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

Maggie Throup Excerpts

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

[Rob Marris]

Q So what threshold would you have?

Philip Kennedy: I would have £50 million, which I think is a European definition of SMEs.

[Maggie Throup (Erewash) (Con)]

Q I have another question for Mr Kennedy, and anyone else if they want to add to it. Is the definition of medical supplies under the National Health Service Act 2006 sufficient, or do you think it needs to be clarified further?

Philip Kennedy: Again, I welcome the question. The definition envisaged here is extremely broad. It is difficult to define exactly what is a medical device or a medical technology. I think that some of the wording is “or any product”. I understand the desire to give this a wide scope, but it is extremely important that we differentiate between a medical device or a diagnostic product and a pharmaceutical or a generic pharmaceutical. They are quite distinct industries, very different in their structure and scope. We would welcome a much tighter definition and a tighter definition for the companies that produce those defined products of the intent—of what exactly is being asked of them by the legislation.

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

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

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

--- Later in debate ---

[Maggie Throup]

Q Coming back to the information side of the Bill, I have a question for Mr Kennedy and Mr Smith. What information do your members currently provide to the Government? Can you describe how it is used?

Philip Kennedy: Members within the ABHI produce a range of information for competitive tendering through the NHS supply chain, for example, whereby tenders are filled out with a request for information, not only the price of the offer but the credentialing of the offer in terms of adherence to environmental policy, service support or ongoing maintenance of spares and supplies. In that respect, data are provided. Also through drug tariff, a number of products that are prescribed are reimbursed, particularly in the ostomy business. We mentioned Coloplast earlier. There is a huge amount of data exchange for submission to drug tariff and then approval on drug tariff. One of the readings made reference to the fact that some of this information is already provided, for a tax perspective, but of course as somebody who has run an SME for 16 years, I can tell you that, although there is a requirement to put in a level of detail in a company tax return for a small business, you would not put in the level of detail that is perhaps envisaged—it is unclear what exactly is envisaged—in the Bill.

Warwick Smith: In primary care, for the majority of generics, our members provide quarterly data on the volumes and net receipts that they have received for those products, simply filling in a spreadsheet sent to them by the Department of Health, which is then merged together by officials. The Department uses those data to determine the reimbursement price for those medicines. Once that price is fixed, community pharmacies source from generic manufacturers, trying to get the best deal possible because they make a margin on dispensing generics. That is what keeps the price down.

There are a smaller number of products where we do not provide data, where we think we should provide data, so again, the reimbursement price is set according to what is actually happening in the market and not based on what can sometimes be misleading prices lists or something like that.

In secondary care—because, again, my members are essentially producing the same product—there is competition managed by the commercial medicines unit, which is currently part of the Department of Health. It runs regional tenders to set the price that should be charged. Those figures are circulated to hospital trusts, which then use them for procurement.

[Maggie Throup]

Q So your concern is really more about where this Bill extends to and what data will be required?

Warwick Smith: Absolutely. On the data, the concern is whether it is practical to collect some of the data being sought here. Once a medicine goes to a wholesaler, we do not know where it will go in the marketplace. It is very difficult to put costs against a lot of individual medicines because they are shared costs. You can create formulae, but they are often misleading. We think that it is important to get that level of detail right. We are not saying these powers should not be in the Bill. What we are saying is that, when using those powers, the Secretary of State should take account of those issues, which, frankly, are too far in the weeds to be in the Bill but need to be considered when it comes to implementation.

--- Later in debate ---

[Dr Whitford]

Q So you do not feel it is increasing access to new drugs in the way that was envisaged.

David Watson: That was the plan. I do not think it has achieved that. I think it could do. I agree with some of the comments that Dr Ridge made on this. It is quite complicated, for example, to imagine a big national medicines fund. I think that would have unintended consequences. I am not sure that is what the NHS wants. I think that there are other ways that we could address the real affordability challenge of new medicines, by finding a way to use this money through PPRS for the benefit of finding medicines for patients.

[Maggie Throup]

Q Currently, over-the-counter medicines are exempt from the proposals. Do you think that that is right, or do you think that if we do not actually include them in the proposals, we shall be sitting around this table again in a few years’ time, amending the legislation yet again? If you feel that they should be excluded, do you think that there are any other medicine groups that should be excluded or included in any other way?

David Watson: No, I think that the over-the-counter medicines exclusion is sensible. It is much easier for companies to report when they are not including over-the-counter sales. On your question about whether other medicines should be excluded, if we look at the intent of the Bill, which is to introduce a new payment mechanism for those companies that are in the statutory scheme, it was suggested in the previous panel that the problem with this is that companies are already agreeing deals with the NHS. I suspect that if we end up with a payment mechanism and deals with the NHS, there may be some reluctance to give the best deal possible to the NHS—if, at the same time, a payment is being made in addition to that. I think that may be one of the consequences of this.

[Maggie Throup]

Q So you feel that what is included and what is not included is correct in the Bill?

David Watson: Yes. Increasingly, the NHS itself is looking to strike deals with industry on medicines that are launched that have a large budget impact. Quite often, those are sold through contracts with the NHS as well. One of the options here would be that the payment mechanism would exclude those products, which have frankly already been managed elsewhere, rather than there being effectively a double dip.

[Justin Madders]

Q You mentioned various challenges to the industry. I wonder whether you could expand on that a little and say whether you feel we are close to a tipping point in terms of the potential impact on investment in jobs and research.

David Watson: As I said, the UK has a really strong history here. The EU transition is clearly one of the specific challenges at the moment, which I will not go into, but there are challenges from industry from a commercial point of view. Access to new medicines in the UK is more challenging for UK patients than it is in a lot of other countries, so we do not always have the best clinical practice here, particularly on newer medicines. As Dr Ridge mentioned, a consultation has just been launched on the interaction between the NHS and NICE. That creates a whole lot of uncertainty for industry, at a time when we have a PPRS in place. The accelerated access review is potentially very good, but it is unclear how it is going to work. At the moment, industry sees a number of different initiatives, some of which it is very encouraged by, others of which it feels are slightly piecemeal and working in isolation from each other. From a global company perspective, I think that it leads to the UK being seen as a confusing place to operate.

[Rob Marris]

Q Is that partly because NICE is slower than you would wish it to be?

David Watson: No, I think that industry recognises that NICE actually does a very good job, given its resourcing and its focus. The question is more about the complexity of the system—the NHS—at different levels and it being able to pick up new medicines. Inevitably, one aspect of that is affordability of new treatments. That is why the benefit of a voluntary scheme such as we have with PPRS is that all these medicine policy issues can be negotiated with the Department of Health and the NHS from an industry perspective. It makes it much clearer for industry to figure out how to navigate the area of uptake of medicines.

[Maggie Throup]

Q In your written evidence, you said:

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

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

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

[Jo Churchill]

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

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