Health Service Medical Supplies (Costs) Bill

Baroness Finlay of Llandaff Excerpts

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

Controlling the cost of drugs and trying to ensure that new drugs are available to patients is obviously key. However, we are still in a situation in which there is a vast degree of overprescribing. We still face the serious challenge of antibiotics being overprescribed. I would welcome, in the Minister’s response, an assurance that, in the round, some of these issues are going to be addressed. It seems that they are all a key part of solving the problem and ensuring that we have an effective drugs policy inside the NHS that is doing two things: encouraging the innovation of new drugs within British companies and ensuring the effective use of these drugs. There is such variation across different trusts, so looking at best practice and where we are getting good value for money is also a key part of the equation. I hope that these points have been of some value.

[Baroness Finlay of Llandaff (CB)]

My Lords, I support this amendment. I have a real concern that the whole process of pricing and costing of drugs is very poorly understood. I was lucky enough to hear a lecture at the weekend by Jack Scannell, an economist who understands quite a lot about drug pricing. He pointed out that there are four reasons why drugs are expensive: one is cost; one is perceived value; another is power; and the fourth is the prize that they can deliver. It is all in a paper that he wrote about the four reasons why drugs are expensive, two of which he labelled as false: the cost and the so-called value. The reason is that a company will start to explore different chemical substances that might have an effect; 90% of these never progress but remain in various test tubes and are stored. One day they might be of use.

The problem then is that, even if they develop something and take it through the different trials, there are fairly arbitrary examples of where the benchmark is set in different sectors. A clear example of this came up with the drug Campath, which came from Cambridge. It was developed for leukaemia, but was found to be remarkably effective for multiple sclerosis. The drug company then withdrew the drug because it was being prescribed off-licence: it was not licensed for multiple sclerosis. It took the trials through, licensed it for multiple sclerosis under a new name—Lemtrada—and the price was much higher because the benchmark of prices for multiple sclerosis was much higher than that for drugs for leukaemia. The chemical was the same. Actually, when a drug goes out and is priced, it really is, in a way, a guess on behalf of the pharmaceutical industry at the outset.

Another problem arises that relates to the importance of having trials in this country. Trials have to be done on the population to which the drugs are going to apply. It is quite interesting that with different healthcare systems, clinicians see patients at different stages of disease, so with a late diagnosis, you might have a much larger disease burden requiring treatment than you would have had if there had been an earlier diagnosis.

If the trials are conducted in this country, therefore, within the NHS and the real care system—the real world in which these drugs are going to be used—and as near as possible on the very population on which they are going to be used, you get the most accurate results. They can guide NICE in determining how effective a drug really is.

If you have a study on a population with a very early diagnosis, and therefore a relatively low disease burden, you might get a false impression of efficacy, which could lead NICE to believe that the drug was being actually more effective than it will turn out to be in our population. The converse is also true.

That leads me to stress the importance of supporting a flourishing life sciences sector, because we need to be developing drugs in this country, within the care setting in which they will be prescribed and for the population to whom they will be supplied. Any attempt at pricing must, importantly, not disincentivise the pharmaceutical industry to develop the 90% of drugs that go nowhere to find the 10% that will go somewhere.

I hope that the Government will take the new clause very seriously, because it signals an important intention up front in the Bill.

[Baroness Redfern (Con)]

My Lords, I declare my interests as recorded in the register and formally welcome my noble friend Lord O’Shaughnessy as the Minister this afternoon. Although the Bill is modest in size and has few clauses, it will deliver an important role in securing better value for money not only for the NHS but for patients.

Pressures on the NHS increase year on year because of our ageing population, new technology, and development of new procedures with advanced drugs, resulting in an increase in spending over the past five years of 20%. We spend more than £15 billion a year on pharmaceutical products, and we are acknowledged by those companies to be a reference market for many other countries that do not have such a large or well-organised supply chain as we do.

Patients request access to innovative and cost-effective medicines, so the Bill delivers value for money and does not support the drug companies, which have a commanding monopoly position, to push up their prices. I am pleased to see a strengthening of the ability to collect data on the cost of medicines, medical supplies and other related products from across the supply chain, which the Bill would amend by extending the provisions of the 2016 Act.

The statutory scheme has delivered significantly lower than expected savings for the NHS, with concern as to whether competition in the market is sufficient to control prices, so with new powers to be established under the Bill, there will be opportunities for more competition for unbranded generic medicines and to apply price controls for companies that are members of the PPRS. Particularly when companies can charge unreasonably high prices for unbranded generic medicines when competition does not keep the prices down, the Bill closes a current loophole in the legislative framework.

