Health Service Medical Supplies (Costs) Bill

Lord Hunt of Kings Heath Excerpts

2nd reading (Hansard): House of Lords
Wednesday 21st December 2016 Lords Chamber

[Lord Lansley (Con)]

My Lords, I am very pleased to follow the noble Lord and pay tribute to the fact that he has clearly identified some of the issues to which I will refer briefly here at Second Reading but which we will need to look at in Committee. The noble Lord did so very ably and helpfully. I thought that my noble friend the Minister set out the Bill very clearly, which is very helpful to the House. I understand that he is moving on to new ministerial responsibilities, so perhaps I may be the first to say that I know—having had the privilege of knowing my noble friend over many years since we first entered another place together—that his knowledge, experience, expertise and wise judgment on health matters is highly respected and much esteemed throughout the sector. His guiding hand will be much missed but we extend enormous thanks to him for all that he has done not only at the Department of Health but prior to that at the Care Quality Commission.

I draw attention to my interests in the register, and in particular as an adviser to MAP BioPharma—although the company is not directly affected by the provisions of the Bill.

In another place this Bill was referred to as a technical Bill. That is probably not an accurate description. It extends the powers of Ministers and gives them the ability to secure a payment under the statutory scheme which they did not feel they were able to do. It gives Ministers greater powers to control the prices of unbranded generic medicines which they did not have and it gives them a greater power to require information from suppliers. So there is a significant threefold extension of the powers of Ministers.

I completely understand and accept the reasons for the Bill. Ministers were right to bring it forward. There has clearly been a transfer that one might uncharitably describe as gaming between the voluntary and the statutory scheme—more politely it would be called arbitrage between the two—since there are suppliers of medicines, particularly in the hospital sector, that discount their list prices to those purchasers. Therefore, a statutory scheme that simply consists of a cut to the list price does not necessarily have any effect on their prices. So it does not have the intention that the voluntary scheme has. The Bill, quite rightly, closes a potential gap in control of the supply of generics by those companies that are also members of the voluntary scheme.

The Bill also extends information supplied by companies for dispensing and it might be useful in all of those to have a little bit of history, if I may detain your Lordships on that. I remember that before 2010, when I was shadow Secretary of State for Health, we were very clear that what we wanted to do as a potential incoming Government was to give stability to the industry and to that effect we said that we would not change the then PPRS before the renewal in 2014. But we were equally clear that when we got to the new PPRS in 2014, it needed to change and that, as it stood, its objectives were no longer being satisfactorily met. It gave businesses freedom for pricing medicines at introduction—and we should be well aware of the relative importance of this. The noble Lord, Lord Warner, referred to the relatively small size of the UK pharmaceuticals market, with about 3% of the international marketplace for pharmaceuticals, but the UK list price plays a much larger part in reference pricing internationally, with something like 25% of the total pricing effect. So it is very important to the industry to have that freedom of pricing.

However, the effect of the ability to price at the list price is that one has a NICE health technology assessment and evaluation with a threshold applied, which still leads frequently to NICE saying no to medicines. The net effect is that we have a licensed and effective medicine available to patients—but at the list price NICE says no and patients lose out. In our view, back then, this was an entirely unsatisfactory position. It seemed to us that, when an effective medicine is available to patients, it should be available to clinicians and patients through the NHS, and between the Government and the industry a mechanism should be established to ensure that a fair price is paid for the medicine. The patient should get the drug, the industry should get a fair price and the NHS should pay only what is necessary to achieve that.

The lack of access in the short run, as your Lordships will recall, is why we established the Cancer Drugs Fund, after Mike Richards’ report on the relative access in different countries in Europe to medicines demonstrated a significant shortfall in access in this country to cancer medicines in particular. But the intention always was—and I reiterate this, because it is frequently misrepresented—for the Cancer Drugs Fund to end at the beginning of 2014, because the new pharmaceutical price regulation scheme was intended to achieve the access benefit that the Cancer Drugs Fund was achieving in the short run. The fund did not overspend up to 2014; it was retained beyond 2014 and it then overspent, but that was not its original intention. So I do not accept the criticism of the Cancer Drugs Fund.

However, the PPRS negotiation for 2014 did not deliver the changes that were intended. It delivered budget control to the Treasury, freedom of pricing and introduction for the industry and a degree of rate of return reassurance to the industry. So to that extent, the taxpayer was well represented, the NHS may say that it was quite well represented and the industry was well represented—but I am not sure that patients were. What we need is a PPRS that serves patients at least as well as it serves the NHS.

[Lord Hunt of Kings Heath (Lab)]

This is a very interesting exposition, but could the noble Lord clarify that there is a difference between the notional list price, which is used as a marker for many other countries, and the actual price paid by the NHS? Secondly, does he agree that, if the Treasury had not purloined the rebate, we would have had the money and patients would have had access to new drugs?

[Lord Lansley]

The noble Lord makes interesting points, which point to where we were always intending to go—to a point where there was in effect a negotiated price between the industry and the NHS so that there was a proper discount. Now we have a rebate system. There was a lot of debate in the other place about where the rebate money went. It goes back into the NHS through the mechanism of the overall Consolidated Fund, so it is less transparent than is the case in Scotland, for example. However, that does not mean that it is lost to the NHS.

I will anticipate something that I was going to say later. A consultation is taking place involving NHS England and the National Institute for Health and Care Excellence, looking at how they can work together to introduce budgetary impact considerations alongside NICE evaluations to establish what prices the NHS should pay for medicines. That is taking us in the direction we have to go—namely, what is in effect negotiated pricing through the NHS to ensure access to medicines for patients. That is the positive construction of the present consultation. The negative construction is that it will create in effect double jeopardy. In the first instance NICE may say no on the basis of the list price. Then NHS England may add a second reason to say no because of the budgetary impact of new medicines—so there is an inherent problem with that.

I will finish the history for a moment. Where dispensing is concerned, there is a history under the last Labour Government of the pharmacy sector significantly exceeding the planned margin between the wholesale price and the reimbursement price because of a lack of good information. Therefore, we can be absolutely clear that an important purpose of the Bill is to get the margin survey right and provide more comprehensive data on the prices being achieved in the purchasing of medicines so as to make the reimbursement price deliver the agreed gross margin as part of the global sum to pharmacies.

Therefore, I support the Bill and its intended purposes. It will be important that it is used properly. The noble Lord, Lord Warner, made some very good points, including on equivalence between the two schemes. Gilead, a firm in my former constituency when I was in another place, continues to tell me what it thinks about these things and points precisely to the potential disparity between the statutory and voluntary schemes in relation to medicines introduced since 1 December 2013. If equivalence is the intention, we need to ensure that the Bill specifies that.

We are looking for a competitive environment in relation to unbranded generic medicines. The Competition and Markets Authority is pushing for that and the measures in the Bill can help Ministers to achieve that prospectively, as it were, rather than just dealing with abuse. But it is wrong for Ministers to take powers which would allow them to behave non-competitively. There is monopsony in this—monopoly purchasing by Ministers. Where a competitive environment is created—for example, where the price is determined in a competitive tender process—it would be completely wrong in my view for them suddenly to find that a price agreed through a competitive process is overridden by ministerial diktat—as the noble Lord said, Lord Warner, said.

I hope that we will also discuss two other issues. A very important one is to build back into the thinking on the future PPRS, through this legislation, what a future PPRS should have at its heart. Ministers making decisions about pricing structures should have specific reference to affordability. They should also have reference to the ability for patients to access the medicines they need through the NHS; the extent to which the pricing system enables unmet need to be met; and the extent to which medicines deliver relative therapeutic benefit, so that we literally pay for innovation and for therapeutic advance, but do not pay a lot of money for me-too drugs with brandings attached to them. However, we should pay for societal benefit. One can imagine the considerable benefit to society that would be derived from a new drug to treat early onset Alzheimer’s. We should also give explicit support to innovation. As the Bill proceeds, I hope that we will see more detail on not only the regulations but how the consultation between NHS England and NICE is proceeding. Perhaps the Government could also say more about their formal response to the accelerated access review and the life sciences strategy.

I support the Bill and I hope all the issues that I have referenced will be brought forward and discussed, including the structure of the information powers. At the moment, they are too wide-ranging and lacking in safeguards. Strictly speaking, there may be circumstances in which it is necessary for Ministers, if they ask for information, to provide a notice saying for what purposes it will be used and with whom it will be shared. Under those circumstances there should also be the potential for an appeal to the General Regulatory Chamber—but we can look at that in more detail in Committee.

As I say, I support the Bill and I hope we can look in Committee at giving more clarity on some of those issues and perhaps even building in one or two safeguards.

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[Lord Hunt of Kings Heath]

My Lords, as the Bill involves the supply of medicines and other goods to the NHS, I should like to start by declaring an interest as president of the Health Care Supply Association and of GS1, the barcoding organisation. I too congratulate the noble Lord, Lord Prior, on his move to the business department. We have very much enjoyed working with him and debating the issues. He has been unfailingly courteous to your Lordships’ House, and I am sure that we have all appreciated the work he has done on behalf of the Department of Health. Like the noble Baroness, Lady Walmsley, I too congratulate the noble Baroness, Lady Chisholm of Owlpen, on her retirement from government and thank her warmly for the work she has done as a Whip. She has taken part in many Dispatch Box debates and we are very grateful to her. I also, of course, welcome the noble Lord, Lord O’Shaughnessy, to his new post. He will enjoy taking the Bill through its remaining stages—perhaps.

As noble Lords have said, the recent fines imposed by the Competition and Markets Authority on Pfizer and Flynn Pharma for charging the NHS excessive prices is a salutary warning to the pharmaceutical industry. We certainly welcome the provisions in the Bill that deal with the small number of companies that have exploited loopholes in current legislation by controlling the price of unbranded generic medicines. However, the Bill misses an opportunity to counter the growing lack of access to new innovative drugs, which is putting the health of NHS patients at risk. I have listened to what the Minister has said, but it seems to me that the cumulative impact of decisions made by his department, and particularly by NHS England, is that there is less and less access. This is a very serious problem, both for the NHS and patients and for the industry and the life sciences sector.

My other concern is that this is a burdensome regulatory Bill. In fact, I am sure that in his new post the Minister will be shocked by the number of regulations that this Bill brings in, without any justification whatever, it seems to me. I hope that as we go through the passage of the Bill, we might look at making some of those regulatory requirements more focused, as the noble Lord, Lord Lansley, suggested.

The powers under the NHS Act currently allow the Secretary of State to make a statutory scheme for limiting the prices or profits of companies that choose not to be members of the voluntary scheme. The Minister has explained that the statutory scheme is less effective in terms of the level of saving that it makes than the mechanism in the voluntary scheme, thus leading to some companies leaving the voluntary scheme in favour of the statutory scheme. I well understand the argument that he put forward. On the other hand, I would argue that the voluntary scheme has served both health service patients and the industry well over the years. It is important that in bringing these measures forward we do not in effect remove the voluntary nature of the PPRS. It would be helpful if the Minister would set out the circumstances under which the powers in Clause 2 would be exercised. Is it intended that the power could be used to change the current voluntary PPRS scheme? Could these provisions be used in the future to restrict the voluntary nature of the PPRS agreement?

I also raise a point referred to by the noble Lord, Lord Warner. Are any perverse incentives likely if companies in the statutory scheme move to the rebate system applying in the voluntary scheme? At the moment, I am informed that companies in the statutory scheme are able to lower their prices directly to the NHS because they are not part of the rebate scheme. In terms of those companies, if the NHS gets the benefit of the lower prices, the department that gets the benefit of the rebate is the Treasury. Is there a risk in switching from the statutory sector to the voluntary sector in terms of the outcome for the National Health Service?

Also, has the Minister assessed the risk that small companies currently in the statutory sector, which may be less able to absorb rebate payments, may leave the market altogether? The noble Lord, Lord Warner, referred to that. I also want to ask about something that the noble Lord, Lord Lansley, mentioned. I understand that the aim is to permit broad equivalence to be achieved between the voluntary and the statutory schemes. Does the Minister think that, to reassure the sector, that should be explicitly stated in the Bill?

Clause 5 extends the power to control the maximum price to other medical suppliers and not just medicines. I listened carefully to what the Minister said, but I am not yet convinced that there is any reason at all for the Government to propose this. The impact assessment, as far as I can see, is silent on the matter. The Minister will know that both the BHTA and the ABHI expressed concerns about the burdens that will be put on the devices and technology sectors. There is also the issue of consultation. It is clear that the major trade associations were consulted, but the industry has a whole host of organisations representing bits of it, such as the continence and stoma industry, for example, which is an important, significant player but was not consulted, despite the implications for it. It comes to the point when the Minister essentially says, “We are going to have these powers, but we do not expect ever to use them”, and they have not been used since 2006. My advice to the Government is to forget it because we seriously question whether Clause 5 should stand part of the Bill.

On regulation in general, I had thought that one benefit of Brexit would be that no longer would we have regulations that the Government consider too burdensome but which they had to agree to, effectively, through the compromises that negotiations in Europe always lead to. I find it curious. This seems to be an example of gold-plating legislation. Clearly, the Government had to deal with a generic problem and introduced this, which is like a Home Office Bill, as the noble Lord, Lord Warner, described it. It is like a Christmas tree. The department found lots of other nice things to put in it, but cannot actually come forward with any strong evidence as to why they should be included. In my naivety I thought that in this Brexit world we would be going for light-touch regulation, but I have to say that this does not look like light-touch regulation to me.

