Health Service Medical Supplies (Costs) Bill

Debate between Lord Lansley and Lord Warner

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

[Lord Warner (CB)]

My Lords, I am grateful to the Minister for the further thought that he has given to the amendment that your Lordships passed at an earlier stage. I am also grateful to him for his courtesy in showing me the amendments before he went forward with them; I very much appreciate that. I accept the Government’s arguments for the new approach that they have provided on the set of concerns that we had across the House about the adequacy of the provisions in the Bill on the life sciences industry and on speedy access to NICE-approved drugs. I accept their arguments that the original amendment was to some extent too restrictive on their freedom of manoeuvre when they need to act on unreasonable high prices. The Government have skilfully met the concerns of your Lordships’ House and I am very pleased to be able to support the amendment.

While I am on my feet, I will also thank the Minister for the courteous way in which he has listened to concerns throughout this Bill and taken the issues away, considered them with his officials and come back and tried to respond to many of the concerns. Across the Benches of this House, we are grateful for the way in which he has conducted the discussions during the passage of the Bill.

[Lord Lansley (Con)]

My Lords, I am glad that my noble friend is on the Front Bench to see this Bill safely through. I share with colleagues an appreciation of how he and officials from the department have worked consensually, carefully and considerately to try to make the Bill as good as we can make it. I welcome the amendments in lieu; they point to a sensible way forward in relation to the consultation on the statutory scheme. I would ask that my noble friend is equally clear that, in the negotiations leading to any voluntary scheme, Ministers will have regard not only to their statutory duties, as we have discussed, but to these considerations reflected in this amendment. One purpose of the Bill is to make a voluntary and a statutory scheme entirely consonant, one with the other.

The only other point that I would make is that, of course, when one passes legislation it is about not just the law but the administration that follows and accompanies it. In that context, it is important that Ministers take these powers, but it is equally important that in the administration of those powers, not least in working with NHS England and NICE, they work in the same constructive fashion to see that the impact on the life sciences industry and the accessibility of the best available treatments for patients, at a price representing value for money, are integral to the purposes of the legislation. I hope that they will equally be part of the further action that the Government take with NHS England and NICE to ensure that, however they manage the budgetary impacts as they must, they do so in a way that has the interests of patients and the country at heart.

Health Service Medical Supplies (Costs) Bill

Debate between Lord Lansley and Lord Warner

Wednesday 5th April 2017 Lords Chamber

[Lord Lansley (Con)]

My Lords, I intervene in this instance not to agree with but, I am afraid, to disagree with the amendment in the name of the noble Lord, Lord Warner. However, I will also make some important points that are relevant to the issues raised in this Motion and the amendment.

I am against the amendment to the Motion because I entirely agree with my noble friend the Minister that Lords Amendment 3, which the Commons disagreed to, was flawed in the sense that—in relation to the specific responsibilities under the Act for the PPRS and pricing medicines and supplies—it would have put into legislation a set of statutory requirements to have regard to, or indeed to take account of, that are partial and disjointed. Over many decades we have argued that the Secretary of State’s responsibility under the PPRS is not to create an industrial strategy. If we had said that that was the objective, it would have been regarded as a state aid, and it was never regarded as such.

It is not the job of the Secretary of State, through the PPRS, to deliver a successful industry. There are many ways—my noble friend illustrated them better than I could have—in which the Government can discharge that wider responsibility, and should do so. That responsibility is to secure the best value for the NHS in purchasing medicines and supplies. We should all be in favour of that and not wish to see it abridged.

[Lord Warner]

Perhaps I may just ask the Minister to explain how, under the PPRS, incentives are often given through R&D tax allowances. Does he not consider that state aid?

[Lord Lansley]

I am perfectly happy if the Minister wants to reply but, from my point of view, I do not regard the PPRS as state aid. If R&D tax credits are available, they should be made available. When the Office of Fair Trading reviewed the PPRS back in 2008-09, I think, it concluded that it was neither a state aid nor a spur to innovation but was actually all about managing the drugs budget. That is what this legislation is all about: managing the drugs budget.

