Branded Medicines Voluntary Scheme and the Life Sciences Vision

Daniel Zeichner Excerpts

Wednesday 3rd May 2023 Westminster Hall

[Daniel Zeichner (Cambridge) (Lab)]

It is a pleasure to serve with you in the Chair, Mr Sharma. I congratulate the hon. Member for Newton Abbot (Anne Marie Morris) not only on securing the debate, but on setting out in such detail and so effectively the complicated range of issues we face. I agree with much of her analysis of the problem, and although I am not sure I agree with all her proposed solutions, it is important that they are brought forward and discussed.

I represent an area of the country where life sciences, particularly research and innovation, are absolutely central to our economic prosperity. Thousands and thousands of jobs, and major investments, are at stake. Partly as a consequence of that, I have chaired the all-party parliamentary group for life sciences for a number of years, and I am grateful to a number of key players in the sector, including Steve Bates of the Bioindustry Association and Leslie Galloway of the Ethical Medicines Industry Group, for their advice in advance of the debate.

Over many months in my part of the world, I have been hearing from a range of people in the sector about their growing concern about the effect that the rebate level is having on a whole range of organisations and the threat that it poses to future investment and jobs. Indeed, the chief executive officer of the BIA has said that the clawback rate has

“gone down like a lead balloon in key global pharma boardrooms”,

and some have consequently withdrawn from the scheme.

I appreciate that this is a negotiation, but in my time talking to people in my part of the world, I have not heard this many concerns raised. Obviously, one always treats some of them with caution, but there are enough to make me think that this is a serious threat. We all agree that we want the NHS to have rapid access to, and the most consistent supply of, the most modern medicines it needs at affordable prices, and in achieving that, we can secure those vital jobs and investment. Frankly, in a complex world where medicines pricing is far from transparent and huge sums are now needed to develop new medicines, that is much easier said than done, not least because, as our knowledge and computational power and our understanding of genetics increase, making much more possible—particularly in terms of personalised treatments—the challenge of costs will only grow.

It is absolutely essential that any Government strike the right balance between securing taxpayer value and investing appropriately in our domestic life sciences industry. At the moment, many in the industry fear that this Government are cutting off their nose to spite their face. Yes, a hard bargain has been driven by the NHS—good—but there is a danger that it comes back to bite, especially at a time when we face shortages of supply. Put crudely, suppliers do not have to supply here if they are not getting the right deal.

As some see it, NHS England secures extra value by imposing commercial deals that take the prices of medicines below what NICE would consider cost-effective, even based on affordability thresholds that have not changed since they were introduced when NICE was established back in 1999. The risk is that the unintended consequence of the good deal that Governments have got drives industry away from the UK at a time when we need the life sciences sector to invest more.

This is not only about VPAS; there are other factors too. The bitter truth is that, despite the Government rightly identifying the life sciences sector as key for our future prosperity, the UK’s share of global R&D spend has decreased from 4.9% to 3.9% since 2012, and clinical trial numbers have fallen 41% since 2017. That has been a consistent message from industry over the last two years, and it has been raised consistently with Ministers.

Shockingly, the UK now has the highest rate of decline in new drug launches compared with Spain, Italy, Germany and France. If the UK ceases to be a first-launch market, patients will not have access to the latest drugs or clinical trials, we will lose the ability to compare future treatments against modern care standards and we will lose vital workforce skills that, once they are gone, will be difficult to replace. It is not just the newer patented drugs that are under threat, but generics and biosimilars too. An unintended consequence of the success of the VPAS scheme is the risk of reducing the availability of biosimilars and generics, as companies prioritise stock to higher-margin markets. A good price but no supply is not the outcome anyone is looking for.

What is to be done? I urge the Government not to dig in their heels and to at least have a sensible dialogue. I echo many of the points made by the hon. Member for Newton Abbot. Let the Government admit that there are problems: yes, our unified NHS is a remarkable resource for research, but the fragmented and complicated decision-making processes undermine that potential. It is a well-known problem. It is no good claiming that there are new regulatory opportunities post Brexit if regulators are then starved of the resources to make those opportunities real. We should recognise that the decline in clinical trials is not just an unfortunate by-product of an NHS in crisis; it is a real problem in itself, and it needs to be addressed.

The distance between how the discount levy is spent and those who make prescribing decisions just does not work. It does not incentivise behaviour, so it does not affect uptake, as the hon. Member for Newton Abbot said. Currently, there is no link between resources returned to Government and the wider life sciences vision. Addressing those points would make a difference, and I genuinely look forward to hearing the Minister’s response.

None of this is easy—it is complicated—but it is really important. Failure to deal with these problems is bad for my constituents, bad for the UK economy and bad for patients. The Government need to get out of denial mode and address the problem urgently.

--- Later in debate ---

[The Minister for Health and Secondary Care (Will Quince)]

It is a pleasure to serve under your chairmanship, Mr Sharma. I thank my hon. Friend the Member for Newton Abbot (Anne Marie Morris) for securing this important and timely debate—I will come on to why it is so timely in a moment. I thank Members from across the House who have contributed to what has been a highly informed discussion, especially as the House is now technically in recess, as the hon. Member for Bristol South (Karin Smyth) has said.