A further example of this is found in Clauses 6 and 7 relating to the provision and disclosure of information. The ABPI has pointed out that the information requirement is onerous and goes well beyond what is necessary, but what is striking is that the provisions are drawn so widely. My reading of the Bill suggests that it applies to any,

“person who manufactures, distributes or supplies any UK health service products”.

The Bill goes on to explain that, so far as England is concerned, it applies to any medical product used to any extent for the purposes of the health service under new Section 264A(1) and any other medical supplies or related products required for the purposes of the health service. We are talking about millions of products. The impact assessment states that the costs have not been quantified for manufacturers, wholesalers and dispensers. Why have the costs not been quantified for these businesses, which number in the tens of thousands? I thought that that was what impact assessments were all about and I thought that the Government had a policy in relation to reducing the regulatory burden on industry. It is very difficult to understand why the department has gone for such a broad-based power and I will certainly be interested in seeing whether it is possible to hone down these clauses and focus on the information that the Government can prove they actually need.

I want to pick up on the issue about access to medicines. What is so striking about the Bill, which is concerned with medicines, is the glaring absence of provisions to increase the uptake of new medicines by NHS patients. Any number of reports, in particular over the past two years, show that we have taken an increasingly restrictive approach to the adoption of new medicines in this country. This goes alongside the current consultation by NICE referred to by the noble Lord, Lord Lansley, with the proposal that if a NICE-approved treatment is expected to exceed £20 million in any of the first three years of its use on the NHS, NHS England can ask NICE to allow a longer period of phased introduction. I think that the noble Lord, Lord Lansley, suggested that this could be okay, but there is a risk of double jeopardy. We need to hear from the Government in this Bill how it is not going to be double jeopardy. The industry goes through all the processes it needs to in order to ensure that a treatment gets through the NICE process. The medicine then has, if you like, an affordability test which is in addition to a cost-effectiveness test, and thirdly, the Minister is taking draconian powers to reduce the amount of money going to the industry generally. That is triple jeopardy. The question I put to the Minister is this: what is the cumulative impact of all these proposals, not only in relation to the actual price but in relation to access to innovative new drugs?

The noble Lord, Lord Lansley, referred to the 2014 PPRS agreement and said that it could have been ground-breaking in relation to access for patients. I agree because it was a very good agreement and one that could have finally opened the door to the NHS giving access to treatments that every other country has access to before we have here. I know that the noble Lord and I seem to disagree about where this rebated money goes, but he will know that the industry agreed to hold drug costs for a five-year period with the bill staying flat for two years and then growing only slowly after that. There have been one or two modifications since then, but that is the broad principle. If drug expenditure by the NHS goes over the agreed level, the industry will pay a rebate at every quarter, and so far it has paid £1.5 billion back. The noble Lord’s argument is that I should not worry about that figure because the NHS gets it. As I see it, what clearly happens is that the Treasury forecasts in advance what the rebate will be. It is also well advertised in advance what the allocation to the NHS will be. In essence, the Treasury gets the benefit because it reduces the contribution it makes to a given figure.

If it had been agreed that the rebate could have been used—perhaps as in Scotland or in another way—to fund much greater access to new drugs, we would have achieved what the noble Lord, Lord Lansley, set out to do. It is a hugely missed opportunity. None the less, I hope the Government, when looking for the next PPRS agreement, will look at the lessons to be learned. I agree with him and my noble friend that clearly we need value for money and certainty but, unless we can deal with this pervading problem of lack of access to new medicines, NHS patients will get no benefit whatever.

We have to link that to the health of the life sciences sectors and the industry. In his new role, the Minister will be as concerned about this as he probably is at the moment. The UK has been one of the foremost countries in the world for drug development. We know that our life sciences was one of the reasons why. The noble Lord, Lord Lansley, suggested that flexibility on pricing on first introduction is also a reason because it acts as a benchmark for other countries, but I have no doubt whatever that the NHS’s failure to adopt new medicines is putting future investment at risk. I do not think we can be complacent. A long time ago, when I was responsible for it, the UK developed about 30% of the top 100 new drugs. That, as I understand it, is now down to 14%. The risk is we can go lower.

We very much look forward to debating the Bill. It clearly has very useful measures on drug costs, but no case has been made to extend its provisions to medical devices and technologies. It looks like gold-plating regulation, which we would like to try to improve, but overriding this is the sense that, until the Bill provides for increasing NHS patients’ access to ground-breaking new treatments, it remains defective.

Health Service Medical Supplies (Costs) Bill

Lord Hunt of Kings Heath Excerpts

Committee: 1st sitting (Hansard): House of Lords
Monday 23rd January 2017 Grand Committee

[Baroness Masham of Ilton (CB)]

My Lords, cost-effective medicines which work for patients are vital, but some orphan drugs will cost more. Why are there differences in the pricing of drugs in Scotland and England? Someone must be making a lot of money.

[Lord Hunt of Kings Heath (Lab)]

My Lords, that is a very interesting question. The exchange between the noble Lords, Lord Lansley and Lord Warner, has been very helpful in focusing on the full intent of the amendment. As it is the first day of Committee, I remind noble Lords of my presidency of the Health Care Supply Association and GS1, the barcoding association.

The amendment is essentially about the life sciences sector and the relationship to it of the pharmaceutical and medical devices and technology industry. However, inevitably, as the noble Lord, Lord Lansley, has shown, it is very difficult not to talk also about issues to do with PPRS and access, and I suspect that those other issues will be dipped into in a number of debates.

First, let me say that the Opposition are strongly in favour of closing the loophole that the core part of the Bill attempts to do. We clearly want to see the NHS get value for money and a good deal out of price negotiations with the different parts of industry it deals with in relation to the matters covered by the Bill. My noble friend Lord Young asked some very pertinent questions. The Minister in passing raised the issue of clinical pharmacology. This is a clinical profession that most clearly enables the health services and, indeed, Ministers to understand the true cost effectiveness and value of new medicines.

The UK is a world leader in clinical pharmacology but, because decisions about the appointment of clinical pharmacologists are made by the NHS, we are at risk of losing the whole profession. I was very disappointed that Health Education England proposed to reduce the number of training posts in its most recent consultation. We were very pleased to have a meeting with the Minister’s predecessor, the noble Lord, Lord Prior, on this, and I very much hope that the Government will be prepared to have a look at it.

This debate is about the contribution of the life sciences sector to this country. Briefly reading the consultation passed today on the industrial strategy I noticed that the introduction talks about the UK benefitting from an,

“open economy: pro-competition rules, flexible labour markets, less intrusive regulation”.

The question that one really wants to put, particularly as this is a sort of declaratory amendment is, if that is so, if—as the noble Lord, Lord Lansley, has suggested—the issue of life sciences post Brexit deserves a great deal of consideration, why have the Government brought what is clearly an overbearing regulatory Bill to your Lordships’ House? If ever I have seen an example of gold plating, this is it. We understand the need to close the loophole but I do not understand and I do not think we really saw a case made at Second Reading for why the Department of Health is determined to intervene in this sector in such a wide-ranging way. It is interesting that your Lordships’ Delegated Powers Committee has already pointed out the open-ended nature of the Government’s approach.

It is impossible to look at the health of the life sciences and the health of the pharmaceutical, medical devices and medical technology industries in this country without looking at the crucial issue of access. I know the Minister’s department is in denial about this and feels that access can be constantly reduced and will have no effect on investment in these sectors. I simply do not believe that that is so. The noble Lord, Lord Lansley, rightly said that this is one of the sectors that we want to protect and enhance—but I believe we are at real risk of losing its pre-eminence in this country.

I understand that the Secretary of State is shortly to go to North America to sweet talk the boardrooms of US pharma. I know the noble Lord, Lord Warner, has been there. I have been there, too. I am sure that the noble Lord, Lord Lansley, has, too. The idea that the Secretary of State will not talk about access is naive. Access is a crucial part of investment decisions by these companies in the UK. The noble Lord, Lord Lansley, referred to the proportion of new chemical entities and top 100 medicines globally that have been developed in this country. I understand that it is now down to 14%. That is healthy compared to 3% turnover, but when I was the Minister responsible we were in the 20% to 25% range. So we have a horrendous decline in the influence of the UK sector. My fear is it is going to decline even further in the years ahead.

We will come back to the 2014 PPRS agreement. Potentially, the industry would have funded the widespread use of innovative medicines in the NHS. Between them, however, the Treasury, the Department of Health and NHS England have completely messed this up. We have ended up with the worst of all worlds, in which rationing in the NHS has reached appalling levels: CCGs are making some of the crudest rationing decisions that I have ever seen.

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Moved by

[Lord Hunt of Kings Heath]

2: Clause 1, page 1, line 14, at end insert—
“( ) After subsection (1) insert—“( ) In exercising functions in relation to the controls on the cost of health service medicines established under this section, the Secretary of State must ensure that any payments made by manufacturers or suppliers to whom the scheme relates which fall under subsection (1)(b) are utilised solely for the purpose of reimbursing the National Health Service for expenditure on medicines and medical supplies.””

[Lord Hunt of Kings Heath]

My Lords, in moving Amendment 2 and speaking to Amendment 4, I will inevitably go over some of the same ground, but I will try to make my remarks briefer than I would have done. I just want to pick up what the noble Lord, Lord Warner, said. The Government have a hell of a job to do to convince these boardrooms, which are no longer much based here. Even the two British companies essentially take global decisions. A lot of work has to be done to convince them that, in the current situation, continued and improved investment will be worth their while.

The Minister may not know this, but there has been great reluctance on the part of his department to talk properly to the industry on these issues, because of this absurd idea that access is a matter that it will not discuss. He may also not know that NHS England is being obdurate about being prepared to discuss these matters in an open way with the industry. I have been astonished by the difficulty that these huge companies have had in getting through the door of NHS England to discuss these matters. This is a serious issue. We would not pursue it unless we thought that we were reaching a critical point in the future of a hugely important sector. I have a sense that because the funding of the NHS so dominates everything that the department does, it then cannot talk about access because it is seen as a cost pressure. I understand that, but it is such a short-term view. We are at risk of making the wrong decisions.

My two amendments are the nearest I can come to the creation of a ring-fenced fund, as suggested by the noble Baroness, Lady Redfern, given the constraints on drafting amendments. That is essentially what I aimed to do: to say that the rebates are for investing in new medicines, devices and technologies. That is the heart of what we seek to do because I still believe that the 2014 PPRS agreement was a golden opportunity to get the best of all worlds—a brilliant life sciences sector, industries investing in R&D and NHS patients getting speedy access to these new developments. But we have not got there yet and that is why this debate is so important.

The Minister mentioned a number of encouraging developments, including the rapid access review, but he must know that there is a general cynicism among anyone involved in earlier discussions about the outcome being a pale shadow of what it could have been. We know that it will really cover only a limited number of medicines and treatments. Equally, the Minister mentioned NICE. It is true that there is an order, which I introduced way back, because of concern that primary care trusts were not implementing technology appraisals effectively enough. But we are seeing a chipping away at even that rather imperfect approach to try to get the NHS to do what legally it should have done, which is enthusiastically to embrace NICE’s technology appraisals.

The department has allowed NHS England to ride roughshod over it in relation to NICE. The latest consultation by NICE, imposed on it by NHS England, to put an arbitrary cap on NICE decisions, coupled with the introduction of a threshold for rare diseases of the £100,000 figure, is putting a triple jeopardy into the system. When it is investing billions of pounds in a new drug, the industry has the NICE process to face; it then has to face the arbitrary imposition by NHS England of these further restrictions; it then gets down to clinical commissioning groups, which in recent months have made some extraordinary decisions in relation to rationing in general and specifically on some of these new medicines. It is very worrying indeed.

I think that the noble Lord, Lord Lansley, hopes the Government might give an outline of their strategy for future voluntary agreements with industry—if there are to be such agreements in future—that embrace the issues of investment, access and value. I am sure that that is very sensible. In the meantime, I am convinced that the only way in which the NHS will start to invest properly, so that its patients come at least somewhere near to the kind of access that we see in other European countries, is by some ring-fenced money being found to finance it. There is no chance of access being improved on the current funding arrangements. NHS England, whose approach is simply to look to control budgets, seems to have no interest whatever in the issue of access. My amendments suggest one way in which we might do that. Ultimately, what I think we all want to hear from the Government is whether they will take a new approach to negotiations which would be about cost-effectiveness and value for money, of course, but takes access almost as its No. 1 aim. I beg to move.

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[Lord Lansley]

May I say a quick word on these two amendments, which would have the same effect in relation to the voluntary and statutory scheme? I understand the debate that we have just had, but it seems to me that we are likely to have a more productive discussion to this effect on the next group. The purpose of these amendments is simply to say that the money that is generated through the rebate must travel back to pay for medicines. The consequence of any such scheme would be that, whereas at present the Treasury together with NHS England and the Department of Health agree a budget based on the Treasury’s assumption that there will be a drugs bill and that bill will be controlled at that level by virtue of the rebate, the Treasury would be obliged to say that the drugs bill could not be controlled. We know that the rebate does not necessarily correspond to the prior assumption of the level, so the amount of money available to fund medicines would be variable, particularly if it was applied to new medicines, as in Scotland. There would therefore be, from the industry’s point of view, nothing in principle to prevent it from pricing up products that fall within the scheme to which the rebate is applied, with the impact that that would increase the money available to supply additional medicines, knowing perfectly well that there would be no overall budgetary control. At the end of the day, there has to be budgetary control. It is only by virtue of the fact that the rebate is not automatically recycled into additional NHS expenditure that the budget can be controlled. In the absence of any such control, I cannot see how the amendments would work.

