Health Service Medical Supplies (Costs) Bill

Lord Hunt of Kings Heath Excerpts

Committee: 1st sitting (Hansard): House of Lords
Monday 23rd January 2017 Grand Committee

[Baroness Masham of Ilton (CB)]

My Lords, cost-effective medicines which work for patients are vital, but some orphan drugs will cost more. Why are there differences in the pricing of drugs in Scotland and England? Someone must be making a lot of money.

[Lord Hunt of Kings Heath (Lab)]

My Lords, that is a very interesting question. The exchange between the noble Lords, Lord Lansley and Lord Warner, has been very helpful in focusing on the full intent of the amendment. As it is the first day of Committee, I remind noble Lords of my presidency of the Health Care Supply Association and GS1, the barcoding association.

The amendment is essentially about the life sciences sector and the relationship to it of the pharmaceutical and medical devices and technology industry. However, inevitably, as the noble Lord, Lord Lansley, has shown, it is very difficult not to talk also about issues to do with PPRS and access, and I suspect that those other issues will be dipped into in a number of debates.

First, let me say that the Opposition are strongly in favour of closing the loophole that the core part of the Bill attempts to do. We clearly want to see the NHS get value for money and a good deal out of price negotiations with the different parts of industry it deals with in relation to the matters covered by the Bill. My noble friend Lord Young asked some very pertinent questions. The Minister in passing raised the issue of clinical pharmacology. This is a clinical profession that most clearly enables the health services and, indeed, Ministers to understand the true cost effectiveness and value of new medicines.

The UK is a world leader in clinical pharmacology but, because decisions about the appointment of clinical pharmacologists are made by the NHS, we are at risk of losing the whole profession. I was very disappointed that Health Education England proposed to reduce the number of training posts in its most recent consultation. We were very pleased to have a meeting with the Minister’s predecessor, the noble Lord, Lord Prior, on this, and I very much hope that the Government will be prepared to have a look at it.

This debate is about the contribution of the life sciences sector to this country. Briefly reading the consultation passed today on the industrial strategy I noticed that the introduction talks about the UK benefitting from an,

“open economy: pro-competition rules, flexible labour markets, less intrusive regulation”.

The question that one really wants to put, particularly as this is a sort of declaratory amendment is, if that is so, if—as the noble Lord, Lord Lansley, has suggested—the issue of life sciences post Brexit deserves a great deal of consideration, why have the Government brought what is clearly an overbearing regulatory Bill to your Lordships’ House? If ever I have seen an example of gold plating, this is it. We understand the need to close the loophole but I do not understand and I do not think we really saw a case made at Second Reading for why the Department of Health is determined to intervene in this sector in such a wide-ranging way. It is interesting that your Lordships’ Delegated Powers Committee has already pointed out the open-ended nature of the Government’s approach.

It is impossible to look at the health of the life sciences and the health of the pharmaceutical, medical devices and medical technology industries in this country without looking at the crucial issue of access. I know the Minister’s department is in denial about this and feels that access can be constantly reduced and will have no effect on investment in these sectors. I simply do not believe that that is so. The noble Lord, Lord Lansley, rightly said that this is one of the sectors that we want to protect and enhance—but I believe we are at real risk of losing its pre-eminence in this country.

I understand that the Secretary of State is shortly to go to North America to sweet talk the boardrooms of US pharma. I know the noble Lord, Lord Warner, has been there. I have been there, too. I am sure that the noble Lord, Lord Lansley, has, too. The idea that the Secretary of State will not talk about access is naive. Access is a crucial part of investment decisions by these companies in the UK. The noble Lord, Lord Lansley, referred to the proportion of new chemical entities and top 100 medicines globally that have been developed in this country. I understand that it is now down to 14%. That is healthy compared to 3% turnover, but when I was the Minister responsible we were in the 20% to 25% range. So we have a horrendous decline in the influence of the UK sector. My fear is it is going to decline even further in the years ahead.

We will come back to the 2014 PPRS agreement. Potentially, the industry would have funded the widespread use of innovative medicines in the NHS. Between them, however, the Treasury, the Department of Health and NHS England have completely messed this up. We have ended up with the worst of all worlds, in which rationing in the NHS has reached appalling levels: CCGs are making some of the crudest rationing decisions that I have ever seen.

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Moved by

[Lord Hunt of Kings Heath]

2: Clause 1, page 1, line 14, at end insert—
“( ) After subsection (1) insert—“( ) In exercising functions in relation to the controls on the cost of health service medicines established under this section, the Secretary of State must ensure that any payments made by manufacturers or suppliers to whom the scheme relates which fall under subsection (1)(b) are utilised solely for the purpose of reimbursing the National Health Service for expenditure on medicines and medical supplies.””

[Lord Hunt of Kings Heath]

My Lords, in moving Amendment 2 and speaking to Amendment 4, I will inevitably go over some of the same ground, but I will try to make my remarks briefer than I would have done. I just want to pick up what the noble Lord, Lord Warner, said. The Government have a hell of a job to do to convince these boardrooms, which are no longer much based here. Even the two British companies essentially take global decisions. A lot of work has to be done to convince them that, in the current situation, continued and improved investment will be worth their while.

