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

Rob Marris Excerpts

Committee Debate: 2nd sitting: House of Commons
Tuesday 15th November 2016 Public Bill Committees

[The Minister of State, Department of Health (Mr Philip Dunne)]

Mr Pritchard, thank you for calling me and, more particularly, for taking time out of your schedule to chair this important sitting.

On amendment 44, I was interested in the comments of the hon. Lady about the motivation behind it, with which I have some sympathy. I hope that what I say will reassure her that her amendment is unnecessary.

The amendment would require income from the pharmaceutical price regulation scheme and the statutory scheme to be ring-fenced to fund and increase access to new and innovative medicines and treatments. As a Government, we are committed to ensuring that patients have faster access to new and innovative medicines and treatments—I mention briefly the accelerated access scheme that we have introduced.

The hon. Lady touched on the compelling and sometimes tragic cases of individual constituents, friends and relatives seeking to get access to innovative drugs, in particular once those drugs have become authorised. Between 1 March 2000 and 30 June 2016, NICE, the National Institute for Health and Care Excellence, made individual recommendations for 646 separate propositions, 81% of which were recommended or optimised, so there is a steady track record of introducing innovative treatments and, in particular, drugs into our health service. That is done, properly, through the independent NICE structure. I am sure we will talk more about that in Committee.

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

On the number of drugs to which the Minister referred, will he give an indication now or later of how many, if any, of those drugs were repurposed? I am thinking, for example, of a drug that has recently had a lot of publicity; it is primarily used for osteoporosis, but there are indications that it may be very helpful with breast cancer. What about such repurposed drugs, as opposed to brand new drugs?

[Mr Dunne]

I do not have that figure in my head, as the hon. Gentleman might expect. I hope to get inspiration during the sitting and will try to address that question later.

We know that investing in new and innovative medicines and treatments, where they are proven to work and are a clinical priority, has the potential to transform the care of patients and to improve outcomes, which is what we all want. However, it is a fundamental principle of NHS funding that it should be allocated according to clinical priorities based on the judgment of clinical commissioners. That may include new treatments, but it may include scaling up older effective treatments—through repurposing, as indicated by the hon. Gentleman—or investing in more staff.

We understand the intention behind the amendment, but it is for NHS England and clinical commissioning groups to determine clinical priorities and to spend that money on what is clinically most important. It is also important to point out to the hon. Lady that income from the voluntary and statutory schemes can fluctuate from year to year, so allocating such income by means of a ring fence to a specific area, such as new medicines, brings risk because in some years the income received may go down. The perverse consequence of the amendment’s ring-fencing may therefore mean less money being spent in a subsequent year, in the event of the scheme not generating an increase in income. That would disadvantage patients by making treatment dependent on income from medicine pricing schemes, which we do not think should be the determinant of available medicine.

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[Rob Marris]

The Minister was talking about such decisions being clinically led. Will he therefore assure the Committee that the decision to cut spending on public health in England, to put the money into frontline medical services, was a clinical decision?

[Mr Dunne]

As the hon. Gentleman knows, decisions to allocate spending across the responsibilities of the Health Department were determined as a result of the spending review last year. The decisions within the NHS that I am talking about, on treatments, rather than preventive public health, are determined by clinicians.

Separate to the Bill, Government are taking action to secure the UK’s future as an attractive place for the life sciences sector and to support faster patient access to medical innovations. For example, the recently published accelerated access review sets out ways to increase the speed at which 21st century innovations in medicines, medical technologies and digital products get to NHS patients and their families. Recommendations included bringing together organisations from across the system in an accelerated access partnership and creating a strategic commercial unit within NHS England that can work with industry to develop commercial access arrangements. We are considering those recommendations with partners and will respond in due course.

NHS England and NICE are jointly consulting on a number of proposed changes to NICE standard technology appraisals and highly specialised technology appraisals, including around speeding up the appraisal process. The Department of Health continues to work closely with NHS England and other stakeholders to improve uptake of new medicines. A key element of that is the innovation scorecard, published quarterly. It is designed to help users—clinicians, patients, commissioning groups, Government and other stakeholders—to understand and monitor the uptake of innovations in the NHS and should ultimately be used to promote an equitable spread of clinically effective, cost-effective innovations.

