Health Service Medical Supplies (Costs) Bill

Andrew Selous Excerpts

2nd reading: House of Commons & Programme motion: House of Commons
Monday 24th October 2016 Commons Chamber

[Andrew Selous (South West Bedfordshire) (Con)]

It is a pleasure to follow the extremely well informed speech given by the hon. Member for Central Ayrshire (Dr Whitford). I hope that Ministers will continue to study what happens in Scotland, as they do elsewhere around the world so that we can share information and copy best practice, whether in Scotland or elsewhere. I am aware of Scotland’s fine medical tradition and what it contributes to the United Kingdom.

I pay tribute to The Times for the investigation that it began on 3 June. We often have cause to complain about the press in Parliament. We are often the subject of their inquiries, which we may find unwelcome, and from time to time the press are irresponsible, and should be more responsible. In this case, we can all thank The Times for shining a spotlight on unacceptable practice in the pharmaceutical industry in the UK, which has huge implications for the NHS, which we all love and have been sent here to protect and improve.

[Rob Marris]

The hon. Gentleman is extolling the work that The Times did in a series of articles this June. May I remind him and the House that in discussing the earlier adoption of drugs, we should bear in mind the work that The Times did in the 1960s to uncover thalidomide as a terrible drug? It was never licensed in the USA because of concerns that testing was not adequate. Yes, we want things to go to market earlier when that is possible, but we have to be extremely careful.

[Andrew Selous]

If memory serves, it was a team of investigative journalists from The Sunday Times that focused on that issue. However, the hon. Gentleman is right: we should pause and reflect, and be thankful for the tremendous tradition of British investigative journalism, which helps us and is our ally in Parliament. It is important to put that on the record. What The Times did contributed to the Secretary of State launching the Competition and Markets Authority inquiry. I am pleased that that happened.

A number of speakers have made a valid point, with which I strongly agree, that it is absolutely vital that we continue to have a strong pharmaceutical industry in the UK. In the months before she was appointed, the Prime Minister said:

“It is hard to think of an industry of greater strategic importance to Britain”

than the pharmaceutical industry, and she was absolutely right. The briefing from the House of Commons Library says that the output of the pharmaceutical industry in 2015 was £12.7 billion, which amounts to 8% of the UK’s entire manufacturing output. Let us look at one or two of the larger players.

GlaxoSmithKline is active in more than 150 markets around the world, and has 110,000 employees globally. It has 80 manufacturing sites, and it is the largest vaccines business in the world. Of particular significance is the fact that it conducts all its research in two research hubs: one in Philadelphia and the other in Stevenage in the United Kingdom, where a number of my constituents are proud to work. AstraZeneca is another large pharmaceutical company that is active in the UK. It has 6,700 UK employees, and supports a further 35,000 jobs in the UK. It operates across seven sites, including one in Luton, close to my constituency. Again, a number of my constituents are rightly proud to work there.

As the Secretary of State said, the medicines bill for NHS England, at £15.2 billion in 2015-16, is the second largest cost for the organisation, after staff costs, so it is absolutely vital that we secure value for money in this huge area of spend. It is a concern that the CMA has spoken of “excessive and unfair prices” and has referred to companies that have “abused a dominant position”. There have been incidences of no competition or insufficient competition, so it is right that the Government have stepped in to deal with the issue. That touches on a broader philosophical point. We had a brief exchange on this earlier. In a response to me only a couple of days ago on the morality of business behaviour, the Prime Minister wrote:

“we need to ensure that the free market has an ethical basis”.

I absolutely agree.

The Library briefing for the debate looks at the top 11 medicine price increases, ranging from ascorbic acid, with an eye-watering 1,012% price rise, right up to Doxepin, which had a 5,281% price rise. In some cases—if some of the ingredients and some of the raw material for a particular drug are suddenly in short supply—a price increase such as that may be justified, but the Department knows that, in the majority of cases, there is no valid reason for the huge increases. That is why the Government have, properly, acted. Therefore, I welcome the Bill’s powers to reduce prices, to impose price controls and, importantly, to gather information. However, I have a couple of questions for my hon. Friend the Minister on gathering information.

