Health Service Medical Supplies (Costs) Bill

Norman Lamb Excerpts

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

[Mr Hunt]

My hon. Friend is right about that. The nice way of putting it is that we are closing a loophole. If one were being less polite, one might say that it is a shame we are having to do that. None the less, it is important to do what we are proposing to the House.

We recognise that it has been some time since the Government consulted on the options, and I wish to reassure hon. Members and those companies in the statutory scheme that we will consult further on the implementation of a payment mechanism in the statutory scheme, including the level of the payment mechanism, before the regulations come into force. We estimate that 17 companies would be affected by the introduction of a payment mechanism, with the 166 companies that are currently members of the PPRS not being affected. Our proposals would save health services across the UK an estimated £90 million per year.

The second key element of this Bill amends the 2006 Act to strengthen the Government’s powers to set prices of medicines where companies charge unreasonably high prices for unbranded generic medicines. We rely on competition in the market to keep the prices of these drugs down. That generally works well and has, in combination with high levels of generic prescribing, led to significant savings. However, we are aware of some instances where there is no competition to keep prices down, and companies have raised their prices to what looks like an unreasonable and unjustifiable level. As highlighted by the investigation conducted by The Times earlier this year, there are companies that appear to have made it their business model to purchase off-patent medicines for which there are no competitor products. They then exploit a monopoly position to raise prices. We cannot allow this practice to continue unchallenged. My Department has been working closely with the Competition and Markets Authority to alert it to any cases where there may be market abuse and provide evidence to support this, but we also need to tackle it within our framework for controlling the cost of medicines and close the loophole of de-branding medicines. Although the Government’s existing powers allow us to control the price of any health service medicine, they do not allow controls to be placed on unbranded generic medicines where companies are members of the voluntary PPRS scheme. Today, most companies have a mixed portfolio of branded medicines and unbranded generic medicines. For that reason, all the manufacturers of the unbranded generic medicines mentioned in the investigation by The Times are able to use their PPRS membership to avoid government control of their prices.

It should be said that that practice is not widespread, but a handful of companies appear to be exploiting our freedom of pricing for unbranded generic medicines where there is no competition in the market, leaving the NHS with no choice but to purchase the medicine at grossly inflated prices or to transfer patients to other medicines that are not always suitable. Alongside the Government, many in the industry would also like to see this inappropriate behaviour stamped out.

[Norman Lamb (North Norfolk) (LD)]

I very much agree with the point that the Secretary of State has just made. He talked about collaboration with the CMA. Can he give any indication as to whether he expects action to be taken on abuse in the marketplace, given that a small number of companies have behaved appallingly?

[Mr Hunt]

I cannot give the right hon. Gentleman that indication because, as he will know, the CMA operates completely independently, and I therefore do not know what its findings are going to be. Of course, I would support any action that it recommended. I do, however, think that this Bill can give us some security in the House that if the CMA is unable to find evidence in the specific cases it has before it, we will be able to take action as a Government, provided the House is willing to support the Bill.

--- Later in debate ---

[Norman Lamb (North Norfolk) (LD)]

This is an uncontroversial set of measures and I confirm my support for the Bill as it stands. The great strides in medical science over the past decade and beyond are obviously to be celebrated, with cutting-edge new treatments for life-threatening and life-shortening conditions, including a number of rare diseases and cancers, offering many people the hope of improved health, longer life and a quality of life that in the past would not have been possible. As well as the enormous benefits it brings to patients, the life sciences industry makes an incredibly valuable contribution to the UK, and it is only right that we acknowledge that today. However, there is an inevitable cost attached to the triumph of modern medicine, and the challenge is to ensure patient access to new treatments as quickly as possible, while ensuring value for money for the NHS.

The Bill seeks to address some of the shortcomings. It addresses clear abuses of the current system and I think that it will bring greater consistency to the existing arrangements for controlling the cost of medicines new and old. As I have said, I find myself in agreement with the proposals.

