Pharmacies and the NHS

Ben Gummer Excerpts

Wednesday 20th November 2013 Westminster Hall

[Ben Gummer (Ipswich) (Con)]

Dr McCrea, it is a pleasure to speak under your chairmanship in my first Adjournment debate. It is also a great pleasure to address the assembled hon. Members—this is a good turnout for a 9.30 am sitting on a Wednesday—and especially the Minister, not only because he is an excellent Health Minister, but because he is my constituency neighbour in Ipswich and will recognise the local issues that I shall mention.

This debate came out of a discussion that I first had with Miss Michelle Claridge, a pharmacist in my constituency; I admit that my knowledge of pharmacies and pharmaceutical services was close to zero before that. As with so many incidents in our lives as Members of Parliament, I learned something immediately from talking to a constituent who brought a new experience—a new query—to my attention. She explained something that I had not appreciated. Perhaps you know, Dr McCrea, because you are no doubt a far more experienced MP than I, that a pharmacy’s appearing on a street, especially a new one, is not the work of a simple entrepreneurial decision. It is a minor miracle, and I will explain why.

As the Minister knows, in the centre of Ipswich there is a new development on the waterfront, encompassing several thousand new apartments and a few houses. This new community is demanding new pharmacy services. Michelle Claridge, an entrepreneur, says, “I would like to set up a pharmacy in this area, to service the new community.” But it is not that simple. People cannot just get a retail unit for which they have planning permission and start a pharmacy; it does not work like that. The system is arranged by the Pharmaceutical Services Negotiating Committee. Hon. Members will understand that, from this moment, we will begin speaking as if we were in East Germany. It will be a time warp.

We start with the PSNC. People have to apply to be on the pharmaceutical list, which is now run by the NHS England area team—when Miss Claridge applied, it was run by the primary care trust—which manages it in consultation with the health and wellbeing board for the area and determines whether there is a need for a pharmacy in an area. It draws a circle around the existing pharmacies and says, “Is there a particular need, for this population in this area?”

When Miss Claridge started, the PSNC said that there was not a need because its map did not show the several thousand new apartments and houses on the waterfront area. Even a simple consultation with the Google maps travel distance calculator could have shown that most of its calculations about walking time were defective. The first problem is that the system starts with a group of no doubt well meaning and intelligent bureaucrats having to work out whether there is a need for a pharmacy in an area.

Once people decide that they want to set up a pharmacy, they have to apply to NHS England with 21 different forms, the shortest—section 21—being five sides long and the longest being 13 sides long. In total, they have to submit about 200 sides of application forms just to say, “I think there is a need in this area for this new pharmaceutical practice.”

After that, the application can either be accepted or rejected. If it is accepted, people can go ahead and if it is rejected they can appeal, via the local pharmaceutical committee, to which other local pharmacies can also make applications, perhaps saying, “This pharmacy is coming into my patch. It is far too close.” They can make whatever objection they feel is necessary.

The system is already completely regulated from the centre. It is a state-controlled system—contracted out to pharmacists, who are working in it—even at the geographical level, before we get on to buying and selling drugs. I do not intend to offer any radical solutions. I just want to open up the matter as a Member of Parliament. I want to explain my experiences in trying to deal with this system and talk about what I have found out, as a layman with none of the medical expertise of the Minister or hon. Members in this Chamber who are members of all-party groups. I want to explain what I saw as I examined this system.

I turned over a stone and found a lot of interesting bodies lying underneath. There are serious questions about the state’s ability to buy medicines. This is not a small bill. We spend £12 billion a year on drugs, via the NHS—a huge amount. The whole thing, from beginning to end, is run by a state bureaucracy, which, in its scale, complication and anticipation of market forces, would make the North Korean Government proud.

How do we comprehend this extraordinary system and what are the problems in it? First, I have been helped very much today by NHS Southwark clinical commissioning group—in London, I live in Southwark—which posted a useful piece of information through my door yesterday. It contains a nice map showing all the general practitioner practices and mentions lots of interesting things about what it wants to do, all of them worthy. In the middle, under a heading, “Our Vision”, it states:

“Our aim is simple—we want to work with the hospitals, community teams and GPs who provide care locally to make sure that the people of Southwark receive the best care possible and live longer, healthier, happy lives.

We will work to make sure that all Southwark residents receive high-quality, safe and accessible health services and that, over time, we narrow the gap in life expectancy between the richest and poorest people.”

All good stuff, but hon. Members will notice that one significant service provider is omitted: the pharmacist, which does not even bear a mention in this list of different health providers for NHS Southwark.