Clause 6 requires information from more producers and companies but, importantly, any information that they supply which may be commercially sensitive cannot be disseminated beyond the prescribed bodies. We may therefore be better informed on a more consistent basis, particularly to assess whether the supply chain as a whole or a specific sector provides value for money for the NHS. The world is changing, and personalised medicine is an important development for us all—but, again, it needs to be delivered both effectively and affordably.

At all times, we must make sure that the UK is seen as an attractive place for the life science sector—research being seen as a vital component in the sustainability of the NHS, as we have heard from previous speakers. To balance the control of the price of medicines and innovation for pharmaceutical companies, there should not be a lack of motivation to invest in the extensive R&D that we all want. In order to stimulate continued investment, it is appropriate for the industry to see a stable marketplace here as significant and important.

If we are to create a level playing field for drug companies, should we not be trying to do the same for patients? I therefore ask my noble friend whether one measure to tackle the issue could be ring-fencing possible rebates or a percentage from the sector to invest in improving access to medicines and treatments—particularly when we read that a fifth of new drugs face rationing under tighter NHS cost-cutting plans. With a budget impact threshold, that has the potential to slam the brakes on the most effective new treatments and technologies just before they get to patients.

Finally, although we promote innovation, that is not only a priority in the NHS for the Government but for many other stakeholders in the industry. As I said, the Bill is modest in size but it carries the opportunity to ensure that this country is not left behind in access to the newest and best treatments, and that it delivers best value for money.

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[Lord Lansley]

The short answer is yes. We should aim for what is a price paid by the NHS to the industry for the medicines that it uses that is reflective of value and is designed to promote innovative medicines—that is, as we will discuss in a later amendment, those that meet unmet need or add substantially to therapeutic benefit and are not the “me-too” drugs that are very similar to existing medicines but have a slightly different method of operation or delivery. Paying for what innovation gives by way of therapeutic benefit is where we want to be.

However, the amendment is right in the sense that one has to do that alongside supporting the life sciences sector. That is where freedom of pricing at introduction is important. I have accepted the principle of a PPRS which delivers a budget to the NHS and delivers freedom of pricing to the industry. We are not legislating precisely for the structure of the PPRS, but let us assume that those are continuing features. However, through the operation of the rebate or some other means, it seems perfectly possible to incorporate some of the criteria that will be the subject of our discussions on a number of amendments, as is reflected in the second limb of the amendment.

[Baroness Finlay of Llandaff]

The noble Lord referred to me-too drugs. I hope that he agrees that it is important to recognise that such drugs have often been developed in parallel. They do not take a molecule and just copy it; they develop a new molecule or delivery system, often to minimise side-effects and to maximise efficacy. But they also have a production cost behind them. They are not just copies of something previously produced and marketed differently; they have innovation behind them as well.

[Lord Lansley]

I understand that. There is a perfectly good argument for the benefits that are derived from incremental innovation. Not every innovation is a step change compared to what has gone before, so that is a perfectly valid point. One objective that we should arrive at, as I hope my own Amendment 10 will later reflect, is that the structure of value has to understand what those benefits might look like. New medicines will come through that are similar but are significantly better, for example in terms of compliance for patient populations, because they are administered differently. One might say, “Well, it’s a very similar drug”, but one has to look at what the overall benefit might be, which is part of the value.

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[Baroness Finlay of Llandaff]

Let me thank the Minister for that comprehensive reply and for his openness in discussing things with us all. He talks about having discussions with the industry. I hope that he is aware that there is a move by the industry to consolidate into three major hubs, or potentially four. The fourth would be the Oxford-Cambridge-London axis, the other three being those in Boston, in California and in Basle in Switzerland. We are at a critical time, because a lot of change is going on—hence the motivation for so many of us to support the amendment, as we are aware that things are potentially fragile.

[Lord O'Shaughnessy]

I thank the noble Baroness for that point, with which I completely concur. This is obviously a big moment in time, for several reasons. Our current price regulation systems for pharmaceuticals run until the end of 2018 and, in 2019, we will leave the European Union. These things are bundled together and co-dependent; making the right decisions on each of the factors will have a knock-on effect on the rest. I very much understand the point. As I said, my job has the tension of both responsibilities, including health, and the trick is to square the circle.