[Lord Hunt of Kings Heath]

Surely it is the other way round. The NHS could up its intake of new medicines willy-nilly, knowing that the industry would have to pay a rebate to the department. In essence, industry would be paying for the uptake of new medicines. The problem is that the Treasury discounts the figure. It makes an estimate of what the rebate is likely to be in the next financial year and builds it into the baseline budget, which is based on minimal growth.

[Lord Lansley]

The position is that the PPRS is a deal based on a budget. If you want to construct something that does not have a budget limit, you could certainly do so, but I do not think that the amendments would have the effect that was looked for. As for another way of doing it, this is where we get on to what in my view is the real debate. I am not sure that I have ever believed that there should be a fixed drugs budget in the NHS. We have a health budget and we should aim for the NHS to derive the greatest possible benefit to patients from the budget that it deploys—not the drugs budget but the total health budget.

[Lord Hunt of Kings Heath]

That is very interesting. It has always struck me that when you chair a board of an NHS foundation trust, for instance, there is a philosophy that says that spending on doctors and nurses is a good thing but spending on drugs is a bad thing. It is a ludicrous position. I agree with the noble Lord, Lord Lansley, that there is a big problem. Spending on drugs is seen as a cost pressure, so automatically everyone’s emphasis is on keeping that spending down, whereas a rather more sophisticated approach would take the view that, if you have spent your money on drugs that have had a hugely positive impact on the throughput of patients, cost-effectiveness and efficiency, that might be a good investment. The question when we come to the next group is whether our current arrangements have come to the end of the road and whether we need to move on to something rather more sophisticated.

[Lord Warner]

What we set up a long time ago was, effectively, NICE to be the arbitrator, and we controlled the flow of technology appraisals into it. I used to sign off a limited number of drugs that would go into the NICE process. We have that system, which has now been legally enshrined. It is also open to NICE to withdraw drugs from use, as it has from time to time, or to change procedures. We have a system enshrined in our law in which the NHS is required to commit to introducing NICE-approved technology appraisals, so the idea that we should let the Treasury arbitrarily reduce and control the small bit of that total NHS budget on those grounds seems bizarre. I agree with the noble Lord, Lord Lansley: we have ended up obsessing about this relatively small part of the NHS budget when we have set up a system to ensure that the NHS gets value for money through the NICE appraisal process. We are getting into a strange situation, which is why we are scrabbling around to make amendments to try to make a pretty crazy system slightly less crazy.

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These amendments could be a matter of concern because there is a potential for gaming the system, as my noble friend Lord Lansley described. Indeed, some of the considerations that we are talking about today would be better conceived of for a future medicine pricing scheme than in the context of this scheme as it stands. On that basis, I ask the noble Lord to withdraw his amendment.

[Lord Hunt of Kings Heath]

My Lords, I am grateful to the Minister and other noble Lords who have spoken. We have had a very good debate. Obviously, as I made clear at the beginning, I am not wedded to the words of the amendment. It was not the amendment that I wished to bring to your Lordships’ Committee. Clearly, the issue is access and the use of the rebates. I understand the issue about risk and, of course, any considered system in which there clearly needs to be budgetary certainty.

Equally, we need to see much faster uptake of new medicines and, indeed, new technology and devices. A similar argument could be made about new technology as well because, again, we are terribly bad at investing in our own companies even though we have highly successful medical technology and devices industries. They have the same issue of the NHS being incredibly reluctant to invest in their new developments. This has been a long-term problem: the noble Lord, Lord Warner, and I dealt with it 15 or 20 years ago and it has been a problem with the NHS right from the start. The problem is that we are now seeing this connected to the success of the UK’s economy as well, which is why—one way or another—we have to find a solution to this problem.

Turning to CCGs, it is reported on a regular basis that they are making rather bizarre decisions: arbitrary decisions about restricting access to certain treatments that clearly are entirely budget-based and seem to have no value as clinical decisions. I am very worried about the fact that we are now starting to see the legitimisation of very crude rationing of access to services by patients.

This has been a useful debate. Access is crucial and it is clearly not happening at the moment. I hope that between now and Report we can have further discussions and an understanding of what the Government are trying to do to seek to increase access. Having said that, I beg leave to withdraw the amendment.

Amendment 2 withdrawn.

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Moved by

[Lord Hunt of Kings Heath]

3: Clause 2, page 2, line 15, at end insert—
“(3) In exercising functions in relation to the controls on the costs of health service medicines, the Secretary of State must ensure that any medicine covered by a voluntary or statutory scheme that requires payments calculated by reference to sales of that medicine shall be made available to all NHS patients if recommended by a qualified NHS clinician.(4) An amount calculated under subsection (1)(b) may only be calculated using the same methodology as an amount payable by any member of a scheme made under section 261 of the National Health Service Act 2006 (voluntary schemes for controlling the cost of health service medicines) is calculated.”

[Lord Hunt of Kings Heath]

My Lords, I will speak to the second part of Amendment 3, as I think we have comprehensively covered the first part in our debates on the first two groups. I am not looking to the Minister to respond to the first part. The second part of my amendment seeks clarification on the relationship and equivalence between the voluntary and statutory schemes. It provides a further opportunity to debate the future of a voluntary PPR scheme, because, clearly, it might be argued that the Bill is setting a precedent for determining in legislation the nature of a voluntary scheme. It would be helpful if the Minister set out in very broad terms the kind of approach he wishes to be taken in the future—in either a statutory or voluntary scheme—looking at the issues we have talked about in relation to pricing, access and value for money.

In many ways, the voluntary PPRS approach has served government, patients and the industry pretty well over the years. There is no doubt, as the noble Lord, Lord Lansley, referred to, that it has provided certainty to government, alongside giving the industry flexibility on the prices it sets, because it acts as a marker to many other countries. However, the actual price paid is very different from the notional price set. What comes to my mind is that this is not very transparent and very few people understand the system. One does begin to wonder whether it is still serving its purpose and whether we need to think about a new approach that is neither the voluntary PPRS approach we have at the moment nor the statutory approach we have in mind for companies that have not signed up to the voluntary system. If anything, there is the issue of equivalence, which companies wish to know about in terms of the two schemes, but it would be helpful to know where we are going in relation to future negotiations, and the amendments from the noble Lords, Lord Warner and Lord Lansley, will address this. I beg to move.

[Lord Lansley]

The purpose of Amendment 5, in my name, is to recognise that the Government have brought forward legislation to do a necessary thing, which is to address the discontinuity between the voluntary scheme and the powers available under the statutory scheme. As such, where companies were operating under the statutory scheme with a pre-existing discounted price, often in the hospital sector, the effect of the statutory scheme imposing a given price cut did not impact on their effective price to their customers. Therefore, they did not make a contribution, in that sense, to the budgetary control that was being looked for. The purpose of the legislation is to bring equivalence to the voluntary and statutory schemes. But if we are creating equivalence between the voluntary and statutory schemes, we should be clear that the legislation does precisely that. The noble Lord, Lord Warner, quite accurately referred to this issue at Second Reading, if I recall. There are companies under the statutory scheme—Gilead is a particular example—with products that would, under the voluntary scheme, not have a PPRS control applied to their pricing because they would not contribute to the rebate as they have been introduced after December 2013. Under the statutory scheme, however, they are required to contribute.

As I understand it, the objection to bringing the two schemes to an equivalent place is that under the statutory scheme, as things stand, there are relatively few products and a significant proportion of them have been introduced since December 2013. Therefore, under the statutory scheme, the effect on the rebate of the rest of the companies would be excessive. That can be dealt with. The powers are available. If we legislate in the form that I propose, the Government can modulate the rebate between the two schemes in order to arrive at a similar result for those companies that have to contribute to the rebate and apply a common percentage. As a matter of principle, if we are legislating for the two to be equivalent, it is desirable to do so.

I am slightly worried about Amendment 3 because it assumes that there is a voluntary scheme. We do not know. There may or may not be a voluntary scheme. But a voluntary scheme will not always be in place at the point at which the Government, in order to protect the NHS, may require there to be one. I do not think that we should be in that position. There would be a flaw in the powers available to set a methodology for a rebate under a statutory scheme. In Amendment 6, which the noble Lord, Lord Warner, has not yet had a chance to speak to, he clearly understands that there needs to be a relationship between these two, but I fear there is a risk of gaming on that amendment because the industry may say that if it does not agree a voluntary scheme there cannot be a statutory scheme. Therefore, there is no scheme, and I do not think that that we want to get ourselves into that position. It will not surprise the Committee that I can see reason for my own amendment even if I am not necessarily in favour of everyone else’s.

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[Lord Hunt of Kings Heath]

My Lords, one of the benefits of Committee is that one can draft imperfect amendments, have them corrected by Members of the Committee and then, if necessary, come back with better amendments on Report. I have never worried about the absolute wording of amendments, because whatever happens, in the end, the Government have to come back at Third Reading to correct everything. So we can relax about that.

It has been a helpful debate, with a helpful response from the Minister. He has used the term “broadly equivalent”; he has also said that the Government are committed to a voluntary scheme in future and, I think, recognises the flexibility that it gives. However, we still have much to discuss about the nature of the future relationship and potential agreements.

I also worry about most people’s current lack of understanding of what the negotiations mean and of the actual prices paid. I wonder whether we have reached a point where we need to move to something that is more understandable and transparent. I think that what the Minister said about the future of the voluntary scheme will be welcomed, I am sure that it has been a helpful debate, and I beg leave to withdraw the amendment.

Amendment 3 withdrawn.

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Moved by

[Lord Hunt of Kings Heath]

9: After Clause 3, insert the following new Clause—
“Report on use of payments made under schemes
The Secretary of State must prepare and lay before each House of Parliament a report covering each financial year during which this Act is in force, detailing how the payments made by manufacturers or suppliers under the schemes established or amended by sections 1 and 3 have been used to re-imburse the National Health Service for expenditure on medicines and medical supplies.”

[Lord Hunt of Kings Heath]

My Lords, I shall speak also to Amendment 10A, which was inserted at a late stage, and Amendment 14. This comes back to the theme of transparency. My amendments cover the use of payments made under the reimbursement scheme. They cover the pricing and availability of medicines and other medical supplies, research and development and the duty on the NHS to promote innovation. Given that we have already had an interesting debate and that these matters are very important to both patients and the life sciences sector, is the Minister sympathetic to the idea of regular reporting on how this is going—the impact on patient access, payments and reimbursement in a way that would allow parliamentarians in particular and the public to be kept up to date?

I am not wedded to the wording of any of the amendments, but it would be helpful to know whether the Minister is sympathetic to regular reports, which would be helpful to noble Lords and Members of the other place. We could get to grips with what is happening and see the impact in terms of access, reimbursement and investment in life sciences. I hope that the Minister will give a positive answer on this. I beg to move.

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[Lord O'Shaughnessy]

My Lords, I am grateful to noble Lords for raising the issue of reporting requirements. We will address at the end the issue of access and my sympathy to reporting requirements, but I first want to deal with the amendments as they stand.

Under the current PPRS, the Government regularly publish information relating to the operation of the voluntary scheme. Of course, for a future statutory scheme I draw attention to the regulations that we have already discussed, in which there are annual reviews of the regulations and a requirement to publish a report on each review. The illustrative regulations require an annual review that will: set out the objectives of the scheme; assess the extent that our objectives have been achieved; and assess whether those objectives remain appropriate. These requirements will be tested through the consultation on the regulations and we will, of course, take account of those views. I totally accept that reporting is a critical principle, but believe that setting out the requirements in primary legislation is too restrictive because of the potential to change from year to year what the priorities are within a sector and within the NHS.

Turning to the specifics of Amendment 9, I reassure noble Lords that the content of annual reviews would not be restricted to reviewing objectives. They must also be able to address key issues arising during the year that might affect the operation of the scheme, so there is flexibility there. We also intend for the annual review to be published and put before Parliament, so there is the opportunity for that to be seen and discussed. On the details of what it is proposed to report—in particular, how the payments are used—to achieve the specific aims of the amendment, the department would need to ring-fence the funds and monitor where the payments are used. I do not want to rehash our discussion about ring-fencing. I take seriously the point that noble Lords make about driving access to innovative drugs but we do not think this is the right way of doing it.

Nor do I believe that, through these means, it is right to address matters relating to the NHS duty to promote innovation. This Bill is ultimately about controlling the cost of medicines and medical supplies. The NHS Act 2006 puts duties on the Secretary of State to take into account both the need for medicinal products to be available for the health service on reasonable terms and the costs of research and development, which is a big factor in innovation. By taking into account these factors, the Secretary of State is looking at the needs of the industry to support the R&D base as is necessary to support the development of innovative medicines and technologies.

The NHS duty to promote innovation is different. It is about promoting innovation in the provision of health services and there is an extremely broad agenda that goes well beyond medicines. We have already said that we all want to make the UK the best place in the world to design, develop and deploy life sciences products. We do not believe that the Bill will have a negative impact on our doing so. We have also talked about the accelerated access review, so I will not go over that.

Turning to the specifics of Amendment 10A, the supply of medicines is highly complex, and pricing is one part of it. Other issues of course include rigorous safety and quality standards. Difficulties faced in the take-up or availability of medicines can be influenced by a number of reasons which are nothing to do with pricing. There can be manufacturing problems, such as batch failures; changes in guidelines, such as antibiotic switches; and raw material problems, as well as regulatory changes.