The Minister may not know this, but there has been great reluctance on the part of his department to talk properly to the industry on these issues, because of this absurd idea that access is a matter that it will not discuss. He may also not know that NHS England is being obdurate about being prepared to discuss these matters in an open way with the industry. I have been astonished by the difficulty that these huge companies have had in getting through the door of NHS England to discuss these matters. This is a serious issue. We would not pursue it unless we thought that we were reaching a critical point in the future of a hugely important sector. I have a sense that because the funding of the NHS so dominates everything that the department does, it then cannot talk about access because it is seen as a cost pressure. I understand that, but it is such a short-term view. We are at risk of making the wrong decisions.

My two amendments are the nearest I can come to the creation of a ring-fenced fund, as suggested by the noble Baroness, Lady Redfern, given the constraints on drafting amendments. That is essentially what I aimed to do: to say that the rebates are for investing in new medicines, devices and technologies. That is the heart of what we seek to do because I still believe that the 2014 PPRS agreement was a golden opportunity to get the best of all worlds—a brilliant life sciences sector, industries investing in R&D and NHS patients getting speedy access to these new developments. But we have not got there yet and that is why this debate is so important.

The Minister mentioned a number of encouraging developments, including the rapid access review, but he must know that there is a general cynicism among anyone involved in earlier discussions about the outcome being a pale shadow of what it could have been. We know that it will really cover only a limited number of medicines and treatments. Equally, the Minister mentioned NICE. It is true that there is an order, which I introduced way back, because of concern that primary care trusts were not implementing technology appraisals effectively enough. But we are seeing a chipping away at even that rather imperfect approach to try to get the NHS to do what legally it should have done, which is enthusiastically to embrace NICE’s technology appraisals.

The department has allowed NHS England to ride roughshod over it in relation to NICE. The latest consultation by NICE, imposed on it by NHS England, to put an arbitrary cap on NICE decisions, coupled with the introduction of a threshold for rare diseases of the £100,000 figure, is putting a triple jeopardy into the system. When it is investing billions of pounds in a new drug, the industry has the NICE process to face; it then has to face the arbitrary imposition by NHS England of these further restrictions; it then gets down to clinical commissioning groups, which in recent months have made some extraordinary decisions in relation to rationing in general and specifically on some of these new medicines. It is very worrying indeed.

I think that the noble Lord, Lord Lansley, hopes the Government might give an outline of their strategy for future voluntary agreements with industry—if there are to be such agreements in future—that embrace the issues of investment, access and value. I am sure that that is very sensible. In the meantime, I am convinced that the only way in which the NHS will start to invest properly, so that its patients come at least somewhere near to the kind of access that we see in other European countries, is by some ring-fenced money being found to finance it. There is no chance of access being improved on the current funding arrangements. NHS England, whose approach is simply to look to control budgets, seems to have no interest whatever in the issue of access. My amendments suggest one way in which we might do that. Ultimately, what I think we all want to hear from the Government is whether they will take a new approach to negotiations which would be about cost-effectiveness and value for money, of course, but takes access almost as its No. 1 aim. I beg to move.

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[Lord Lansley]

May I say a quick word on these two amendments, which would have the same effect in relation to the voluntary and statutory scheme? I understand the debate that we have just had, but it seems to me that we are likely to have a more productive discussion to this effect on the next group. The purpose of these amendments is simply to say that the money that is generated through the rebate must travel back to pay for medicines. The consequence of any such scheme would be that, whereas at present the Treasury together with NHS England and the Department of Health agree a budget based on the Treasury’s assumption that there will be a drugs bill and that bill will be controlled at that level by virtue of the rebate, the Treasury would be obliged to say that the drugs bill could not be controlled. We know that the rebate does not necessarily correspond to the prior assumption of the level, so the amount of money available to fund medicines would be variable, particularly if it was applied to new medicines, as in Scotland. There would therefore be, from the industry’s point of view, nothing in principle to prevent it from pricing up products that fall within the scheme to which the rebate is applied, with the impact that that would increase the money available to supply additional medicines, knowing perfectly well that there would be no overall budgetary control. At the end of the day, there has to be budgetary control. It is only by virtue of the fact that the rebate is not automatically recycled into additional NHS expenditure that the budget can be controlled. In the absence of any such control, I cannot see how the amendments would work.

[Lord Hunt of Kings Heath]

Surely it is the other way round. The NHS could up its intake of new medicines willy-nilly, knowing that the industry would have to pay a rebate to the department. In essence, industry would be paying for the uptake of new medicines. The problem is that the Treasury discounts the figure. It makes an estimate of what the rebate is likely to be in the next financial year and builds it into the baseline budget, which is based on minimal growth.