It is, however, important to recognise that the statutory duties in Lords Amendment 3 do not include the one which the Secretary of State should have specific regard to: affordability. It is deficient in not providing for that. Noble Lords will recall that, at an earlier stage, I tabled an amendment the purpose of which was to insert a more complete set of statutory duties for the Secretary of State to have regard to. Affordability must form part of that, but it is not present in this amendment. I am therefore against the amendment.

In the course of this legislation we have discussed other important issues which are still coming to a head. It is absolutely right, as my noble friend said, that the Government are setting out to promote innovation and the life sciences sector, and there are many ways of doing that. The Conservative Party manifesto of 2015 stated:

“We will increase the use of cost-effective new medicines and technologies”.


It also stated:

“We will speed up your access to new medicines”.


It is important that we do that as it is in the interests of patients, our life sciences industry and ourselves as a world leader in science in this area. However, we have on the stocks the accelerated access review—which, ironically, took too long to be produced, was delayed in its publication and has not yet been replied to. We also have a life sciences strategy. The many positives in that run the risk of being negated by the way in which NHS England and NICE have gone about the consultation.

As I said at an earlier stage, it is possible to see how NICE and NHS England can work together in ways that would give industry greater confidence as it would mean that it could get early engagement with NHS England about the managed entry of new medicines into the NHS, including, as my noble friend said, on issues of importance to industry, such as the volume of purchasing of new medicines in the early stages of access. However, the budget impact test, at £20 million, is probably not one-fifth of all new medicines; it is one-fifth of all new medicines regarded as cost effective by NICE. Therefore, this is not a case of any old medicine that might be very expensive; it just happens to be medicines which are cost effective but have relatively high volumes, which is exactly the point to which the noble Baroness, Lady Walmsley, referred.

However, the issue for NHS England should not be the cost of introducing new medicines that are cost effective and in the voluntary PPRS, as the purpose of the pharmaceutical price regulation scheme, as currently designed, is—through the clawback—to give government assurance about the overall increase in the drugs budget. As a consequence, that money is made available as part of the overall funding provided to NHS England. Therefore, NHS England should in theory have in its budget the money that is necessary to meet the drugs bill, including new medicines as they come on stream, because there is clawback for that.

We have this Bill in front of us partly, but not entirely, because the drugs budget was rising much faster than anticipated, and much of that growth was outside the voluntary PPRS. This Bill plugs that gap and sorts that out. However, in doing so—and here we are at the beginning of April—once this Bill is on the stocks and secures Royal Assent and the Secretary of State is able to align the statutory PPRS with the voluntary PPRS, there is no reason why NICE and NHS England should continue to apply an overall budgetary impact test. I say to my noble friend that I think the Government should step in at that point and say, “Where this product has come through a PPRS where a clawback is applied and we have a budgetary mechanism in place—redress—for any extra cost to the drugs bill in the course of this PPRS through to the end of 2018, NHS England should not interpose any extra delay, or seek any extra delay, through NICE in introducing that medicine to the NHS”. I am afraid that if it continues to do so in the way that it is at the moment, that will have a severe negative impact on the view held by the boards of major corporations in relation to the take-up of new medicines by the NHS.

I am sorry to say to the noble Lord, Lord Warner, and other noble Lords that the remedy is not contained in this amendment. The remedy is in the Government’s hands if they choose to make that point very clearly to NHS England in relation to what this legislation enables us to achieve in controlling the drugs budget.

Health Service Medical Supplies (Costs) Bill

Debate between Lord Lansley and Lord Warner

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

[Lord Warner]

Will the noble Lord clarify something for me? The point of my amendment was, in a sense, not any particular PPR scheme but the principle of a PPR scheme, which is a negotiation between government and the industry. No one is arguing that the PPR scheme should be set in stone for ever and a day. What the industry is concerned about is that Government are getting ready to impose a system as an alternative to a negotiated system. The amendment is not meant to enshrine a particular PPRS but to encourage the idea of a negotiated deal with the sector. Does the noble Lord accept that that is a good principle?

