Health Service Medical Supplies (Costs) Bill (First sitting)

Jo Churchill Excerpts

Committee Debate: 1st sitting: House of Commons
Tuesday 8th November 2016 Public Bill Committees

[James Berry (Kingston and Surbiton) (Con)]

Q We have had a submission from the British In Vitro Diagnostics Association, which says that if its products are included within the definition, it does not envisage that the new information required under clause 6 would be too burdensome and that much of the information that it would be required to provide is information that companies record anyway. Do you disagree with that analysis?

Philip Kennedy: I do disagree with that. From our members’ perspective, the data, as we understand it—we would greatly seek some clarity on exactly what data are being requested—are not routinely collected, particularly for small companies. Of course we collect data for tax purposes, productivity and all the usual parts of running a business, but data on profitability at a product level would be a huge additional burden for companies that are relatively small in scope. They would not normally do that. Even if the information was available, I am not sure how it would be analysed and reported on effectively, to give the information that is sought. We are happy to collect data to run our businesses, but the definition of what is being asked here is something that we would greatly appreciate clarity on.

[Jo Churchill (Bury St Edmunds) (Con)]

My question is to Dr Ridge and to Mr Kennedy. I have a concern about how the Bill might have an impact on pharmaceutical companies’ research and development, particularly in the light of medical innovations and how they are moving on. We do not want to stop that innovation with things such as pumps and so on. We know that we are trying to reduce the viscosity of insulin to get the pumps to work more effectively. How does this cover the case? Is it a medicine or an innovation? Can you give me a little more of your thoughts of how we pin things down? On the personalised front, are we future-proofing? Good legislation should be adaptive, I would argue, so that we do not revisit this.

Dr Ridge: In the first instance, I should make it clear that NHS England is very supportive of the proposals in the Bill and, indeed, the £5 million cut-off point around SMEs. We are also very supportive of innovation in the UK. For example, we have recently launched a scheme around innovation acceleration and the like. We want to see a thriving pharmaceutical and medical devices industry—that is, life sciences—more generally. There is no doubt about that.

The Bill will make a contribution to the financial challenge I mentioned. I am sure that in due course, with this pharmaceutical price regulation scheme due to expire at the end of 2018, there will be a negotiation in the normal way. NHS England will want to play its part around that.

The world is changing and personalised medicine is an important development for us all, but it needs to be delivered in a way that is both effective and affordable. This way of filling a bit of a problem between the PPRS voluntary and statutory scheme in the short term will also perhaps give us a basis for a further negotiation, I am sure, in the context of many things, including personalised medicine.

There is a lot more to do around getting best value and outcomes from medicines more generally in a variety of care settings, whether in hospitals, care homes or whatever it might be. We spend a lot of money on medicines and are going to be spending more, but we do not always see best outcomes, in many ways because of the way medicines are used. NHS England is looking carefully at how to optimise medicines and their use, and that will include personalised medicine.

Philip Kennedy: If I can clarify your question, I think it specifically related to insulin and the cost of that. It may be more appropriate that Mr Smith answers around pharmaceutical development by plan.

[Jo Churchill]

Q I suppose the question was more about how the burden could be minimised, from the comments that you made, referred to earlier. I am concerned that we do not cut off that important pipeline, particularly of personalised medicines. It is about where we are taking ourselves in the future, whether in generic or pharmaceutical industries.

Philip Kennedy: We at the ABHI have worked on a number of initiatives with the Government on the accelerated access review, with the vanguard programmes and also with Lord Carter, in terms of our response to the challenge to reduce costs within the NHS. We believe that a thriving, innovative R and D landscape for SMEs is the way to do that. Indeed, there are plenty of examples already whereby significant savings could be effected by looking at the lifetime costs of ownership of products and also the patient pathway design.

We are actively engaged in a number of areas with the Government to do that. We feel that the proposed legislation is not necessarily helpful, adding another layer of data collection that is not advancing the cause. If anything, the risk is that it thwarts innovation and increases cost, and that would not be an outcome that anyone would welcome, either within the industry or the NHS.