[Lord Lansley]

The position is that the PPRS is a deal based on a budget. If you want to construct something that does not have a budget limit, you could certainly do so, but I do not think that the amendments would have the effect that was looked for. As for another way of doing it, this is where we get on to what in my view is the real debate. I am not sure that I have ever believed that there should be a fixed drugs budget in the NHS. We have a health budget and we should aim for the NHS to derive the greatest possible benefit to patients from the budget that it deploys—not the drugs budget but the total health budget.

[Lord Hunt of Kings Heath]

That is very interesting. It has always struck me that when you chair a board of an NHS foundation trust, for instance, there is a philosophy that says that spending on doctors and nurses is a good thing but spending on drugs is a bad thing. It is a ludicrous position. I agree with the noble Lord, Lord Lansley, that there is a big problem. Spending on drugs is seen as a cost pressure, so automatically everyone’s emphasis is on keeping that spending down, whereas a rather more sophisticated approach would take the view that, if you have spent your money on drugs that have had a hugely positive impact on the throughput of patients, cost-effectiveness and efficiency, that might be a good investment. The question when we come to the next group is whether our current arrangements have come to the end of the road and whether we need to move on to something rather more sophisticated.

[Lord Warner]

What we set up a long time ago was, effectively, NICE to be the arbitrator, and we controlled the flow of technology appraisals into it. I used to sign off a limited number of drugs that would go into the NICE process. We have that system, which has now been legally enshrined. It is also open to NICE to withdraw drugs from use, as it has from time to time, or to change procedures. We have a system enshrined in our law in which the NHS is required to commit to introducing NICE-approved technology appraisals, so the idea that we should let the Treasury arbitrarily reduce and control the small bit of that total NHS budget on those grounds seems bizarre. I agree with the noble Lord, Lord Lansley: we have ended up obsessing about this relatively small part of the NHS budget when we have set up a system to ensure that the NHS gets value for money through the NICE appraisal process. We are getting into a strange situation, which is why we are scrabbling around to make amendments to try to make a pretty crazy system slightly less crazy.

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These amendments could be a matter of concern because there is a potential for gaming the system, as my noble friend Lord Lansley described. Indeed, some of the considerations that we are talking about today would be better conceived of for a future medicine pricing scheme than in the context of this scheme as it stands. On that basis, I ask the noble Lord to withdraw his amendment.

[Lord Hunt of Kings Heath]

My Lords, I am grateful to the Minister and other noble Lords who have spoken. We have had a very good debate. Obviously, as I made clear at the beginning, I am not wedded to the words of the amendment. It was not the amendment that I wished to bring to your Lordships’ Committee. Clearly, the issue is access and the use of the rebates. I understand the issue about risk and, of course, any considered system in which there clearly needs to be budgetary certainty.

Equally, we need to see much faster uptake of new medicines and, indeed, new technology and devices. A similar argument could be made about new technology as well because, again, we are terribly bad at investing in our own companies even though we have highly successful medical technology and devices industries. They have the same issue of the NHS being incredibly reluctant to invest in their new developments. This has been a long-term problem: the noble Lord, Lord Warner, and I dealt with it 15 or 20 years ago and it has been a problem with the NHS right from the start. The problem is that we are now seeing this connected to the success of the UK’s economy as well, which is why—one way or another—we have to find a solution to this problem.

Turning to CCGs, it is reported on a regular basis that they are making rather bizarre decisions: arbitrary decisions about restricting access to certain treatments that clearly are entirely budget-based and seem to have no value as clinical decisions. I am very worried about the fact that we are now starting to see the legitimisation of very crude rationing of access to services by patients.

This has been a useful debate. Access is crucial and it is clearly not happening at the moment. I hope that between now and Report we can have further discussions and an understanding of what the Government are trying to do to seek to increase access. Having said that, I beg leave to withdraw the amendment.

Amendment 2 withdrawn.

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Moved by

[Lord Hunt of Kings Heath]

3: Clause 2, page 2, line 15, at end insert—
“(3) In exercising functions in relation to the controls on the costs of health service medicines, the Secretary of State must ensure that any medicine covered by a voluntary or statutory scheme that requires payments calculated by reference to sales of that medicine shall be made available to all NHS patients if recommended by a qualified NHS clinician.(4) An amount calculated under subsection (1)(b) may only be calculated using the same methodology as an amount payable by any member of a scheme made under section 261 of the National Health Service Act 2006 (voluntary schemes for controlling the cost of health service medicines) is calculated.”

[Lord Hunt of Kings Heath]

My Lords, I will speak to the second part of Amendment 3, as I think we have comprehensively covered the first part in our debates on the first two groups. I am not looking to the Minister to respond to the first part. The second part of my amendment seeks clarification on the relationship and equivalence between the voluntary and statutory schemes. It provides a further opportunity to debate the future of a voluntary PPR scheme, because, clearly, it might be argued that the Bill is setting a precedent for determining in legislation the nature of a voluntary scheme. It would be helpful if the Minister set out in very broad terms the kind of approach he wishes to be taken in the future—in either a statutory or voluntary scheme—looking at the issues we have talked about in relation to pricing, access and value for money.

