Health Service Medical Supplies (Costs) Bill

Baroness Walmsley Excerpts

Report stage (Hansard): House of Lords
Tuesday 7th February 2017 Lords Chamber

[Baroness Masham of Ilton (CB)]

My Lords, I thank the Minister for his helpfulness and the work he has done on this amendment about specials. I also thank him on behalf of my noble friend Lady Finlay of Llandaff, who has to help her pregnant daughter who has had an emergency health problem. She had hoped to be here. I hope this amendment will help patients get the specials they need at a reasonable price.

[Baroness Walmsley (LD)]

My Lords, the noble Baroness, Lady Finlay, is so grateful to the Minister that she asked two of us to convey her thanks for the time he has given to addressing her concerns. She is very happy with these amendments.

[Baroness Wheeler (Lab)]

My Lords, I am the third person to congratulate the Minister. I add the support of these Benches for these amendments, which address unlicensed special medicines, and I congratulate the noble Baroness, Lady Finlay, on her tenacity in pursuing this issue and securing an important concession from the Government. I am sorry she cannot be here, but we can be pretty sure she will be reading Hansard to make sure we have got it right.

It has been hard to understand why the Government were refusing to recognise the need for urgent action on medicinal specials, particularly in view of the substantial price variation between hospital and community care, the many patients in community and primary care who are currently denied access to some specials, and the potential savings across the NHS that introducing a cheaper and more cost-effective whole-market procurement system will provide.

We are very pleased that the Minister has now recognised the need for the Bill to address this important issue in England and Wales. I welcome the legislative framework he has presented. As he pointed out, he has an extensive consultation exercise to conduct on all parts of the Bill, and this will certainly be included in that.

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[Lord Warner (CB)]

My Lords, Amendment 3, in my name and those of the noble Lords, Lord Patel and Lord Hunt of Kings Heath, and the noble Baroness, Lady Walmsley, is very straightforward. At the start of the Bill, it would lay a clear duty on the Government, in discharging the Bill’s provisions, to have full regard to promoting and supporting a growing UK life sciences sector and to ensuring patients have rapid clinical access to new medicines approved by NICE through its technical appraisal process.

This is to ensure that the Bill does not just focus on driving down the price of NHS drugs regardless of other considerations—which, in my view, there is a clear danger of given the way the Bill is framed. I made absolutely clear at Second Reading and in Committee that I fully support the Government acting through the Bill to prevent the NHS being blatantly ripped off under the statutory scheme when a branded drug comes off patent, as happened with Flynn Pharma when a Pfizer anti-epilepsy drug came off patent. The ABPI has never challenged actions in cases of this kind. However, the broad wording of the Bill goes well beyond closing this particular loophole. The Bill gives the Government the power, in the statutory scheme, to replace a list-price discount system with one in which a company repays the Government a percentage of net sales, with as yet no clear indication of what this level will be.

That might well be an acceptable approach if the system was applied solely to the statutory scheme, but not if it is then used in the voluntary PPRS. The industry’s concern is that this statutory scheme provision will create a precedent that could be applied later by the Government to the voluntary PPRS. My reading of the Bill is the same as that of the ABPI, namely that the legal precedent could enable a future Government to try unilaterally to apply the same approach to the voluntary scheme when a PPRS period ends, whatever assurances the current Minister may give. This would effectively abort a negotiated system of settling NHS drugs prices and encouraging research and innovation that has worked well for industry, UK plc and successive Governments for over 50 years. Ministerial assurances that this will not happen have not convinced the pharmaceutical industry or me that this could not happen. We both believe that stronger legislative safeguards are needed.

I think I can speak with some authority on this issue, having been a Minister with responsibility for the pharmaceutical industry and NICE, and having had, perhaps unlike the Minister, to negotiate a PPRS settlement with the industry, which achieved a 7.5% price cut in branded drugs prices for the NHS. I do not think anybody in the industry would see me as a soft touch for big pharma, but I knew that my job, like the Minister’s, was to balance a number of factors and not just get the cheapest drugs for the NHS. These factors involve the safety and value for NHS money of new medicines, but they also involve helping the UK life sciences industry to grow and flourish and to secure speedy access for patients to new drugs approved by NICE.

