Branded Medicines Voluntary Scheme and the Life Sciences Vision

Anne Marie Morris Excerpts

Wednesday 3rd May 2023 Westminster Hall

[Mr Virendra Sharma (in the Chair)]

Before we start, I remind hon. Members that the debate can last until 6.13 pm. There will be five minutes for the SNP to wind up, five minutes for the official Opposition and 10 minutes for the Minister.

[Anne Marie Morris (Newton Abbot) (Con)]

I beg to move,

That this House has considered the voluntary scheme for branded medicines and the Life Sciences Vision.

It is an honour to serve under your chairmanship, Mr Sharma. The “Life Sciences Vision”, which was agreed and published in 2021, was a very ambitious document of which the Government should be rightly proud. It looks at further investment and development in neurodegenerative disease, kick-starting diagnostics, treatments and novel vaccines, more investment in cardiovascular disease and obesity, morbidity or mortality from respiratory disease, the biology of ageing and mental health conditions. That is an ambitious and worthwhile list. However, its delivery can only be a joint endeavour; it has to be a partnership between Government and industry. Both parts need to do what they can to drive this forward.

If industry is to play its part, it needs from Government good research facilities, first-class universities and academics who are attracted to this country. It needs efficient an effective systems for clinical trials, phases 1 to 3. I am aware that the Government are currently looking at how that might be improved and that James O’Shaughnessy is spearheading a report that will hopefully be out shortly. I sincerely hope that its findings will be implemented.

Industry also needs a regulatory regime that is fit for purpose across both the Medicines and Healthcare products Regulatory Agency, which evaluates whether a medicine is fit for purpose and safe, and the National Institute for Health and Care Excellence, which looks at whether a medicine is value for money. Industry also needs to ensure that whatever medicines finally come through the regulatory system are used—that there is an uptake among patients and that they are prescribed. There is clearly a moral imperative for that, but there is also clearly a financial one.

From the Government’s perspective, if they are to invest in ensuring that we are most attractive and efficient place to launch a medicine, they need to ensure that UK patients have quick access to both old and new innovative medicines. They need to ensure that industry is there, ready and waiting, with the new initiatives and ideas absolutely raring to go. That said, the Government need to manage the overall cost of the medicines budget, and they need a commitment from industry to invest. Fundamentally, it is a contract—an agreement—and both benefit if the deal is right.

One of the mechanisms that sets out the terms of that arrangement in practice is the voluntary scheme for branded medicines pricing and access. Most of us refer to it in shorthand as VPAS, as I shall for the purposes of this debate. So what is VPAS? Effectively, in this agreement the Government set out what they will do for the industry. In the last iteration of VPAS, commitments were made about reforms to NICE, some of which have been met and some of which have not. At the same time, industry agrees that it will cap the growth of Government medicine spending. The consequence is that all over-prescribing beyond the agreed and expected rate of growth is at the risk of the pharmaceutical industry. It is a very complicated formula.

The current scheme was devised in 2019. It replaced the PPRS—the pharmaceutical price regulation scheme—and was originally conceived such that the medicines budget could grow by 1.7%. That figure is now 2%. Any prescribing over that figure would effectively be paid for by the pharmaceutical companies by way of a reimbursement to Government of a percentage of their turnover, but it is a very complex and uncertain calculation.

One of the reasons for that is that the figure is anchored at a 2013 growth point, and it is not re-based each year. The consequence is that there is great uncertainty for any investing company about what the rebate will be year on year, which makes it difficult to budget. The compounding effect of the lack of re-basing is that the effective rebate is currently 26%, and left unaltered it would go to 30% for the next iteration, which is currently being negotiated to start in 2024.

We need to get that pricing in context. Effectively, when pharmaceutical companies go to NHS England and the regulators, there is a process of price-gouging. The first gouge, effectively, is by NICE. It looks at the market price and discounts it by an average of 55% to 65% under the patient access scheme. After that, NHS England may require a further cut to meet the affordability criterion of £20 million. The VPAS slice is after that, and, as a consequence, many pharmaceutical companies are saying, “Frankly, the pips are being squeezed too hard, and we simply cannot afford to invest in the research and launch our medicines here.” The current rate is uncompetitive internationally, and unless we change our approach to rebasing and to the growth cap, I fear we will lose much-needed investment here.

Pharmaceutical companies have a choice, and they can research and launch anywhere in the world. We are now a single-country regulator, rather than part of a European system, and that makes us, from the start, much less attractive. Industry is already voting with its feet. Indeed, in this morning’s Science, Innovation and Technology questions, a number of questions were about disinvestment decisions by pharmaceutical giants in this country. It is clear that many are simply no longer investing in research here or in UK regulatory approvals. That is a loss not just to the economy but to patients, because every drug prescribed to patients has to go through that regulatory approval process. Indeed, the Association of the British Pharmaceutical Industry has done some analysis and believes, based on the evidence, that our global share of research and development declined from 4.9% in 2012 to 3.3% in 2020. It advises that the number of initiated industry clinical trials fell by 41% between 2017 and 2021. Across leading European countries, the UK saw the largest decline in new medicine launches between 2010 and 2021.