It is good that so many companies recognise their responsibility for keeping the branded medicines bill in check by signing up to the pharmaceutical price regulation scheme. Under the scheme, manufacturers pay a rebate to the Department of Health to cover expenditure on branded medicines above agreed limits. It is a responsible approach, helping to ensure that patients can benefit from access to novel drugs in a way that is sustainable for the taxpayer. However, I agree with the Secretary of State on the need to address the current disparity whereby the statutory medicines pricing scheme delivers lower savings than the voluntary scheme. Those differences are expected to widen, which is clearly not in keeping with the spirit of either arrangement, so it makes sense that they should be more closely aligned. As he said, we have to remove the incentive to shift from one scheme to another.

I particularly welcome the proposals to strengthen the authority of the Secretary of State to intervene where unbranded medicines are priced excessively. The NHS and patients benefit immensely from medicines, which were once available only at great public expense, becoming available far more cheaply after the patent expires and generic products come on to the market. We should recognise the great value that the competitive market brings, saving the NHS more than £13 billion every year, according to the British Generic Manufacturers Association, but we also know that the overall cost of generic items is increasing at a faster rate than branded items, and that there have been some outrageous increases, to which other hon. Members have referred, in the price of some individual generic drugs in recent years when there is only a single company producing that drug. It looks like a clear case of profiteering, where the NHS is being ripped off.

Let us be clear what the implications are when a particular company makes an excessive profit from increasing the price of a drug in that way. It means that other NHS patients, particularly those in more marginal areas that do not get the attention that they deserve, lose out. There is less money to spend on, for example, teenagers with mental health problems or learning disabilities. There is a price to be paid for that excessive profiteering. It is utterly unethical behaviour. I hope that the Competition and Markets Authority can find a way to take action against these companies, which appear to have constructed a business model to exploit the loophole.

As hon. Members have said, a number of generic medicines increased in price by more than 2,000% in the last decade. The most horrific example I have come across is a medicine that increased in price from £13.98 in 2005 to £632.96 in 2015, a rise of more than £600 per item dispensed. It is utterly despicable for any private company to think that it can do that. The Government are right to take action to end that outrageous practice.

Generics account for three quarters of prescription items dispensed in the community. In those cases where competition fails to deliver value for money, it is important that there are measures at our disposal to control prices and to tackle abuses that could place intolerable pressure on NHS budgets. It makes little sense that generic medicines can be controlled through the statutory scheme, but that the Government are currently prevented from stepping in when a company’s branded products are regulated through the PPRS. It seems clear that we should remove that anomaly. I should add that, in using these powers to introduce price controls, the Government should of course exercise caution and guard against any unintended consequences that may impact on the viability of smaller companies. I am sure that the Government will be alert to that.

The aims and provisions of the Bill are admirable, but it is only part of a much wider debate about how we can sustain access to groundbreaking new treatments when the NHS is in the middle of the longest financial squeeze in its history. One intervention from a Government Member on the Secretary of State drew attention to the fact that the total bill for drugs is rising at an unsustainable rate. The right hon. Member for Chelmsford (Sir Simon Burns) also raised this question, and we have to address that because the NHS will not be sustainable at the current rate of increase in cost.

It is no secret that the NHS has struggled to adapt to modern medicines, particularly those that carry a large budgetary impact. Both NICE and NHS England have had great difficulty in figuring out which medicines to approve and how those medicines are to be afforded and brought to patients. Recently, NHS England has delayed funding for the new hepatitis C treatment, so I was interested in the points made by the SNP representative, the hon. Member for Central Ayrshire (Dr Whitford).

We also have the ongoing and deeply unsavoury case of the PrEP, or pre-exposure prophylaxis treatment. Not only is NHS England taking its legal challenge to the bitter end to avoid having to pay for the drug, but there have been reports of it pitting patient groups against each other by saying that patients could miss out on vital treatments for cancer or rare diseases for children should PrEP be funded. We do not want to get into comparing the rights and interests of one group of patients against those of another in that way.