The Government have not done a spectacularly good job with their consultations on the Bill in showing the industry that they understand this balancing act. They certainly have not convinced the industry, and suspicions have been raised by the inclusion of elements that were not in the 2015 consultation on the Bill. The effect has been to foster distrust within an industry that UK plc badly needs to nurture at this time of massive economic uncertainty. This has been made worse by a negotiation currently taking place with the industry to slow the introduction of NICE-approved drugs if they exceed a certain financial threshold. Why is this so important? Why should the Government not just focus on getting the cheapest drugs they can for the NHS at this time of financial constraint?

The pharmaceutical industry invests over £4 billion a year in R&D in the UK, more than any other sector. It employs 62,000 people with a geographical spread outside London and the south-east. Pharmaceutical manufacturing employees have the highest gross value added of any high-technology industry, at over £330,000 per employee. One in four of the world’s top prescription medicines was discovered and developed in the UK. All this will be put at serious risk by Brexit, as the Prime Minister seems to recognise in the new industrial strategy that she recently announced.

We know that through Brexit the UK will lose the European pharmaceutical regulator, the EMEA, but there are also many other threats to the UK life sciences industry from Brexit. We could lose market access for our innovative products and there could be a flight of researchers and research. At such a time, the last thing this highly successful UK sector needs is a rather indifferent piece of legislation proposing what are in my view unnecessary regulatory burdens and creating uncertainty about the future arrangements of settling NHS prices for new drugs.

The second leg of the amendment covers the issue of speedy patient access to new drugs approved by NICE. I will not detain the House on this issue because others will probably want to say more about it. However, I remind the House that we already have a poor record on the take-up of new NICE-approved medicines. For every 100 European patients who can access new medicines in the first year that they are available, just 15 UK patients have the same access. Even when NICE has approved drugs and treatments, the NHS take-up still lags behind what it should be, despite the legal obligations.

To be fair to the Government, they seem to recognise the threat to the UK life sciences industry that Brexit poses. In the industrial strategy they identify life sciences as one of the five world-leading sectors that they wish to cultivate, and they have asked Sir John Bell—I can describe him only as brilliant—to lead work on early deals in this sector. That only makes the timing of this rather scrappy piece of legislation all the more surprising. However, we are where we are. The best thing we can do is put a protective overarching duty at the beginning of the Bill, and that is what Amendment 3 does. I hope the Minister considers that the amendment is helpful to the Government’s industrial strategy and the work Sir John is doing, as well as being a reassurance to the life sciences sector. It also needs to be the first clause in the Bill. I beg to move.

[Baroness Walmsley]

My Lords, in supporting the amendment, I reiterate my support for the general purpose of the Bill, which is to ensure good value for the NHS. However, there is a danger that it could result in reduced access for UK patients to new drugs and treatments if badly handled by the Government in future. As usual, the devil is in the detail—and, in particular, how the Government use the powers given to them in the Bill. That is why I support the imposition of a duty to ensure the continued growth of the life sciences sector and to protect access for patients to new medicines and treatments.

I share the concerns of the noble Lord, Lord Warner, about the effect of Brexit, which I mentioned in my Second Reading speech. In the light of the hard Brexit on which the Prime Minister is intent—without a mandate—there are many hazards to this industry, on which we depend for a major contribution to our economy, and to the future of medicine in the UK, so it is vital that the Government have that in mind when operating the Bill when it becomes an Act.