I hope that having heard in particular what I said about the way in which income from these schemes does not rise in a continuum but fluctuates, the hon. Member for Burnley will recognise that the amendment could have the adverse consequence of leading to a reduction in funding available for medicines.

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[Mr Dunne]

I will not be drawn into the detail on a specific drug, because the hon. Lady may have access to information that I do not, but in relation to hepatitis C, as she has raised it, there has been a discussion between the trust and NICE. As I understand it, the trust is continuing to work with NHS England collaboratively to discuss the issue of access to the new hepatitis C drugs. We will always have some discussions about applicability when a new treatment is introduced, to see whether it is appropriate for all conditions; it may be that only some benefit from the drug. I think that that is as far as I can go on this issue.

To return to the Government’s view of the amendment, we are concerned that it would in effect circumvent the critical system of checks and balances around clinicians’ prescribing freedoms. That would present a danger to patients and the sustainability of the NHS. It is also not the purpose of the Bill to address matters other than the cost of medicines and medical supplies.

Treatments that do not demonstrate efficacy, safety and value for money should not be routinely available on the NHS. The National Institute for Health and Care Excellence, an internationally respected organisation that provides evidence-based guidance to the NHS, ensures that the treatments recommended for patients deliver value for money and improved patient outcomes. NICE’s recommendations are developed free from political interference and help NHS organisations to design services that are in line with the best available evidence and that meet the needs of their local populations.

[Rob Marris]

The Minister read out what I understood to be the role of NICE. May I focus for a moment on the words “value for money”? My understanding is that if NICE in England says that a particular medicine—perhaps a new medicine or a repurposed medicine—is value for money, then because that cost-benefit analysis has taken place, the drug should be freely available to clinicians to prescribe in medically appropriate cases. However, we are hearing quite a lot of stories, particularly about the prophylactic HIV drug or hepatitis C drugs, of when that is not the case. In other words, NICE says that a drug is value for money, but clinicians are blocked from prescribing it, even when they think it would be medically efficacious for their patient. Why is that?

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[Mr Dunne]

We are anxious to ensure that we do not inadvertently introduce a regime that might cause difficulty when there might be a valid reason for increasing a drug’s price significantly. That was the justification in the past for not addressing the issue, because abuses were seen to be pretty isolated. However, in the past two or three years, the prices of more drugs have risen seemingly unjustifiably. That is the justification for introducing these measures.

I recognise that there may be occasions when a manufacturer incurs some additional costs: for instance, if a production run or line has finished and the manufacturer must start a new line or restart an old one, that would lead to a justifiable price increase. The clause allows us to take action where we suspect a price has risen excessively. The rest of the Bill provides opportunities for the Department to gain information about the cost of supplies, which allows us to get a better handle on when we think an increase has been unjustifiable, and identify that more rapidly. [Interruption.] Does the hon. Member for Wolverhampton South West want to intervene, or is he just poised in an energetic way?

[Rob Marris]

I am always ready.

[Mr Dunne]

Then I will continue.

Certain companies appear to have made it their business model to buy the marketing authorisations for medicines without any patents outstanding. They then de-brand the medicines and abuse the existing freedom of pricing for unbranded generic medicines. Although the practice is not widespread, it must be addressed, which is the reason for the clause.

Currently, our only recourse is to refer such cases to the Competition and Markets Authority, as I mentioned. When the CMA investigates, we must wait for the outcome, and in the meantime the NHS continues to have to pay high prices. The Department consulted on the issue as part of the consultation on the statutory scheme that was launched in December 2015. The Department has been working closely with the Competition and Markets Authority and has referred cases to it. The CMA is about to issue a decision in a case on a high-priced unbranded generic medicine. As I have just said, it has also recently opened another investigation.

The powers under section 262 of the 2006 Act to limit prices of health service medicines can be exercised through directions or regulations. The Government’s intent is to work with directions, which will enable us to limit the price of a specific medicine from a specific manufacturer. The Government are obliged to consult the industry representative body when we want to direct the price of a medicine. In the case of high-priced generics it would be the representative body of the unbranded industry—currently the British Generic Manufacturers Association, which appeared before the Committee last week.