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[Lord Warner]

My Lords, I support these amendments, to which I have added my name. I do not want to go over again what has just been said, but the issue of access is critical. It is why companies have invested in this country. They criticised NICE when it was first set up; they were highly hostile but have been wooed over, have stayed with the game, played in it and continued to make products which are of great benefit to NHS patients. However, having jumped that hurdle they now see a new one, which is driven not by cost-effectiveness but by cost—a straightforward capping of expenditure at an arbitrary figure of £20 million. The noble Lord, Lord Hunt, was a little critical of NHS England. I would be if I thought that it was only NHS England but I do not believe that the Government are not behind this, putting pressure on it. We already have a massive difference of view between the Conservative chairman of the Health Select Committee and the Prime Minister over how much extra money has actually been put into the NHS. The noble Lord, Lord Lansley, winces, but such measures are being introduced basically to stop the NHS carrying out a legal obligation to implement NICE recommendations. I totally support the amendments in the name of the noble Lord, Lord Hunt, because they are a way of trying to ensure that, where repayments are made, they go back to where they should be, which is in the NHS and helping patients to access new drugs.

[Baroness Finlay of Llandaff]

I have added my name to the first of the amendments. I would have added it to the second, but there was not room—there were already four names there. I strongly support them. The debate so far has related to the pharmaceutical industry, to pharmacies—that is, chemists in the community—and to the NHS but these amendments go to the heart of it, which is access for patients.

One problem with what will feel to a patient like almost arbitrary rationing is that they will know that they have a disease or condition and that there is a drug which, if they lived in other parts of the world or had more money, they would be able to access and which, for one reason or another, they cannot. We must recognise that any costing system for medicines is relatively arbitrary and does not cost in all the social costs of disease progression, or of more severe versus less severe forms. Nor does it factor in the cost to the whole family of the distress somebody feels when they need medication and cannot access a drug which has gone through an appraisal process and whose criteria they can see they fit.

I hope that the Minister will look sympathetically at the principles behind this amendment. If you save money but do not put it back into access to medicines, you are effectively bleeding that area to plug other gaps or deficits in the NHS. As for the patient with the condition who knows that there is medication that probably would help them, although they are well aware that they could be a non-responder, no one should underestimate the anguish to them and their families, or the knock-on effect on society in the long term of failing to ensure access to effective medications.

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[Baroness Finlay of Llandaff]

In light of the noble Lord’s remarks, I wonder how he sees there being flexibility. The problem with establishing a value-based price, however one works it out, is that we do not have a crystal ball. A product may be used for a whole lot of different indications. One example is Rituximab, which was developed for lymphoma but is now widely used for at least seven other indications. Some of those are chronic conditions, so there is long-term use.

Obviously, the company produced a product and a price was fixed estimated on a certain amount of use, but then its sales went up hugely. That represents an enormous profit. In the system that the noble Lord envisages, how much flexibility would be built in to allow for volume sales and a dramatic lowering of the production costs? That has happened with a lot of things that were initially expensive to produce, but where production costs dropped dramatically over time. We must not inadvertently get locked into pricings that over time become inappropriate.

[Lord Lansley]

There is a risk of making this debate too extended, but the amendment is not about the whole structure of pricing but about what criteria should be taken into account. In the context of a PPRS scheme such as the present one, the point I made previously was that it would be possible, for example—and this is only an example—to modulate the rebate by reference to any gap between the price charged to the NHS by a company and the value as disclosed by a comparative assessment.

Of course, if there are a number of different indications, the value may vary according to those indications, but that is no problem in itself because all you are doing is trying to understand to what extent a company would be required to contribute a lot to the rebate because there was a big gap between the price charged and its relative value. Some companies may contribute virtually nothing to the rebate because there is no disclosed gap between the price charged to the NHS for a product and its relative value. That is merely an example of how a scheme could be adapted using this sort of value assessment. I beg leave to withdraw the amendment.

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Moved by

[Baroness Finlay of Llandaff]

15: After Clause 5, insert the following new Clause—
“Specials
After section 260 of the National Health Service Act 2006 (control of maximum price of medical supplies other than health service medicines) insert—“260A Specials(1) When commissioning the production of ”specials”, National Health Service clinical commissioning group, hospital trust and community pharmacies must seek no less than three quotes for non-tariff items, at least one of which should be from a National Health Service manufacturer.(2) Unless there are over-riding reasons not to accept it, the cheapest quote must be selected.(3) When setting the tariff price for “specials”, NHS England, in its tariff-setting process, should seek prices from National Health Service, as well as private, manufacturers.(4) For the purposes of this section, a “special” is an unlicensed batch of a medicine prepared or extemporaneously dispensed.””

[Baroness Finlay of Llandaff]

My Lords, I will now move into a very different area, but one that is integrally related to the Bill: that of “specials”. Concerns relating to specials and obtaining them have been brought to my attention by the British Association of Dermatologists, the Royal College of Ophthalmologists, the Royal College of General Practitioners and others—so the issue goes more broadly than simply dermatology.