I have in mind as an example the new biosimilar medicines that the noble Lord, Lord Carter, pointed out in his report have the potential to save the NHS a vast amount of money while providing the same or even better treatment. He said that one new biosimilar drug alone can save the NHS £60 million a year. These biologic drugs currently account for six out of the top 10 medicines by spend in the UK, and I gather that five out of the top seven biologics will come out of patent by 2020—so there will be enormous potential for the development of generic biosimilars for many diseases. These drugs cost about 100 times more to research and develop than other generic drugs, but the current pricing system does not take that into account. They are different and, because of their enormous cost-saving potential and the competitive environment in which they will be marketed, which could bring down the cost even further, I think that they need special consideration from the Government.

Amendment 7, tabled by the noble Lord, Lord Lansley, which I support, could achieve this if the Government were inclined to use it, but I think we need to go further and put at the heart of the Bill a duty on the Government to protect future cutting-edge medicines when they first come into the market. Unless that is done, UK patients could become the last in the developed world to get these medicines. We want to be first, not last.

A healthy, competitive market will deliver tremendous cost savings to the NHS in the long term, but this requires sufficient—not excessive but sufficient—financial returns to compensate for the high cost of R&D. Otherwise, we will not have enough companies prepared to compete over a long period. This will prevent the NHS benefiting from the potential savings offered by these medicines. For those reasons, I support the amendment.

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[Lord Lansley]

My Lords, I am grateful for the further opportunity to touch on an interesting issue which we discussed in Committee. On Report, I have proposed a different amendment that tries to meet some of the considerations that were quite properly raised in Committee. This relates to where the method of procurement for a branded medicine or product to which the statutory scheme would apply would be through a tender process and there would be an expectation that the best available price would be obtained through that process. I completely accept that previously we were looking at possibly exempting tender processes generally. The Minister quite rightly said that sometimes the tender process is used not to secure the best price, but to secure supply or procure products which are not directly comparable and where price competition would not be expected to be available.

I completely understand that, so this amendment says not that the Secretary of State under any circumstances is obliged to exempt a tender which has delivered a price outcome but that he may do so. Why do I think it is useful to do that? It is because there will sometimes be products where, for reasons of security of supply, it is important to undertake a tender process. At the moment, all companies in the statutory scheme or the voluntary scheme will have the implications of the PPRS pricing and rebate structure applying to them. As we have heard previously, the way that applies to individual products may be subject to price modulation depending upon how the company overall is affected by the scheme. It may therefore have a distorting effect on products that are offered through the tender. That is undesirable. We should want the tender process to be as transparent as possible and the price, supply and other considerations of the tender to be as self-contained as possible. That is perfectly possible to achieve if the Secretary of State has the discretion to exempt a tender process from the scheme.

As the Minister told us in Committee, the Government intend that framework agreements agreed before the regulations come into force will be exempted in any case. This amendment would helpfully give the Secretary of State the ability to exempt specific tenders from the application of the scheme. I do not want to anticipate too much, but the Minister may respond that the Secretary of State has the power to do that. If he says that the Government will actively assess where we may use such discretion to make it clear that tenders should be conducted in that way, I would be content. My noble friend instanced von Willebrand factor, where there are very similar products which are not necessarily competing on price. There is a general problem with plasma protein therapies because the cost structure that applies to them does not reflect the cost structure over the life of a product as it is reflected in patented, branded medicines generally. There is a good case for looking at an exemption in relation to products which have that high level of fixed cost rather than applying the price control and rebate in the way that happens now. I hope my noble friend will be able to say positive things about how we can maintain competition in the tender process and recognise the cost structures of certain medicines, because there is likely to be the application of the same principles to those products whether or not the company has opted into the voluntary scheme. Therefore the Government should be more willing under the statutory scheme to apply exemptions to those companies which have not opted into the voluntary scheme. I beg to move.

[Baroness Walmsley]

My Lords, as I mentioned in the debate on Amendment 3, I support this amendment because it gives the Secretary of State a bit more flexibility to take account of the specific circumstances of a company with very high fixed costs, in the interest of making sure that we have security of supply and patient access to the particular products that it produces. I do not think it undermines any of the objectives of the Bill in any way, and because of that, I hope that we will hear something encouraging from the Minister.