Getting information is vital, and I am pleased that the Government have included measures in the Bill to obtain complete information. Is the Minister satisfied that there is sufficient analytical ability in his Department to really know what is going on? I ask that for this reason. I have had the huge privilege of working with members of the senior civil service in a different Department in the past two years, but sometimes we expect civil servants to have a range of skills that it is not fair of us to expect them to have. Is there the necessary commercial expertise in his Department to really work out what is going on with the additional information that he and his officials will have at their fingertips? Is there a scheme for secondments between pharmaceutical businesses and the Department of Health, so that his officials really know how the market works and any particular games that might be played? That is important.

I am aware that one permanent secretary in post at the moment had a secondment earlier in his civil service career to Diageo, but it is important that the Minister and the permanent secretary ensure that there is that capability in their Department. If it is not there, I hope that he and the ministerial team will take steps to ensure that it is. I say that because, if we look at some of the emails that came into the public domain as a result of the investigation by The Times—some were brought to light through freedom of information requests—it seems that there was not quite the level of serious analysis, probing and inquiry that we would all, including the Minister, have liked to see.

The Government have introduced the Bill because they care passionately about the future of our NHS. They will do everything necessary to protect it and that very much includes getting value for money from the drugs that the NHS pays for. On the Conservative Benches, we value and care about the role of the free market. We know that it is the greatest economic mechanism in the history of mankind for creating wealth and for relieving poverty. It is because we care about it that we will act to reform where that is necessary, whether that be in the interests of the NHS or any other part of our country.

Health Service Medical Supplies (Costs) Bill (First sitting)

Andrew Selous Excerpts

Committee Debate: 1st sitting: House of Commons
Tuesday 8th November 2016 Public Bill Committees

[Julie Cooper (Burnley) (Lab)]

Q This question is probably to Mr Smith. Generic supplies to the NHS in the UK provide some of the cheapest medicines in the developed world. Do you think that the approach to control the cost of generics is the right one, given that it is a minority of individual items that have come to the public’s attention because profits have soared significantly?

Warwick Smith: I am on record as saying it is the least worst system in Europe. There is no perfect system. What we have found, comparing what we have in the UK and elsewhere in Europe, is that competition is a much better way of controlling price than intervention. We produce lower prices in the UK than in the rest of Europe. We have had an issue, as you say. I think fewer than 2% of our products have made the front page of The Times. We agree that there should be data available to investigate whether those prices have a justification or not, and intervention perhaps by the Secretary of State or, at the end of the day, by the competition authorities. However, for the majority of products, as the Secretary of State said on Second Reading, the system works extremely well. We have spent time trying to come up with better systems and we cannot.

[Andrew Selous (South West Bedfordshire) (Con)]

Q This is a question for Dr Ridge about the analytical capacity of the Department to look at the extra data you are going to be collecting. I was a little worried that, in The Times investigation, given some of the emails and responses from officials, they did not really appear to be on top of what was happening in terms of prices. My question is to seek reassurance as to the capability within NHS England sensibly and intelligently to analyse the extra data that will be collected under the Bill to know what is going on.

Dr Ridge: I am glad you make the point that I am from NHS England as opposed to the Department of Health. However, I am aware that the Department of Health has an analytical team in a particular bit of the Department that focuses entirely on issues associated with medicines and reimbursement. Indeed, the reimbursement policy responsibility sits with the Department of Health. Having been associated with that team for a number of years, and having previously been the Department of Health’s chief pharmaceutical officer, I am fully aware of the capability of that team. It is substantial, although I am sure that the head of that team—I can see him in my head now—will be considering whether he needs more resources to deliver what is required.

On the issue of price gouging and the 2% figure quoted by Warwick, it seems to me that at some point someone has to intervene in these things when you are into several thousand per cent. price rises. Although the intention would never be to do that first off—I am sure there would continue to be competition—there has to be a mechanism to do that.

Warwick Smith: To add to that, it is important to realise that the officials who were named in The Times were not part of that team. They were performing a more mechanical function to do with producing lists. The Bill ensures that the team reporting to the Secretary of State has powers of investigation and intervention. As Dr Ridge said, that is necessary and we agree that it is necessary.

[Kevin Foster (Torbay) (Con)]

Q In looking at any piece of legislation, one must consider whether there is an alternative. My question is directed at Mr Smith in particular. To put a scale on this, although we accept that it concerns a minority of manufacturers, we are talking about 262 million quid a year for 50 drugs that have increased significantly in price. Given the voluntary range and references to past difficulties, do you see any sensible alternative to dealing with the minority of companies that have adopted that type of approach?