I understand that this is a common problem throughout the country. Indeed, only 10% of clinical commissioning groups have a contracting relationship for additional services with pharmacies. That is unusual in the European context. As is so often the case in health care provision, this country is somewhat behind our European neighbours.

Highly qualified people are centred where they can serve local populations, yet in so many cases they cannot offer the kind of medical services that they could offer if they were in France, Germany or the Netherlands, or some more enlightened parts of this country. Pharmacists could offer such services easily and relieve pressure on general practitioners and hospitals. The scale of what they could do is significant. Why can they not offer basic diabetic treatment or flu jabs? One could—I am sure not you, Dr McCrea—go to the pharmacist for emergency contraception, but not for various other treatments that they could offer, depending on the area.

Michelle Claridge has experienced this situation. She said, “I want to set up GP provision in this new community, linked to my pharmacy.” That is sensible, but—oh, no—people cannot just hire a locum in a pharmacy, providing a medical and pharmaceutical service to a new community, because there would be a series of new arrangements and contracts to go through with the NHS area team to allow that to be done. Therein lies another problem. The contracting relationship between the two is so complicated and separate that the area for innovation in what is not really a market at all is limited. That seems to me a great sadness and a missed opportunity, and I am sure the Minister will agree. So how do we loosen things up? I will address that in a second, because we first need to examine how pharmacists sell drugs and purchase them from the various wholesalers who sell the drugs on behalf of pharmaceutical companies.

There are essentially three categories of drugs. First, there are the so-called “special drugs”—not the special drugs that you might be aware of in Northern Ireland or in the rest of the country, Dr McCrea, but special drugs as defined by the NHS. Those drugs are outside the normal regulatory regime. They are called unregulated but, of course, this being the NHS, they are regulated.

Secondly, there are the regulated drugs—the vast majority. They are drugs that are within patent and a few other sectors. Finally, there are the category M drugs, which have come off patent. The NHS tries to derive benefits from their coming off patent by ensuring that there is not excessive profiteering in the sector. I hope I have explained that properly. No doubt I am making a series of solecisms, but I hope Members will excuse me.

[David Simpson (Upper Bann) (DUP)]

I congratulate the hon. Gentleman on obtaining this debate. He mentions special drugs, which are addressed in the research papers that we have received. I am sure he agrees that it is a scandal that the suppliers of those drugs issue invoices of, for example, £600, as it says here, when the actual cost of the drugs is £300. The NHS refunds the £600, and the pharmacy or the supplier pockets the other £300. Multiply that by the billions of pounds out there in the supply chain, and it is a scandal. Something must be done.

[Ben Gummer]

I could not agree more with the hon. Gentleman. I will address that point.

There are three separate groups that each present different and particular problems. The scandal to which the hon. Gentleman alludes, which was uncovered recently by an excellent piece of journalism in The Daily Telegraph, shows how the NHS, customers and taxpayers have been ripped off by the drug companies that are coming in and double invoicing—they are issuing credit notes to pharmacists but invoicing full amounts to the NHS. That situation is outrageous, but it is inevitable when the market is so complicated and lacking in transparency. That is the first of several problems with special drugs.

Category M drugs are incredibly complicated. In the parallel trading of pharmaceuticals across the European Union—just to take one issue—it was often beneficial to import drugs from Greece or southern Europe to the UK because of the price differences between the pound and the euro. The reverse is now true, which means that there is sometimes a shortage of supply in the United Kingdom.

The situation is addressed by a quota system imposed by the pharmaceutical companies, which inevitably causes difficulties for pharmacists because sometimes five people, rather than three, want a particular drug one week. At that point, the pharmacist rings up the wholesaler and says, “I need two more prescriptions.” The wholesaler will then say, “Actually, I don’t have them.” The pharmacist will then have to phone the supplier to ask for two prescriptions, and if the pharmacist cannot get the prescriptions from the supplier, they have to go into the secondary market to buy from another pharmacist who is keeping the prescriptions in stock. The other pharmacist, completely understandably, takes a margin on selling the drug to the pharmacist who requires the prescription.

[Oliver Colvile (Plymouth, Sutton and Devonport) (Con)]

My hon. Friend might be aware that I am vice-chairman of the all-party group on pharmacy. The right hon. Member for Rother Valley (Mr Barron) and I considered the issue about 18 months ago, and we produced a report. Unfortunately, the Department of Health does not seem to have taken an awful lot of action and has rather pushed the report into the bottom drawer. Perhaps my hon. Friend might be willing to meet the chairman of the all-party group and me so that we can share our report.