The Government would of course also engage with the company involved before issuing a direction that limited the price of a medicine. As I have indicated, there may be good reasons for a price increase, and it is important that the Government understand the reason behind a price increase before issuing a direction. As I said, the new information powers will help us with that.

My officials have initiated talks with the unbranded generic medicines industry representative body and the CMA to explore how in practice we would determine what should be considered a reasonable price. Any decision by the CMA in the cases that I highlighted earlier could help set a useful precedent. I can reassure the Committee that companies charging unreasonably high prices for unbranded generic medicines is not a common practice. The Government do not intend to use the power where competition in the market for unbranded generic medicines is working. However, the Government need the right legislative tool to be able to address unreasonably high prices of unbranded generic medicines. The clause will give us that tool, and I ask the Committee to agree to it.

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[Mr Dunne]

I am grateful to the hon. Lady for making that clear to the Committee. The different approaches to price control between the voluntary and statutory schemes have led to some companies making commercial decisions to divest products from the voluntary scheme and sell them through the statutory scheme, thereby reducing the effectiveness of the voluntary scheme and savings to the NHS. The introduction of a payment mechanism in the statutory scheme would save the health services across the UK an estimated £90 million a year, as set out in the impact assessment.

In response to the Government’s consultation on introducing a payment mechanism in the statutory scheme, the pharmaceutical industry queried whether the Government had the powers to introduce a statutory payment system. The clause clarifies the existing powers to make it clear that the Government have the power to introduce a payment mechanism in the statutory scheme. The ability to make the statutory scheme by way of regulations rather than setting out the detail in primary legislation provides us with the flexibility to respond to changes in the wider economy, the medicines market and patient needs. We have provided illustrative regulations to support scrutiny of this delegated power.

The clause makes a further amendment to section 263 of the National Health Service Act 2006. Currently, the power to make a statutory scheme cannot be applied to members of a voluntary scheme, which means that if the Government introduced a statutory scheme for unbranded generic medicines—although we have no current plans to do so—we would be unable to apply the scheme to manufacturers of unbranded generic medicines that have a mixed portfolio of branded and unbranded generic medicines, and are members of the voluntary scheme. The clause therefore amends the Act in such a way that the power to make a statutory scheme cannot be applied to products covered by the voluntary scheme rather than member companies of the voluntary schemes.

The Government’s view is that, for the most part, competition works well to keep down the price of unbranded generic medicines. Should that situation change, this amendment would enable the Government to use their clause 2 powers to take action beyond individual products or companies. I hope that is clear to the Committee. If so, I ask the Committee to agree that clause 3 should stand part of the Bill.

[Rob Marris]

What a pleasure to appear before you for the first time, Mr Pritchard. As you know, my mother is one of your constituents and was quite a frequent correspondent. She is now in quite frail health so I suspect that you have not heard from her recently, but I thank you for your courtesy in your replies to her over the years. It is a particular pleasure to appear opposite a fellow west midlands MP, the Minister, who represents Ludlow, the constituency in which my mother used to live. She is still in the same house, but the constituency boundaries have changed.

[Mr Dunne]

She may move back again.

[Rob Marris]

Indeed. I very much welcome clause 3 because it is to do with extending the statutory scheme. The helpful library briefing cites the Department of Health consultation from December 2015, which points out:

“In 2014 the statutory scheme covered around 6% of branded medicines sales in the UK”,

in contrast to the voluntary scheme, which covered about 75%. Those are the relative sizes of the schemes.

The Minister said—forgive me that this is not an exact quote, but I do not write that fast—that one of the effects of the clause 3 changes will be to broaden the statutory scheme to cover companies that have a mixed portfolio of branded and unbranded drugs, and are members of the voluntary scheme. As he pointed out, the clause clarifies the power of the Secretary of State to make the statutory scheme—something that was debated or contested by some companies.

In particular, I welcome the clause philosophically or ideologically because it amends section 263 of the National Health Service Act 2006—a Labour Act for which I voted proudly. Section 263(1) of that Act provides the Secretary of State with the power to make a statutory scheme for the purposes of “limiting the prices” or, as in section 263(1)(b) “limiting the profits”. This is something of a damascene conversion for this Government.