Warwick Smith: It may help if I give a couple of comments on data collection, from the point of view of the generic industry. We have had voluntary arrangements in place for 15 years to provide the Department of Health with data, so it can see the actual price being charged in the market and thus set the pharmacy reimbursement price. That arrangement came around due to past difficulties. We decided, in agreement with the Department and subsequently NHS England, that transparency is the best way to deal with these issues. For the large tranche of generic products that face competition, we submit data quarterly to the Department showing the net cost of each product we sell. That allows the Department to monitor what is happening and set the reimbursement price.

Providing those data is not a big issue for the majority of our members because it is run from their invoicing system. I cannot speak for Mr Kennedy’s members, who I think have a different profile. My members go from global companies to small start-ups, but they all have to run an invoice system, and they can generate the data from that.

Let me make a couple of points about the use of the data. We are not unhappy with the proposals in the Bill. The way in which the data are used is really important, because it is easy to get the wrong end of the stick. For example, if you look at the profitability of one product, it might be subsidising another, so taking an overview of what is going on and understanding the market is important.

Let me add just one more point. We understand why the extension of the statutory scheme’s scope to allow subsequent payments to be made is in place. We understand that it mirrors the arrangement in the PPRS negotiated by colleagues from the Association of the British Pharmaceutical Industry, but we feel that charging a payment for generic and biosimilar products—the price of branded generics that fall within that scheme will already have dropped by 70% or 80%, and it may be 50% for biosimilars—is double jeopardy. The NHS is getting its money through competition and then charging additional costs on that. It has been suggested to us that we should put up our prices, but I do not think that is the way to go.

Dr Ridge: Again, NHS England is very supportive of the proposals in the Bill. We feel that it is important to have end-to-end transparency associated with, in this case, pharmaceuticals. At the end of the day, we want to see a very robust reimbursement system for one of the commissioners of health services. We feel that that will be supported further by the information set out in the Bill. However, I agree with Warwick that it is important to sustain a market around generics, in particular.

[The Chair]

Thank you. A lot of people wish to ask questions, so I ask the witnesses to try to keep their answers a little shorter.

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[James Berry]

It has not been used.

Philip Kennedy: But the certainty and clarity for how it exists is there. Increasing the uncertainty and the scope does not serve the medical device sector. We very much support its application elsewhere, but for the medical device sector, which is different and unique for all the reasons I have expressed, we would seek other mechanisms by which to achieve the end.

[Jo Churchill]

Q Thank you for that answer on the off-patent or repurposed drugs, Mr Smith. Perhaps putting them in the British National Formulary might help. What is the one thing, gentlemen, that you would do to get better value for the NHS? If costs have gone up by 59% since 2010—I think that is the statistic you threw in at the beginning—we have to do something. What is the one thing you would do to make the NHS provide better value for drugs?

Dr Ridge: The one thing.

[Jo Churchill]

Yes, you are allowed only one, and you have got only two minutes.

Dr Ridge: The Bill undoubtedly makes an important contribution, but it is only a contribution. From our point of view, we need to focus much more on getting best value out of the considerable expenditure on medicines, and that means adopting an approach around optimising the medicines used and working closely with patients, clinicians and others to get to the point where people take their medicines and we deliver the right outcomes. That needs to be surrounded by a framework, at a national level at least, that is commercial in nature, in terms of the ability to work with industry and secure the best value for the NHS.

Philip Kennedy: From a device technology perspective, I would say that the one thing we would support and encourage is a wider adoption of technology. The accelerated access review, published only a couple of weeks ago, is a good start in that direction, and we support its findings. We feel that significant efficiencies and cost savings are to be had in a wider-scale adoption of technologies, and we would support any effort in that respect.

Warwick Smith: We should ensure that we use new, innovative medicines when they produce the most cost-effective, best clinical outcome for patients. Where that is not the case, and where the generic is still the gold standard, we should ensure through the medicines optimisation programme, which Dr Ridge mentioned, that we use generics. A 1% swing to generics in prescribing and dispensing saves the NHS £172 million per year. It is a very easy thing to do.

[The Chair]

A final, quick question, Mr Madders. You have got one and a half minutes for the question and answer.