[Ben Gummer]

My hon. Friend wrote and published his report before the Minister was appointed to his position, so I am sure my hon. Friend is calling on new ears and eyes that are able to consider the problem afresh.

Another problem is that pharmacists are completely at the mercy of the demographic that they happen to serve. The averaging of pricing operated by the PSNC means that if pharmacists happen to be selling a particular pharmaceutical in their area because of a high incidence of diabetes and are making a loss, and if they are not selling many drugs on which they might otherwise make a profit that allowed them to break even or make a small margin, they are immediately disadvantaged—just because of their geography.

If, however, a pharmacist happens to be in another location with a low incidence of diabetes but a high incidence of another condition that requires a high-margin drug, the pharmacist will do very well—not because of business acumen, not because they are running a particularly good service, not because they are friendly to customers, who want to come to see them, but just because of where they happen to be and the health indicators of their particular area. That cannot be right.

The third problem with the regulated market is that, because of the price changes of particular pharmaceuticals that happen every day and every week, it is impossible for businesses to plan, as they are uncertain of their future margins.

Those are all classic problems of trying to regulate a market. It would be good for the Opposition spokesman, the hon. Member for Copeland (Mr Reed), to take note of what happens when people try to regulate a market to the degree that his party—not him, I am sure; he is one of the more sensible members of his party—wishes to on energy prices. Such regulation results in inflated prices across the spectrum, as has happened in many instances in the drugs market in the United Kingdom. Good customer service is not incentivised, and good pharmacists are crying out to be rewarded for quality. Furthermore, innovation and supply are restricted.

I could go into those problems in far greater detail across the sector. The problems frustrate pharmacists and, no doubt, Ministers, who ultimately have to write the cheque on behalf of the taxpayer.

The third area I will address before I give others an opportunity to contribute is the essential problem at the heart of the debate. Of course it is understandable that we have ended up with a regulated system, because there is only one customer for most drugs. Indeed, if I understand things correctly, 80% of prescription drugs are bought by the NHS on behalf of people who are entitled to free prescriptions. Because of the way in which we have set up our health service in this country, it is impossible to extract the kind of value from the big pharmaceutical companies that other countries are able to extract, as there is only one purchaser. I do not know why in this country we have not got to a position of questioning the business motives and ethics of big pharmaceutical companies, as the United States has for many years.

I should qualify all that by saying that, of course, within the pharmaceutical sector there are the most fantastic companies that are innovating, contributing upwards of £12 billion a year to the UK economy and employing thousands of brilliant people across the country. We should be proud of those companies, but it is surprising that we have such an unquestioning attitude to those enormous interests, which have a relationship with the NHS and general practitioners that could be generously described as corporatist. That is unhealthy in driving innovation, in encouraging responsibility and, most importantly, in ensuring transparency. That is precisely why we get scandals such as the one raised by the hon. Member for Upper Bann (David Simpson). If there is an opaque market, frauds will be committed against the interests of the taxpayer.

I have, I hope, opened up the debate a little so that we can discuss some of the issues. I do not have any prescriptions for how we might deal with them, other than the general principle, which I hope the Opposition will agree with, that liberalisation is generally a good thing. If we deregulate this market—not the quality of the people dispensing pharmaceuticals, but the commercial side of the market—to allow pharmacists to offer more services more innovatively and more cheaply, and if we encourage competition in NHS purchasing and price-setting, we will do something on behalf of taxpayers and patients. I have put forward a group of questions to open up the debate, and I am grateful for the contributions that will follow mine.

--- Later in debate ---

[Steve Baker (Wycombe) (Con)]

I congratulate my hon. Friend the Member for Ipswich (Ben Gummer) on provoking a stimulating debate, and one in which I have learned a great deal. In particular, he emphasised the local impact that pharmacies can have, while the right hon. Member for Rother Valley (Mr Barron) clearly explained some of the opportunities that can be seized through pharmacies.

In Lane End in my constituency, a pharmacy opened alongside a dispensing GP practice, but if I remember the circumstances correctly, the practice was forbidden from serving local people; we had an absurd situation in which the purpose of the regulation made my constituents’ lives less convenient and less easy, in the interests of somehow distributing profit fairly. The debate has brought in some of the wider aspects for society and some of the things that a heavily regulatory state has messed up.