For example, in 2015, there was worldwide withdrawal of a branded antipsychotic injection, Piportil, due to a global shortage of the active pharmaceutical ingredient. Sanofi was unable to find an alternative source of this ingredient and had to discontinue the product. I set that out to illustrate the point that it is not always easy to link changes in pricing to issues of availability or access: there are other things to take into account. That is why we do not believe that we should set out, either in primary legislation or beyond the commitments made in the illustrative regulations, specifically to assess the impact on availability, access and so on.

Leaving all that aside and returning to the recurring theme of the debate, I understand the desire for greater transparency, which is undoubtedly the right approach to access. We must think about how we can improve access to innovative medicines for NHS patients and, in doing so, improve the operating conditions, if you like, for the life sciences industry—the win-win situation to which we keep returning. I would be happy to meet noble Lords either individually or collectively to think about what more we could do, whether through the Bill or looking ahead to the life sciences strategy, to ensure that we deliver on this promise. I take very seriously the warnings that many noble Lords have issued; the Government absolutely want to address this. On that basis, I ask noble Lords not to press their amendments.

[Lord Hunt of Kings Heath]

My Lords, I am grateful to the Minister. On the two arguments he put forward against the amendments, he said, first, that primary legislation would be too restrictive and what one might need to report on one year, one would not in another. The three amendments cover payment, supply, R&D and innovation. I do not think that there would be any year in which it would not be appropriate to report on them. He also said that duties in existing legislation cover some of these areas, and that where they do, such as the duty on innovation—presumably in the 2012 Act—they go wider than the intent in the amendments. I fully accept that. None the less, there is a strong argument for progress being monitored and for Parliament to be involved in that. However, I am grateful to the Minister for agreeing to have further discussion about the core issue of access, and I hope that we may take this forward. In the meantime, I beg leave to withdraw the amendment.

Amendment 9 withdrawn.

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[Lord Lansley]

I am grateful to my noble friend for that thoughtful and helpful response. I will say three things. First, thank you for the opportunity to be consulted as the future PPRS structure is developed. I very much appreciate that.

Secondly, on freedom of pricing and introduction, it does not necessarily follow that putting into the legislation the criteria that Ministers should take into account in so far as they exercise their powers has a direct impact. That might be done, as I described, through the mechanism of modulating the rebate, which would not impact on the freedom of pricing and introduction.

My third point is that I did not invent value-based pricing. I may have advocated it for some considerable time—probably 10 years now—but it was advocated before I took it up by the OECD in a wide-ranging report on pharmaceutical pricing internationally and by the Office of Fair Trading in its review of the previous PPRS.

[Lord Hunt of Kings Heath]

My Lords, I think it goes back even further, to an Oxera report on value-based pricing.

[Lord Lansley]

The noble Lord is absolutely right about that. There is a history to this. The reason why there is a history is, first, that this is an eminently desirable place to arrive at, in that it would give us tremendous transparency in pricing. At the moment, it is extremely difficult to discern the pricing structures in the industry from the point of view of the payers. Secondly, it would enable us—and this is the objective—to arrive at the point where we could give patients the access to the medicines that are most appropriate to them.

[Lord Hunt of Kings Heath]

This is very interesting and rows back to a point that the noble Lord made earlier. One issue is the capacity to negotiate with industry. My understanding is that the pharmaceutical industry has made some approaches to NHS England to look at elements of what the noble Lord is suggesting. There is a sense that, at the moment, there simply is not the capacity to negotiate the kind of sophisticated agreement that he seeks.

[Lord Lansley]

Without repeating what I said earlier about the consultation being conducted jointly by NHS England and NICE, I think that that is precisely the point. These two organisations need to be brought together. There is a degree of sophistication in the NICE processes that needs to be allied to the affordability and therapeutic benefit considerations as seen by NHS England. I freely admit that NHS England is still developing its role.

In relation to specialised health commissioning, I think that it is tremendously positive for it to be able to see the needs and advantages of commissioning all these specialised services on a national basis, as opposed to the patchwork and inconsistencies that we used to see. In that sense, it is only discovering what the commissioning pressures and costs look like—but that will enable it to move on to understanding what that means in terms of the relative benefit and, by implication, affordability of getting into negotiations with companies.

We need to arrive at the point where NHS England can engage up front with industry about the potential cost and pricing of medicines and obviate the need for NICE to go through the long process of the introduction of additional thresholds. As we discussed, there is an issue about the introduction of an additional threshold for highly specialised technologies. We do not want to go to that place with additional thresholds and a variety of arbitrary figures. We should be able to arrive at a point where industry can engage up front with an expectation of understanding what kind of discounting or price it is likely to be able to attract from the NHS because it is able to have a serious discussion about relative value.

I have been dragged back into another, longer conversation. I entirely take my noble friend’s point that there are references to these criteria for Ministers to take account of elsewhere, but there is a risk that the PPRS can be constructed as a budgetary control mechanism without regard to those criteria—notwithstanding that Ministers have a responsibility for them in other places. Even if it were constructed in terms of cross-reference to ministerial duties elsewhere, we could still continue to look at whether this part of the legislation—the statutory basis for the scheme—should cross-refer to the criteria that should be brought to apply. But I take my noble friend’s comments in good part and I am happy on that basis to withdraw the amendment.

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[Lord Hunt of Kings Heath]

My Lords, we discussed at Second Reading the general concern that the Bill extends amendments aimed at the provision of health service medicines to provisions relating to medical supplies. Subsequently, the Minister has written to us to explain that,

“section 260 of the NHS Act 2006 already provides the Secretary of State with powers to control prices of medical supplies and to require companies to provide information on any aspect of their business. Clause 5 of the Bill ensures that the enforcement and territorial provisions for any scheme concerning medical supplies are aligned with those for health service medicines, including changing non-compliance from a criminal to a civil offence … While the Government is currently not using its powers to control prices of medical supplies … it is important that we continue to have these powers”.

I have to say that, so far, I am not convinced. Will the Minister confirm that the section of the NHS Act 2006 to which he referred is essentially a consolidation measure, which merely restates the provision introduced some years before? Indeed, with the help of the Library, I can say it seems that the measure was first introduced in 1977. There seems to be no reference in Hansard as to the reasons that it was then introduced, although it is thought that it was part of the debates on the Bill on the status of private patients in the NHS. Looking back to those happy days, one can only imagine the debates that we had. The point is that the power has never been used: it was legislated for 40 years ago and it has never been used.

I start from the premise that, if a provision introduced 40 years ago has never been used, the first question is: should it be needed at all? So far, I have heard no convincing argument that it should. With this provision having never been used, even though on the statute book for 40 years, the Minister should not be surprised that the companies concerned are suspicious of the Government’s motives for doing what they are doing. This is particularly the case because there was so little consultation with the medical technology industry, as an example, prior to the publication of this Bill.

As just one example of this, at Second Reading in the Commons, the Health Secretary said that his officials had consulted stakeholders across the supply chain, including those from the medical devices sector. My understanding, however, is that the continence-stoma industry, and its relevant trade associations, was not consulted about the potential impact of the Bill. It is unclear why the Government want to do this in relation to medical supplies. If ever there was an example of gold-plating of legislation, this is it. I hope that the Government will be prepared to modify those provisions.

If the Government really want to extend this beyond medicines to medical supplies, surely they can find a way to remove the open-ended provisions and set a threshold to trigger them. At the moment, we have no information. There was none in the impact assessment. Given that the Government are supposedly interested in light-touch regulation, it is difficult to understand why Ministers have not removed this clause from the Bill and the section from the 2006 Act. It is very difficult to see what they are getting at here.

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[Lord O'Shaughnessy]

I thank noble Lords for the debate on Clause 5. I am also grateful for the tour d’horizon or history lesson on how this has all come about. It feels as though it has slipped through many nets, for which there are multiple responsibilities around the room.

I will first address the point about consultation. Noble Lords will appreciate it when I say that, personally, I have not had the chance of undertaking that consultation but it is something that I am committed to doing. Whatever has gone before, I can at least give the reassurance that I will meet the relevant bodies in the next few weeks and discuss their concerns ahead of Report. At least in a forward-looking way, I can provide that reassurance.

As everyone has stated, the critical point here is that the 2006 Act gives the Secretary of State the power to control the price of medical supplies and to collect information about medical supplies. What Clause 5 does is to ensure that the same enforcement and territorial extent to provisions apply to controlling the cost of medical supplies and health service medicines. It does not give the Secretary of State any new powers to control the price of medical supplies. There are currently inconsistencies in the enforcement and territorial extent provisions. For example, a contravention or a failure to comply with the current provisions in the 2006 Act for medical supplies can result in a criminal offence. By contrast, the equivalent penalty for medicines is a civil financial penalty. Clause 5, therefore, aligns the enforcement provisions for medical supplies with those for medicines and, in so doing, makes them more proportionate, as the noble Baroness, Lady Walmsley, has pointed out.

With respect to the territorial extent, the power to control the prices of medical supplies in the NHS Act 2006 currently extends only to England and Wales. Clause 5 would extend the power to control the prices of medical supplies to Scotland and Northern Ireland. That would be consistent with the territorial extent of the powers to control the costs of health service medicines. That is an important point.

A number of noble Lords asked why the Government need the powers to control the prices of medical supplies when they do not currently use them nor have ever used them. That is a perfectly reasonable question to raise and one that occurred to me, too. We do not have any immediate concerns about the pricing of medical supplies. It is true that the market for medical supplies is very different from the market for medicines. It is innovative and competitive, and new medical supplies are generally faced with competition much more quickly than is the case for new medicines. However, I remind noble Lords that until recently we did not think that we needed the powers to set the price of unbranded generic medicines. We thought that competition in the market was working well and keeping prices down. When we realised that the market was not functioning as well as we thought with respect to certain products, and we were faced with companies charging unreasonably high thresholds where they had no competitors, we realised that we did not have sufficient powers to intervene when needed. That is of course one of the reasons for the Bill.

A question was asked about thresholds and when such a provision could be triggered, which is a reasonable question. The two examples I can give are when we had evidence from existing data that there may be an issue with pricing—for example, the reimbursement price that we set in primary care is increasing without an obvious reason—or when there is effectively a bottom-up complaint where patients, clinicians, commissioners or industry raise concerns because it is not obvious what is driving a price rise. I want to minimise the need for future primary legislation on medical supplies pricing controls. The Government should have the ability to intervene, but only when the market is not working well. Whether it is for medicines or medical supplies, it is right that those powers exist but are used only when necessary and proportionately. On that basis, I ask the Committee to agree that Clause 5 stand part of the Bill.

[Lord Hunt of Kings Heath]

My Lords, I am grateful to the Minister for his response. I also thank him for his consultation and willingness to meet bodies before Report, which I am sure will be very welcome. I understand the first argument, which is that there is a need to ensure consistency in relation to this Bill and the 2006 Act. I fully understand that. I also understand the change from criminal to civil penalties. But we then come to the issue of whether this provision should be in statute at all. The Minister himself has acknowledged that this is a different market, with competitive tendering. It is very competitive. We can see no evidence that this measure has been used for 40 years, and as far as I can see there is no evidence to suggest that it will be used any time soon.

The Minister said that it was not thought that the switch from branding to generics would arise in relation to medicines, and therefore that we should look into a completely different sector and say that because something might happen in the future we need to have this overarching provision in the Bill. But that is not the right approach. It has become clear that there are two courses of action. One is to take this out of the 2006 Act altogether, which at the moment I rather favour. We should not regulate for something that might happen in the mystical future.

I, too, was a better regulation Minister and it was drummed into me that if you do not need it, get rid of it—and if you do not need it, do not legislate in the first place. In his heart of hearts, surely the Minister realises that this is unnecessary. The alternative approach is to take the threshold he suggested and put it in the form of an amendment so that we have some reassurance on the face the Bill that it will not be used inappropriately. Those are two particular options.

In my tour d’horizon, as the noble Lord said, I came across the comments made by the noble Earl, Lord Howe, in 1999 when my noble friend Lady Hayman was taking one of the many health service Bills through your Lordships’ House. The discussion was not about devices but about the PPR scheme, because the then Government had taken powers in relation to prices. The noble Earl, Lord Howe, said that the Government had,

“arrogated to themselves sweeping powers to bring the current voluntary scheme to an end and to control the price of any drug at will. Lower medicine prices are appealing but too much of that will kill the golden goose”.—[Official Report, 9/2/99; col. 118.]

If the noble Earl, Lord Howe, were here arguing for this Bill, I think that he would have reflected that the case had not been made for non-health service medicines to be involved. We need to find a way forward between this stage and Report, otherwise the persuasive argument will be to remove the offending sections from the 2006 Act.

[Lord Warner]

Perhaps the Minister will consider the Bill’s definition of “medical supplies”. It states that it,

“includes surgical, dental and optical materials and equipment (and for this purpose ‘equipment’ includes any machinery, apparatus or appliance, whether fixed or not, and any vehicle)”.

That seems to take the Government into any bits of kit—not just ordinary devices as we normally understand them. It covers ambulances and all sorts of fixed equipment in the NHS. Is the Minister really saying that the Department of Health needs a power to cover that range of subjects—I presume that it includes scanners—where competitive tendering may be used, and that the Government reserve the right to intervene in that? That is what the Bill seems to say.

