Health Service Medical Supplies (Costs) Bill

Justin Madders Excerpts

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

[Justin Madders (Ellesmere Port and Neston) (Lab)]

I thank the Secretary of State for outlining the overarching principles of this Bill, which, as we have heard, seek to allow the NHS to better control the cost of medicines and to close some of the loopholes, which have been the subject of blatant abuses in recent years.

I also thank the Minister of State for taking the time to meet me and other hon. Members last week to set out what the Government were seeking to achieve with this Bill. I only hope that this increased appetite for state intervention in the market that we have on display will spread more widely across Government. As my hon. Friend the Member for Wolverhampton South West (Rob Marris) said, this kind of approach used to be called Marxist, anti-business interventionism. I never thought that I would say this, but, having heard what the Secretary of State said today, I believe that he is now a fully fledged Corbynista.

In all seriousness, it is clear that the market is not serving the patient or the taxpayer as well as it could. As we have heard, expenditure on medicines is a significant and growing proportion of the NHS budget, standing at £15.2 billion in England in 2015-16, an increase of more than 20% since 2010-11. One can only imagine where we would be now if the whole of the NHS had seen such an increase during the same period.

The incredible advances in science that we have seen in recent decades, often led by companies here in Britain, mean that people in this country are living longer, healthier lives than ever before. Although we celebrate that, it is also right that we work hard to secure value for money for the NHS to ensure that as many patients as possible can benefit from medical advances.

[Keith Vaz (Leicester East) (Lab)]

May I declare an interest as a type 2 diabetic and chair of the all-party diabetes group? Ten per cent. of the expenditure of the NHS budget is on dealing with diabetes and complications related to it. Does my hon. Friend agree that there may well be a desire to prescribe more medicines, which will cost more, rather than providing diabetics with a structured education which, if appropriately used, can bring down the cost of diabetes to the health service? It is not just about pills.

--- Later in debate ---

[Justin Madders]

I thank my right hon. Friend for his intervention and pay tribute to him for his great work on diabetes. It is a matter that he consistently raises in the House, and he is right to do so. Of course he is right that there are many ways in which the diabetes bill can be tackled, and some of the shocking statistics that I have seen on the level of take-up of education courses is something on which we can do much better.

We support the broad aims of the Bill and of what the Government are trying to achieve, but we have a number of concerns, which I hope the Minister will address when this debate is drawn to a close, both about what is in the Bill and about the Government’s policies more widely on access to treatments.

Historically, the technical mechanisms used by the NHS to control expenditure on medicine have not set the public’s imagination alight, but in June we were all appalled to read reports that a small number of companies were exploiting loopholes to hike up the cost of medicines. In the past few years, we have also seen headline after headline about one effective treatment or another being denied to patients in desperate need on the basis of cost. I will address each of those issues after briefly touching on the Government’s proposal to harmonise the statutory and voluntary schemes for price control and on the new reporting requirements.

As we have heard, there are currently two schemes for controlling pricing: the voluntary scheme, the pharmaceutical price regulation scheme, which applies to the vast majority of suppliers; and the statutory scheme, which, in 2014 covered around 6% of branded medicine sales in the UK.

The voluntary PPRS scheme is based on companies making payments back to the Department of Health based on their sales of branded medicines to the NHS. By contrast, the statutory scheme operates on the basis of a cut to the published prices of branded medicines. These different approaches appear to have produced different results. Since 2014, the statutory scheme has delivered significantly lower savings than those of the PPRS, partly as a result of companies either switching individual products or switching wholesale into the statutory scheme, which is one reason why we have seen a significant reduction in the level of the rebate. Therefore, we support the rationale behind aligning the two schemes, which will create a more level playing field between companies and also give us a better chance of delivering greater savings to the taxpayer.

However, as we have heard, this Bill extends beyond closely aligning the two schemes and adds a new provision, giving the Secretary of State the power to require all medicines manufacturers and suppliers to provide information relating to prices.