[Lord Hunt of Kings Heath]

My Lords, in Committee the noble Lord said that he did not think that biosimilars should be excluded from the voluntary or statutory pricing schemes, as competitive tendering would not generate sufficient levels of price reductions. I had a note from one of the companies involved, Sandoz, which says that one of the issues here, alongside the fact that fierce competition is already driving significant price reductions for the NHS, is that development costs of generic medicines do not compare with those of biosimilars. Those costs can be up to 100 times those of generic medicines, partly because of the licensing process and the time needed for development. I hope the noble Lord will be able to address that and explain how the Bill aligns with recent NHS policy, which has expressed support for the uptake of biosimilar medicines, particularly through the intention for specialised services commissioning. The noble Lord’s comments in Committee on biosimilars caused some disappointment, and if he could respond more positively now that would be helpful.

[Lord O'Shaughnessy]

My Lords, I am grateful to my noble friend for his amendment and for providing the opportunity to talk about this important issue. It is important to note that the substance of this amendment is different from the substance of the amendment that was tabled in Committee, which would have given a blanket exclusion, while this is much more about providing the Secretary of State with the opportunity to exercise his or her judgment to exempt a product.

I absolutely appreciate the intent of the amendment, and reassure my noble friend that we believe it unnecessary. Due to the powers in the 2006 Act, the Secretary of State already has the ability to exempt individual products or groups of products from the terms of any statutory scheme, so this amendment would duplicate existing powers. For example, the Secretary of State uses these powers in the current statutory scheme to exempt products already under a contract or framework agreement. It is currently the Government’s intention that under the new statutory scheme, products procured under framework agreements that were entered into prior to the regulations coming into force would be exempt from the pricing controls and payment mechanism. However, branded products procured after the regulations come into force would be subject to the pricing controls and payment mechanism. Like any other cost, companies would be able to take this into account when proposing a price in response to a new tender. The regulations will of course be subject to consultation.

The point here is that there may well be cases where an exemption is required, and noble Lords have given examples of what that might look like. I hope your Lordships would agree that it would not be responsible for me to try and set out a list of them now, but clearly there will be occasions where that might be necessary. Any statutory scheme must of course also be sensitive—as indeed the legislation demands that it is—to the differing R&D costs that apply to the development of different medicines.

I hope that provides some reassurance on the points that noble Lords have made. We would be able to use the powers that already exist in the creation of the new statutory scheme for whichever purposes are desired at the time. On that basis, I ask my noble friend to withdraw his amendment. I hope those reassurances have done the trick.

[Baroness Walmsley]

My Lords, before the noble Lord sits down, is he able to respond to the issue about biosimilars, which I raised in an earlier debate and which the noble Lord, Lord Hunt, has just raised?

[Lord O'Shaughnessy]

I thought I had, when I talked about taking into account the differing R&D costs, which I think was the substance of the point made by the noble Baroness and the noble Lord, Lord Hunt. We have to take into account both getting a good price and the R&D costs, and that needs to be reflected within a statutory scheme, and would clearly apply to the case in point.

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[Lord O'Shaughnessy]

My Lords, I beg to move Amendment 13 and am grateful to the noble Baroness, Lady Walmsley, for putting her name to this amendment and to the others in my name.

The amendments relate to the report and recommendations of the Delegated Powers and Regulatory Reform Committee, and I am extremely grateful to the committee for its scrutiny of the Bill—which, I believe, together with the government amendments, will lead to improved legislation. In my response to the committee, I confirmed that the Government would accept all four recommendations and would table amendments to take forward these actions. Once again, I am grateful for the work of the noble Baronesses, Lady Walmsley and Lady Finlay, and the noble Lord, Lord Hunt, for continuing to highlight the issues raised in the report.

