Trade and Investment

Debate between Lord Hunt of Kings Heath and Lord Green of Hurstpierpoint

Wednesday 9th February 2011 Lords Chamber

[Lord Green of Hurstpierpoint]

I thank my noble friend Lord Lang for that question because it is an important one. Productivity is indeed something of an Achilles’ heel, at least in parts of the British economy, and we need to work at that. It is a complex matter that involves the whole question of the skills base. There is one very interesting fact about exports that is extremely important to this question. Research shows that as small companies get engaged in the international markets, they not only tend to be the more efficient ones, they tend to get more efficient as they do so. In other words, an enhanced trade performance engaging more SMEs in the international markets has the effect of strengthening the backbone of the whole economy. That is an extremely important consideration that leads me to underscore again the very centrality of this trade agenda to the growth strategy for this economy for the next few years.

[Lord Hunt of Kings Heath]

My Lords, perhaps I may follow up the question raised by my noble friend about the pharmaceutical industry, particularly the decision of Pfizer. Is the Minister aware of a Department of Health consultation on value-based pricing, which essentially changes the way in which the health service will compensate the pharmaceutical industry for the cost of drugs?

Under the current system, the PPRS, companies have great flexibility in setting a price within an overall profits cap. The advantage of that is that price sets a benchmark for at least 25 other countries and probably many more than that. That is one of the attractions for the industry of investing in the UK. When I was responsible for the pharmaceutical industry at the Department of Health, the UK had 4 per cent of global turnover in pharmaceuticals and 10 per cent of global R&D investment.

The Department of Health’s concern is to control the cost of pharmaceuticals to the NHS but, frankly, there is a much greater issue: the strength of our pharmaceutical R&D investment. I therefore urge the Minister to make sure that we are looking at pharmaceutical prices from the point of view of UK plc. I should say to the House that I have a number of health interests which are declared in the register.

[Lord Green of Hurstpierpoint]

I thank the noble Lord, Lord Hunt of Kings Heath, for that suggestion. I have to say that, as somebody relatively new to my role, this is not an area with which I am very familiar. However, his idea is very interesting and I am happy to undertake at least to inform myself more about the issues.

I am aware that Britain has been a very attractive site for R&D in the pharmaceutical industry. I think that we are all aware of the way in which the pharmaceutical industry is changing, with an increased tendency for the major companies to look at whether primary R&D is better contracted out to smaller operations. There is a need to think through the implications of that for the strategy of attracting and retaining inward investment in that sector.