but they could decide to use them at short notice at any time in the future. That provides the very uncertainty that investors hate and it is very bad for business.

Clauses 6 and 7 concern data collection. It seems very strange to me that the National Health Service Act 2006 already contains the power for the Government to require medical technology suppliers to provide them with information, and the Government have said that the Bill will clarify and modernise those powers. We have heard from officials that the penalty for non-compliance will be changed from a criminal to a civil one, which will be more proportionate to the offence. However, as these powers have not been used to date, the fact that the Government are making these changes suggests to some that their use may be planned in the not-too-distant future, and that brings more uncertainty.

One can understand the Government wanting and needing information in order to ensure that the reimbursement system works effectively, but the new provisions go a lot further than the current requirements and may put a very heavy administrative burden on companies. We have been told by officials that the intention is to make this burden as light as possible, and that is good, but how will this be done when, I understand, separate information will be required for every product throughout the whole supply chain, even for those outside this country? Companies tell me that currently they do not collect all the information the Bill requires and they would find it very difficult to do so. Is all this information really necessary to achieve the Government’s intentions in the Bill?

There is an issue about consultation. Some suppliers are claiming that the Government’s statement in another place that there has been extensive consultation is simply not true. They were not consulted. Only a few large trade organisations were consulted. We really need from the Government a clear commitment to proper consultation before these regulations are finalised and implemented. It is essential that the Government proactively engage with the entire industry before bringing forward legislation such as this.

I believe in evidence-based policy and that the Government should always be transparent in their intentions when they make changes, as mentioned by a previous speaker. However, at the moment that is not the case. If the powers are to be used, they should say so, and then there should be proper engagement and consultation with the businesses affected. It is in the interests of the companies affected that they work with government to support consumers and the NHS. After all, that is what they do; that is their business. The Government are asking for clarity from NHS suppliers about costs throughout the supply chain, so should not suppliers be able to expect clarity from the Government in return?

My primary concern is that any increase in payments by manufacturers and suppliers to the Department of Health should be put to use in improving access to new medicines and ensuring that existing medicines are provided in a timely way to all patients who need them. So far, I have not been assured by the Minister that this is what will happen to any increased payments. I wonder whether he is willing to do that today—after all, it is Christmas.

We need to see this Bill in the wider context of the struggle of the NHS and social care to provide services in the light of rising demand and costs. Apart from their efforts in this Bill to control costs, the Government have ignored that. The recent Statement announcing a small amount of additional money for social care, and the allowance of a raised local authority precept, will not bring money into the deprived areas that need it most. Until this is dealt with, measures such as those in the Bill are only scratching the surface of the problem.

Finally, I join the noble Lord, Lord Lansley, in paying tribute to the noble Lord, Lord Prior. It has been a great pleasure to work with him. He has always been very patient and courteous with us in this House in answering our questions. I also thank the noble Baroness, Lady Chisholm of Owlpen, who I understand is also moving on. I wish them both a very peaceful and restful Christmas and extend that to other noble Lords and to the Bill team. I look forward to working with whoever it will be in the new year as we move on to the Committee stage of the Bill.