In many ways, the voluntary PPRS approach has served government, patients and the industry pretty well over the years. There is no doubt, as the noble Lord, Lord Lansley, referred to, that it has provided certainty to government, alongside giving the industry flexibility on the prices it sets, because it acts as a marker to many other countries. However, the actual price paid is very different from the notional price set. What comes to my mind is that this is not very transparent and very few people understand the system. One does begin to wonder whether it is still serving its purpose and whether we need to think about a new approach that is neither the voluntary PPRS approach we have at the moment nor the statutory approach we have in mind for companies that have not signed up to the voluntary system. If anything, there is the issue of equivalence, which companies wish to know about in terms of the two schemes, but it would be helpful to know where we are going in relation to future negotiations, and the amendments from the noble Lords, Lord Warner and Lord Lansley, will address this. I beg to move.

[Lord Lansley]

The purpose of Amendment 5, in my name, is to recognise that the Government have brought forward legislation to do a necessary thing, which is to address the discontinuity between the voluntary scheme and the powers available under the statutory scheme. As such, where companies were operating under the statutory scheme with a pre-existing discounted price, often in the hospital sector, the effect of the statutory scheme imposing a given price cut did not impact on their effective price to their customers. Therefore, they did not make a contribution, in that sense, to the budgetary control that was being looked for. The purpose of the legislation is to bring equivalence to the voluntary and statutory schemes. But if we are creating equivalence between the voluntary and statutory schemes, we should be clear that the legislation does precisely that. The noble Lord, Lord Warner, quite accurately referred to this issue at Second Reading, if I recall. There are companies under the statutory scheme—Gilead is a particular example—with products that would, under the voluntary scheme, not have a PPRS control applied to their pricing because they would not contribute to the rebate as they have been introduced after December 2013. Under the statutory scheme, however, they are required to contribute.

As I understand it, the objection to bringing the two schemes to an equivalent place is that under the statutory scheme, as things stand, there are relatively few products and a significant proportion of them have been introduced since December 2013. Therefore, under the statutory scheme, the effect on the rebate of the rest of the companies would be excessive. That can be dealt with. The powers are available. If we legislate in the form that I propose, the Government can modulate the rebate between the two schemes in order to arrive at a similar result for those companies that have to contribute to the rebate and apply a common percentage. As a matter of principle, if we are legislating for the two to be equivalent, it is desirable to do so.

I am slightly worried about Amendment 3 because it assumes that there is a voluntary scheme. We do not know. There may or may not be a voluntary scheme. But a voluntary scheme will not always be in place at the point at which the Government, in order to protect the NHS, may require there to be one. I do not think that we should be in that position. There would be a flaw in the powers available to set a methodology for a rebate under a statutory scheme. In Amendment 6, which the noble Lord, Lord Warner, has not yet had a chance to speak to, he clearly understands that there needs to be a relationship between these two, but I fear there is a risk of gaming on that amendment because the industry may say that if it does not agree a voluntary scheme there cannot be a statutory scheme. Therefore, there is no scheme, and I do not think that that we want to get ourselves into that position. It will not surprise the Committee that I can see reason for my own amendment even if I am not necessarily in favour of everyone else’s.

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[Lord Hunt of Kings Heath]

My Lords, one of the benefits of Committee is that one can draft imperfect amendments, have them corrected by Members of the Committee and then, if necessary, come back with better amendments on Report. I have never worried about the absolute wording of amendments, because whatever happens, in the end, the Government have to come back at Third Reading to correct everything. So we can relax about that.

It has been a helpful debate, with a helpful response from the Minister. He has used the term “broadly equivalent”; he has also said that the Government are committed to a voluntary scheme in future and, I think, recognises the flexibility that it gives. However, we still have much to discuss about the nature of the future relationship and potential agreements.

I also worry about most people’s current lack of understanding of what the negotiations mean and of the actual prices paid. I wonder whether we have reached a point where we need to move to something that is more understandable and transparent. I think that what the Minister said about the future of the voluntary scheme will be welcomed, I am sure that it has been a helpful debate, and I beg leave to withdraw the amendment.

Amendment 3 withdrawn.

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Moved by

[Lord Hunt of Kings Heath]

9: After Clause 3, insert the following new Clause—
“Report on use of payments made under schemes
The Secretary of State must prepare and lay before each House of Parliament a report covering each financial year during which this Act is in force, detailing how the payments made by manufacturers or suppliers under the schemes established or amended by sections 1 and 3 have been used to re-imburse the National Health Service for expenditure on medicines and medical supplies.”

[Lord Hunt of Kings Heath]

My Lords, I shall speak also to Amendment 10A, which was inserted at a late stage, and Amendment 14. This comes back to the theme of transparency. My amendments cover the use of payments made under the reimbursement scheme. They cover the pricing and availability of medicines and other medical supplies, research and development and the duty on the NHS to promote innovation. Given that we have already had an interesting debate and that these matters are very important to both patients and the life sciences sector, is the Minister sympathetic to the idea of regular reporting on how this is going—the impact on patient access, payments and reimbursement in a way that would allow parliamentarians in particular and the public to be kept up to date?