Members will know that the current VPAS scheme is the latest in a long line of such agreements, which date back to 1957. For many years, those agreements have been at the heart of a collaborative relationship between the Government and industry. As my hon. Friend the Member for Newton Abbot says, the partnership helps to manage the affordability of medicines while, vitally, supporting our life sciences sector to deliver for UK patients and provide them with access to the most innovative and cutting-edge medicines both now and in the future.

VPAS has proven to be a powerful tool in both improving patient outcomes and supporting economic growth. Hon. Members will be aware that a key goal of VPAS, as my hon. Friend pointed out, is to ensure the sustainability of NHS finances by limiting total growth in spending on medicines. Since its inception in 2019, VPAS has driven significant improvements in patient access to cost-effective medicines. It has also ensured predictable spending growth, which is key for the NHS during a period of economic uncertainty.

I can absolutely assure hon. Members that the Government remain firmly committed to the scheme and to continuing to work with the pharmaceutical industry to create a strong, innovation-friendly environment for the development of medicines here in the United Kingdom. We set that out in our life sciences vision, as my hon. Friend said. As she also pointed out, there is only so much I can say, because it is commercially sensitive and negotiations start tomorrow, which is why this debate is so timely.

As both my hon. Friend and the hon. Member for Bristol South said, and as I have set out previously, the idea is to create a four-way win—a win for UK plc, and I will come on to why that is important; a win for our NHS, and the hon. Lady eloquently set out why that is so important; a win for patients, so that we are getting the most cutting-edge and innovative medicines to patients here in the United Kingdom first; and, importantly, a win for industry because of its importance to UK plc. As my hon. Friend the Member for Newton Abbot pointed out, life sciences falls under multiple Government Departments, which makes it complex and not the easiest thing to navigate around Government.

As my hon. Friend rightly says, life sciences falls under the Departments for Business and Trade and for Science, Innovation and Technology, is covered by us at the Department of Health and Social Care and therefore also by NHS England, and is also covered by the Treasury —ultimately, everything comes back to the Treasury. But then we have the Office for Life Sciences, which sits partially in DSIT and partially in DHSC and co-ordinates life sciences across Government.

I understand what my hon. Friend says about the important link between medicine pricing and life sciences investment in the UK, but we are in danger of simplifying a very complex situation. If it were simply down to medicine pricing, that would be a far easier argument to make to Treasury. The reality is that it is not; when we look at the investment environment in the UK, we see that it comes down to a number of things.

Yes, medicine pricing is part of that investment environment, but it also comes down to regulation, as my hon. Friend said, with MHRA and NICE, and to adoption and take-up in the NHS. Each individual trust and GP practice is autonomous. GPs, surgeons and clinicians prescribe the drugs they wish to prescribe—that is not something we centrally mandate—which means that adoption and roll-out across the NHS are not always as easy or as simple as some of the pharmaceutical companies would like it to be, solely within the gift of the Department, Ministers and clinicians at NHS England.

Clinical trials, as the hon. Member for Bristol South rightly said, are hugely important, and I will come on to talk about that later. The hon. Member for Cambridge (Daniel Zeichner) set out eloquently the importance of academia and the role it plays in inward investment into UK plc by pharmaceutical companies because of the golden triangle between London, Cambridge and Oxford—and beyond. That work is spread far more widely around the United Kingdom, but those three places are hubs, and rightly so, and I have enjoyed many a visit to see the incredible work being done there.

There are other issues, such as access to finance, R&D tax credits and, vitally, the NHS as an innovation partner, which is often forgotten. We talk about Oxford, Cambridge and some of the big university and teaching hospitals in London. Actually, the key is every district general hospital—and, in fact, I would love this to be the case for every GP practice up and down the country—being part of clinical research, and encouraging its patients to take part, because we know the impact that that would have.

I recognise the link, but it is wider than that; it is about the environment here in the UK. That is important because when I speak to UK CEOs of pharma companies —the hon. Member for Cambridge set this out—they raise not only VPAS but lots of other issues. My role, and that of my counterparts in other Government Departments —in fact, of all those involved in life sciences—is to ensure that we are giving them the tools in the arsenal to go to their global boards and make the case, as I know they want to, for investment in the United Kingdom. As the hon. Gentleman set out, there is global competition, and to some extent we are falling behind. We need to address that.

Why do life sciences matter? Why is this so important? There are three reasons. First, it is important for UK plc, as has been set out already. It is an enormous investment and part of the UK economy. Of course, it could be so much bigger. That is why it is so important that we continue to encourage life sciences investment in the UK. The second reason is its importance to patients, as the hon. Member for Bristol South set out. This is about ensuring that patients across our NHS get access to the most innovative and cutting-edge medicines that exist globally, and that we are getting UK patients access to them as quickly as, or quicker than, anywhere else.