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[Maggie Throup]

Q In your written evidence, you said:

“The Department of Health should provide greater clarity on the additional information that will be required by the Department”.

Can you expand on that further and outline what clarification you need as an industry?

David Watson: First, we agree with the intent of the information powers. It is important; if the Department is to address some of the issues of significant price rises, it needs the information to go and do that. Our concern was that, as written, the Bill is extremely broad in this area. For example, it will require companies to provide profit-level data at product level, or even the cost of delivery at the product level. That requirement would be on every company across, potentially, tens of thousands of products a week. So we thought that the Bill was too broad in that area, and we would like to make some written submissions about how it could be tightened—although we recognise that the regulations underpinning the Bill, which we saw yesterday, provide some additional clarity in this area.

[Jo Churchill]

Q Just as a small supplementary to that, having run businesses—I would imagine pharma is the same—is it not possible that when you drill down to that sort of level, an unintended consequence will be that where you perhaps support a drug to market by using one that has volume-based profit to it, you may unintentionally stop that development? My other worry is about the rare diseases and specialist cancer areas, where it is highly expensive to develop drugs. We all know that we are trying to close this loophole, and that is right—exploitation around that area is not good for the NHS or, ultimately, patients—but can you see any unintended consequences that you would like to flag before you go?

David Watson: Yes, we recognise that it is very difficult to put a specific cap on a price, because the requirements on a company to produce, discover and sometimes cross-subsidise some of their costs across their portfolio are quite complicated. If the UK system, it seems, wants to drive costs of some medicines down to the lowest possible mark then that is, of course, quite possible, but the consequence if we look at areas such as vaccines, though, is that we end up in a situation in which companies do not invest appropriately in the factories or quality, etc., and then there are potential gaps in the supply of those products. So what we would ask for here is that, when the Department is considering the circumstances in which it thinks the price is too high, it has a dialogue with that company to understand the reasons for the price and what may be going on underneath to ensure the continuity of supply of the product.

[Dr Whitford]

Q I want to ask Mr Watson about the issue that I raised with the previous panel about the repurposing of patent drugs and the concern that we did not pass a Bill to add those purposes to old licences, or to have a new system. What would the ABPI view be on trying to avoid that, for the new purpose, suddenly a pretty similar drug comes back at an eye-watering price?

David Watson: Again, I agree with that, and I understand quite often that medicines are repurposed, not necessarily by pharmaceutical companies, but by other research centres. Quite often, even in that scenario, those companies may expect a reasonable return on their effort to bring that product in, which might mean a price rise. Again, I would say that there has to be a balance between price rises to reward innovation and return on investment and those price rises that are clearly not justified.

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[Andrew Selous]

Q The actual question I want to ask follows on from Ms Churchill’s question. What is your experience of how reasonable the NHS is when dealing with you on the sort of quality and safety issues you referred to in terms of how the Government will respond on pricing if there are specific reasons in terms of plant safety and quality and so on that might justify a slightly increased price? You have obviously been dealing with the Government for a long time. What is your experience of the NHS’s reasonableness in responding to those valid issues you mentioned?

David Watson: Companies will never launch products that are not of the required quality, and the NHS would never pay for them. The issue is more that if there is essentially a procurement-driven approach to medicines, that can and will drive prices down. The long-term impact is much more about organisational investment in the UK, perceiving the UK as a good place to do business. I suspect that in some classes—biosimilar and vaccines are examples—companies will eventually drop out of the market because they do not see the UK as a viable place to do business.

[Jo Churchill]

Q Is there a better way of looking at this? If we had more transparency through the pricing mechanism, but enabled tax efficiencies, R and D and so on, would that be a different way of balancing this for the industry?

David Watson: Yes. That is why this sort of industrial policy becomes really important. Again, that is why the industry semi-globally recognises the value of the Government’s continued willingness to have a voluntary pricing arrangement that not just covers pricing and affordability, but touches on some of the other aspects of how industry operates in the UK. We think that is really important.

[The Chair]

Thank you, Mr Watson, for coming this morning.

Given that we have no more witnesses, I invite the Government Whip to propose the Adjournment.

Ordered, That further consideration be now adjourned. —(Mark Spencer.)