Warwick Smith: The focus needs to be first on transparency, so that those officials whose job it is to monitor these prices and set the reimbursement rates can see the data. Not all companies currently submit data. Our requirements do not include all products, and we think they should. We have proposed to the Department that they should include all products and that there should be powers to insist that all manufacturers provide those data. The Bill does that—it gives them those powers. That is the first important step to transparency. Once the officials in the team that Dr Ridge referred to have those data, they can monitor what is happening and put questions. They will have powers to investigate and the Secretary of State will have the power to act. We all thought that the Secretary of State had those powers, but it appeared—through a piece of drafting that none of us had noticed—that he did not. So the Bill will fill the gaps in a system that we think is the right system but had some gaps in it that none of us had spotted, frankly.

--- Later in debate ---

[Rob Marris]

Q Do you think there are further steps, besides what is in the Bill, that could be taken to ensure that the NHS gets best value for money?

David Watson: The Bill specifically addresses the point of unbranded generic prices. It also specifically talks about a new mechanism for the statutory scheme. Most branded medicine spend—about 80% of it—is actually in the voluntary scheme. We think that the voluntary scheme has operated very well to help address the issue of affordability and pricing.

[Andrew Selous]

Q What would be a reasonable return on capital for your industry, so that we have a thriving and competitive pharmaceutical industry in this country, with prices that are fair to the NHS and the taxpayer?

David Watson: I could not honestly give you a specific number.

[Andrew Selous]

Q Give a range or an indication. Obviously, you are a wide industry and there are different parts to it. We have seen considerable variation in prices and returns from some of the information that has come into the public domain.

David Watson: I think that the question of profitability in the UK is much more complex than just pricing. The pharmaceutical industry, compared with other parts of the life sciences industry, tends to be much more global in its focus. It perhaps tends to have larger organisations. Those organisations would look partly at, frankly, their profits in the UK, but they would also look at the UK in terms of its uptake of medicines and the UK as a setting to do good science and research. I am sorry that I cannot give you a direct number. I do not have a number we could provide on profitability. My point would be that it is more than profitability; it is companies’ perception of operating in the UK.

[Andrew Selous]

Q What is the general perception about operating within the UK then among the members?

David Watson: I think that we would all say that the UK has had a strong life sciences sector. We have a very strong, productive pharmaceutical sector. Lots of current medicines have been discovered here. It is a challenging market, to put it in those terms, to operate in for companies. It is increasingly challenging for a number of reasons, not just the commercial environment.

[Dr Davies]

Q We have received correspondence from an individual who takes liothyronine, as does one of my constituents who is affected by the current issues. He has pointed out that the company that manufactures that makes an excess profit of £50,000 a day as a result of the hike in prices. With that in mind, do you think that the proposed maximum fine, the penalty of £100,000 or £10,000 a day, is sufficient?

David Watson: I am not aware of the individual product. We support the Bill in so far as the Government need to be able to have the powers to step in where they spot that there have been price hikes that are not justified. It is entirely appropriate that the Department is able to question companies on why that price has gone up. If it has gone up unreasonably, it is entirely correct that they should reduce it. What I would say, though, is that the majority of branded medicines, for example, covered by the PPRS, have an affordability mechanism underneath them. For example, we repay under the PPRS the difference in NHS spend on medicines; so regardless of the list price, which is often quoted for medicines, very often there are significant deals being made underneath that with the NHS.

--- Later in debate ---

[Dr Whitford]

Q Do you think that the Bill as it stands will deal with that, or do some of these more specialist areas need to be highlighted?

David Watson: I do not think that the Bill will perhaps ever be clear enough about the circumstances in which one price rise is right or wrong, but I think that we agree with the need for the Department to have adequate powers to go after those cases—though of course to do so it needs adequate resources as well. But we agree with the principle that the Department should be able to look at price.

[Andrew Selous]

Q I am tempted to have another go, because you used the phrase “reasonable return” in your answer to Dr Whitford. You would not give me a figure on that earlier. Are you prepared to say anything further on that?

