Health Service Medical Supplies (Costs) Bill

Jeremy Hunt Excerpts

2nd reading: House of Commons & Programme motion: House of Commons
Monday 24th October 2016 Commons Chamber

[The Secretary of State for Health (Mr Jeremy Hunt)]

I beg to move, That the Bill be read a Second time.

This is a short and focused Bill which is vitally important not only for the NHS but for patients. NHS spending on medicines is second only to staffing costs. The Health and Social Care Information Centre—now NHS Digital—estimated that the NHS in England spent over £15.2 billion on medicines during 2015-16, a rise of nearly 20% since 2010-2011. With advances in science and our ageing population, those costs can only continue to grow.

Medicines are of course a vital part of patient care in the NHS, both in hospitals and in the community. Thanks to the research and development efforts of the life sciences industry—an industry which contributes £56 billion and tens of thousands of jobs to the UK economy every year—our understanding of diseases and the best way to treat them has improved dramatically over the past 20 years. Who would have thought for instance that UK work pioneering superconducting magnets would result in MRI scanners—scanners which would save hundreds of lives each year through the early detection of breast cancer—or that the remarkable research by our National Institute for Health Research into translational medicine would lead to scientific breakthroughs in areas such as gene therapy being taken from the lab to the clinic? In a six-year period this has led to 340 patents, generating over £80 million from intellectual property.

This Government are committed to ensuring that patients get access to innovative and cost-effective medicines as quickly as possible. I pay tribute to the work carried out by my hon. Friend the Member for Mid Norfolk (George Freeman), who worked tirelessly in government to promote the life sciences industry, and who established the accelerated access review to provide clear recommendations on how the Government, the NHS and the industry can work together to ensure patients benefit from transformative new products much more quickly. That review was published today and is an excellent document which challenges everyone in the medicines system to up their game.

Our mission is to continue our progress in ensuring patients get rapid access to life-changing and cost-effective medicines. However, we also need to ensure that we are getting the best value for the NHS, which is why we have brought this Bill before the House.

The purpose of the Bill is to clarify and modernise provisions to control the cost of health service medicines and to ensure sales and purchase information can be appropriately collected and disclosed. These provisions will align the statutory and voluntary cost control mechanisms currently in existence, allow the Government to control the cost of excessively priced unbranded generic medicines, and ensure we have comprehensive data with which to reimburse people who dispense medicines. Taken together, these measures will enable us to secure better value for money for the NHS from its spend on medicines.

[James Cartlidge (South Suffolk) (Con)]

I congratulate my right hon. Friend on this effort. I recently received a written answer saying that last year GPs spent £85 million prescribing paracetamol. A packet of 500 mg paracetamol costs 19p in Asda, and I wonder whether this Bill will enable us to look those costs and whether such prescribing is appropriate.

[Mr Hunt]

I am grateful to my hon. Friend for raising that issue. Although the measures he mentions are not directly covered in this Bill, he reminds the House that the business of getting value for money from our drugs business is everyone’s business throughout the NHS. There is a huge amount of prescribing of medicines that is not strictly necessary. Indeed, we had further evidence of that from the Academy of Medical Royal Colleges this morning. My hon. Friend makes an extremely important point: this Bill is part of the effort to get better value for money from our medicines budget, but initiatives such as the one he talks about are equally important.

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

Further to that question, I can see how the Bill will deal with the issue of debranding, and that is very welcome, but I understand there are three other areas of concern. There is the question of price delay, which the Competition and Markets Authority has been looking at, and there are the problems of tying and bundling and so-called loyalty schemes, all of which act to inflate the cost of medicines to the NHS artificially. Will the Bill also deal with those areas?

