Health Service Medical Supplies (Costs) Bill

Lord Warner Excerpts

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

[Lord Warner (CB)]

My Lords, I am sure we are all grateful to the Minister for taking us through the provisions of the Bill and explaining the Government’s approach to the pharmaceutical and devices sectors. I am not altogether sure I followed his metaphor on treacle and icing, but we will let that pass.

I support the main purpose of the Bill, which is to control the cost of unbranded generic medicines if the competitive market is not working properly in respect of particular products. We have all seen what happened when Pfizer and Flynn Pharma hiked the price of an anti-epilepsy drug used by the NHS by over 2,000% when a branded drug came off patent. The proposed £90 million fine from the Competition and Markets Authority should be a salutary warning to others contemplating such action, but I understand why the Government are taking preventive legislative measures, and I fully support that.

However, as the Minister indicated, the Bill goes a good deal wider than stopping the NHS being ripped off when branded drugs go off patent, and that is where we need to probe a little further. Here, I should make it clear that, like the Minister, I have been a Pharmaceuticals Minister negotiating a PPRS deal with big pharma and curbing the excessive profits of generic companies—all areas which such a Minister has to take account of—and I have no illusions about the difficulties of his brief in this area. But it is also part of that brief to ensure flourishing UK pharmaceutical, biotech and devices sectors as part of a buoyant life sciences industry in this country, which provides many high-value jobs. It is not just about getting the cheapest deal on drugs for the NHS.

The Bill includes medical devices and technologies which have nothing whatever to do with the Pfizer-Flynn case. The information provided to me suggests that there has been little consultation with the sector before devices provisions were included in the Bill. The ABHI, the sector trade body, wrote to me to express its concern that the Bill will impose onerous regulation on its members across the country. It points out that SMEs make up 98% of the medical technology industry—I think the Minister accepted that—and that some of those SMEs are already leaving the UK market in favour of more flexible markets. As it says, in the longer run, this will have an adverse effect on the UK’s supply chain and the quality and competitiveness of the products available to the NHS. Given that the Minister has accepted the existing powers to intervene in the devices market if things are going wrong, why are the Government taking these new powers? I have never been very convinced by words such as “streamlining” and “modernising”, and I do not think the sector has been either. Why do they seem to be going in for a heavy-handed way that is bound to alienate many small businesses? Can the Minister explain in more detail what discussion there has been with the ABHI and the sector itself on the Bill’s provisions on devices and technologies, and why the sector was included in the Bill at all? What is the mischief that is being addressed by that inclusion?

Turning to the pharmaceutical industry, it is clear that the Government have not totally taken the sector with them, although the ABPI accepts the Government’s right to act in cases such as Pfizer-Flynn. Companies are clearly uncertain how the Government are going to set the price mechanism in the statutory scheme. I think the Minister was promising consultation, but he will have to do quite a lot of work to convince them that there is not some secret agenda. Can the Minister throw more light on the Government’s current thinking on the issue? How will the provisions ensure that payment levels that seem fair to large multinationals are not punitive to SMEs? I would like to know a bit more about at what level SMEs are excluded from the provisions. Will payment levels in the statutory scheme vary—this is critical to the sector—according to the circumstances of particular producers, some of whom are producing drugs for a very niche market with particular patient interests and concerns?

There are clearly concerns about the drafting of Clause 3 and whether it will penalise innovation. It has been suggested to me that the clause will not achieve the Government’s stated objective of delivering equivalence between the statutory and voluntary schemes. This is because the PPRS excludes sales of branded medicines launched after 1 December 2013 but, so far as I and the industry can see, there seems to be no similar exclusion for such products in the proposed arrangements for the statutory scheme, which would in effect be a penalty on innovative drugs. Does the Minister agree that there is an inconsistency? Is there not a risk that the UK’s already poor record, which he acknowledged, on speedy uptake of new medicines will get worse? Linked to this is the question of what consideration has been given to the impact of the new payment scheme on patient access to medicines where there is little competition. What risk assessment has been made of companies withdrawing supplies from the NHS market? Have there been any discussions with patient interest groups about these issues?

Another issue surfaced by the ABPI is the new power to obtain payments from pharmaceutical companies through the PPRS scheme. They accept that this makes sense if a company leaves the PPRS with a payment outstanding, but the Bill seems to be more widely drawn than that. The ABPI is clearly concerned that the Government may be considering making the voluntary PPRS somewhat less voluntary after the current one has run its course in 2018. What assurances can the Minister give the industry on that?

There are clearly significant industry concerns about the Bill’s provisions on the collection of information at a product level, especially in the international companies. For many of these companies, the UK market is a very small part of their business. What happens if they decline to co-operate over the information provisions in the Bill? It also looks a somewhat cumbersome information collection system that could impose quite rigorous burdens on many smaller companies. How much discussion has there been with the industry on the detail of the information requirements in the Bill and what scope is there for further modification?

Lastly, can the Minister clarify how this new system fits in with the current arrangements for using competitive tendering to purchase innovative drugs which NHS England, for example, does from time to time? Will companies give competitive prices in those tendering arrangements if there is a real risk that the Department of Health will take another cut a bit later on? Indeed, will the Department of Health snaffle money through this statutory levy which will not find its way back to the NHS to purchase innovative drugs more speedily? Can the Minister reassure us that the Department of Health is not creating a more bureaucratic edifice in this Bill that could damage NHS finances rather than confining itself to closing the loophole that Pfizer-Flynn exposed? We may need to probe some of these issues a little further in Committee.