I am not wedded to the wording of any of the amendments, but it would be helpful to know whether the Minister is sympathetic to regular reports, which would be helpful to noble Lords and Members of the other place. We could get to grips with what is happening and see the impact in terms of access, reimbursement and investment in life sciences. I hope that the Minister will give a positive answer on this. I beg to move.

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[Lord O'Shaughnessy]

My Lords, I am grateful to noble Lords for raising the issue of reporting requirements. We will address at the end the issue of access and my sympathy to reporting requirements, but I first want to deal with the amendments as they stand.

Under the current PPRS, the Government regularly publish information relating to the operation of the voluntary scheme. Of course, for a future statutory scheme I draw attention to the regulations that we have already discussed, in which there are annual reviews of the regulations and a requirement to publish a report on each review. The illustrative regulations require an annual review that will: set out the objectives of the scheme; assess the extent that our objectives have been achieved; and assess whether those objectives remain appropriate. These requirements will be tested through the consultation on the regulations and we will, of course, take account of those views. I totally accept that reporting is a critical principle, but believe that setting out the requirements in primary legislation is too restrictive because of the potential to change from year to year what the priorities are within a sector and within the NHS.

Turning to the specifics of Amendment 9, I reassure noble Lords that the content of annual reviews would not be restricted to reviewing objectives. They must also be able to address key issues arising during the year that might affect the operation of the scheme, so there is flexibility there. We also intend for the annual review to be published and put before Parliament, so there is the opportunity for that to be seen and discussed. On the details of what it is proposed to report—in particular, how the payments are used—to achieve the specific aims of the amendment, the department would need to ring-fence the funds and monitor where the payments are used. I do not want to rehash our discussion about ring-fencing. I take seriously the point that noble Lords make about driving access to innovative drugs but we do not think this is the right way of doing it.

Nor do I believe that, through these means, it is right to address matters relating to the NHS duty to promote innovation. This Bill is ultimately about controlling the cost of medicines and medical supplies. The NHS Act 2006 puts duties on the Secretary of State to take into account both the need for medicinal products to be available for the health service on reasonable terms and the costs of research and development, which is a big factor in innovation. By taking into account these factors, the Secretary of State is looking at the needs of the industry to support the R&D base as is necessary to support the development of innovative medicines and technologies.

The NHS duty to promote innovation is different. It is about promoting innovation in the provision of health services and there is an extremely broad agenda that goes well beyond medicines. We have already said that we all want to make the UK the best place in the world to design, develop and deploy life sciences products. We do not believe that the Bill will have a negative impact on our doing so. We have also talked about the accelerated access review, so I will not go over that.

Turning to the specifics of Amendment 10A, the supply of medicines is highly complex, and pricing is one part of it. Other issues of course include rigorous safety and quality standards. Difficulties faced in the take-up or availability of medicines can be influenced by a number of reasons which are nothing to do with pricing. There can be manufacturing problems, such as batch failures; changes in guidelines, such as antibiotic switches; and raw material problems, as well as regulatory changes.

For example, in 2015, there was worldwide withdrawal of a branded antipsychotic injection, Piportil, due to a global shortage of the active pharmaceutical ingredient. Sanofi was unable to find an alternative source of this ingredient and had to discontinue the product. I set that out to illustrate the point that it is not always easy to link changes in pricing to issues of availability or access: there are other things to take into account. That is why we do not believe that we should set out, either in primary legislation or beyond the commitments made in the illustrative regulations, specifically to assess the impact on availability, access and so on.

Leaving all that aside and returning to the recurring theme of the debate, I understand the desire for greater transparency, which is undoubtedly the right approach to access. We must think about how we can improve access to innovative medicines for NHS patients and, in doing so, improve the operating conditions, if you like, for the life sciences industry—the win-win situation to which we keep returning. I would be happy to meet noble Lords either individually or collectively to think about what more we could do, whether through the Bill or looking ahead to the life sciences strategy, to ensure that we deliver on this promise. I take very seriously the warnings that many noble Lords have issued; the Government absolutely want to address this. On that basis, I ask noble Lords not to press their amendments.

[Lord Hunt of Kings Heath]

My Lords, I am grateful to the Minister. On the two arguments he put forward against the amendments, he said, first, that primary legislation would be too restrictive and what one might need to report on one year, one would not in another. The three amendments cover payment, supply, R&D and innovation. I do not think that there would be any year in which it would not be appropriate to report on them. He also said that duties in existing legislation cover some of these areas, and that where they do, such as the duty on innovation—presumably in the 2012 Act—they go wider than the intent in the amendments. I fully accept that. None the less, there is a strong argument for progress being monitored and for Parliament to be involved in that. However, I am grateful to the Minister for agreeing to have further discussion about the core issue of access, and I hope that we may take this forward. In the meantime, I beg leave to withdraw the amendment.