[Mr Hunt]

It will deal with some of those concerns, and we will listen to all the concerns raised by hon. Members during the progress of the Bill. On the particular issue the hon. Gentleman raises, the CMA is already investigating the behaviour of pharmaceutical companies in certain situations, but it has become clear to us that there is a particularly unethical and unacceptable practice of drugs companies getting control of generic drugs for which they command a monopoly position and then hiking the prices. There was one product whose price increased by 12,000% between 2008 and 2016, and if the price had stayed the same as before the increase, the NHS would have spent £58 million less. The Government’s conclusion is that the simplest and quickest way to sort this out is through new legislation, but I will happily take the hon. Gentleman’s other concerns offline and look into them further.

[John Glen (Salisbury) (Con)]

I welcome the provisions of the Bill that will close a loophole and deal with terrible examples of where the NHS is in effect exploited, but can my right hon. Friend point to the future in light of the suggestion that the drugs bill will increase to £20 billion by 2020—a much more significant increase than can be afforded under the projected expenditure in the NHS? What bigger measures need to be put in place for us to deal substantively with that bigger problem?

[Mr Hunt]

My hon. Friend is right in that we see demand for NHS services, which includes treatment and drugs, increasing by a total of around £30 billion over the next five-year period, which is a huge amount and certainly more than we as a country can afford without changing practice. That is why we are implementing a very challenging series of efficiency reforms designed to make sure that we can afford to continue current levels of NHS service on the £10 billion increase this Government are putting in. Part of that is indeed measures such as those in this Bill to control the drugs bill. My hon. Friend is also right that going forward over the next 25, rather than five, years we will be seeing the bigger issue of the accelerating pace of innovation in science. That provides great opportunities for the NHS, but potentially great pressures for the budget, and I am sure we will continue to discuss those issues extensively in this House.

[Dr Andrew Murrison (South West Wiltshire) (Con)]

What assessment has my right hon. Friend made of the impact this Bill might have on the parallel trade in pharmaceuticals, which he will know has both costs and benefits for the NHS and for patient care?

[Mr Hunt]

My hon. Friend obviously knows about these matters in a great deal of detail and should be reassured that this Bill should prevent people who are part of the current voluntary pharmaceutical price regulation scheme—PPRS—from parallel-importing through European subsidiaries, which currently under single market rules we are not able to do anything about. That loophole will be closed.

The first element of the Bill relates to controls on the cost of branded medicines. For many years the Government have had both statutory and voluntary arrangements in place with the pharmaceuticals industry to limit the overall cost of medicines to the NHS. Companies can choose to join either the voluntary scheme or the statutory scheme. Each voluntary scheme typically lasts for five years before a new scheme is negotiated.

The current voluntary scheme is the 2014 PPRS. The objectives of that agreement include keeping the branded health service medicines bill within affordable limits while supporting the availability and use of effective and innovative medicines. For industry, the PPRS provides companies with the certainty and backing they need to flourish both in the UK and in the global markets.

The current PPRS operates by requiring participating companies to make a payment to the Department of Health of a percentage of their NHS sales revenue when total sales exceed an agreed amount. So far the PPRS has resulted in £1.24 billion of payments, all of which have been reinvested back into the health service for the benefit of patients.

[Rob Marris (Wolverhampton South West) (Lab)]

The early part of the Bill appears incredibly tortuous, because it relates to whether something is under the voluntary scheme or the statutory scheme and to switching back and forth between the two. Is that because we have a voluntary scheme which started in 2014 and will run until 2019, and the Government intend not to renew it? If the Government are minded to consider renewal in 2019, why have parallel schemes making the whole thing much more complex than it needed to be?

[Mr Hunt]

The hon. Gentleman makes an important point. It will be for this House and the Government to reflect prior to 2019 on whether it is worth carrying on with two schemes, which has been the arrangement for many years. Successive PPRS voluntary agreements have covered the vast majority of sales to the NHS and the statutory scheme has been a back-up for people who do not want to participate in the voluntary scheme. Recently, however, there has been an element of gaming the system whereby more and more firms have been moving from the voluntary scheme into the statutory scheme. The Bill will remove the incentives for them to switch between schemes and will make the benefits to the NHS essentially the same whichever scheme people choose. It will be for this House to reflect on and for the Government to consider whether the dual structure is right going forward.