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[Lord Hunt of Kings Heath]

Perhaps I may continue, my Lords. My noble friend will move an amendment on this later on, but the Bill states:

“‘Health service products’ means any medicinal products used to any extent for the purposes of the health service continued under section 1(1) and any other medical supplies, or other related products, required for the purposes of that health service”.


So it is a draconian regulatory power. Having said that, I think that we have had a very good debate. I am sure that we will come back to this on Report.

Clause 5, as amended, agreed.

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[Lord Lansley]

Amendment 16 takes us to an issue that was the subject of consultation prior to the introduction of the Bill: whether the Government should take powers to control prices in circumstances where there has been an open and competitive process—for example, a tender process. We know that one reason why the legislation is required is because it does not follow that because products have become unbranded generic medicines they are necessarily available on a fully competitive basis in the marketplace. We have seen examples of that. In explaining the purpose of the Bill, it was stated that:

“The government’s intention is to use these new powers where due to a lack of competition in the market, companies charge unreasonably high prices for unbranded generic medicines”.


That is understood. There can be circumstances where there is a lack of competition.

Quite clearly, however, there are circumstances where the products available and the prices set are themselves the product of an open and competitive process, such as a tender process; for example, in relation to blood products being supplied to the NHS. There may well be a degree of market dominance in some of those, even though some of the complex medicines may be generic. For example, I know a company that produces medicines in circumstances where it has to use opiates, and the availability of those opiates might be limited.

None the less, if the NHS can procure on the basis of a tender that is open and competitive, why should the Government leap in and try to amend it? I understand that the response to that is to say that companies can take account of the rebate in the prices that they set. But surely when one enters into a tender, the companies concerned may not be in symmetrical positions in relation to the implications of the rebate. Some companies are indifferent to the rebate because they are not affected by it and other companies are affected by it. The nature of the rebate over a period of time and the extent of it may be variable, and they may make completely different assumptions about what that process looks like. So it seems, on the face of it, that a much cleaner approach to the Bill would be exemption from the price control mechanism in those circumstances where clearly the mischief that the Bill is intended to remedy does not apply: that is, in an open and competitive process. I beg to move.

[Lord Hunt of Kings Heath]

My Lords, this is helpful. Medicines have been referred to, but I would have thought that it could be helpful with other medical supplies. I have had a letter from the British Healthcare Trades Association. It says, in relation to other medical supplies:

“We cannot think of any procurement scenario in our sector where products, on an ongoing basis, are not subject to tender or tariff procedures. The price is tested at entry and reviewed at regular intervals, and the terms and conditions pertaining to the contract or tariff arrangements will include requirements for provision of information”.


That deals with the issue of information. So the noble Lord has put forward a very interesting suggestion and I hope that the Minister might be sympathetic to it.

[Lord Warner]

My Lords, I too am sympathetic to this amendment. I have a linked amendment, Amendment 33, which is about introducing a trigger before information is required. Both amendments, I think, are intended to curb the enthusiasm of Secretaries of State to intervene in a market situation where things are working reasonably well. So I have every sympathy with the amendment of the noble Lord, Lord Lansley, and I hope that the Minister will consider it sympathetically.

Health Service Medical Supplies (Costs) Bill

Lord Hunt of Kings Heath Excerpts

Committee: 2nd sitting (Hansard): House of Lords
Wednesday 25th January 2017 Grand Committee

[Lord Lansley (Con)]

It is a pleasure to start this, the second and concluding session in Committee. We have reached Clause 6, which relates to the provision of information. In the 2006 Act as it stands, there is a wide-ranging requirement to provide information under the statutory scheme for medicinal products. However, in the Bill the Government have resolved to go rather wider in the scope of the information-gathering power. We will come on to some of the reasons why I think that process of gathering information more rigorously is necessary and why I support it.

Happily, we are in this Bill discussing legislation that is, in principle, supported by the industry—it recognises the importance of securing a good relationship between the Government and the industry in determining the right pricing structure. This is particularly true because, in the past, under the voluntary scheme and statutory scheme, the information-gathering capacity was built into the schemes themselves.

In addition, there is the issue of gathering information relating to the reimbursement of pharmacies under what I think is known as scheme W. I completely understand why it is necessary. I remember that, back in about 2006—I am not sure which of our noble friends, if I may be so bold, was in ministerial office at that time—the issue that arose with pharmacies was the lack of contemporaneous data that enabled the gap between the wholesale purchasing and the reimbursement price on dispensed drugs to be determined accurately. At that time, I was the shadow spokesman, and whistleblowers came to me to tell me that the pharmacy industry was taking anything up to £500 million a year more, by way of its margin over its purchasing of drugs, than was allowed for in the global sum negotiated with the department. That was investigated by the National Audit Office and the whole system was tightened up.

We are, however, still not where we should be. On Monday, we debated the idea that if one ends up hearing about purchasing only from large organisations, one will get it wrong because one might leave out the fact that small pharmacies cannot necessarily purchase at quite so fine a price. However, unless I am very much mistaken, and contrary to that, if you gather information only from small pharmacies—even if they have a collective purchasing operation—and leave out the very biggest pharmacy chains, the chances are that you may be overestimating the wholesale price. Of course, there are some integrated operations, and getting that information from an integrated supply chain is extremely difficult.

The starting proposition for this debate is that there is a need to broaden the information-gathering power. Amendment 34, in my name, is consequential, but Amendment 32 is about what happens once one goes down the route of gathering quite so much information, potentially. I do not seek to amend the purposes that are set out, as the Committee will see, in Clause 6(3).

In Clause 6, there is a long list of the reasons why the Secretary of State might wish to gather information and the purposes required for that. It is potentially necessary for the information to be gathered. As a consequence, I do not wish to change all that list but at the moment, compared to most of the analogous information-gathering requirements for government laid upon industry, there is no safeguarding process. There is no process which, in itself, requires the Government to be much clearer about the information they require, the purposes for which they require it, the character of the use to which it will be put or, since there is a power to share information, with whom that information will be shared. Amendment 32 sets out to do this.

Under the voluntary or statutory schemes, there can be a scheme for gathering information that does not necessarily require information notices. Amendment 32 essentially says that in any circumstances where the Secretary of State does not receive the information the Government are looking for under a scheme, including presumably scheme W and others, there should be a power for the Secretary of State to issue an “information notice”. But where a notice is to be issued to somebody, it would then have to say some very specific things: what is required, in what form, by when, for what purpose, with whom it will be shared and about giving a right of appeal. There may inevitably be circumstances where there is a belief on the part of industry that the information being sought is not required—that the Government are unnecessarily hoovering it up, as it were. It may have a particular set of reasons of its own to try to resist this.

This amendment would give industry an opportunity to seek appeal if the Government are being disproportionate. Of course, it would have a right to judicial review but it would be much easier if this were governed under statute by way of simple appeal to the General Regulatory Chamber, as happens in a number of other areas where there is a requirement to gather information from people. I hope that the Minister will be sympathetic to an understanding that, notwithstanding the general support of industry, concerns have been properly raised about the scope and extent of the information-gathering power the Government propose in the Bill. I hope he will recognise that the amendment would reassure the industry that it would be properly informed about what information is required, and would have some recourse if it objects to that information being taken. I beg to move.

[Lord Hunt of Kings Heath (Lab)]

My Lords, I want to express some sympathy with the remarks of the noble Lord, Lord Lansley. I am not sure whether he has got the terms of his amendment right; my noble friend Lord Warner has an amendment in the next group which, in a sense, covers the same ground.

The noble Lord, Lord Lansley, knows that I am sceptical about whether these powers should be extended to non-medicines but the issue here is that they are very broad, as he says. As far as I can see, there are absolutely no safeguards regarding how these powers will be used. The safeguards are not in the Bill or the 2006 Act, and certainly not in the draft regulations as far as I can see. We are looking for the Minister to table amendments on Report to build in thresholds or safeguards to stop the department simply undertaking fishing expeditions. That would give us some sense of proportionality. I am not sure whether the noble Lords, Lord Lansley and Lord Warner, have got their amendments quite right but I am certain there will be a consensus for building in some safeguards over the use of these powers.

[The Parliamentary Under-Secretary of State, Department of Health (Lord O'Shaughnessy) (Con)]

My Lords, it is nice to be back with you again today to finish the Bill’s Committee stage. I am grateful to my noble friend Lord Lansley for tabling his amendments, and for his support for the Bill’s ultimate purpose: more rigorous gathering of data to support voluntary and statutory schemes and pharmacy reimbursements. That support is very welcome. I have huge sympathy with his argument. It is because we agree with the need properly to set out the information powers that we have published two sets of illustrative regulations to help Parliament scrutinise the information powers in the Bill. Reflecting on those, I believe that I can reassure my noble friend about the concerns behind his amendment.

I start by addressing the general proposition that a UK producer should be provided with an information notice every time the Secretary of State seeks to require information from that producer. Many noble Lords have expressed concerns about the regulatory burden the Bill might impose, and the amendment could exacerbate those worries. Regarding routine information collection, the Government already collect information on prices and volumes every quarter to support the operation of the PPRS and statutory schemes, and to inform reimbursement prices for community pharmacies. The Bill would expand routine collections to inform reimbursement prices to enable us—as my noble friend pointed out—to use data from more companies, to make the reimbursement of community pharmacies fairer and more robust, and to set reimbursement prices for more products.

For the purposes of requiring information on a routine basis, the illustrative regulations clearly set out what information would need to be provided, the form in which it would need to be supplied, the period of time it would need to cover and the date by which it would need to be supplied. Where information is required on a non-routine basis, the illustrative regulations demonstrate that the Secretary of State would notify a UK producer of that request. The regulations set out the notice that the Secretary of State would give a UK producer, the form in which the notice would be given and the type of information that would be required. The regulations would also require the Secretary of State to inform UK producers of the time period the information would need to cover and the time within which the information would be required.

Turning to the purposes for which information can be required and the persons to whom confidential and commercially sensitive information can be disclosed, I reassure the Committee that the Government take these matters very seriously. We have sought clearly to set out in the Bill the limited purposes for which information can be required and the persons to whom confidential or commercially sensitive information can be disclosed in relation to those purposes. The Bill makes it clear that information can be required for only three purposes: first, to reimburse community pharmacies and GPs; secondly, to support the PPRS and the cost-control provision in the NHS Act 2006; and thirdly, to ensure that healthcare products provide value for money.

The information that we would collect under the first two purposes would generally involve routine collections, to operate the reimbursement system and our voluntary and statutory schemes. However, assuring ourselves that products or the supply chain provide value for money would be done through ad-hoc collections. This is where we get to the critical issue of thresholds. Those collections would be triggered by evidence from existing data that there may be an issue with pricing—for example, when the reimbursement price we set in primary care is increasing without obvious reasons—or patients, clinicians, commissioners or the industry raising concerns, for example about price rises without obvious reasons or access problems. I hope that that makes it clear that this is not intended for fishing expeditions, to use the expression of the noble Lord, Lord Hunt.

[Lord Hunt of Kings Heath]

Have I missed this? Are those qualifications for the use of the provisions set out in the Bill?

[Lord O'Shaughnessy]

They are not. I am using this opportunity to set out on the record the reasons why information would be sought.

The Bill is also clear about with whom confidential and commercially sensitive information can be shared. This is restricted to other Government departments, the devolved Administrations and specific NHS bodies and persons providing services to any of these bodies. The information can be disclosed to these bodies only for the purposes set out in the Bill—which I just reprised. The Bill also enables the Secretary of State to share information with trade bodies, and Regulation 11 of the illustrative regulations sets out the trade bodies with whom the Secretary of State might want to share information, and the type of information that he would want to share with them.

The illustrative regulations currently limit the information that we can share with trade bodies to aggregated data that cannot be led back to a specific company. Furthermore, the Bill enables the Government to prescribe in regulations any other person to whom the Secretary of State can disclose information. The flexibility provided by this regulation-making power allows the Secretary of State to disclose information to other persons who may become involved in payment or reimbursement for health service medicines, medical supplies or other related products, including, for example, in circumstances of regional devolution. Again, it would be possible to disclose confidential or commercially sensitive information to these persons only for the purposes set out in the Bill. We will have further opportunities to discuss these powers of disclosure when we discuss the amendments relating to the report of the DPRRC. In summary, we would not be able to disclose information to bodies not listed in the Bill or prescribed in regulations, so the legislation will restrict to whom we can disclose information.

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[Lord Young of Norwood Green (Lab)]

I am not an expert in this area, but I am puzzled. If it is that difficult to identify, how come the Times managed it in its expose? It did not seem very difficult or complex. The Times found drugs that had come out of patent and were available on a generic basis and for which the company that bought the patent increased the cost by staggering amounts. You do not have to be Sherlock Holmes to alight upon that. I do not know which way to go on this debate. My noble friend worries about fishing expeditions, and he is right, but I am even more worried about the NHS being ripped off for inordinate amounts of money by people whose corporate responsibility polices omit the word “ethics”. I asked once before why none of the current audit processes inside the health service exposed this until the Times brought it to public attention. There may be a mass of information, but I would have thought that these things could quite easily be identified. I may be wrong because, as I said, I am not an expert in this very complex area, but those points need to be answered. The problem was identified. We have this Bill because we know that the current system is not working. Even though people in the various systems in the NHS were reporting their concerns, no action was taken for quite a long time. It certainly justifies the legislation. The Delegated Powers Committee expressed its concerns about whether the legislation is right, and I do not profess to be qualified to rule on that, but my major concern is about the ability of some companies to rip off the NHS.

