Branded Health Service Medicines (Costs) (Amendment) Regulations 2023

Lord Markham Excerpts

Thursday 25th May 2023 Lords Chamber

[Baroness Wheeler (Lab)]

My Lords, I thank my noble friend for his usual expert and comprehensive explanation of his regret Motion on this SI, which is so important for the future of the NHS and the UK’s pharmaceutical industry and life sciences sector.

While the Government’s argument for maintaining equivalence between the two schemes makes sense, we certainly do not want companies to choose to leave the voluntary scheme for better rates. We on these Benches fully recognise the strong concerns about the impact and potential damage that the 27.5% clawback rate will cause to the manufacturer of branded medicines, to the availability of those medicines to the NHS and its patients and to future investment in the research and development of new drugs.

I point out that this is the first opportunity, on such an important subject, that we have had to discuss in depth the key issues my noble friend and other speakers across the House have raised, since the short Grand Committee debate last October on pharmaceutical research and development spending. The Minister will recall that it was his first debate as Health Minister and that he surprised us all by bursting into maiden speech mode when he summed up the debate. He expressed his confidence that the Government

“through Life Sciences Vision … will develop the end-to-end improvements required to attract an ever-growing proportion of pharmaceutical investment to the UK”.—[Official Report, 13/20/22; col. 135GC.]

He also made the acknowledgement that growing the UK’s proportion of global pharmaceutical investment meant improving

“every aspect of the life science ecosystem”.—[Official Report, 13/20/22; col. 133GC.]

As my noble friend and other expert speakers have shown today, this is just not happening.

The continuing dramatic decline in the UK’s share of global pharmaceutical investment is clear evidence of this, causing the loss of billions of pounds to the industry over the past 10 years. We have heard the stark figures. The NHS faces huge challenges and obstacles to becoming an effective innovation partner in supporting the access to and uptake of new and innovative drugs, which are so critical to developing better outcomes for patients and creating a thriving life sciences ecosystem. If the NHS continues to be slow on the uptake of innovative medicines and treatments, the UK could lose its position as a world leader in life sciences, particularly with the rapid advancements in biotechnology and AI.

For the UK to become a destination of choice for cutting-edge research, urgent action has to be taken to reverse the sharp decline in industry clinical research trials within the NHS and to address the standstill we have reached in developing the comprehensive strategy on patient data and research that is vitally needed. We need to balance the safeguards for patients and public engagement with the ability of accredited researchers to access the data they need to develop the valuable research at the heart of innovative medicines and treatments. What consideration are the Government giving to further embedding research within the NHS, both to underline the importance of patient participation and to allow a more direct link between health and science? During Covid we saw how, with the right drive and attitude, this can be done successfully for vaccine development, with life-saving results.

That is why the background and context of the proposals in this SI are so important. Despite the “remote” risk optimism of the impact assessment, and all the flaws that noble Lords outlined, the SI’s proposals for a substantial clawback, in 2023, of net sales income for UK biopharmaceutical companies greatly increases the risk of them reducing their current level of R&D investment. I look forward to the Minister’s explanation of how other countries that have similar clawback schemes—Ireland, Germany and Spain—managed to keep their clawback rates considerably lower than half what is proposed in the UK. This was mentioned by a couple of speakers. What assessment have the Government made of the impact these lower rates would have on investment in the UK? Why do they think that AbbVie and Lilly chose to leave the voluntary scheme?

In 2023, manufacturers of branded drugs in the voluntary scheme will be required to return almost £3.3 billion—or 26.5% of sales—to the Government, up from around £0.6 billion in 2021 and £1.8 billion in 2022. ABPI says that this means that the money spent on branded drugs has declined by 14% in real terms over the past decade, despite rising demand. The noble Lord, Lord Warner, pointed out that, overall, the savings to be made are minor when compared with the likely damage.