Specials are unlicensed medicines manufactured or procured specifically to meet the clinical needs of an individual patient. They may be put on the skin; they may be alternative ways of making a medication that can be ingested when there are swallowing difficulties: for example, in babies fitted with a fine-bore nasogastric tube, and so on. The most frequently prescribed specials are made in small batches, but sometimes there are only one or two patients at any one time in the country who need this particular preparation.

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In conclusion, I hope that I have reassured the noble Baroness that we are engaged in considerable work to improve the value for money that the NHS gets in the procurement of specials. This Bill provides a key element of that ongoing work by enabling us to get information from NHS manufacturers to achieve the result that the noble Baroness and, I believe, all noble Lords seek. However, I have concerns about the impact that the first part of her amendment would have on the cost of operating the system and on prompt access by patients to specials. On that basis, I ask the noble Baroness to withdraw her amendment.

[Baroness Finlay of Llandaff]

I am grateful to the Minister for his very full reply, which I intend to study in detail. While he has made several points, I have ongoing concerns about leaving this unaddressed in the Bill. In light of what he said, I still do not understand why some manufacturers quote different prices for Scotland and England. Their production costs are exactly the same, so why are they quoting higher prices for England? It does not make sense. England is then paying a higher price than Scotland.

The dispensing fee that goes to the community pharmacists is the same, irrespective of the price paid. I worry that the bureaucratic burden of the clinical commissioning group refusing to pay for something because it seems inordinately expensive is a short-term view in the interests of immediate budget containment, and does not take a long-term view over the life course of an illness that could be contained by using something specifically designed for that patient so that, in the long term, there could be a decreased cost to the NHS. I remain concerned.

I have absolutely no intention of there ever being delays in accessing things in an emergency, but only where a patient is not in an emergency situation. In the community, the pharmacist often does not have things in stock anyway and has to order them. The patient or their representative has to come back the following day or 48 hours later, when something has arrived. I am not convinced that the bureaucratic burden would be that great. I can see that three quotes may be too many, but an alternative quote might be a way forward. In the meantime, I beg leave to withdraw the amendment.

Amendment 15 withdrawn.

Health Service Medical Supplies (Costs) Bill

Baroness Finlay of Llandaff Excerpts

Committee: 2nd sitting (Hansard): House of Lords
Wednesday 25th January 2017 Grand Committee

[Baroness Finlay of Llandaff (CB)]

My Lords, I have some sympathy with the amendment of the noble Lord, Lord Warner. It strikes me that the information being asked for in the Bill requires a degree of detail that probably is not going to reflect reality. This is very often a global industry, so defining a “UK producer” will be quite difficult. If we make the information requirements too difficult, I see a risk of some of the larger companies deciding to produce more offshore rather than here.

The other difficulty with the pricing of any medical treatment that comes to market is that it has often had a very long lead time—over years. So the true cost of that particular item becomes almost impossible to disaggregate from all the other costs. Then, once it is produced and packaged, there are distribution costs, the mark-up at wholesale level and so on. I can see how a producer, in wanting to keep a cost high, could potentially move around its budgeting line to protect itself. But the problem is that if you do not have a trigger, you may get so much data that you cannot actually extract the true knowledge and the important information from them. I understand why you would want to have a lot of data to be able to move the cost and map it efficiently, but there is only any point in mapping it if it has accuracy attached to it.

I have a question for the Minister. In all these information requirements, how will a “UK producer” be defined, as distinct from an international producer from elsewhere? I may have missed it, but I could not find it defined in the Bill; I can see only products defined.

It will become almost impossible to know where the true cost is, but if a cost is going up, that becomes counterintuitive. Generally, for medication that is out there on the market, the cost should fall. Usually, production costs drop, because, for example, antibiotic production used to be incredibly expensive and is now very much cheaper because of efficiencies and the way that the science has moved forward. So you would expect, with bulk sales and technological advances, that the cost should come down. I therefore have a question for the noble Lord, Lord Warner, on the trigger mechanism. Is his price absolute—in pounds—or is it also considered relative to other products in that field that may be on the market? For example, we have seen some major discrepancies with ophthalmic products. Eye drops for glaucoma have been incredibly expensive compared to exactly the same substance that is being used in oncology and has been priced at a much lower rate. The question has to come up as to whether the price is being held and maintained inappropriately, rather than having gone up.

[Lord Warner]

In response to the noble Baroness’s point, I would not claim to have actually considered the detail of what level of pricing we will use. My point in this amendment is to try to establish the principle of a trigger mechanism, and I am happy to be advised on ways of improving it.