[Lord Hunt of Kings Heath]

My Lords, my noble friend is right because he goes to the heart of the argument about this Bill. I think we have all said that we support the core aim, which is to deal with branded products becoming generics and the issues that were identified. The question is whether the Bill is a proportionate response to that and what impact it will have on future investment in this country.

I have been wracking my brains to puzzle out why this was first legislated for in 1977. My noble friend will remember that that was the time of the prices and incomes policy. Lady Williams of Crosby and my esteemed noble friend Lord Hattersley were Secretaries of State for Prices and Consumer Protection. I would not be at all surprised if it had something to do with that. I have to say that it was not altogether successful as a policy, and I am not sure that it is a great precedent for the Minister to rely on now. Certainly, in 1979 the electorate did not think that it was a very successful policy, that is for sure.

The only point I want to put to the Minister is this: I think there is a consensus in the Committee that there needs to be some trigger mechanism. We have had elements of that. The noble Lord, Lord Lansley, proposed an amendment that included appeals. He suggested what would trigger action, which was very helpful. In his amendment, my noble friend suggested another approach. The Delegated Powers Committee is concerned about the general terms of this clause. It said:

“We consider the general power to be inappropriate unless the Minister is able to explain why it is not feasible to specify the further bodies to whom information may be disclosed on the face of the Bill, and why it is not feasible to limit the kinds of bodies to whom disclosure may be made”.


That picks up the point raised by the noble Lord, Lord Lansley, and I agree with him about NHS bodies,

The question is this. The only satisfactory safeguards will be in the Bill. This House has no influence on regulations. The Minister will know that only six or seven statutory instruments have ever been defeated, so regulations in themselves provide very little safeguard. This is our only opportunity to provide safeguards in the Bill. Essentially, the choice for us is to press on with amendments at Report or to come to some agreement with the Government about what is appropriate. That we need something in the Bill is not in doubt.

[Lord O'Shaughnessy]

I thank noble Lords for that very good debate, which has again got to the heart of why we are all here. While we are reflecting on the 1970s, we have an industrial strategy again, so who knows? The wheel turns.

I am grateful to the noble Lord, Lord Warner, for his amendment and understand that he seeks to minimise the burden on businesses; we agree with him on that aim. However, the amendment would have serious unintended consequences. I will set out why I believe that to be the case and in doing so, I hope to respond to other noble Lords’ questions.

The amendment would restrict the circumstances under which the Government could ask for information on revenues or profits accrued in connection with the manufacturing, distribution or supply of UK health service products. We have been clear throughout that the information that we seek for routine data collection does not go beyond that which would be required for tax purposes. That is the reassurance that we provide on the overall burden and how it would affect businesses. I appreciate that there is a separate question about non-routine data collection, which I will come to, but the overall intention is not to create any additional burden.

The amendment would restrict the information-gathering powers to where a specific health service product has significantly increased in price and where there are reasonable grounds to believe that the NHS is not receiving value for money. However, it would prevent us operating our cost and price control schemes. The reason for that is that the Government collect information on revenues from companies as part of the various cost and price control schemes to be able to determine the sales of those companies to the health service. This enables us to identify the savings achieved through price cuts and which, in our reformed statutory scheme, would be a prerequisite for calculating the payments due from individual companies.

The Government require this information at product level to satisfy ourselves that the terms of the scheme are being applied correctly. As noble Lords know, this model has been in operation through the PPRS for many years, and we have not heard concerns from industry about the burden that it places upon it. Indeed, it is precisely this mechanism which demonstrated to both the Government and the ABPI that the current PPRS was not operating as expected during 2016—something to which the noble Lord, Lord Hunt, referred during our previous sitting.

We had constructive discussions with the ABPI during 2016 about why the spend measured by the PPRS and used to calculate payments under the scheme had fallen, compared to the real growth in NHS spending on branded medicines, which continues to rise. Joint analysis of company data by the ABPI and the Department of Health shows that the NHS is spending more than ever on branded medicines, with spend growth in 2016 likely to be around 5.3% of the budget.

It became clear that the cap mechanism was not capturing significant areas of branded medicines spend—in particular, parallel imports. Also, some companies left to join the statutory scheme, or divested individual products from the voluntary to the statutory scheme, but this growth was not captured by the PPRS methodology. Without action, this would have led to a significant drop in income from the scheme while branded medicines spend continued to rise, which is obviously against the spirit of the agreement. After a short period of very constructive negotiation just before Christmas, we agreed a new deal with the ABPI to cover the last two years of the scheme, details of which I set out in a Written Ministerial Statement published last week, I think—it has been only three and a half weeks, but it feels longer. This shows how well industry and the Government can work together to develop and maintain voluntary arrangements, but we can do so only with the right information available.

We have provided illustrative versions of both the information regulations and the statutory scheme regulations. I emphasise that these regulations show that the Government have no intention of routinely collecting information on profits. They do, however, set out the circumstances in which the Government might want to collect information about profits.

First, the illustrative regulations set out that we would be able to ask for information related to products where a company asks for a price increase under the statutory scheme regulations. To agree such an increase, the Government require assurance that the product is no longer profitable at its current price. Information on profitability is therefore crucial to determine this.

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[Lord Warner]

I am grateful to the Minister for his detailed explanation, although I am not totally convinced. The intention was to apply my amendment to the new information requirements, not the existing routine collection. That is a drafting issue rather than an issue of principle. If I got the drafting wrong, we can sort it out.

I still think we need some kind of trigger safeguard in the Bill. I am not particularly wedded to this provision. I am quite attracted to a trigger mechanism, linked to the information notice and appeal idea suggested by the noble Lord, Lord Lansley. I am certainly very happy to discuss with the Minister and other colleagues on the Committee how we might improve this.

The Minister cited the example of abuse of the PPRS system, but if there were such abuse and the Government or the department were aware of it, nothing in my amendment would stop them intervening. Those would be the reasonable grounds for expecting abuse which this trigger mechanism provides. Therefore, it would not be that the Government’s hands would be tied behind their back when they had some reasonable grounds for thinking that the NHS was being abused. The trigger mechanism does not stop intervention when there is evidence; it just requires the Secretary of State to have some prima facie evidence that some kind of abuse is going on that requires the collection of more information. That is where the ideas of the noble Lord, Lord Lansley, fit in rather well. You would then specify exactly what you need to deal with the abuse you suspect is going on, but which you do not have enough information to prove. That would enable you to act way before a case came to the CMA. You would need only some reasonable grounds for issuing the kind of information notice that the noble Lord, Lord Lansley, wanted to see what was going on.

The Minister mentioned the consultations with the ABPI, but if those were such a success, why does the ABPI come to people like me and say that it is highly dissatisfied with the system that now appears in the Bill? The messages must have got lost in the night somewhere along the way, because the Minister certainly did not convince it to be comfortable with what is proposed in the Bill.

We need some kinds of safeguard, whether it is this trigger mechanism or a blend of that and the idea of the noble Lord, Lord Lansley—

[Lord Hunt of Kings Heath]

It seems from this debate that you could put together into an amendment the appeal mechanisms suggested by the noble Lord, Lord Lansley, the general thrust of the amendment in the name of the noble Lord, Lord Warner, and the three examples the Minister gave of what would trigger the investigation. The Minister clearly has “resist” on every briefing for every amendment. However, this is the House of Lords and basically, we are either going to put an amendment through ourselves, which will win on Report, or the Minister will sit down with us to try to agree something. If the Minister is not able to give way on anything, frankly, it is pretty hopeless and departs from what your Lordships’ House is about. That is what I find frustrating. It is quite clear that there is a broad consensus that we need to see a trigger mechanism of some sort in the Bill. We would like to work with the Government, otherwise we are left with no option but to construct something ourselves.

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[Baroness Walmsley]

My Lords, the next two groups of amendments relate to the concerns expressed by the Delegated Powers and Regulatory Reform Committee in its 12th report of the 2016-17 Session. Amendments 49 and 51 refer to Clause 6, which inserts a series of new sections into the NHS Act 2006 authorising the Secretary of State to disclose information provided by suppliers of health service products. New Section 264B(1) lists the bodies to which information may be disclosed. It also allows the Secretary of State to prescribe in regulations further persons to whom information may be disclosed. We have already heard from the noble Lord, Lord Hunt, about Parliament’s inability to have much effect on that.

There are two powers: a specific power to prescribe bodies which appear to represent manufacturers, distributers and suppliers of health service products and a general power to prescribe any other person. In his Amendment 50 the noble Lord, Lord Hunt of Kings Heath, has attempted to place in the Bill the specific organisations that represent UK producers. This is reasonable enough, although I know that Ministers hate having lists in Bills. However, it is the general power that the Delegated Powers Committee objects to. As the noble Lord, Lord Lansley, said a few minutes ago when talking about Amendment 32, disclosure under new Section 264B may involve confidential and commercially sensitive information, even though the purposes for the disclosure are limited by subsections (2) and (3). The committee felt the general power to be inappropriate. No explanation of the need for this power was provided to the committee in the memorandum.

Amendment 49 therefore seeks to delete the general power in subsection (1)(l) of new Section 264B to enable the Minister to justify why the Secretary of State would need such a broad and wide-ranging power. Amendment 51 is consequential. Can the Minister say why it is not feasible to specify in the Bill the further bodies to which information may be disclosed, or even the groups of people or organisations? After all, in subsection (1)(k)—in lines 7 and 8—the Government specify representative bodies of producers. Why not specify other groups at the end of the subsection? This appears to me to represent a power too far, and the committee feels the same. What is this power for and how is it to be used? I beg to move.

[Lord Hunt of Kings Heath]

My Lords, I have a little list, which is a bit bigger than the Minister’s list.

[Lord O'Shaughnessy]

Have you seen it?

[Lord Hunt of Kings Heath]

Indeed so. In following the remarks of the noble Baroness, Lady Walmsley, this is really a probing question. Lists are generally avoided in primary legislation for the obvious reason that you need flexibility. I can see why a list of bodies has been put into paragraph (11) of the draft regulations. At this stage, I am just puzzled to know why those organisations which are in the list have been chosen and why others have not.

First, I see that the BMA is in the list. I assume that is because it represents dispensing pharmacists, but I would be grateful to have clarification. I think that may have been clarified. For instance, why is the British Healthcare Trades Association not in the list? Clearly, its membership, although sometimes the same, is rather different from the ABHI. There are other organisations that I have put down to probe how the department has come to that list. When we know that, we can then come back to the general principles that the noble Baroness has so rightly raised.

Health Service Medical Supplies (Costs) Bill

Lord Hunt of Kings Heath Excerpts

Report stage (Hansard): House of Lords
Tuesday 7th February 2017 Lords Chamber

[Lord Hunt of Kings Heath (Lab)]

My Lords, first, as we are entering Report, I declare my interests as president of the Healthcare Supplies Association and of GS1, the barcoding organisation.

Like the noble Baroness, Lady Walmsley, and the noble Lord, Lord Warner, I make it clear that in supporting the amendment, the Opposition support the core purpose of the Bill. The recent fines imposed by the Competition and Markets Authority on two companies, which essentially exposed a loophole, left the Government with no option but to act—we agree with that. I have to say that it is interesting to note that the powers that the Government have taken upon themselves in the Bill will give them draconian influence over drug prices in future.

The Bill allows the Government to institute price controls. It states that the Government may have reached a voluntary agreement with industry over pricing but can none the less come in and impose price controls over that agreement. To cap it all, it massively extends the Government’s powers to ask for information about any health service product sold to the NHS. Such information could cover prices, discounts, rebates, revenues and profits, and could apply to millions of products every year.

It is a socialist dream of state intervention. Speaking here as a great believer in central state intervention, my heart warms to the Minister’s vigour and enthusiasm for regulation. It gives an idea of the nirvana of post-Brexit, light-touch regulation from this Government. Perhaps we should dream of EU directives in future, because this Government are so bent on their home-grown regulation.

We will come to the issue of proportionality, because many of our later amendments involve whether the Government have been proportionate. For me, this amendment is essentially about access, because I do not think you can talk about price controls on drugs without talking about patient access to innovative drugs and treatments. At the moment we are seeing an unprecedented level of rationing, both locally and nationally. Locally, clinical commissioning groups are making some really perverse decisions, ranging from cutting out health promotion programmes to being incredibly restrictive on operations and restricting access to innovative drugs.

A fairly recent report that I read by leading charities Breast Cancer Now and Prostate Cancer UK, for instance, showed that NHS cancer patients are missing out on innovative treatments that are available in any comparable country to the UK. One example is the PrEP drug. The reluctance of NHS England to fund the use of this extraordinary preventive drug in relation to the treatment of HIV is another example of the problem that we have. When the previous Labour Government set up NICE, it was designed to speed up the introduction of innovative new treatments. But since 2010, access to new drugs approved by NICE has been increasingly impeded, which has culminated in the current consultation that if a NICE-approved treatment is expected to exceed a cost of £20 million in any of the first three years of its use, NHS England can ask for a longer period for its introduction.

We also have a consultation on the introduction of a QALY threshold of £100,000 for evaluating highly specialised technologies. My understanding is that no other country in the world uses such a threshold in evaluating ultra-rare disease treatment. The almost universal view is that this form of assessment is not appropriate and would effectively stop the flow of new medicines reaching patients with rare and complex processes.

Of course, the noble Lord, Lord Warner, is right that the drugs budget cannot be open ended and that the NHS must achieve value for money—and I, too, have engaged with industry over the years in seeking to get the drug budget down. We all understand that. The tragedy is that a ground-breaking agreement reached by the last Government in 2014 with drug companies could have led to many new drugs being introduced. The pharmaceutical industry guaranteed to hold down drug costs for a five-year period and, if the costs went over the agreed limit, the industry would pay back a rebate every quarter. To date, £1.5 billion has been handed over.