The purpose of prices, profit and loss in a market society is to guide individuals and voluntary associations into best serving society. If pharmacists wish to open a pharmacy, they should simply be able to do so, if they can find a place to do it, can do so within the law and are selling lawful products. They should be able to get on with it and serve whomever comes through the door. Instead, we have the situation described by my hon. Friend—people have to fill in a 200-page application form and might subsequently find themselves subject to particular restrictions on whom they may or may not supply.

One of the issues with a market system is that business men are profit-maximising, which is both a problem and a benefit. The problem is that business men do not like competition much, because that is what drives down prices and therefore profit. That is the crux of the matter. The purpose of the Government is not to entrench in law and regulation the tendency of business men to seek rent—excess income through capturing the state—but that is just what is happening when competition is inhibited by restrictions placed on a dispensing practice simply because a neighbour has opened a pharmacy. Certainly, on the siting of pharmacies, the Minister should seek to abolish rules and controls wherever he can, because they are getting in the way.

[Ben Gummer]

In my address, I omitted to mention the whole range of practice payments paid to pharmacists simply for, in effect, being open. The problem is that the opening of a new pharmacy creates a liability for the NHS to pay those practice payments, no matter who does or does not go through its doors. That shows the rather extraordinary situation that we have ended up with in respect of how pharmacies are remunerated.

[Steve Baker]

My hon. Friend is absolutely right and I am extremely grateful to him for bringing that up. We pretend that we live in a capitalist society—I have said this in the House before—but if our system is capitalism, I am not a capitalist. We have an absurd hybrid system, in which the state constantly intervenes in order to give people rents. It is peculiar that we call it a free market society.

The purpose of our all being here, of course, is to improve our constituents’ lives. When I say such things, my intention is to ensure that my constituents—all our constituents—have better access to pharmacies. In the House, we have a real consensus about an increase in the services offered by pharmacists being of benefit to all our constituents. What I want is for the Government to get out of the way, not to use taxpayers’ money to provide the payments that my hon. Friend mentioned and to allow pharmacists to get on and best serve the public in a way that is in the public’s best interests—a way that can be discovered only through experimentation and entrepreneurship.

On pricing, I want to make the point that in this country we are not good at haggling. We should haggle over prices and drive them down. The hon. Member for Strangford (Jim Shannon) talked about the scandal of some simple and inexpensive medicines that ought to cost pennies, but cost very much more. What I see at work there could be something that I witnessed when I was a contractor working with Government: Departments are not good at driving down prices. They tend to accept the price that they are given—“Oh, that must be the market price.” No—they should set the market price by demanding that they are charged less and, if suppliers do not provide the goods at a lower price, they should go elsewhere.

That brings me to generics and parallel imports, a subject touched on earlier. We ought to be making sure that the big pharmaceutical firms do not hold the NHS over a barrel. I have heard some of their arguments, and of course producing a new drug is an expensive business, but we should not be held over a barrel. In a market society, people should be held to account to drive down costs and drive up quality.

Johnson & Johnson, based in my constituency, has a wonderful credo, which was written when the basis of a free society was under threat in an earlier time. That credo sets out the principles on which the industry should be founded, and one such should be: no legal privileges, wherever possible.

[Steve Baker]

My hon. Friend has identified what might be a missed opportunity because an enormous effort is going into preventing that fraud. With the opportunities that electronic communication offers today, it should be possible to use some of that information in other contexts. With that in mind, I will turn to the internet.

Clearly, everyone wants to ensure that prescribing takes place properly, but when people have been prescribed medicines it should be possible for them to buy over the internet in appropriate circumstances. I am particularly aware that homeopaths have had great difficulty with the internet because of the need for people to present physically to buy a medicine.

We cannot have it both ways on homeopathy—either the medicines are relatively harmless and can be treated with scorn by the medical profession, in which case they should be freely available on the internet, or they are dangerous and should be tightly regulated. Homeopaths’ experience suggests that people can take responsibility for themselves and buy products on the internet.

[Ben Gummer]

My hon. Friend touches on an interesting issue. Given the fact that the Government are going to great lengths to try to get GPs to do more consultations on the internet and Skype—great news for many of my constituents, especially those in busy jobs with difficult hours—it seems obvious to extend such innovation to the dispensing of pharmaceuticals.

[Steve Baker]

My hon. Friend is right. In the 21st century, we should be waking up to the opportunities to use technology to drive down costs and drive up service. People are so busy today, so why can they not have consultations in their offices with Skype, and why can pharmacists not prescribe to offices with Skype? The solution to these problems is for the Government to abolish whatever rules and controls they can and wherever they can, and to liberalise when abolition is not possible.