Amendment 9 withdrawn.

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[Lord Lansley]

I am grateful to my noble friend for that thoughtful and helpful response. I will say three things. First, thank you for the opportunity to be consulted as the future PPRS structure is developed. I very much appreciate that.

Secondly, on freedom of pricing and introduction, it does not necessarily follow that putting into the legislation the criteria that Ministers should take into account in so far as they exercise their powers has a direct impact. That might be done, as I described, through the mechanism of modulating the rebate, which would not impact on the freedom of pricing and introduction.

My third point is that I did not invent value-based pricing. I may have advocated it for some considerable time—probably 10 years now—but it was advocated before I took it up by the OECD in a wide-ranging report on pharmaceutical pricing internationally and by the Office of Fair Trading in its review of the previous PPRS.

[Lord Hunt of Kings Heath]

My Lords, I think it goes back even further, to an Oxera report on value-based pricing.

[Lord Lansley]

The noble Lord is absolutely right about that. There is a history to this. The reason why there is a history is, first, that this is an eminently desirable place to arrive at, in that it would give us tremendous transparency in pricing. At the moment, it is extremely difficult to discern the pricing structures in the industry from the point of view of the payers. Secondly, it would enable us—and this is the objective—to arrive at the point where we could give patients the access to the medicines that are most appropriate to them.

[Lord Hunt of Kings Heath]

This is very interesting and rows back to a point that the noble Lord made earlier. One issue is the capacity to negotiate with industry. My understanding is that the pharmaceutical industry has made some approaches to NHS England to look at elements of what the noble Lord is suggesting. There is a sense that, at the moment, there simply is not the capacity to negotiate the kind of sophisticated agreement that he seeks.

[Lord Lansley]

Without repeating what I said earlier about the consultation being conducted jointly by NHS England and NICE, I think that that is precisely the point. These two organisations need to be brought together. There is a degree of sophistication in the NICE processes that needs to be allied to the affordability and therapeutic benefit considerations as seen by NHS England. I freely admit that NHS England is still developing its role.

In relation to specialised health commissioning, I think that it is tremendously positive for it to be able to see the needs and advantages of commissioning all these specialised services on a national basis, as opposed to the patchwork and inconsistencies that we used to see. In that sense, it is only discovering what the commissioning pressures and costs look like—but that will enable it to move on to understanding what that means in terms of the relative benefit and, by implication, affordability of getting into negotiations with companies.

We need to arrive at the point where NHS England can engage up front with industry about the potential cost and pricing of medicines and obviate the need for NICE to go through the long process of the introduction of additional thresholds. As we discussed, there is an issue about the introduction of an additional threshold for highly specialised technologies. We do not want to go to that place with additional thresholds and a variety of arbitrary figures. We should be able to arrive at a point where industry can engage up front with an expectation of understanding what kind of discounting or price it is likely to be able to attract from the NHS because it is able to have a serious discussion about relative value.

I have been dragged back into another, longer conversation. I entirely take my noble friend’s point that there are references to these criteria for Ministers to take account of elsewhere, but there is a risk that the PPRS can be constructed as a budgetary control mechanism without regard to those criteria—notwithstanding that Ministers have a responsibility for them in other places. Even if it were constructed in terms of cross-reference to ministerial duties elsewhere, we could still continue to look at whether this part of the legislation—the statutory basis for the scheme—should cross-refer to the criteria that should be brought to apply. But I take my noble friend’s comments in good part and I am happy on that basis to withdraw the amendment.

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[Lord Hunt of Kings Heath]

My Lords, we discussed at Second Reading the general concern that the Bill extends amendments aimed at the provision of health service medicines to provisions relating to medical supplies. Subsequently, the Minister has written to us to explain that,

“section 260 of the NHS Act 2006 already provides the Secretary of State with powers to control prices of medical supplies and to require companies to provide information on any aspect of their business. Clause 5 of the Bill ensures that the enforcement and territorial provisions for any scheme concerning medical supplies are aligned with those for health service medicines, including changing non-compliance from a criminal to a civil offence … While the Government is currently not using its powers to control prices of medical supplies … it is important that we continue to have these powers”.

I have to say that, so far, I am not convinced. Will the Minister confirm that the section of the NHS Act 2006 to which he referred is essentially a consolidation measure, which merely restates the provision introduced some years before? Indeed, with the help of the Library, I can say it seems that the measure was first introduced in 1977. There seems to be no reference in Hansard as to the reasons that it was then introduced, although it is thought that it was part of the debates on the Bill on the status of private patients in the NHS. Looking back to those happy days, one can only imagine the debates that we had. The point is that the power has never been used: it was legislated for 40 years ago and it has never been used.

I start from the premise that, if a provision introduced 40 years ago has never been used, the first question is: should it be needed at all? So far, I have heard no convincing argument that it should. With this provision having never been used, even though on the statute book for 40 years, the Minister should not be surprised that the companies concerned are suspicious of the Government’s motives for doing what they are doing. This is particularly the case because there was so little consultation with the medical technology industry, as an example, prior to the publication of this Bill.