I shall take each recommendation in turn. First, the committee concluded that the general power in new Section 264B(1)(l) proposed in Clause 6 to prescribe in regulations any person to whom information may be supplied is too wide, with insufficient justification. The government amendment clarifies this issue by confining the ability to prescribe in regulations to any health service body already listed in Section 9 of the NHS Act 2006 and NHS foundation trusts which are not listed in Section 9. This would have the effect of enabling government to prescribe in regulations the sharing of data with other health service bodies such as clinical commissioning groups, but not enabling other persons to be included by means of subsection (1)(l). We have made this change, as we would want to be able to share information with local health bodies, such as CCGs or hospital trusts, if we had concerns about prices—but not with others.

The committee concluded that the power in Clause 7 to enable 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 which are required for the health service in Wales, should be consistent with similar provisions in the 2006 Act. In particular, the committee recommended that the maximum penalty which may be imposed under what would be Section 201A of the National Health Service (Wales) Act should be set out in the Bill, and that a power to increase this maximum by regulations should be made subject to the affirmative regulations. I am pleased to say that, following discussions with the Welsh Government, an amendment has been tabled which would amend Section 201A(5) to introduce maximum penalties into the National Health Service (Wales) Act 2006. We will amend the Bill to enable through regulations the power to increase the maximum penalty, and these regulations will be subject to the affirmative procedure.

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. By 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. To address these concerns, the government amendment would limit the single penalty to £10,000 and the daily penalty to £100.

I turn to the amendment which would remove the provisions allowing Welsh Ministers to disclose information to persons prescribed in regulations. Welsh Ministers have agreed that the Bill should be amended to limit the types of bodies with whom information may be shared. The government amendment would specify the following persons to whom information may be disclosed by virtue of Section 201A. They include: a local health board or other person appointed under Section 88(3)(b) of the National Health Service (Wales) Act 2006 to exercise the functions of a determining authority under Part 7 of that Act; a National Health Service trust established under Section 18 of the National Health Service (Wales) Act 2006; any person who provides services to Welsh Ministers or to any person falling within paragraph (a) or (b); and any body that appears to the Welsh Ministers appropriate to represent Part 4 providers or Part 7 providers, as defined by Section 201A(8).

I turn to the amendment from the noble Lord, Lord Hunt, which seek to put those bodies that represent UK producers on the face of the Bill instead of in regulations. The Government will prescribe these bodies in regulations; the illustrative regulations we published merely provided some examples of representative bodies that the Secretary of State may disclose information to, and I assure the noble Lord that further work will be done on this list. We will discuss the list with stakeholders and we will, of course, publicly consult on the list to ensure that we get it right. I know that that was a concern of his.

Finally, we are proposing to table technical amendments to the Bill at Third Reading to reflect the fact that the Northern Ireland Assembly was not able to pass its legislative consent Motion on the Bill before it dissolved, despite the relevant committee having approved it. We will seek to amend the Bill to enable the Northern Ireland components of the Bill to be commenced separately through regulations once it has been possible to secure legislative consent.

As I hope your Lordships will see, the Government have addressed the concerns of the DPRRC. I also hope that I have addressed the concerns of the noble Baronesses, Lady Walmsley and Lady Finlay, and the noble Lord, Lord Hunt. I ask noble Lords who have tabled amendments not to press them and support the amendments in my name and those of the noble Baroness, Lady Walmsley.

[Baroness Walmsley]

My Lords, I am grateful to the Minister for what he has just said and for the conversations that we had about this group of amendments at Richmond House. As noble Lords will see, I have added my name to the government amendments in this group, because they achieve exactly what I was hoping to achieve when I tabled amendments in Committee. I am grateful to the noble Baroness, Lady Finlay of Llandaff, for supporting me in that intention. Unfortunately, when I withdrew my amendments in favour of the Government’s amendments, my message to the noble Baroness, Lady Finlay, did not get through, so she has unfortunately failed to withdraw her name. That is why she has asked me that, when the amendments in her name come to be put in order, I should make it clear on her behalf that they are not moved, which will achieve our joint intention. I know that the committee is also grateful to the Minister for hearing our concerns and taking action.