[Mark Tami (Alyn and Deeside) (Lab)]

My hon. Friend will know—I am sure that we all know this—that there is a difference between the list price that is advertised and the price that the NHS actually pays. That is a very important point, and we have to be very careful that, in gaining all this information, we do actually bring down the cost for the NHS. Those companies may well charge other people higher amounts, and we need to put that in context.

[Justin Madders]

My hon. Friend is absolutely right. That is one reason why we must tread carefully, and hear what regulations the Government produce for consultation.

Some of the measures did not form part of the initial consultation, and there is a feeling that they have been added to the Bill at the last minute. Given the damaging cuts to the community pharmacy sector that were announced only last week, there is an anxiety about what costs could be created by any additional administrative burden.

[Sue Hayman (Workington) (Lab)]

Does my hon. Friend agree that pharmacists often know their patients much better than over-stretched GPs do? They can also advise on the prescription of appropriate cheaper drugs. Does he also agree that, instead of putting further pressure on the pharmacy sector, the Minister should be supporting it to reduce the burden on GPs and to help the NHS save money?

[Justin Madders]

My hon. Friend is absolutely right. There was real concern about the announcement last week. From the surveys that have been taken, we know that approximately one in four people who currently use the pharmacist would go to their GP if they were unable to seek advice from the pharmacy. We know the pressure that GP surgeries, and indeed the NHS, are under. We will have to watch carefully the impact of these proposals, which I hope will not be as serious as a number of Members fear.

The impact assessment does not offer many clues. It states that the additional costs that could be incurred

“have not been quantified, as their magnitude will not be known until after consultation on subsequent regulations.”

We need to tread carefully. The Secretary of State is asking us to give him new powers before setting out exactly how he will use them. That is a far from perfect state of affairs. I hope that we will get some further clarity when the Bill reaches Committee.

[Mark Field]

The hon. Gentleman has been fair in his broad analysis of the problems that we face between the statutory and voluntary schemes. It is a salutary lesson that whenever a statutory scheme is put in place, it can easily be gamed by anyone in the industry. Is he encouraged by the fact that the Association of the British Pharmaceutical Industry supports the Government’s proposal and wants to work with the Secretary of State so that we can, hopefully, reach an agreement that will work for the future, rather than a draconian recommendation being issued by Richmond House?

[Justin Madders]

I agree that it is important that we keep the dialogue open with industry. We are proud of what the pharmaceutical industry can deliver for this country. It is a world leader and we certainly do not want to throw the baby out with the bathwater.

The Government will be aware that concern has been expressed by the medical technology sector that medical supplies are to be brought within the scope of a regime designed ostensibly to tackle a problem in the pharmaceutical industry. The medical technology sector has expressed concern that the Bill’s measures will put additional burdens on that sector and could lead to higher costs overall for the NHS. We welcome the assurances given by the Secretary of State today that the 99% of businesses in this industry that are small or medium-sized will not be unduly troubled by onerous additional reporting requirements. We hope to discuss that in further detail.

The former Minister for Life Sciences reported in February 2016 that the estimated income in England from PPRS payments in 2016-17 would be £518 million. That is considerably less than the amount received in 2015, at a time when the overall drugs bill is increasing, so that tells us that the scheme is not going according to plan. The Government have stated that the measures would save the health service around £90 million a year, so let us consider what has been going on and whether this Bill can address the issues that have arisen.

One of the benefits we have heard about is that the Bill will help to close the loophole that I referred to earlier which has led to extortionate prices being charged for a number of generic medicines. This occurs, as we heard, when a small number of companies purchase off-patent drugs for which there are no competitor products or there is a dominant supplier. They then remove the brand name, which takes the drugs out of the current pricing controls, allowing the companies to hike up the costs by many hundreds or even thousands of per cent. It is clear that some of these companies have made this strategy a key part of their business model.

