Health Service Medical Supplies (Costs) Bill

Baroness Redfern Excerpts

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

[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.

[Lord Lansley (Con)]

My Lords, I am pleased to have the opportunity to contribute in Committee. I join in welcoming our noble friend the Minister to his new responsibilities on the Bill. I also draw attention to my interests as recorded in the register. I think only one of them might be regarded as specifically relevant to the Bill, although it is a company which would not benefit directly from it.

As the noble Lord, Lord Warner, said, Amendment 1 raises quite a number of issues, which we will have the opportunity to return to on further amendments. If I may be so bold, the structure of Amendment 1 would insert a clause which is really designed to express hope and intention, rather than to provide a statutory provision having any effect. Some of the other amendments would have the necessary statutory effect to back up some of the intentions encapsulated in Amendment 1, but it does no harm to realise what we are trying to do.

On the amendment’s first limb of supporting,

“a flourishing life sciences sector”,

it is a very apposite day as that is one of the clear intentions of the consultation on an industrial strategy. Listening to the reports this morning, it was clear that in so far as there is a focus on sectors where this country has a comparative advantage—I think we were discussing comparative advantage in the Chamber only last week—pharmaceuticals and life sciences is clearly one of those areas.

A number of noble Lords talked about the strength of our research base in this country and, as the noble Lord, Lord Warner, said, the proportion of new discoveries that have emanated from our research base is striking. It is considerably in excess of our relative importance as a market. We are only about 3% of the global market in pharmaceuticals but we have more than 10% of the new chemical entities—and as my noble friend Lady Redfern said, we often represent up to 25% of the international reference pricing. That is one of the reasons why there is a noted sensitivity on the part of the industry about its strength in the UK.

Where the life sciences sector is concerned, from my experience around Cambridge—in my former constituency and where I live—we probably have the strongest cluster of life sciences in Europe. As was raised by the noble Baroness, Lady Walmsley, when you talk to the industry at the moment its principal concern is simply its capacity to recruit and retain some of the very best researchers and staff. It is often specifically about retaining them and is all to do with the current situation relating to our future relationship with the European Union.

The sector recruits staff from all over the world, way beyond the European Union, but is only too aware of the reaction there has been among its staff—something like 15% of whom are on average from elsewhere in the European Union—to the prospect of our leaving the EU. It is one of those classic situations: if Britain had never been in the European Union, staff attracted from elsewhere within it would have come here understanding under what circumstances they came. Having had the expectation of being EU citizens enjoying access to all the British circumstances, they find the prospect that those might be taken away from them very difficult. It is very important for us to be clear about not only accrued rights but the circumstances in which people come here.