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

Rob Marris Excerpts

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

[Justin Madders (Ellesmere Port and Neston) (Lab)]

Q This question is to Dr Ridge. The pharmaceutical bill has increased significantly in recent years—up another billion pounds in the last financial year. Could you give us some thoughts on why that has been the case?

Dr Ridge: I am absolutely delighted to do so. Just to emphasise some of the increases, I have brought with me the “Prescribing Costs in Hospitals and the Community” report from the Health and Social Care Information Centre, which is now part of NHS Digital. That organisation routinely publishes information on a range of things, including prescribing and drug expenditure. In the 2014-15 report—the latest one—it says that the overall NHS expenditure on medicine in 2014-15 was £15.5 billion, an increase of 7.8% from £14.4 billion in 2013-14 and nigh on 20% from £13 billion in 2010-11. In 2014-15, hospital use accounted for nearly 43% of the total cost—that is up from 40% in 2013-14 and 32% in 2010-11. From 2013-14 to 2014-15, the cost of medicines rose by 7.8% overall but by 15.4% in hospitals. This is a particularly important fact: the cost of medicines in hospitals has risen by some 59.8% since 2010-11.

I hope that emphasises where we are in terms of expenditure on medicines. There are a number of reasons for that. One is around an ageing population, with people living longer and multi-morbidities—more than one disease. Of course, in many ways we are very grateful to the pharmaceutical industry. I would say this as a pharmacist: medicines are a truly wonderful thing. They are also the highest expenditure in the NHS after staff, but they have delivered some really important therapeutic gains over the years.

When you look to the future in terms of how medicines in the specialised areas will change in nature, particularly at the reasons around ergonomics, personalised medicine and the ability to be able to target medicines, that will affect expenditure, with development costs in among that, but it will also affect how the pharmaceutical industry will price medicines. So there is a raft of reasons, largely clinical but also technological, from the past. Going forward, we are going to see more of that. Of course, that is set in the context of the NHS financial position and the gaps set out in the five year forward view.

[Rob Marris (Wolverhampton South West) (Lab)]

Q The new proposals suggest a £5 million threshold exemption for small companies. I wonder what your views of the appropriateness of the magnitude of that threshold are. Perhaps Mr Kennedy might lead on that because it is principally your bailiwick.

Philip Kennedy: Yes. Thank you. I would like to welcome the question. From our perspective at the ABHI, 99% of the medical device industry is made up of small to medium-sized enterprises, which are absolutely vital to the lifeline of the industry as well as to the whole country and employ some 90,000 people. There are over 3,000 companies. The definition of SME within that is companies that employ 250 people or fewer or have annual turnover of £50 million.

In the scope of these proposals, we believe that the considerations of the SMEs in the sector are absolutely crucial, not only to the health of the industry, for which you would expect us to be extremely vocal, but to the effectiveness of the NHS being able to benefit from the innovation and the good working relationship it has with SMEs in the sector. We feel that the potential to put in a layer of bureaucracy and cost is not good for the NHS and certainly not good for the SMEs that are largely representative of the sector.

[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.

--- Later in debate ---

[Justin Madders]

Q So you would tender for something you might make a loss on.

Philip Kennedy: Absolutely we might, because we may feel that to keep the factory running that month, we need to make a loss, or if we see potential revenue for further purchases from that particular trust, either in service contracts or future hospital builds, we may decide to take a lower price point for that tender.

[Rob Marris]

Q Or the other way round—what the market will bear. That is our concern.

Philip Kennedy: Or what the market will bear. Of course, in recent years, with the funding concerns, the price is only really going in one direction and that is putting a huge squeeze on niche product manufacturers. The other thing about the medical device sector, which goes back to the point about definition, is that there are some very specialised small businesses that work only within a certain sector. It is difficult to ask them to produce swathes of data to the same extent as a larger generic manufacturer or, indeed, large ostomy company that is quite accustomed to producing data for drug tariff.

[John Glen (Salisbury) (Con)]

Q This question is to Mr Kennedy and to Mr Ridge. With the data on the cost of medicines going up by over 7.5% in the last year—at a time when we have aggressive efficiency savings of £21 billion, or whatever it is, over the next few years—something needs to be done. To Mr Ridge, I am concerned that this is not radical enough. If we are really going to deal with the expected increases in medicine costs, we have got to do something more about innovation and the way that the NHS embraces innovation, so that we do not rely on Mr Kennedy’s members to provide what the NHS needs, which is wholly necessary at the moment, but the NHS could take more ownership of that. I would like you to reflect on that.

Mr Kennedy, in terms of the distribution of sales between what goes into the NHS and what goes into exports, surely one of the big justifications for the Government moving this forward is the fact that the rigour of the challenge, and the regulatory challenge, in the NHS—before medicines and devices that apply to the NHS—validates a considerable volume of export sales. I understand your difficulty in quantifying where your fixed costs are distributed over your NHS sales and exports, but nonetheless there is a massive advantage to supplying the NHS in terms of validating markets outside. How do you respond to that?

Dr Ridge: I am glad you asked that question, because the contribution of a particular component of the Bill is guesstimated at £88 million.

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[James Berry]

Q Mr Watson, do you think it is right that the Government should take action to stop profiteering from the NHS on drug prices?

David Watson: Specifically on the issues that we were widely covered by the media, yes. We have been very clear. We think the Government should have the powers to step in where there are price hikes, frankly, in unbranded products. We agree with that and with the intention of the Bill to widen the powers to apply to any company.

[Rob Marris]

Q Do you think there are further steps, besides what is in the Bill, that could be taken to ensure that the NHS gets best value for money?

David Watson: The Bill specifically addresses the point of unbranded generic prices. It also specifically talks about a new mechanism for the statutory scheme. Most branded medicine spend—about 80% of it—is actually in the voluntary scheme. We think that the voluntary scheme has operated very well to help address the issue of affordability and pricing.

[Andrew Selous]

Q What would be a reasonable return on capital for your industry, so that we have a thriving and competitive pharmaceutical industry in this country, with prices that are fair to the NHS and the taxpayer?

David Watson: I could not honestly give you a specific number.

--- Later in debate ---

[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 Following up on that, I understood you to say that other jurisdictions do it better, particularly for new medicines. Forgive me if I misunderstood you there. If I did understand you correctly, can you give some indication of what they are doing that we are not doing, which you and your members think would be desirable for the industry and for patients, were we to do it in the United Kingdom?

David Watson: That was exactly the subject covered by the Government’s accelerated access review, so it has identified some of the reasons. One of the specific things we would say that the NHS could look at is that, where medicines are viewed to be very cost-effective, the implementation of the guidance and quick access for patients to those medicines should be a priority. Quite often, we see medicines that are cost-effective and affordable, but are still not being taken up. I think that is a real concern for everybody.

[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.