On the consultation exercise, I look forward to the Minister’s explanation of how 39 days of consultation over the Christmas period was sufficient to provide this. This is made even starker by the fact that 32 out of 33 respondents opposed the proposals. One thing we know businesses need in order to invest their money is certainty, but they are not getting it.

Finally, today’s discussions have made a convincing case for taking a long, hard look at the current scheme and how it is working. Negotiations are under way for the new voluntary scheme for pricing, access and growth, and we will watch them carefully. The priority must be to find a solution that allows patient access to the best-quality treatments, with good value for the NHS and taxpayer, while ensuring a fair return for the industry. We need to secure arrangements that will build confidence and provide mutual benefit for the NHS and industry. Can the Minister provide an update on the early talks or negotiations that have taken place? I noted the comments of the noble Lord, Lord Warner, about how this SI’s approach could be paused in the light of any significant developments that are likely to take place.

[The Parliamentary Under-Secretary of State, Department of Health and Social Care (Lord Markham) (Con)]

I thank noble Lords for the debate, and I particularly thank the noble Lord, Lord Hunt, for bringing forward this important subject. It was clear from the contributions of noble Lords that we all want the same thing here, and this is a discussion about how best to achieve it. We all want the UK to be a

“science and technology superpower by 2030”,

as quoted by the Prime Minister. We all want a thriving life science sector, we want access to the best medicines for the NHS and we all want to ensure that the NHS is achieving value, in terms of money for the front line—I think we are united on those things. I also commend the fact that this debate was very much a discussion, so I will respond in that vein, rather than reading out a speech. I will try to discuss this from the Government’s point of view. I apologise if that means that I might not come across as quite as polished, but I would rather respond directly to the points raised.

We would all accept that we are striking a delicate balance here: between having value for the NHS—through, for example, the funding of £2.5 billion this year—and having value and making savings for frontline services, which we all want to see. While we are focusing on those, we also want to make sure that we do not go too far and damage what is, and what we want to be, a thriving sector.

The noble Lord, Lord Hunt, asked whether the Government are being complacent about this. The words of the Prime Minister, saying that he wants a negotiated outcome with the ABPI, are probably the strongest sentiment in terms of wanting a sensible, negotiated outcome. At this point, I say to the noble Lord, Lord Warner, that I am responding on behalf of the Government.

As the noble Lord, Lord Warner, pointed out, just today, the Chancellor is having a round table with the life sciences industry. That, too, is very much about getting a solution that works all the way round. Having said that, please remember that some of the comments I am making in this debate are about a balance. We are all aware that we are entering into a negotiation and obviously, in any negotiation, sides make points—sometimes at the negotiating table and sometimes publicly. Please take my comments in that vein; we want to make sure that a balance is brought to the debate.

[Lord Warner (CB)]

I am sorry to interrupt the Minister’s flow. He said that we are having the fruitful discussions that the Prime Minister wants with the industry and that they are starting to progress. However, the industry itself is starting with a figure in the single figures, nowhere near 27%. I am curious as to why we are having this discussion about progressing these regulations, as they seem to be going in totally the opposite direction from the aspirations the Prime Minister has.

[Lord Markham (Con)]

The mechanics behind this debate—I was planning to say that my noble friend Lord Lansley made this point—are about the alignment of the voluntary and statutory schemes. I think that we would all agree that it is sensible that the two are roughly aligned. We can argue over how high or low that figure should be, but we would agree, I think, that it is quite sensible that the two are aligned. If you had large disparities between the two, you would disadvantage, for instance, the members who have joined the VPAS system.

[Lord Warner (CB)]

I am sorry to interrupt the Minister again. We are talking about signals given to the outside world, in these discussions that are now taking place about the voluntary scheme. As the noble Lord, Lord Lansley, asked, rather elegantly, why do we have two schemes in the first place? There is something very odd about levelling up to a voluntary scheme’s level with a big increase and, at the same time, sitting down with the industry and saying how much we love it and that we want a new, agreed programme, when the industry is talking about figures which are nowhere near the figures in these two schemes. It seems almost politically inept.