David Watson: I could make up some figures, but companies, depending on their skill and their pipeline—

[Andrew Selous]

Q You could not give us a range within which “reasonable” might lie typically within the industry that you think would still lead to a healthy, thriving industry, which is what we want, with an NHS that is not being ripped off.

David Watson: The range would start at zero because I believe there are companies selling products in the UK and making no money from them, and probably losing money. There are companies making a high return of 20% or 30%, so there is a big range in between.

[Andrew Selous]

Q The actual question I want to ask follows on from Ms Churchill’s question. What is your experience of how reasonable the NHS is when dealing with you on the sort of quality and safety issues you referred to in terms of how the Government will respond on pricing if there are specific reasons in terms of plant safety and quality and so on that might justify a slightly increased price? You have obviously been dealing with the Government for a long time. What is your experience of the NHS’s reasonableness in responding to those valid issues you mentioned?

David Watson: Companies will never launch products that are not of the required quality, and the NHS would never pay for them. The issue is more that if there is essentially a procurement-driven approach to medicines, that can and will drive prices down. The long-term impact is much more about organisational investment in the UK, perceiving the UK as a good place to do business. I suspect that in some classes—biosimilar and vaccines are examples—companies will eventually drop out of the market because they do not see the UK as a viable place to do business.

[Jo Churchill]

Q Is there a better way of looking at this? If we had more transparency through the pricing mechanism, but enabled tax efficiencies, R and D and so on, would that be a different way of balancing this for the industry?

David Watson: Yes. That is why this sort of industrial policy becomes really important. Again, that is why the industry semi-globally recognises the value of the Government’s continued willingness to have a voluntary pricing arrangement that not just covers pricing and affordability, but touches on some of the other aspects of how industry operates in the UK. We think that is really important.

Health Service Medical Supplies (Costs) Bill (Second sitting)

Andrew Selous Excerpts

Committee Debate: 2nd sitting: House of Commons
Tuesday 15th November 2016 Public Bill Committees

That is a big step forward for the Government. It is almost Churchillian for the Minister and the Secretary of State to say that the Conservative Government are going to embrace price controls—something I am not sure any Conservative Government has done since 1945 when we had price controls during the war. I warmly commend the Government on the Bill, particularly as crystallised in the design of, and powers under, clause 3, which ensures that the Secretary of State has the power to make a statutory scheme, which can limit not only prices but profits.

[Andrew Selous (South West Bedfordshire) (Con)]

Many Conservative Members may see the Bill as limiting the ability of drug companies to rip off the Government in a wholly unacceptable way, rather than as introducing price controls in the manner to which the hon. Gentleman refers.

[Rob Marris]

With respect to the hon. Gentleman, that is precisely what price controls do: they stop rip-offs. If one has price controls for other reasons, that is a separate debate. The price controls discussed in the Bill and in the 2006 Act are, as I understand it, precisely to stop rip offs. It appears that the Secretary of State for Business, Energy and Industrial Strategy is now looking at the same thing, as the newspaper quote suggested. It may be an incorrect quote—I give that caveat—but it is a direct quote from the Secretary of State to say that the Government are looking at these things. That does not necessarily mean that they will do them, but it is an ideological watershed for a Conservative Government to look quite rightly at legislating to stop rip-off Britain with regard to prices, but also with regard to limiting profits.

That is what a statutory scheme has the power to do under section 263(1) of the 2006 Act. As I understand it—the Minister can correct me if I am wrong—clause 3, which is at the heart of this provision, does not say, “There has been a debate about whether we can have a statutory scheme or not”. For the sake of certainty, we are saying in clause 3 that the Government will have the power to make a statutory scheme, but I do not hear the Minister going on to say, “But that statutory scheme will have nothing to do with limiting profits.”

In the absence of the Minister’s saying that, he appears ideologically to encompass the concept that I embrace, which is that, in certain circumstances in capitalism, it is incumbent and right for a Government to intervene in the market to limit not only prices—rip-off Britain and so on—but profits. On certain occasions, the Government should have that power, and I think a pharmaceutical supplier to the NHS is one such example. There is a very narrow range of things I could see this happening in, but in pharmaceuticals it is possible.

I congratulate the Government on coming over to a socialist perspective, not only on pharmaceuticals but apparently, if The Times report is right, coming our way on energy companies. Long may that continue. Perhaps we can look at rail fares next. Will the Minister have a word with his fellow Ministers on that?