As just one example of this, at Second Reading in the Commons, the Health Secretary said that his officials had consulted stakeholders across the supply chain, including those from the medical devices sector. My understanding, however, is that the continence-stoma industry, and its relevant trade associations, was not consulted about the potential impact of the Bill. It is unclear why the Government want to do this in relation to medical supplies. If ever there was an example of gold-plating of legislation, this is it. I hope that the Government will be prepared to modify those provisions.

If the Government really want to extend this beyond medicines to medical supplies, surely they can find a way to remove the open-ended provisions and set a threshold to trigger them. At the moment, we have no information. There was none in the impact assessment. Given that the Government are supposedly interested in light-touch regulation, it is difficult to understand why Ministers have not removed this clause from the Bill and the section from the 2006 Act. It is very difficult to see what they are getting at here.

--- Later in debate ---

[Lord O'Shaughnessy]

I thank noble Lords for the debate on Clause 5. I am also grateful for the tour d’horizon or history lesson on how this has all come about. It feels as though it has slipped through many nets, for which there are multiple responsibilities around the room.

I will first address the point about consultation. Noble Lords will appreciate it when I say that, personally, I have not had the chance of undertaking that consultation but it is something that I am committed to doing. Whatever has gone before, I can at least give the reassurance that I will meet the relevant bodies in the next few weeks and discuss their concerns ahead of Report. At least in a forward-looking way, I can provide that reassurance.

As everyone has stated, the critical point here is that the 2006 Act gives the Secretary of State the power to control the price of medical supplies and to collect information about medical supplies. What Clause 5 does is to ensure that the same enforcement and territorial extent to provisions apply to controlling the cost of medical supplies and health service medicines. It does not give the Secretary of State any new powers to control the price of medical supplies. There are currently inconsistencies in the enforcement and territorial extent provisions. For example, a contravention or a failure to comply with the current provisions in the 2006 Act for medical supplies can result in a criminal offence. By contrast, the equivalent penalty for medicines is a civil financial penalty. Clause 5, therefore, aligns the enforcement provisions for medical supplies with those for medicines and, in so doing, makes them more proportionate, as the noble Baroness, Lady Walmsley, has pointed out.

With respect to the territorial extent, the power to control the prices of medical supplies in the NHS Act 2006 currently extends only to England and Wales. Clause 5 would extend the power to control the prices of medical supplies to Scotland and Northern Ireland. That would be consistent with the territorial extent of the powers to control the costs of health service medicines. That is an important point.

A number of noble Lords asked why the Government need the powers to control the prices of medical supplies when they do not currently use them nor have ever used them. That is a perfectly reasonable question to raise and one that occurred to me, too. We do not have any immediate concerns about the pricing of medical supplies. It is true that the market for medical supplies is very different from the market for medicines. It is innovative and competitive, and new medical supplies are generally faced with competition much more quickly than is the case for new medicines. However, I remind noble Lords that until recently we did not think that we needed the powers to set the price of unbranded generic medicines. We thought that competition in the market was working well and keeping prices down. When we realised that the market was not functioning as well as we thought with respect to certain products, and we were faced with companies charging unreasonably high thresholds where they had no competitors, we realised that we did not have sufficient powers to intervene when needed. That is of course one of the reasons for the Bill.

A question was asked about thresholds and when such a provision could be triggered, which is a reasonable question. The two examples I can give are when we had evidence from existing data that there may be an issue with pricing—for example, the reimbursement price that we set in primary care is increasing without an obvious reason—or when there is effectively a bottom-up complaint where patients, clinicians, commissioners or industry raise concerns because it is not obvious what is driving a price rise. I want to minimise the need for future primary legislation on medical supplies pricing controls. The Government should have the ability to intervene, but only when the market is not working well. Whether it is for medicines or medical supplies, it is right that those powers exist but are used only when necessary and proportionately. On that basis, I ask the Committee to agree that Clause 5 stand part of the Bill.

[Lord Hunt of Kings Heath]

My Lords, I am grateful to the Minister for his response. I also thank him for his consultation and willingness to meet bodies before Report, which I am sure will be very welcome. I understand the first argument, which is that there is a need to ensure consistency in relation to this Bill and the 2006 Act. I fully understand that. I also understand the change from criminal to civil penalties. But we then come to the issue of whether this provision should be in statute at all. The Minister himself has acknowledged that this is a different market, with competitive tendering. It is very competitive. We can see no evidence that this measure has been used for 40 years, and as far as I can see there is no evidence to suggest that it will be used any time soon.

The Minister said that it was not thought that the switch from branding to generics would arise in relation to medicines, and therefore that we should look into a completely different sector and say that because something might happen in the future we need to have this overarching provision in the Bill. But that is not the right approach. It has become clear that there are two courses of action. One is to take this out of the 2006 Act altogether, which at the moment I rather favour. We should not regulate for something that might happen in the mystical future.