[Daniel Zeichner (Cambridge) (Lab)]

The Secretary of State tells us that £1.24 billion has come back through the rebate, but many are puzzled about where that money has been spent. Can the Secretary of State tell us?

[Mr Hunt]

Absolutely. The money comes back to the Department of Health and is invested in the NHS. Indeed, it would be wonderful if it was more than £1.24 billion, because there is an awful lot of need on the NHS frontline right now; the funds are much needed. Our concern is that companies have been exploiting the differences between the voluntary and statutory schemes, particularly the loophole, which the Bill seeks to close, that if companies have drugs in both schemes, we are unable to regulate at all the prices of the drugs that would ordinarily fall under the statutory scheme. That is why the Bill is so important.

[Kit Malthouse (North West Hampshire) (Con)]

Notwithstanding the Bill’s objectives, which I can see are admirable, does the Secretary of State accept that hundreds of millions of pounds could be saved in the drugs budget if there was better analysis of NHS prescription patterns? I have called before for the appointment of analytical pharmacists to look at the balance between prescription efficacy and cost and at trying to increase the use of biosimilars. Some of that £1.24 billion could be invested in that greater analysis.

[Mr Hunt]

Yes. My hon. Friend makes an important point. The third part of the Bill will provide for much better data collection to allow that analysis to take place. We are also seeking to break down the barriers between the pharmacy sector and general practice. During this Parliament, we will be financing 2,000 additional pharmacists to work in general practice so that we can learn exactly those sorts of lessons.

[Dr Sarah Wollaston (Totnes) (Con)]

Further to that important point about biosimilars, and in welcoming this legislation and the opportunity to create savings for the NHS, will the Secretary of State also address the long-standing issues around Lucentis and Avastin? The hon. Member for Mid Norfolk (George Freeman) updated the House about the barriers in both domestic and European legislation that prevent the use of Avastin—it is not licensed for wet age-related macular degeneration—but the scale of savings could be so vast that there is a case for introducing measures in the Bill to allow for such issues to be addressed.

[Mr Hunt]

I am happy to look into that—some of my own constituents have been affected by that issue. I am not aware that there is scope to consider that important point in the Bill, but we should reflect on what we can do to deal with some of the anomalies in the drug licensing regime that lead to the unintended consequences that my hon. Friend talks about.

We have a statutory scheme for companies that are not in the PPRS that is based on a cut to the list price of products, rather than a payment mechanism on company sales. Since the introduction of the rebate mechanism in the PPRS, the volumes of drugs going through it have been lower than estimated. At the same time, the statutory scheme has delivered lower savings than predicted. The inequity between the two schemes has led to some companies making commercial decisions to divest products from the PPRS to the statutory scheme, further reducing the savings to the NHS.

Last year, the Government consulted on options to reform the statutory medicines pricing scheme by introducing a payment mechanism, in place of the statutory price cut, broadly similar to that which exists in the PPRS. Our clear intention was to put in place voluntary and statutory schemes that were broadly comparable in terms of savings. Of course, companies are free to decide which scheme to join and may move from one to the other depending on the other benefits they offer, but the savings to the NHS offered by both schemes should be broadly the same.

NHS respondents to the consultation supported our position, but the pharmaceutical industry queried whether the Government had the powers to introduce a statutory payment system. Following a review of our legislative powers, we concluded that amendments should be made to clarify the existing powers to make it clear that the Government do have the power to introduce a payment mechanism in the statutory scheme. The Bill does that by clarifying the provisions in the NHS Act 2006 to put it beyond doubt that the Government can introduce a payment mechanism in the statutory scheme. The Bill also amends the 2006 Act so that it contains essential provisions for enforcement action. Payments due under either a future voluntary or statutory scheme would be recoverable through the courts if necessary. That would include the power to recover payments due from any company that leaves one scheme to join the other.