However, it does not have to be like that. The ABPI and PricewaterhouseCoopers confirmed in a report that the life sciences sector is one of the most valuable for the UK: it creates £36.9 billion in gross value added, 584,000 jobs and 18% of all the UK’s R&D. They say that if the life sciences strategy was implemented in full, there would be £68 billion of additional GDP over 30 years from R&D investment, 85,000 additional jobs and a 40% decrease in disease burden. So VPAS could and should be part of a solution, not a problem.

The approach needs fundamentally to change; it cannot continue to be a question of who blinks first on what the pricing figure and the size of the reimbursement will be. This has to be looked at holistically in the context of what is in the best interests of UK plc and our health outcomes. The approach needs to be a collaborative one in which risk is shared. The solution proposed by the ABPI is a cut in the rebate to 6.88% and the creation of a two-pot system under which one pot continues to go the Treasury while the other—a separate 1.5% premium, if you like—goes specifically towards clinical research, genomics and so on.

The challenge with the second pot is, first, that it is quite small in terms of making significant changes; secondly, that it is a bidding pot, so there will be winners and losers; and thirdly, that although the ambition is to use it to level up, that will create all sorts of problems in relation to the Barnett formula. So although the system is well intentioned, I am not sure it would actually work in practice. It has had much support from patient groups and others, and I understand why, because delivering a fairer relationship is the direction of travel.

However, we have to bear in mind the political and economic reality of where we are, and we must not lose the prize of providing a much stronger link to, and a driver of, the life sciences vision, which seems largely to have been orphaned. That agreement needs some tangible benefits and obligations. There need to be key performance indicators for both sides—industry and Government—and there need to be deliverables for both sides.

The all-party parliamentary group on access to medicines and medical devices, which I chair, set out an alternative proposal to try to find a more collaborative approach. I believe in the free market and that, ideally, there should be no cap; sheer market growth through investment would result in our growing the economy and the Government tax take funding new medicines and producing money for the NHS. However, I am clear that I have to be grounded in reality, and if we are to find a way forward, there needs to be a risk-sharing solution, because no cap is the inverse of where we are now—it puts all the risk on Government rather than on industry.

How can we find this risk-sharing solution? First, we can increase the cap. It is currently at 2%; 4% would allow quite a lot of headroom. We could ensure that, each year, the system is rebased, so that we do not end up with a complex way of compounding what the rebate figure will be year on year.

One of industry’s real concerns is that a big chunk of money goes straight into Treasury coffers, and there is no evidence of how it is recycled to benefit pharma or health. In its paper, the APPG suggests that we ringfence a large part of that rebate, though probably not all. Part of it would probably still have to go back to the Treasury, but a significant enough amount would enable those seven life science missions to be driven forward, and industry, academia and clinicians could look at what we can do to drive this vision forward with a sensible amount of money.

The current scheme could also be simplified by excluding some of the six categories of medicines included in the VPAS scheme. Biosimilars and branded generics, where the branding is mandated by the regulator rather than choice, could sensibly be excluded. I appreciate that that increases the cost, but given that those products represent such a large chunk of medicines used in the NHS, that must be a no-brainer. Some of those are older products that are of great benefit to the NHS.

There has also been concern that the negotiation needs to be across all Government Departments, whether the Department of Health and Social Care, NHS England, the Treasury, the Department for Business and Trade or the new Department for Science, Innovation and Technology. Similarly, although the Association of the British Pharmaceutical Industry represents all the sectors, some very specific interests groups, such as the Ethical Medicines Industry Group and the British Generic Manufacturers Association, believe they need the opportunity to put their case forward. What is the downside of listening? Surely, think-tanks, academia and those groups all have something to say. If we want the right answer, that is the right way forward. We need a two-way commitment and two-way investment.

What could the Government do to help themselves manage their medicine budget cost? First, they could streamline regulatory activity. Currently, we have the Medicines and Healthcare products Regulatory Agency and the National Institute for Health and Care Excellence. That is a sequential system, which means we have to go through different sets of appraisal to satisfy both regulators. Much of the data and many of the questions, while not the same, are similar. Other jurisdictions are looking at running the two processes in parallel. Why do we not steal a march on others and integrate them? We could do that and have a state-of-the-art regulatory body. To do that, we would need to take out the budget impact test and put it back into NHS England, where it started. That strikes me as the right place for it to sit.

How could we monetise that regulator? First, as the Government already recognised in the last Budget, we should look at mutual recognition of approvals in the USA, Japan and the EU. That will not be easy, and I suspect it will be possible only in some limited areas of medicine. None the less, that is the way to go. Many developing countries would be delighted to have a quality regulator such as the MHRA and NICE. Why can we not charge to be their regulator?

The real call from industry, however, is to make uptake real. Although the theory is that any drug approved by NICE will automatically be taken up in the integrated care system budgeting system, the reality is that that is not the case, because there is no enforcement mechanism. That is very important for financial and moral reasons, and uptake is an issue that the Government could sensibly agree to look at. It is about implementing many of the new suggestions coming forward and, hopefully, the clinical trials and recommendations from James O’Shaughnessy. Because we would have a large pot for life sciences, we could create a long-term working partnership through the VPAS to deliver the life sciences vision.