In the past few months we have seen this House expose some of the worst excesses of capitalism, from Mike Ashley and his employment practices at Sports Direct, to Philip Green, but there should be a special category of obloquy for those who make themselves extremely wealthy by using loopholes in the law to prey on the sick and vulnerable and to extract obscene profits from our health service. An investigation in The Times highlighted how a small number of companies including Amdipharm, Mercury, Auden Mckenzie and Atnahs raised the cost of medicines by £262 million a year through this practice.

When a US pharmaceutical company hiked the price of HIV medication, people across the world were united in their condemnation, but it is less well known that at the same time the price of over 200 medicines more than doubled in this country, with 32 rising by more than 1,000% and in one case, as we heard, an unbelievable increase of 12,500%. An indication of how central to the business plan of some companies this practice has become can be found just by looking at their websites. The company Amdipharm boasts that it was sold to a private equity company for £367 million and talks of acquiring and commercialising niche generic medicines. Another of these companies, Concordia International, which now owns both Amdipharm and Mercury, is quite open about the fact that it

“specializes in the acquisition, licensing and development of off-patent prescription medicines, which may be niche, hard-to-make products.”

This may sound like a noble pursuit, but we know that it can in fact be code for establishing and then abusing a dominant market position to the detriment of vulnerable patients and the taxpayer.

[Rob Marris]

My hon. Friend speaks of the abuse of a dominant market position, and this Bill extends the powers of the Secretary of State effectively to confiscate profits, rather than acting through taxation. Does my hon. Friend agree that the same approach may be worth considering in the case of a company such as Google? It has 85% of the world mobile phone market for Android operating systems, and people use Google for 85% of the searches carried out in the United Kingdom. That is a dominant market position and there are questions about the tax paid by Google. Perhaps profit confiscation might be considered.

[Justin Madders]

My hon. Friend tempts me a little way outside my brief. I note, though, that our health service is entering into partnerships with Google, so I hope that questions are being asked by Ministers about the taxation arrangements.

We know that the vast majority of the generics sector is well controlled by competition and delivers value for money to the taxpayer, and we welcome the extension of pricing controls where competition has failed. Is the Minister confident, however, that the steps taken in the Bill are adequate? We have seen, as my hon. Friend the Member for Wolverhampton South West mentioned, how adept international companies can be at moving figures around to avoid taxation, and we clearly want to ensure that the system that we develop is not vulnerable to the gaming that we have seen elsewhere. I do not think for a minute that given the vast sums of money at stake, the companies will just shrug their shoulders and take the hit if they can avoid it.

I was more than a little concerned when I read a section about this Bill in a Concordia investor presentation, which said that in the past the Department of Health

“would seek informal negotiations with manufacturers where it believed there were pricing issues. We believe this step will remain.”

The notion of informal talks with officials brings up uncomfortable memories of the sweetheart deals between multinationals and Her Majesty’s Revenue and Customs. Although I am happy for chains of communication to be open with such companies, can the Minister reassure us that in all cases prices will be regulated through a transparent, formal process and not through behind-the-scenes talks?

[Steve McCabe]

Where the advertising budgets of pharmaceutical companies dwarf their R&D budgets, is there not an argument for the Government to look again at the tax position of those companies, as well as at the price of their products?

[Justin Madders]

We will not get very far with this Government on corporation tax. They have been going in a direction that we would not have chosen. They have decided on the measures in the Bill as the best way to control prices and we will see how they get on. Will the Minister confirm that if it becomes clear in a few years that we have opened up another set of loopholes, we can expect the Department to take the lead and to be proactive in its investigations, rather than relying on a team of journalists to expose the problem?

We know that in Scotland the rebate that has been generated has been used to create a dedicated fund to give patients access to new medicines. Will the Minister consider investigating similar models and ensuring that the benefits of the scheme are used for the purpose of improving our frankly poor record in allowing patients to benefit from new medicines? We accept that there will always be challenges in matching funding to new drugs, but there is at least a degree of logic in allowing savings made in the drugs bill to be reinvested to enable new products to reach patients more quickly.