I know how irritating it is to point to Scotland and Wales and say that they are doing something better—but something like the Scottish fund that has been established from the rebates to fund the introduction of new medicines would have been a preferable way in which to go forward in the situation that we have in England, where restriction after restriction is taking place in the use of better drugs for patients.

You then have to link the issue to our investment in R&D and life sciences. Sir John Bell, regius professor of medicine at the University of Oxford and chair of the Office for Strategic Coordination of Health Research, who is playing an absolutely pivotal role in this area, spelled this out recently. As he said, the last 30 years have witnessed an unprecedented number of major innovations in healthcare that have resulted in significant extensions in life expectancy and quality of life. The problem is that the National Health Service has been unable to adopt this new innovation effectively and, as a result, many improvements in healthcare have been put in jeopardy.

This is not an easy issue. Sir John Bell says—and I agree—that one problem is that our current model too often layers the cost of supporting the innovation needed to help discover new healthcare innovations on top of existing practice. So, unlike in other sectors, in the health service innovation always seems to cost money. This is a very important issue when it comes to thinking about how we can afford the kind of changes that will fall to health and social care in future.

I will also quote Keir Woods, head of oncology at the major pharmaceutical company Merck. He points to that company’s investment in the UK—20% of its global venture capital is invested in the UK—and he celebrates the UK’s position as a global power in health, with our world-class universities, centres of excellence in clinical research and some of the top medical journals, which has a positive impact on investment. We are home to 4,800 life science companies, with the largest pipeline of new discoveries in Europe. That is something to celebrate. Dr Woods says that we can build on that, but there are two provisos. First, we have to be able to secure the cream of international talent. The discussions around Brexit are very important in relation to that. Secondly, we have to increase the uptake of these new innovations in the UK.

The frustration that I and many others have is that the UK is a wonderful place for innovative and ground-breaking new treatments and drugs, but the fruits are increasingly being enjoyed by patients in other parts of the world. Currently, the UK has developed around 14% of the top 100 global medicines. That is something to celebrate—but 20 years ago we were responsible for about one-quarter of the global medicines that had been developed. The noble Lord, Lord Warner, referred to the £4 billion invested by pharma R&D. However, up to 2011 it was £5 billion—so we are seeing a deinvestment that is very much linked to the hopelessly poor record of adoption of new medicines in this country.

I know that the Minister will talk about some of the initiatives he is taking and I am sure that he will mention the accelerated access review, which aims to make the UK the fastest place for the design, development and widespread adoption of innovations. This is entirely laudable, but the problem is that this approach will take a few items and accelerate access while the NHS goes about crudely rationing a whole host of other innovations and putting at risk our life sciences, R&D investment and, of course, the quality of patient care.

That is why this amendment is so important. We support the Bill and its aims, but what has been lacking so far is any recognition by the Government that there are three planks to this. The first is better value for money in terms of drugs and health service products; the second is the quality, range and health of our life sciences and R&D investment; and the third is access to treatment by patients. So far the Government have not been prepared to grip this last issue. That is why the amendment is so important and I support it.

[Lord Lansley (Con)]

My Lords, I will speak briefly on this amendment, although there are later ones in my name which will allow me to say more about the way in which the Bill proposes that the Secretary of State exercises his or her duties. The idea that it is not part of government strategy—back in 2014 or now—to promote the life sciences sector through the structure of the PPRS is absurd. It is self-evidently the Government’s intention, and was in 2014. The structure of a negotiated, voluntary PPRS was designed to achieve that. The issue that has emerged since 2014 and the application of the new voluntary scheme is that the industry was looking for stability for the Government in terms of the budget; freedom to price at introduction, and action on access to new medicines. It is in that third area that there has been a lack of progress. In many ways, I agree with what noble Lords have been saying about the desirability of achieving that access. It has not been restricted since 2010, although the noble Lord, Lord Hunt, tended to construct it that way. For example, we introduced the cancer drugs fund in 2010 precisely because prior research by Mike Richards had demonstrated that patients in this country were failing to have access to new cancer medicines at the time when patients in other European countries did. It is not a new problem: it has been around a long time. The cancer drugs fund was intended to meet that gap by 2014 and the PPRS should have taken over, but it did not. After Innovation, Health and Wealth in December 2011, and the accelerated access review now, we are now seeing efforts to try to make that happen and they should be thoroughly supported.

The second limb of the amendment does not help, because it is just about access for patients to those new treatments which have been approved and recommended by NICE. That is only one part of a much wider issue about the adoption and diffusion of new technologies across the NHS more generally, often in circumstances where NICE has not been involved. I find the new consultation proposal on NHS England’s budget impact threshold something of a double-edged sword. The measure could erect another hurdle to be cleared before patients can access new medicines, and we have to avoid that. However, it may have the positive effect of encouraging NHS England, as the budget holder, and NICE, as its pharmacoeconomic evaluation mechanism, to work together with companies at an early stage to arrive at a negotiated price at an early point. That would be much to the benefit of the industry and the NHS given that we are aiming, through this legislation and beyond, to obtain patient access to medicines on reasonable terms that the NHS can afford. If the measure were used in that way, it would have the right benefit. However, I fear that this amendment, particularly its latter limb, does not take us any further in that direction.

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[Lord O’Shaughnessy]

The treatments become available throughout the NHS from three months after the appraisal.

[Lord Hunt of Kings Heath]

My Lords, given that I took the order through Parliament many years ago, I can confirm that the whole intention was that the NHS had 90 days to prepare for funding a medicine that had been designated by NICE as both clinically and cost effective. The problem is that, subsequently, in particular over the past few years, clinical commissioning groups have done everything they can to avoid this responsibility. Alongside that, the purity of the 90-day rule is being eaten into, and that is at the heart of the concern of this amendment.

[Lord Warner]

My Lords, I am grateful to all my colleagues for the powerful support they have given to the amendment. I do not doubt the Government’s commitment to the life sciences, which I acknowledge from what they have put in the industrial strategy and the person they put in charge of leading that work. However, they have not convinced the industry with the Bill. They seem to be sending out separate messages.

The amendment is meant to tackle the two issues of supporting a flourishing life sciences industry and guaranteeing patient access to drugs that have been approved by NICE. It is very clear that that second part is not working well and is getting worse. It does no harm whatever to reinforce that message in the Bill with this amendment.

On life sciences, I say to the Minister that it is a funny way to show he is supporting that industry, at a critical time for this country, by bringing along a Bill that, as the noble Lord, Lord Hunt, made very clear, overdoses on regulatory requirements, price control and information requirements. This is a pretty strange message to say to a load of international companies when you want them to settle here and do your research.

I have listened to the Minister very carefully. I am much more persuaded by my colleagues’ supportive speeches, for which I am grateful. I wish to test the opinion of the House.

--- Later in debate ---

[Lord Lansley]

My Lords, even though the House has just divided, the Bill has been characterised by a substantial measure of agreement on the purposes we are trying to achieve and I am sure that will be reflected in the further amendments that are to be discussed. I neglected earlier to draw attention to the register of interests and, in particular, to my position as an adviser to MAP BioPharma, which is not itself a participant in the PPRS in any way.

Let me make the purpose of Amendment 4 clear to noble Lords. The Government, in bringing this legislation, were prompted in part by the fact that expenditure on medicines was rising somewhat faster than the Government had anticipated, the amount of the rebate being achieved by way of payment back to the Government was less than was anticipated, and the difference was, in part, explicable by virtue of the transfer of certain products into the statutory scheme. In the statutory scheme they had a price cut applicable but no rebate scheme applicable and the Government did not feel that they had the necessary power to amend the statutory scheme to make a rebate apply.

The purpose of the legislation is to make the two schemes broadly equivalent. As the Minister told the Committee, the Government’s intention was to make the revenues being rebated back to the Government from the two schemes broadly equivalent. However, in my view that would potentially have the perverse impact that certain products in the statutory scheme would end up with a much higher rebate percentage being applied to them as a consequence—or, alternatively, that products outwith the price control under the voluntary scheme, because they were introduced after December 2013, would have the price control applied to them under the statutory scheme. So a discontinuity would apply, potentially either way, by applying the broadly equivalent proportion of cost of sales being returned to the Government in the form of a rebate.

I have therefore suggested that it is a perfectly reasonable principle on the Government’s part, as we explored in Committee, to try to make the two schemes equivalent so that there cannot be gaming, as it were, by moving into one scheme rather than the other. That should be applied, as the amendment specifies, by means of asking the Government, wherever a voluntary scheme is in place—which is an important caveat—to ensure that a statutory scheme should seek, so far as is practicable and relevant, and it will not be precise, so I do not think it can be regarded as too rigid, to make it so that the equivalent effect is applied at a product level: not at a company level or a whole-scheme level, but in relation to the individual products. Individual products, whether they are in the voluntary scheme or the statutory scheme, should expect to have broadly the same overall treatment applied to them. The net effect would therefore be that the schemes will become equivalent and the scope for gaming will be reduced. I hope that explains the amendment and I beg to move.

[Lord Hunt of Kings Heath]

My Lords, the noble Lord, Lord Lansley, has raised a very important point. For me, the question is: what is the future of the voluntary scheme? Over the years it has clearly served its purpose well. In Committee, the noble Lord acknowledged the benefit of the PPRS, which is the voluntary scheme, and said that it showed how Government and industry could work together to develop solutions. I draw the noble Lord’s attention to a piece written by Sir John Bell recently. When talking about what we have just discussed, the dynamic between access, cost and life-science investment and the problem the NHS has in investing in innovation, he said:

“A solution for both parties is necessary and must come from healthcare systems and innovators working more closely together, sharing risk and cost and attempting to use innovation to take cost out of health systems wherever possible”.


This is a wider issue than drug costs and PPRS, but it would be good to hear about the context in which the Minister thinks a potential new PPRS is going to be agreed. Many in industry think that the Government are not really committed to a new PPRS. It would be interesting to get some sense from the Minister as to where he thinks things are going.

[Lord O'Shaughnessy]

My Lords, I am grateful to my noble friend Lord Lansley for bringing this amendment and for the opportunity to talk about the intentions of the Bill. He is quite right to highlight that the reason for bringing the Bill forward is to stop the behaviour of switching between schemes in order to reduce liabilities. That has characterised behaviour in the past few years and has had an impact on the successful operation of the PPRS. I will discuss the PPRS towards the end of my speech.

Amendment 4 is about the relationship between the voluntary and statutory schemes. I thank noble Lords for their views in this area. This amendment would require us to secure that, for any given product, the voluntary and statutory schemes would have an equivalent impact. It presents a slightly different approach to securing equivalence between the voluntary and statutory schemes, but I understand that, fundamentally, equivalence is what the amendment is seeking to achieve. I gave my views on this matter in Committee and I am happy to respond in similar terms on this occasion.

The Government’s intention is for the two schemes to deliver a broadly equivalent level of savings as a proportion of the total sales covered by each scheme. However, to require the terms of each scheme to be the same, in so far as possible, is inappropriate and would restrict the scope of the two schemes to operate in a complementary manner. Requiring equivalence to operate at product level, as the amendment suggests, would be even more restrictive.

The voluntary scheme is a matter for negotiation with industry. As such, there is scope to have a range of measures included that reflect the priorities of both sides at any point. It may be helpful to the House if I reiterate some of the examples I set out in Committee. The current voluntary scheme, the PPRS, includes a range of provisions, developed through negotiation with industry, that sit alongside the payment mechanism. This includes price modulation, which enables companies to put prices up and down as long as the overall effect across their portfolio is neutral. This has commercial value to companies, which may be willing to accept a higher payment percentage as a result.

In another example, while new medicines in the PPRS are excluded from PPRS payments, the PPRS payment percentage level itself is set at a level to achieve the agreed level of savings across both new and older medicines. This means that each company’s share of the income due to government will vary depending on the balance of new and old products in their portfolio, with companies that have mainly new products paying less than companies with mainly old products. However, it would be very challenging to replicate this model in the statutory scheme, as many fewer companies are affected by the statutory scheme regulations than are members of the PPRS. As a result, there is a much smaller pool of companies with older products. To achieve the same level of savings overall from the statutory scheme as from the PPRS while exempting newer products would require an extremely high payment percentage. This provides an example of where minor differences in terms may be required in order to deliver an equivalent level of savings across the two schemes overall. As noble Lords know, as we discussed in Committee and as I now repeat, the detail of how any future statutory scheme will work will be subject to further consultation.

As was discussed here and in the Commons, the freedom to negotiate the voluntary scheme has been valued greatly by both industry and government. As the noble Lord, Lord Hunt, reminded us, I said as much in Committee. Our intention for the future of the PPRS is to work collaboratively and constructively with industry on future medicines pricing arrangements when the current PPRS comes to an end.

[Lord Hunt of Kings Heath]

This time, will NHS England be a full partner in the discussions and negotiations? Clearly, unless it owns the solution as well, you have the problem that an agreement can be reached but it does not quite translate itself into action on the ground. I realise that this is traditionally a negotiation between the Department of Health and the industry but it would be useful if NHS England were fully part of that.

[Lord O'Shaughnessy]

The noble Lord makes an excellent point. Clearly, as the budget holder, NHS England ultimately must be a key part of negotiations for any future schemes. We intend that any future voluntary scheme should be established through negotiation in this way, but linking the payment mechanisms would inevitably place a restriction on that freedom.