I, too, was a better regulation Minister and it was drummed into me that if you do not need it, get rid of it—and if you do not need it, do not legislate in the first place. In his heart of hearts, surely the Minister realises that this is unnecessary. The alternative approach is to take the threshold he suggested and put it in the form of an amendment so that we have some reassurance on the face the Bill that it will not be used inappropriately. Those are two particular options.

In my tour d’horizon, as the noble Lord said, I came across the comments made by the noble Earl, Lord Howe, in 1999 when my noble friend Lady Hayman was taking one of the many health service Bills through your Lordships’ House. The discussion was not about devices but about the PPR scheme, because the then Government had taken powers in relation to prices. The noble Earl, Lord Howe, said that the Government had,

“arrogated to themselves sweeping powers to bring the current voluntary scheme to an end and to control the price of any drug at will. Lower medicine prices are appealing but too much of that will kill the golden goose”.—[Official Report, 9/2/99; col. 118.]

If the noble Earl, Lord Howe, were here arguing for this Bill, I think that he would have reflected that the case had not been made for non-health service medicines to be involved. We need to find a way forward between this stage and Report, otherwise the persuasive argument will be to remove the offending sections from the 2006 Act.

[Lord Warner]

Perhaps the Minister will consider the Bill’s definition of “medical supplies”. It states that it,

“includes surgical, dental and optical materials and equipment (and for this purpose ‘equipment’ includes any machinery, apparatus or appliance, whether fixed or not, and any vehicle)”.

That seems to take the Government into any bits of kit—not just ordinary devices as we normally understand them. It covers ambulances and all sorts of fixed equipment in the NHS. Is the Minister really saying that the Department of Health needs a power to cover that range of subjects—I presume that it includes scanners—where competitive tendering may be used, and that the Government reserve the right to intervene in that? That is what the Bill seems to say.

--- Later in debate ---

[Lord Hunt of Kings Heath]

Perhaps I may continue, my Lords. My noble friend will move an amendment on this later on, but the Bill states:

“‘Health service products’ means any medicinal products used to any extent for the purposes of the health service continued under section 1(1) and any other medical supplies, or other related products, required for the purposes of that health service”.


So it is a draconian regulatory power. Having said that, I think that we have had a very good debate. I am sure that we will come back to this on Report.

Clause 5, as amended, agreed.

--- Later in debate ---

[Lord Lansley]

Amendment 16 takes us to an issue that was the subject of consultation prior to the introduction of the Bill: whether the Government should take powers to control prices in circumstances where there has been an open and competitive process—for example, a tender process. We know that one reason why the legislation is required is because it does not follow that because products have become unbranded generic medicines they are necessarily available on a fully competitive basis in the marketplace. We have seen examples of that. In explaining the purpose of the Bill, it was stated that:

“The government’s intention is to use these new powers where due to a lack of competition in the market, companies charge unreasonably high prices for unbranded generic medicines”.


That is understood. There can be circumstances where there is a lack of competition.

Quite clearly, however, there are circumstances where the products available and the prices set are themselves the product of an open and competitive process, such as a tender process; for example, in relation to blood products being supplied to the NHS. There may well be a degree of market dominance in some of those, even though some of the complex medicines may be generic. For example, I know a company that produces medicines in circumstances where it has to use opiates, and the availability of those opiates might be limited.

None the less, if the NHS can procure on the basis of a tender that is open and competitive, why should the Government leap in and try to amend it? I understand that the response to that is to say that companies can take account of the rebate in the prices that they set. But surely when one enters into a tender, the companies concerned may not be in symmetrical positions in relation to the implications of the rebate. Some companies are indifferent to the rebate because they are not affected by it and other companies are affected by it. The nature of the rebate over a period of time and the extent of it may be variable, and they may make completely different assumptions about what that process looks like. So it seems, on the face of it, that a much cleaner approach to the Bill would be exemption from the price control mechanism in those circumstances where clearly the mischief that the Bill is intended to remedy does not apply: that is, in an open and competitive process. I beg to move.

[Lord Hunt of Kings Heath]

My Lords, this is helpful. Medicines have been referred to, but I would have thought that it could be helpful with other medical supplies. I have had a letter from the British Healthcare Trades Association. It says, in relation to other medical supplies:

“We cannot think of any procurement scenario in our sector where products, on an ongoing basis, are not subject to tender or tariff procedures. The price is tested at entry and reviewed at regular intervals, and the terms and conditions pertaining to the contract or tariff arrangements will include requirements for provision of information”.


That deals with the issue of information. So the noble Lord has put forward a very interesting suggestion and I hope that the Minister might be sympathetic to it.

[Lord Warner]

My Lords, I too am sympathetic to this amendment. I have a linked amendment, Amendment 33, which is about introducing a trigger before information is required. Both amendments, I think, are intended to curb the enthusiasm of Secretaries of State to intervene in a market situation where things are working reasonably well. So I have every sympathy with the amendment of the noble Lord, Lord Lansley, and I hope that the Minister will consider it sympathetically.