We welcome today’s report by the Accelerated Access Review, which sets out an ambitious plan that could see patients accessing new lifesaving treatments up to four years sooner. We hope the Minister will take this opportunity to give financial backing to the aims of the review by committing to using future rebates from the pharmaceutical sector to improve access to treatments. I ask the Government to seriously consider this, as there are growing concerns about access to new drugs and treatments in this country, and particularly about the widening gulf between the UK’s record on developing new drugs and the ability of the NHS to ensure that all patients benefit sufficiently.

The “International Comparisons of Health Technology Assessment” report published in August by Breast Cancer Now and Prostate Cancer UK shows that NHS cancer patients in the UK are missing out on innovative treatments that are being made available in some comparable countries of similar wealth. This is at the same time as a number of medicines have been delisted by the Cancer Drugs Fund after it overspent its budget, and the failure to extend this scheme to innovative treatments as well as medication. There was a report in The BMJ in July entitled “A pill too hard to swallow: how the NHS is limiting access to high priced drugs”. It came to similar conclusions when looking at new antiviral drugs that held out a real prospect of eliminating hepatitis C but which were very expensive.

[Mark Tami]

Does my hon. Friend agree that we have to be careful not to discourage drug companies from doing research, particularly into those rarer illnesses, because they would not see a financial return?

[Justin Madders]

My hon. Friend is absolutely right. We must be careful of the law of unintended consequences with this piece of legislation. Commercial decisions will be taken on investment if the return is not sufficiently high, so we have to get the balance right between encouraging investment and getting value for money for the taxpayer.

The BMJ report showed how NHS England, having been unable to budget for broad access to the drugs I mentioned, sought to alter the outcome of the National Institute for Health and Care Excellence process and, when it failed, defied NICE’s authority by rationing access to those drugs. There was also widespread controversy over attempts by NHS England to avoid funding anti-HIV pre-exposure prophylaxis by passing on responsibility to local authorities at the same time as cutting the public health budget allocated to councils. If we are to strive to create a level playing field for drugs companies, we should look to do the same for patients and their ability to access treatments.

Labour established NICE to speed up the introduction of clinically proven and cost-effective new medicines and procedures. An order was made by Parliament in 2001 to mandate the funding of healthcare interventions approved by NICE through its technical appraisal process. They were intended to be available to patients three months after publication of the appraisal. However, subsequent orders have chipped away at that, culminating in the current consultation by NICE and NHS England, which will again potentially delay or deny access to important treatments. Therefore, as well as looking at ring-fencing the payments received under this scheme, will the Minister look more widely at access to medicines? Successive studies have demonstrated that there is relatively low take-up of new medicines by the UK compared with other high-income countries. Not only does that let patients down, but it could impact on the future of the pharmaceutical industry in the UK, particularly given the sector’s concerns about the relatively small value of sales in the UK, compared with other countries, and given the uncertainty surrounding the future of the European Medicines Agency following our decision to leave the European Union.

I am sure Ministers are aware of the concerns that have been raised about that and of the need to ensure that the country is still seen as a leader in the research sector. The Prime Minster has said:

“It is hard to think of an industry of greater strategic importance to Britain than its pharmaceutical industry”,

and the Opposition agree, but we cannot be complacent about the state of UK pharma, particularly as investment decisions are often made by parent companies based in other parts of the world. I hope the Minister will take seriously the interrelationship between decisions about access to treatments and the future of pharmaceutical research and development in the UK, particularly when we know that other countries across Europe are using the current uncertainty as a result of Brexit to eye up opportunities to steal a march on our own industry.

To conclude, the Opposition support the broad aims of the Bill and what the Government seek to achieve in terms of better controlling the cost of medicines. In Committee, we will seek to explore in more detail the new information powers and the details of the impact of those new powers on the supply chain. We will also continue to hold the Government to account and ensure that patients are able to access the best available treatments without any unnecessary delay.