The powers proposed in the Bill to control the cost of medicines are a modest addition to the powers already provided for in the 2006 Act to control the price of and profit associated with medicines used by the health service. The powers are necessary to ensure that the Government have the scope and flexibility to respond to changes in the commercial environment. The intended application of the powers will, of course, be set out in regulations. We will provide illustrative regulations to reassure the House that we will be fair and proportionate in exercising the powers.

[Rob Marris]

I voted for the 2006 Act, but I have to say to the Secretary of State that profit controls are pretty draconian, particularly for a Conservative Government. The Government appear to be extending them when we have historically dealt with what society refracted through this House as excessive profits through taxation, such as the windfall tax on banks and so on. The Secretary of State now proposes to extend profit controls to a major part of the economy, which would no doubt be loved by the Leader of Her Majesty’s Opposition. To a socialist such as me, a Conservative Secretary of State doing that seems a bit counterintuitive. Could he say a bit more about why he is extending profit controls?

--- Later in debate ---

[Mr Hunt]

Our march on to the centre ground carries on apace. [Laughter.] In response to the hon. Gentleman’s fascinating point, I gently reassure him that our approach will be fair and proportionate. This is not about bringing in wide profit controls. It is important to say that we recognise—our view is shared across the House—the pharmaceutical industry’s incredibly important role in medical advances, and we want Britain to be its European centre of operations post-Brexit. Many Members have campaigned about dementia and we hope that we can get a cure—it could happen in this country—and we recognise that profits are what fund the research that makes such remarkable changes possible.

It is important, however, that we are able to see what profits are being generated from a company’s choice between the PPRS scheme and the statutory scheme as a clue to whether the company is being fair to the NHS, which is funded by taxpayers. That is why the Bill’s measures strike the right balance.

[Mark Field (Cities of London and Westminster) (Con)]

I hope that not only the Opposition but Government Members are reassured by those comments in response to the hon. Member for Wolverhampton South West (Rob Marris). Will the Secretary of State take this opportunity to emphasise the great contribution that the pharmaceutical industry makes not only in this country but as a global player? As he says, the profit motive is important to ensuring the competition that allows for reform and the new drugs that will transform our lives and the lives of future generations.

[Mr Hunt]

I am happy to give that reassurance. As I said, this industry contributes £56 billion to the UK economy, with tens of thousands of jobs. When the Prime Minister talks about where she sees our competitive advantage, she talks, first, about financial services, and life sciences is the very next industry she mentions. I completely agree with right my hon. Friend about its incredible importance, not just to this country but to the future of humanity. That is why we seek in this Bill to establish a fair relationship between the NHS, which we have to represent as we are funding it through the tax system, and the pharmaceutical industry. It is also fair to say that there have been times when some pharmaceutical companies’ practices have been disappointing, and because we want to make sure that that does not happen and that we can continue with a harmonious and productive relationship we are proposing this Bill to the House.

[Kevin Foster (Torbay) (Con)]

We agree that this is not about profit controls—about having a fair return for investment made—but about tackling an emerging business model that could almost be seen as profiteering.

[Mr Hunt]

My hon. Friend is right about that. The nice way of putting it is that we are closing a loophole. If one were being less polite, one might say that it is a shame we are having to do that. None the less, it is important to do what we are proposing to the House.

We recognise that it has been some time since the Government consulted on the options, and I wish to reassure hon. Members and those companies in the statutory scheme that we will consult further on the implementation of a payment mechanism in the statutory scheme, including the level of the payment mechanism, before the regulations come into force. We estimate that 17 companies would be affected by the introduction of a payment mechanism, with the 166 companies that are currently members of the PPRS not being affected. Our proposals would save health services across the UK an estimated £90 million per year.