The third reason, which the hon. Lady also touched on, is that the NHS is under considerable pressure. Some of the challenges that it faces will be addressed by more funding, and some by workforce. Those things will be very important here and now, and in the medium term. However, if we want to address the challenges that the NHS faces in the long term, that depends on genomics and gene cell therapy, and on investment in innovation and transformation around pharma, med tech, systems and AI. Ensuring that the UK is an attractive market for investment is really important to the future of the NHS, and we have world-leading academic and scientific expertise, as the hon. Member for Cambridge set out. We have a competitive tax regime, and a health system that is committed to acting as a good innovation partner. Can we do better? Yes, of course, but it is a good innovation partner. We have to unlock the transformative power of real-world data—something that the NHS is unparalleled in being able to provide.

Despite the relatively gloomy picture that my hon. Friend the Member for Newton Abbot set out, there are huge signs of hope. Take the recent investment and deals that are coming to the UK from Moderna or BioNTech. These are huge investments in UK plc and UK life sciences, which we should be very proud of. Of course, we want to see far more. We also have some exciting opportunities, as my hon. Friend set out, through the O’Shaughnessy review and our desire to massively turbocharge clinical trials in the UK. As my hon. Friend and the hon. Member for Cambridge pointed out, we are losing market share to other countries across Europe. If we look, however, at foreign direct investment, in 2021 it was £1.9 billion from 49 projects, coming in only behind the United States in terms of value—a significant increase. Furthermore, the UK life science industry raised £7 billion in equity finance. It was placed third behind only the USA and China.

I can make the case for UK life sciences—it is a strong one—but we have to do better. We have to always continue to drive forward. I understand the influence of boardroom sentiment, which the hon. Member for Cambridge set out, and that price regulation schemes such as VPAS have to be a consideration in the decision to locate investment. That is exactly why we are committed to agreeing a deal.

[Daniel Zeichner]

The Minister is giving a very thorough reply. I wonder whether he will acknowledge—I have not heard him concede this point—that the 26.7% factor is a real problem that needs to be addressed.

[Will Quince]

I thank the hon. Gentleman; I am going to come to that exact point. I want to respond to as many of the issues as possible, and—rarely for a Westminster Hall debate—we actually have a little time.

We are committed to agreeing a deal that supports a strong UK life sciences sector and drives economic growth through investment, but I recognise what my hon. Friend the Member for Newton Abbot says: we have to do far more in many other areas—clinical trials, regulation, the life sciences missions and the investment therein. There is also the ongoing work around uptake.

The hon. Member for Cambridge talked specifically about the higher VPAS percentage rates, so let me move on to those directly. Of course I understand the industry concerns about higher payment rates, but it is important to stress that those were projected when the scheme was agreed—they were agreed with industry and negotiated by the ABPI on behalf of industry. They reflect the scheme working as intended: to limit to 2% the annual growth in the sale of branded medicines within the NHS.

We are firmly committed to VPAS and to continued working with the pharmaceutical industry to create an environment that facilitates innovation and maintains the UK’s world-leading position in the life sciences sector. I remain hugely grateful to industry for its continued participation in VPAS, which has offered much-needed financial security to our NHS during a period of significant economic uncertainty.

[Daniel Zeichner]

rose—

[Will Quince]

Let me conclude the point, as I may well answer the hon. Gentleman. He has pushed me on the negotiation that we are about to start—on our mandate and where we would aim to get to. The scheme ends at the end of this year and the negotiations for the successor scheme start tomorrow. As I have mentioned, what I can say today is limited by commercial sensitivity. The negotiations will be overseen by Sir Hugh Taylor, which is hugely welcome—he brings a wealth of experience and expertise that will be of immense benefit and, I genuinely believe, will ensure that we continue to get the best outcomes for patients, the UK life sciences sector and the taxpayer.

But in response to the hon. Gentleman’s question, I should say that we are very much open to ideas about how a successor voluntary scheme should operate from 2024 onwards. I look forward to working with industry, as I know Sir Hugh does, to agree a mutually beneficial scheme that supports the sustainability of the NHS spend on branded medicines, which is critical, and also improves patient outcomes and facilitates a stronger UK life sciences industry.

[Daniel Zeichner]

This is my final intervention, I promise —I am grateful. I think I heard the Minister say that the scheme was working as intended. There is not much transparency in this process, for reasons that are perhaps understandable, but my understanding was that the current situation was not really anticipated when the scheme was drawn up and that a range of things in between have led to it. Will he clarify that point?

[Will Quince]

I am happy to. I will answer by making two points. The first is that the situation was entirely predicted. Forecasts and projections were given; whether industry believed them to be possible is another matter, but my understanding—the scheme was negotiated several years ago, prior to my time as a Minister in the Department —is that it was projected that we could have got to this point through growth. Growth has been significant, which is why it is important that we negotiate a new scheme that takes on board industry’s concerns. More broadly, we have talked a bit about medicine pricing and it is important to stress international comparisons.