I am grateful to my noble friend for raising this issue and I hope I have reassured him on equivalence, while also explaining why I believe the amendment goes too far by focusing specifically on products. On that basis, I ask my noble friend to withdraw his amendment.

--- Later in debate ---

[Baroness Walmsley]

My Lords, as I mentioned in the debate on Amendment 3, I support this amendment because it gives the Secretary of State a bit more flexibility to take account of the specific circumstances of a company with very high fixed costs, in the interest of making sure that we have security of supply and patient access to the particular products that it produces. I do not think it undermines any of the objectives of the Bill in any way, and because of that, I hope that we will hear something encouraging from the Minister.

[Lord Hunt of Kings Heath]

My Lords, in Committee the noble Lord said that he did not think that biosimilars should be excluded from the voluntary or statutory pricing schemes, as competitive tendering would not generate sufficient levels of price reductions. I had a note from one of the companies involved, Sandoz, which says that one of the issues here, alongside the fact that fierce competition is already driving significant price reductions for the NHS, is that development costs of generic medicines do not compare with those of biosimilars. Those costs can be up to 100 times those of generic medicines, partly because of the licensing process and the time needed for development. I hope the noble Lord will be able to address that and explain how the Bill aligns with recent NHS policy, which has expressed support for the uptake of biosimilar medicines, particularly through the intention for specialised services commissioning. The noble Lord’s comments in Committee on biosimilars caused some disappointment, and if he could respond more positively now that would be helpful.

[Lord Warner]

My Lords, from time to time I have been approached by plasma companies and vaccine companies about supply issues, particularly where there have been changes in the structure of the industry and a reduction in the number of producers of some of these products, and sometimes on the point of whether British companies may start to go out of business because of some of those structural changes. My question to the Minister is whether the amendment would actually help enable the Secretary of State to deal with some of those supply problems when this becomes an issue. It becomes an issue for those patients who really need that particular product when no other will do. Is this the kind of amendment that would help with these supply problem areas, which to my knowledge have been experienced from time to time, particularly in plasma and vaccine areas?

--- Later in debate ---

Moved by

[Lord Hunt of Kings Heath]

8: Clause 6, page 5, line 35, leave out “revenue or” and insert “product revenue and aggregate UK”

[Lord Hunt of Kings Heath]

My Lords, I will speak very briefly to Amendment 8 and then allow the Minister to explain his amendments. I can then perhaps come back at wind-up to refer to my own Amendment 12 to his Amendment 11.

We have discussed whether the Bill is proportionate, and this is particularly apposite in relation to this clause. There is concern that the powers may be too intrusive in requiring companies to submit profit-level information on individual products, which I understand from many of the companies involved that they consider complex and onerous to provide, and not necessary routinely for the Government. My amendment attempts to deal with this in a way which I think is proportionate and not intrusive, but which should provide the kind of information the Government want. I will be very interested to hear what the Minister says about his amendments. I beg to move.

[Lord Warner]

My Lords, my name is on this amendment and I support it. I want to emphasise the point about the UK, which is in this amendment from the noble Lord, Lord Hunt. Members of the industry are concerned that they will be brought into a conflict between them and their headquarters over the pricing of particular products in the UK. The point that the noble Lord has made in his amendment about specifying the UK is extremely important.

--- Later in debate ---

[Lord Lansley]

My Lords, I reciprocate my noble friend’s thanks. In Committee he said he was going to think very carefully about the subject of information and the circumstances in which it is required from companies. Having done so and engaged us in a conversation about it, he has come forward with an amendment that seems specifically designed to meet the concerns raised in Committee. From my point of view, and this is very simply put, there must be a general scheme to acquire information, but when one goes beyond it the company has a right to expect that the information notice must be specific, itemised and additional, and that, as is now provided for, there should be a right of appeal in relation to that. My noble friend has very kindly listened and brought forward an amendment to do in substance the things that we were looking for, so I am grateful to him.

[Lord Hunt of Kings Heath]

My Lords, I thank the Minister. I am grateful for his amendments, because he clearly listened to the debate. I just want to encourage him to go that little bit further. I am glad that we have a government amendment on Third Reading, because that means that we can continue this debate: his amendment is amendable, which is always the issue for noble Lords on Third Reading.

The Minister said on my Amendment 12 that he was anxious not to put particular conditions into the Bill, but my reading of his Amendment 11 is that he imposes particular conditions. Its first four lines state:

“Regulations under this section must require the Secretary of State to give a UK producer an information notice if information is required in respect of the costs incurred by the producer in connection with the manufacturing, distribution or supply”.


All I want to do in my amendment is add the word “access”. I am just taking his elegant drafting and adding a bit to it. I beg leave to withdraw Amendment 8.

Amendment 8 withdrawn.

--- Later in debate ---

Moved by

[Lord Hunt of Kings Heath]

12: Clause 6, in subsection (5), before “manufacturing” insert “access to, ”

--- Later in debate ---

[Lord Hunt of Kings Heath]

My Lords, I am grateful to the Minister for the way he responded to Amendment 14 in my name. I am satisfied that the Government will consult closely on the list of bodies.

Amendment 13 agreed.

Health Service Medical Supplies (Costs) Bill

Lord Hunt of Kings Heath Excerpts

3rd reading (Minutes of Proceedings): House of Lords
Thursday 23rd February 2017 Lords Chamber

[Lord Warner (CB)]

My Lords, I thank the Minister for listening so intently during the proceedings and for his response. I am also grateful to those on the Front Benches opposite for their co-operative approach—they are a shining example to their colleagues in the Commons of how to be effective in persuading the Government to change their mind. I hope the Minister’s emollient approach will continue when the Bill leaves this place in relation to the new clause that we have put in at the front of the Bill, despite the advice he was given. I hope that good will will continue to operate as the Bill completes its passage through both Houses of Parliament.

[Lord Hunt of Kings Heath (Lab)]

My Lords, I too welcome the amendments. Clearly, the Opposition will support them. I must remind the House of my presidency of the Health Care Supply Association and GS1 UK.

First, I thank the Minister and his officials for their warm co-operation. The ability to have a number of meetings has been much appreciated. This has been a very good example of cross-House co-operation. Various noble Lords, including the noble Lord, Lord Warner, and the noble Baroness, Lady Walmsley, worked very hard together on the core issue of ensuring that NHS patients get access to effective new medicines. I say to the Minister that I hope Clause 3 will remain in the Bill when it comes back to your Lordships’ House, if indeed it needs to come back—I take the point of the noble Baroness, Lady Walmsley, that this House has done the job it is here to do: it has revised and scrutinised the legislation. I would have thought that the other place should simply accept the Bill as it is, and I hope the Minister will be able to confirm that when he responds. I also thank my noble friend Lady Wheeler for her tremendous support, and Dan Stevens, our health researcher.

It seems to me that the Minister has shown himself adept at handling health legislation in your Lordships’ House, and so we look forward to the next health Bill. If he is looking for suggestions, we are going to have the great repeal Bill and perhaps we can look forward also to the repeal of the Health and Social Care Act 2012. That would bring great joy to many.

[Lord O'Shaughnessy]

I am very grateful to noble Lords for their support for these amendments. I am also grateful to my noble friend Lord Lansley, one of the architects of this new approach to information notices; that was extremely useful and we have ended up in a good place. I am grateful to the noble Baroness, Lady Walmsley, who I have enjoyed getting to know through the process of this Bill. She is quite right to emphasise the vital role that this House plays through its proper constitutional role in revising legislation—I will not say anything more than that. I thank the noble Lords, Lord Warner and Lord Hunt, both of whom have been in my shoes in the past. Good will will certainly operate, and I hope that both noble Lords, and indeed the noble Baroness, Lady Wheeler, have found me to be open, open-minded and willing to work with them. Throughout the passage of the Bill I have been keen to ensure that it is a proportionate response to tackle this challenge, and I think we are all agreed on that.

To conclude, I am delighted that we have come this far on the scrutiny of the Bill and are now debating the final amendments to bring it to a close. As we end Third Reading I would like to take this opportunity to place on record my thanks to all noble Lords who have taken part in the debates, beyond those I mentioned just now, throughout all stages in this House. It is fair to say that the collected efforts of this House in bringing together different views have paid dividends in the improvements that we have seen. It has been a good example of the rigour and attention to detail that this House is known for.

I particularly thank the many officials involved in the Bill, who have worked not only to support me but to ensure that noble Lords are briefed and that any concerns are addressed, within what at times have been very tight timescales. They have done a tremendous job and I am sure the House will join me in paying tribute to them.

Although this may not be the final word on the Bill, I am convinced that the House is sending it back to the other place having been significantly improved in key respects.

Health Service Medical Supplies (Costs) Bill

Lord Hunt of Kings Heath Excerpts

Ping Pong (Hansard): House of Lords
Wednesday 26th April 2017 Lords Chamber

[Baroness Masham of Ilton (CB)]

My Lords, I congratulate the Minister on his hard work on the Bill and his helpfulness. I have one question. As this is a global matter, how can the Government assure us that the prices of drugs will come down?

[Lord Hunt of Kings Heath (Lab)]

My Lords, I look forward to the Minister’s answer to that last question. From the opposition Benches, I very much welcome the agreed amendment that has come forward from the Government today. It is good to see how wash-up can concentrate minds no end, and we have reached a very satisfactory outcome. I am very grateful to the Minister and his officials for their co-operation on this.

The Opposition have been in no doubt whatever that it is absolutely right to take action against those companies that have clearly been abusing the system. We should also pay tribute to the Times newspaper for its campaign, which has opened up some transparency in a pretty murky area.

There are two key issues that need to be taken forward. First, the key message of debates in your Lordships’ House is that, in seeking to deal with this particular problem, we must not underestimate the contribution of the pharmaceutical industry to this country, to the economy and to the life sciences sector. We have a problem in that we are incredibly innovative in the number of new drugs that are developed in this country, but the NHS is finding it increasingly difficult to invest in them and patients are not getting the benefit.

The second is the whole question of balance between the statutory and voluntary schemes—the noble Lord, Lord Lansley, referred to this. I have reached the conclusion that the current arrangements are simply not up to scratch in relation to how government should negotiate with the industry in the future. The patent lack of transparency about the real price paid by the NHS for individual drugs means, in my view, that the arrangements are no longer fit for purpose. I hope that the Government—whichever Government are in power post election—will look afresh at the need for new arrangements in negotiation which get a fair price and also lead to the adoption of innovative new drugs for NHS patients.

Can the Minister say when he thinks the Government will be in a position to implement the key provisions in this Bill in relation to prices?

[Lord O'Shaughnessy]

My Lords, I thank all noble Lords for their warm words and I reciprocate those feelings: it has been a very interesting, challenging and enjoyable experience working with noble Lords on this Bill on what is—as the noble Lord, Lord Hunt, has pointed out—a critical matter. It is critical not just that we get the best possible prices for drugs and that we crack down on those who are trying to rip off the system, but that we make sure we are also supporting the life sciences industry and are improving access for patients.

I am particularly grateful for the work done by the noble Lord, Lord Warner, and I appreciate his support for this amendment. My noble friend Lord Lansley and the noble Lord, Lord Hunt, made the point about the equivalence between the voluntary schemes and statutory schemes. There is equivalence in law and equivalence in spirit. It is in the nature of voluntary schemes that they take into account issues around access and life sciences, because that is, in a way, why they come about. You would not have one if you could not have some agreement on that. By making this amendment today we have provided something that was taken into account by the voluntary schemes by moving it into the statutory schemes and providing that equivalence.

My noble friend is quite right about the need to work in a constructive manner. It is possible to create a system in which the interests of patients, industry and the NHS align. There is no necessary reason for them to be in conflict and, indeed, we all want a system where we have improved access and keen prices that raise the standard of care available on the NHS.

I join the noble Lord, Lord Hunt, in congratulating the Times on its investigations, which continue. Indeed, I think that there was a story at the beginning of the week or the end of last week about that. It has put a turbo boost under this, but clearly there is more to do. This Bill will allow us to get up stream and not have to wait until things get to the Competition and Markets Authority many years down the track; it will allow us to improve things up front.

As to whether the current arrangements are up to scratch and what might happen in the future, noble Lords will understand if I resist making a comment on what might happen in the future, or what a future Government might do. My own observation—this is my way of answering the question from the noble Baroness, Lady Masham, which I will avoid slightly—is that any new system ought to be trying to rebalance spending towards innovative drugs, which can of course be done in any fiscal envelope; it is not necessarily a point about spending per se but about the balance of spending. Any system would probably benefit from being both simpler and quicker. I am sure that is something that Ministers in the Department of Health, whoever they may be after the next election, will want to grapple with.

I thank my officials who have done a fantastic job and have worked very hard with noble Lords across the House on the Bill and on amendments. I am very grateful to them. I think that 24 government amendments have now improved the Bill.

On a personal note, I have very much enjoyed taking my first piece of legislation through your Lordships’ House. Pending the election result, it may be my last, but I hope it will not be. Others may disagree.

[Lord Hunt of Kings Heath]

My Lords, I will not comment on that last remark. The key clause is Clause 5. Can I take it that once the Bill receives Royal Assent the Government can implement that straightaway?

[Lord O'Shaughnessy]

I believe that would be the case. Of course, there is a difference between what officials can do and what Ministers can give instructions to do in a period of purdah. However, as soon as the measure is in law, it is enforceable.