The second key element of this Bill amends the 2006 Act to strengthen the Government’s powers to set prices of medicines where companies charge unreasonably high prices for unbranded generic medicines. We rely on competition in the market to keep the prices of these drugs down. That generally works well and has, in combination with high levels of generic prescribing, led to significant savings. However, we are aware of some instances where there is no competition to keep prices down, and companies have raised their prices to what looks like an unreasonable and unjustifiable level. As highlighted by the investigation conducted by The Times earlier this year, there are companies that appear to have made it their business model to purchase off-patent medicines for which there are no competitor products. They then exploit a monopoly position to raise prices. We cannot allow this practice to continue unchallenged. My Department has been working closely with the Competition and Markets Authority to alert it to any cases where there may be market abuse and provide evidence to support this, but we also need to tackle it within our framework for controlling the cost of medicines and close the loophole of de-branding medicines. Although the Government’s existing powers allow us to control the price of any health service medicine, they do not allow controls to be placed on unbranded generic medicines where companies are members of the voluntary PPRS scheme. Today, most companies have a mixed portfolio of branded medicines and unbranded generic medicines. For that reason, all the manufacturers of the unbranded generic medicines mentioned in the investigation by The Times are able to use their PPRS membership to avoid government control of their prices.

It should be said that that practice is not widespread, but a handful of companies appear to be exploiting our freedom of pricing for unbranded generic medicines where there is no competition in the market, leaving the NHS with no choice but to purchase the medicine at grossly inflated prices or to transfer patients to other medicines that are not always suitable. Alongside the Government, many in the industry would also like to see this inappropriate behaviour stamped out.

[Norman Lamb (North Norfolk) (LD)]

I very much agree with the point that the Secretary of State has just made. He talked about collaboration with the CMA. Can he give any indication as to whether he expects action to be taken on abuse in the marketplace, given that a small number of companies have behaved appallingly?

[Mr Hunt]

I cannot give the right hon. Gentleman that indication because, as he will know, the CMA operates completely independently, and I therefore do not know what its findings are going to be. Of course, I would support any action that it recommended. I do, however, think that this Bill can give us some security in the House that if the CMA is unable to find evidence in the specific cases it has before it, we will be able to take action as a Government, provided the House is willing to support the Bill.

[Mike Wood (Dudley South) (Con)]

Has my right hon. Friend made any assessment of how the prices of the drugs quoted in the article in The Times compare with those paid in other health services and by healthcare providers in other western European countries?

[Mr Hunt]

We have made some assessments of those things, but, in essence, our concern is that, even without comparisons with what is happening in other countries, we are talking about totally unreasonable behaviour. I mentioned one example earlier, but I can give another of a medicine whose price increased by 3,600% between 2011 and 2016. I just do not think we can justify that. Given that we want to have strong, harmonious, positive relationships between the NHS and the pharmaceutical industry, we need to eliminate the possibility of that kind of behaviour happening in the future.

This Bill therefore amends the 2006 Act to allow the Government to control prices of these medicines, even when the manufacturer is a member of the voluntary PPRS scheme. We intend to use the power only where there is no competition in the market and companies are charging the NHS an unreasonably high price. We will engage with the industry representative body, which is also keen to address this practice, on how we will exercise this power.

The final element of the Bill will strengthen the Government’s powers to collect information on the costs of medicines, medical supplies and other related products from across the supply chain, from factory gate to those who supply medicines to patients. We currently collect information on the sale and purchases of medicines from various parts of the supply chain under a range of different arrangements and for a range of specific purposes. Some of these arrangements are voluntary, whereas others are statutory. The Bill will streamline the existing information requirements in the 2006 Act relating to controlling the cost of healthcare products. It will enable the Government to make regulations to require all those involved in the manufacture, distribution or supply of health service medicines, medical supplies or other related products to record, keep and provide on request information on sales and purchases. The use of this information would be for defined purposes: the reimbursement of community pharmacies and GPs, determining the value for money that the supply chain or products provide; and controlling the cost of medicines. This will enable the Government to put the current voluntary arrangements for data provision with manufacturers and wholesalers of unbranded generic medicines and manufactured specials on a statutory footing. As the arrangements are currently voluntary, they do not cover all products and companies, which limits the robustness of the reimbursement price setting mechanism.