[Lord Lansley]

The short answer is yes. We should aim for what is a price paid by the NHS to the industry for the medicines that it uses that is reflective of value and is designed to promote innovative medicines—that is, as we will discuss in a later amendment, those that meet unmet need or add substantially to therapeutic benefit and are not the “me-too” drugs that are very similar to existing medicines but have a slightly different method of operation or delivery. Paying for what innovation gives by way of therapeutic benefit is where we want to be.

However, the amendment is right in the sense that one has to do that alongside supporting the life sciences sector. That is where freedom of pricing at introduction is important. I have accepted the principle of a PPRS which delivers a budget to the NHS and delivers freedom of pricing to the industry. We are not legislating precisely for the structure of the PPRS, but let us assume that those are continuing features. However, through the operation of the rebate or some other means, it seems perfectly possible to incorporate some of the criteria that will be the subject of our discussions on a number of amendments, as is reflected in the second limb of the amendment.

--- Later in debate ---

[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.

[Lord Lansley]

There is a risk of going on about this, but the structure of the amendment in the context of the PPRS as presently constructed is illogical, because the PPRS is constructed around budget control. The point, however—we will no doubt come back to this, not least on the next group—is that we should be thinking about how we can arrive at a negotiated price for the NHS to buy medicines which may well be marketed initially or globally at a given price, but the amount that the NHS should pay should reflect value. I have said it before and I will keep coming back to it.

I would not be as disparaging of the current consultation between NHS England and NICE at the noble Lord, Lord Hunt. It could have the effect that he describes: adding additional jeopardy because one has to meet not only all the normal criteria for an effective medicine but the NICE threshold, and NHS England might step in with hobnailed boots and say, “But we are not going to make it available and you must change the funding direction”. But it might recognise reality. The consultation, in my view, may have the effect of avoiding arbitrary post hoc rationing of medicines, because the NHS should be up front, negotiating price discounts on medicines, regardless of the rebate. That means engaging with the industry at an early point.

If the industry understands the consultation properly, it will understand that the budgetary impact for the NHS under current circumstances cannot be ignored. The best way to deal with that is not to go through all these processes and then find, at the end of the day, that the NHS cannot afford it, or that NICE has to say no through the application of the threshold. Rather, it is to use the pharmaco-economic evaluation and the health technology assessment properly alongside NHS England and say: “Here is something that is valuable and we want to be able to use it, but we must recognise the budgetary impacts”. There may well therefore be some risk-sharing processes or discounting processes to enable the product to be available to the NHS at an early stage and to give industry and the NHS all the information they need subsequently to be able to make sure that they have got the pricing right.

--- Later in debate ---

[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.

[Lord Warner]

My Lords, I reassure the noble Lord, Lord Lansley, that I see excellent reasons for his amendment. If the purpose of the Bill is to achieve equivalence between the two schemes, the Bill should secure that. At the moment, it does not. The industry does not think that it does. I am not sure, technically, whether the noble Lord’s amendment secures it, but I think it does. If it is not quite right, no doubt the Government can amend it. I tabled Amendment 6 to push the Government a little more on their commitment to a voluntary scheme. That is its purpose. We have had a good canter over that particular area. As I said when we discussed Amendment 1, I was not totally convinced by the Government’s position, but I want to set out briefly why this is important.

The scheme has stood the test of time as a basis for a relationship between an industry and government where that industry has a much bigger set of customers and a much bigger presence outside the UK. We have actually punched above our weight in securing the presence of that industry in this country, partly through the NHS, but partly because a system was imposed on the industry in terms of the research-based drugs industry. There was a negotiation. Amendment 6 is not meant to say in any way that a particular type of PPRS should be enshrined in legislation for all time. It is trying to get the Government to say, clearly and unequivocally, that for the foreseeable future, there will be some form of voluntary scheme in which a negotiation takes place in an open and transparent way with this particular sector in order to keep this sector being attracted to setting up, doing research and developing pharmaceuticals for the population at large and for the NHS in particular.

Amendment 6 is trying to get out of the Government rip-roaring support for the foreseeable future, a little stronger than the Minister said earlier on, for a voluntary scheme that presents an opportunity for government and the sector to agree the basis on which they operate in a life sciences industry producing drugs that can be made available quickly and speedily, when proven, to the NHS and its patients.