Health Service Medical Supplies (Costs) Bill

Debate between Baroness Finlay of Llandaff and Lord Lansley

Wednesday 5th April 2017 Lords Chamber

[Lord Lansley]

I am perfectly happy if the Minister wants to reply but, from my point of view, I do not regard the PPRS as state aid. If R&D tax credits are available, they should be made available. When the Office of Fair Trading reviewed the PPRS back in 2008-09, I think, it concluded that it was neither a state aid nor a spur to innovation but was actually all about managing the drugs budget. That is what this legislation is all about: managing the drugs budget.

It is, however, important to recognise that the statutory duties in Lords Amendment 3 do not include the one which the Secretary of State should have specific regard to: affordability. It is deficient in not providing for that. Noble Lords will recall that, at an earlier stage, I tabled an amendment the purpose of which was to insert a more complete set of statutory duties for the Secretary of State to have regard to. Affordability must form part of that, but it is not present in this amendment. I am therefore against the amendment.

In the course of this legislation we have discussed other important issues which are still coming to a head. It is absolutely right, as my noble friend said, that the Government are setting out to promote innovation and the life sciences sector, and there are many ways of doing that. The Conservative Party manifesto of 2015 stated:

“We will increase the use of cost-effective new medicines and technologies”.


It also stated:

“We will speed up your access to new medicines”.


It is important that we do that as it is in the interests of patients, our life sciences industry and ourselves as a world leader in science in this area. However, we have on the stocks the accelerated access review—which, ironically, took too long to be produced, was delayed in its publication and has not yet been replied to. We also have a life sciences strategy. The many positives in that run the risk of being negated by the way in which NHS England and NICE have gone about the consultation.

As I said at an earlier stage, it is possible to see how NICE and NHS England can work together in ways that would give industry greater confidence as it would mean that it could get early engagement with NHS England about the managed entry of new medicines into the NHS, including, as my noble friend said, on issues of importance to industry, such as the volume of purchasing of new medicines in the early stages of access. However, the budget impact test, at £20 million, is probably not one-fifth of all new medicines; it is one-fifth of all new medicines regarded as cost effective by NICE. Therefore, this is not a case of any old medicine that might be very expensive; it just happens to be medicines which are cost effective but have relatively high volumes, which is exactly the point to which the noble Baroness, Lady Walmsley, referred.

However, the issue for NHS England should not be the cost of introducing new medicines that are cost effective and in the voluntary PPRS, as the purpose of the pharmaceutical price regulation scheme, as currently designed, is—through the clawback—to give government assurance about the overall increase in the drugs budget. As a consequence, that money is made available as part of the overall funding provided to NHS England. Therefore, NHS England should in theory have in its budget the money that is necessary to meet the drugs bill, including new medicines as they come on stream, because there is clawback for that.

We have this Bill in front of us partly, but not entirely, because the drugs budget was rising much faster than anticipated, and much of that growth was outside the voluntary PPRS. This Bill plugs that gap and sorts that out. However, in doing so—and here we are at the beginning of April—once this Bill is on the stocks and secures Royal Assent and the Secretary of State is able to align the statutory PPRS with the voluntary PPRS, there is no reason why NICE and NHS England should continue to apply an overall budgetary impact test. I say to my noble friend that I think the Government should step in at that point and say, “Where this product has come through a PPRS where a clawback is applied and we have a budgetary mechanism in place—redress—for any extra cost to the drugs bill in the course of this PPRS through to the end of 2018, NHS England should not interpose any extra delay, or seek any extra delay, through NICE in introducing that medicine to the NHS”. I am afraid that if it continues to do so in the way that it is at the moment, that will have a severe negative impact on the view held by the boards of major corporations in relation to the take-up of new medicines by the NHS.

I am sorry to say to the noble Lord, Lord Warner, and other noble Lords that the remedy is not contained in this amendment. The remedy is in the Government’s hands if they choose to make that point very clearly to NHS England in relation to what this legislation enables us to achieve in controlling the drugs budget.

[Baroness Finlay of Llandaff (CB)]

My Lords, I thank the Minister for the way in which he has conducted all the previous stages of the Bill, the amount of discussion and negotiation that he has had with all of us, and for accepting many of the amendments. It might be helpful to the House, if, when he sums up, he could clarify how much of the 7% increase is due to new NICE-approved drugs coming through into the system.

It would also be helpful to know whether NICE has the ability to refuse to go along with the budget impact test on this estimated one-fifth of medication that it deems to be cost effective if it feels that a new medicine coming on line is extremely cost effective and that its cost efficacy will have a major impact on those with life-limiting or life-altering conditions. I am talking about people with a disease that will progress at quite a rate, meaning that over a 90-day period they will be likely to experience a significant decline without the intervention of whatever the new medication might be.

It would also be helpful if the Minister could tell us how the independence of NICE will be assured with this budget impact test. In many parts of the world NICE has been viewed as exemplary in deciding how a medication is approved to come on line, but there are problems with it. If it were viewed as having its independence eroded, that would seriously undermine public confidence in the whole process, particularly among those who have serious and life-limiting or life-altering illnesses.

Health Service Medical Supplies (Costs) Bill

Debate between Baroness Finlay of Llandaff and Lord Lansley

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

[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.

--- Later in debate ---

[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.