A statutory footing for these data collections is important so that the Government can run a robust reimbursement system for community pharmacies. I know that some colleagues have raised concerns about the implications of our funding decisions for community pharmacies, and today I want to reassure the House that this Bill does not impact on those decisions, nor does it remove the requirement for consultation with the representative body of pharmacy contractors on their funding arrangements in the future. However, the information power will give us more data on which to base those discussions and decisions, rather than relying on data only available to us under voluntary schemes and arrangements. The information power would also enable the Government to obtain information from across the supply chain to assure themselves that the supply chain is, or parts of it are, delivering value for money for NHS patients and the taxpayer—we cannot do that with our existing fragmented data.

[Mrs Flick Drummond (Portsmouth South) (Con)]

In this regard, will my right hon. Friend be giving consideration to asking pharmacies that can prepare their own medicines—aqueous cream and things—as tremendous sums could be saved for the NHS? Will he be considering that in the overall scheme of getting information on the medicines they are providing?

[Mr Hunt]

The information we collect might make it possible for us more robustly to analyse issues such as the one my hon. Friend rightly brings to the House’s attention. Even if it does not, we should consider the issue, and I am happy to write to her to see whether we can make more progress in that area.

I also wish to reassure the House about the application of the information power to the medical technology industry. More than 99% of the companies supplying medical technologies to the NHS are small and medium-sized enterprises. Their products may be less high profile than the latest cancer medicine, but they are no less innovative or vital for patients. We have no interest in placing additional burdens on those companies.

The 2006 Act already provides powers for the Government to require suppliers of medical technologies to keep and provide information on almost any aspect of their business. This Bill will clarify and modernise those powers, and I am committed to exercising them in a way that is fair and proportionate to companies, to the NHS and to taxpayers who rightly demand value for money from the supply chain. Companies are currently required to hold information on their income and sales for six years for tax purposes. We will work closely with industry to ensure that the requirement to keep and record data does not significantly increase this burden.

My officials have already been in discussion with all parties across the supply chain—for both medicines and medical devices—about these powers to ensure that their implementation is robust but proportionate. We will provide illustrative regulations to aid debate on these provisions. I also want to reassure colleagues that, following Royal Assent, a full and open consultation will take place on the regulations specifying the information requirements.

I thank Ministers and their officials in the devolved Administrations for their constructive input and engagement with my Department on the Bill. Although many of its provisions are reserved in relation to Scotland and Wales, some information requirements that currently apply to England only could also apply in the territories of the devolved Administrations.

We intend to propose amendments to the Bill to reflect the agreement between the Government and the devolved Administrations, so that information from wholesalers and manufacturers can be collected by the Government for the whole of the UK and shared with the devolved Administrations. That avoids the burden created by each country collecting the same information.

The Welsh Government have also asked me to enable them to obtain information from pharmacies and dispensing GPs—a power that the Scottish Government and the Northern Ireland Executive already have. The Government will therefore propose an amendment to the Bill to amend the NHS (Wales) Act 2000 so that Welsh Ministers can obtain information from pharmacies and dispensing GPs.

Medicines are a vital part of the treatment provided by our NHS. Robust cost control and information requirements are key tools to ensuring that NHS spending on medicines across the UK continues to be affordable. They also help to deliver better value for taxpayers and to free up resources, thereby supporting access to services and treatments. This Bill will ensure that there is a more level playing field between our medicines pricing schemes while ensuring that the decisions made by the Government are based on more accurate and robust information about medicines’ costs. It will be fairer for industry, fairer for pharmacies, fairer for the NHS, fairer for patients and fairer for taxpayers, and I commend it to the House.