Earlier this month, NHS England and NICE launched a consultation on proposals to change the way some drugs are funded when there is a high cost involved. NHS England and clinical commissioning groups are legally required to fund drugs recommended by NICE as being clinically and cost-effective, normally within three months of the guidance being issued, barring unique circumstances. Under the new proposals, if NICE recommends a drug that will bring an estimated cost to the NHS above a certain amount—£20 million is the suggested figure—NHS England can go back to NICE and ask it for longer to roll out the medicine if it is unable to agree a lower price with the manufacturer. Surely that is precisely the opposite of what we ought to be trying to achieve as regards speedier access to new drugs that are coming on stream. Ignoring questions about how that somewhat arbitrary cost threshold was arrived at, there is a concern that this is a creeping step towards the rationing of approved treatments in the NHS. It seems to me to be an admission that the NHS cannot afford to pay even for the drugs that are found to be cost-effective by NICE; similar concerns have been raised by Nicholas Timmins, that highly respected observer who is a senior fellow at the King’s Fund.

The great worry is that opening up the debate on how quickly or slowly approved treatments can be adopted will put us on a slippery slope to a new discussion about whether approved treatments should be adopted at all, and at the very least UK patients will be further disadvantaged—the SNP spokesperson has already made the point that we compare very badly with other countries —and there will be more delays in getting access to new cost-effective treatments.

[Dr Philippa Whitford]

Does the right hon. Gentleman recognise that we are one of a tiny handful of OECD countries that allow that opening price to be set completely by the pharmaceutical industry and to be set as high as it likes?

[Norman Lamb]

I note that point. I suppose my overall point is that given the unsustainable increase in the total drugs bill and given the actions that NHS England and NICE appear now to be taking, it seems that we will be in a more difficult position in getting speedy access to new drugs that can be life-saving. The Government need to reflect on that. The hon. Member for Central Ayrshire made the point in her speech that this Bill tidies up things that have to be tidied up, but there is a much bigger debate about how on earth the NHS can afford vital treatments that in other countries patients are getting access to much sooner.

If we are approaching a situation in which we are unable to cope with new treatments that have been judged by an arm’s length expert body, NICE, to be clinically effective for patients and cost-effective for the NHS, it is yet more evidence that the NHS needs more resources, and I repeat again to the Minister—he will be sick of hearing me say it—that at some point the Government must recognise that they are simply drifting towards a crash with the NHS. We face an existential challenge that this evening’s debate has highlighted and that has to be confronted at some point. I urge the Government again to consider a cross-party approach so that we can ultimately achieve, in discussion with the public, a long-term and sustainable settlement for the NHS and care that recognises both this dramatic increase in the cost of drugs and that all our loved ones want to have access to those drugs in their hour of need.

We should also be mindful of the potential impact of Brexit on the life sciences industry and the additional challenges we face in keeping the NHS medicines bill under control. If trade between the UK and other EU countries becomes subject to customs duties, import VAT and border controls, thereby increasing costs to the life sciences industry, that might in turn drive up the costs of new medicines to the NHS, and impact on access for UK patients to the most innovative new treatments.

Finally, we also need to make sure that evaluation processes and methodologies are fit for purpose. Traditional appraisal methods and notions of cost-effectiveness are unsuitable for many modern medicines, especially for drugs of immense scientific innovation that target just a small number of patients, but the NHS has been slow to respond to that. The Cancer Drugs Fund is a case in point—established as a sticking plaster after a cluster of promising drugs were judged not to be cost-effective. While it is almost certainly the case that many of those treatments came with too high a price to be routinely funded, few would deny that they were being evaluated under outdated processes that could not fully capture their value. Many rare disease treatments suffer from the same problem.

Companies have a duty to ensure that their medicines are fairly priced, but NHS England and NICE also have a duty to make sure that their evaluation processes and decision-making criteria are fit for purpose, so that new medicines are given a fair hearing without some of the excessive delays we have seen in the recent past. We owe it to patients to make sure that happens.

I support this tidying-up measure and, in particular, the ending of the outrageous practice of a number of companies profiteering at the expense of NHS patients, but this debate has also raised a much bigger issue about how we in this country afford groundbreaking treatments that keep our loved ones alive.