[Lord Markham (Con)]

As I said, this is about the scheme and the pricing for this year. The negotiations happening now are about future years, while, technically, this debate is about making sure that the alignment is there for this year and its pricing. Given that the discount has been decided on for this year for the voluntary scheme, having alignment will ensure fairness, so that members in the voluntary scheme are not suddenly disadvantaged against the statutory scheme—which would happen if we were not putting in a similar price. It does not in any way predicate what a negotiated outcome might be for future years.

In terms of a future negotiation, if there was a VPAS-type scheme—again, everything is on the table—you would have the argument about alignment. Most people would accept, as my noble friend Lord Lansley was saying, that having an alignment between the two is a sensible mechanism. The real debate today is about what level that discount should be. Regarding the balance—and I am not making any value judgment about what the right level is—when this was first forecast in 2018, a forecast was put out about what the discount would be over a five-year period, and in year 5 it showed a discount in 2023 of 31.1%. Those were the projections made, at that time—in 2018—the ABPI welcomed the scheme as an innovative one. In fact, today, the discount is less than that, at 26.5%. This was all known and projected as part of the scheme at the time. That is not to say that, in these negotiations, it should not be reset or that we should not make sure that there is a sensible conversation, but I am trying to do this while making sure that there is a balance in the negotiation.

--- Later in debate ---

[Lord Hunt of Kings Heath (Lab)]

My Lords, I am very grateful to the Minister. I think he has responded in a positive way, which is gratifying and, I hope, sets the foundation for a proper negotiation with the industry to get a jointly owned voluntary scheme which will incentivise global pharma to invest in the UK.

For me, two or three themes come from this. First, the noble Lord, Lord Lansley, talked about the curiosity of a fixed drugs budget, and I found it curious when the Minister said we need value for money on medicines in order to have resources for front-line services. But medicines are a front-line service. Why is it a good thing to increase the number of doctors and nurses and buy more medical equipment, but it is suddenly shock-horror to spend more on medicines? What would we do without medicines? It is curious. I have never understood why the Department of Health has such a downer on the medicines budget, when it has just said—and I declare an interest as a member of the GMC—that it wants to see a massive expansion in medical school places. Why is the medicines budget regarded as such a negative factor? It defies all understanding; of all the great advances we have made in healthcare, how many have been made through new medicines? And I have to say that new medicines are rather easier to get than extra staff.

[Lord Markham (Con)]

May I just clarify? I completely agree that medicines are of course valuable. My comments were not about not spending money on medicines but about getting value for what we spend on medicines—not the quantity, not the quality, but the price that we are paying. I think that all noble Lords would agree that we want to make sure that we are getting the best value on pricing.

[Lord Hunt of Kings Heath (Lab)]

I fully accept that, but the sentiment that comes through is something that is shared throughout the National Health Service: that drugs expenditure, per se, is something to be held down. That is why, even though we have NICE, and bilateral negotiations—as the noble Lord, Lord Lansley, said—between NHS England and pharma companies in relation to specific drugs, at local level you have formularies and all sorts of mechanisms designed to ration medicines to patients. It is a curiosity about our whole approach. I agree with the Minister that one needs to start with a health budget. If we have—and I hope we do—new medicines coming on in relation to, say, Alzheimer’s, we will need to spend extra money in order to invest in them.

My second point—also made by the noble Lords, Lord Warner and Lord Allan, and my noble friend Lady Wheeler—is that it is very important that this is seen as a cross-government approach. If this is seen simply an issue for the Department of Health and NHS England in terms of the NHS budget, we will never get the kind of agreement that we need. If the Prime Minister is true to his word in terms of trying to reset the relationship—as the Minister implied—that is very welcome indeed.

This has been a very useful debate and I am very grateful to the Minister and other noble Lords. I beg leave to withdraw my Motion.