If this is going to work, the industry needs to identify, in principle, investments that it would make in the UK. I know that such discussions take place, but what can the industry bring to the table to generate growth in the economy, increase skilled jobs and attract research academics and practising physicians? How can it identify ways in which it can support the Government in other parts of the life sciences vision delivery pipeline? Ultimately, much of this is going to be based on trust and good will. Sadly, that is not there at the moment, so the most important thing is to get it back.

For the VPAS 2024 to work, we need something that is fair to the industry and the Government and that will deliver what we absolutely need: the most innovative medicines for individuals living in this country, which they want and deserve. It can be done, and I am absolutely confident the Minister and his team will do their level best to try to achieve that. I am conscious that he is limited in what he can say, because of ongoing consultations, but I would welcome some reassurance that he agrees we should move to something that is more of a partnership—where there is true commitment and collaboration, and where there is a true link between the VPAS payment by industry and its use for life sciences development—so that we can actually see the life sciences vision live.

--- Later in debate ---

[Anne Marie Morris]

I apologise for interrupting the Minister’s flow. He is right that there was a forecast, but my understanding is that it was wrong and that there was an under-growth in all those years bar one. The consequence was that it was not possible for industry to have the predictability that he outlines. Forecasting will clearly always be a challenge, but, as I understand it, in this case it did not give industry what it needed.

[Will Quince]

I hear what my hon. Friend says, but we are talking about what is now history. I do not think anybody is realistically advocating any kind of change to the existing VPAS scheme—in effect, we would be saying that there would be a retrospective rebate to big pharma, despite what was agreed and negotiated. I do not think anyone here is proposing that today. What we are proposing is something that we get right—something that is totally transparent and open for the future in the new VPAS scheme. I know that getting this absolutely right will be at the forefront of the minds of the ABPI and industry as we approach new negotiations.

I want to briefly touch on international comparisons. While direct comparisons of rebate rates can be misleading —as has rightly been pointed out, they are not necessarily as clear internationally and there are differences in the structure of systems between countries—we none the less continue to monitor and consider UK spending on medicines in an international context. It is important to point out that the UK is around the median for spending on medicines per capita among comparable countries in Europe. We tend to spend the same as or more than Denmark, Sweden, Portugal, Spain and the Netherlands, and less than Germany, France and Italy. It is important to provide context.

I come back to the initial point: as important as medicines pricing is, it is part of a wider bricking-up of a UK environment on which global boards will make a decision as to whether the UK is a good place to invest. Yes, we take this matter very seriously. However, as important as VPAS is, I am equally concerned by and keen to address some of the other issues that industry is rightly pointing out. Understandably, given that we are just about to start negotiations and its importance to industry, the issue of the day is VPAS. However, I know how interested industry also is in getting our regulation right, in our speed in setting up clinical trials and our ability to get patients on to clinical trials, and the uptake of new and innovative medicines and medtech into our NHS. Those are huge issues for industry too, and they are areas I am focusing on.

I am conscious of the need to give my hon. Friend the Member for Newton Abbot time to wind up, so I will conclude by once again reassuring her and Members from across the House that the Government are committed to a mutually beneficial voluntary scheme that supports patient outcomes, a strong, thriving life sciences industry here in the UK and—vitally—a financially sustainable NHS. We can all agree that this scheme is vital to keeping the branded medicine bill affordable for our NHS and ensuring that the UK life sciences industry can earn the money it needs to fund research and development into the new and improved medicines of the future. We cannot overestimate the impact that the scheme has had for thousands of patients by ensuring that they have rapid access to new life-saving and life-extending treatments. We remain firmly committed to VPAS and to working with the industry to deliver a new branded medicines agreement. I will ensure that we put patients’ needs at the forefront of these discussions and at every step of the process.

[Anne Marie Morris]

As has been rightly said, we are encroaching on recess time, so I am grateful to all contributors for still being here. This has been an important debate, and one thing is clear: there is more agreement than disagreement on what we want to achieve. We all want growth in the UK economy and to see medicine prices set in such a way that they are affordable; however, we also want to ensure that the system is a partnership and that we do not disincentivise the very investment that makes all this possible.

I am heartened by what the Minister has said. I understand, of course, that this is not a simple, binary negotiation about medicine prices as against the life sciences vision. Indeed, in my proposals, all the things the Minister set out as issues for industry are things that should and could be part of the VPAS debate. The reason is that it is the only debate where Government and industry agree between them what they are going to do—there is no other opportunity. I urge the Minister to make the most of it by ensuring that all the things he says, and I agree, that industry wants—quite apart from the specifics of what the medicine pricing mechanism will be—are debated in the round. I am sure that Sir Hugh Taylor will do a first-class job supervising that, and I am delighted to hear that we have somebody independent. I will close on that note, and thank you, Mr Sharma, for your indulgence in allowing us to sit into recess.

Question put and agreed to.

Resolved,

That this House has considered the voluntary scheme for branded medicines and the Life Sciences Vision.