I hope, Mr Pritchard, that you will give me a bit of latitude, as I am about to read a quotation from this morning’s edition of The Times. An article entitled “Energy companies face caps on ‘rip-off’ tariffs” says:

“Measures designed to cap the household energy bills of millions of British families on ‘rip-off’ standard variable tariffs are being considered by ministers.”

I think we heard about that in my party’s manifesto at the general election; there has been a damascene conversion by the Government. That article also says:

“Greg Clark, the business and energy secretary, said: ‘I have made clear to the big firms that they must treat customers properly or be made to do so.’”

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[Andrew Selous (South West Bedfordshire) (Con)]

Many Conservative Members may see the Bill as limiting the ability of drug companies to rip off the Government in a wholly unacceptable way, rather than as introducing price controls in the manner to which the hon. Gentleman refers.

[Rob Marris]

With respect to the hon. Gentleman, that is precisely what price controls do: they stop rip-offs. If one has price controls for other reasons, that is a separate debate. The price controls discussed in the Bill and in the 2006 Act are, as I understand it, precisely to stop rip offs. It appears that the Secretary of State for Business, Energy and Industrial Strategy is now looking at the same thing, as the newspaper quote suggested. It may be an incorrect quote—I give that caveat—but it is a direct quote from the Secretary of State to say that the Government are looking at these things. That does not necessarily mean that they will do them, but it is an ideological watershed for a Conservative Government to look quite rightly at legislating to stop rip-off Britain with regard to prices, but also with regard to limiting profits.

That is what a statutory scheme has the power to do under section 263(1) of the 2006 Act. As I understand it—the Minister can correct me if I am wrong—clause 3, which is at the heart of this provision, does not say, “There has been a debate about whether we can have a statutory scheme or not”. For the sake of certainty, we are saying in clause 3 that the Government will have the power to make a statutory scheme, but I do not hear the Minister going on to say, “But that statutory scheme will have nothing to do with limiting profits.”

In the absence of the Minister’s saying that, he appears ideologically to encompass the concept that I embrace, which is that, in certain circumstances in capitalism, it is incumbent and right for a Government to intervene in the market to limit not only prices—rip-off Britain and so on—but profits. On certain occasions, the Government should have that power, and I think a pharmaceutical supplier to the NHS is one such example. There is a very narrow range of things I could see this happening in, but in pharmaceuticals it is possible.

I congratulate the Government on coming over to a socialist perspective, not only on pharmaceuticals but apparently, if The Times report is right, coming our way on energy companies. Long may that continue. Perhaps we can look at rail fares next. Will the Minister have a word with his fellow Ministers on that?

[The Chair]

If the Minister is in Churchillian mode—I do not take a view on that; I am completely neutral as Chair—that is something I have always wanted to see. In fact, we have two Churchills in the debate, as Members will recognise. That is probably a first, which is great.

[Mr Dunne]

Thank you very much indeed, Mr Pritchard. I hope I am not going to disappoint you, given that build-up.

As ever, I am delighted to see the hon. Member for Wolverhampton South West, who is almost my parliamentary neighbour and with whom I served on countless Finance Bill Committees when he was previously in this place. He always entertained the Committee with his interventions, some of which were occasionally on the subject of the Bill, rather like on this occasion. He has craved your indulgence, Mr Pritchard, and I am glad that you allowed him to point out what I am going to take a stage further, if you will indulge me a little.

The Conservative party is the party of the working man in Britain in 2016. As the hon. Gentleman may have heard, because he is a keen student of these things and because the Conservative party conference was held in Birmingham this year, which is not too far from his constituency, the Home Secretary made it clear that she regards the Conservative party as the party of the consumer in 2016. I will take that one step further.

[Rob Marris]

Do you mean the Prime Minister?

[Mr Dunne]

No, I mean the Home Secretary.

We believe that competition is the best way to drive prices of medicines down for the NHS, and generally speaking that works well. In the case of the specific unbranded generics where there is a single supplier, we have seen that there is an opportunity for market abuse, and I agree with my hon. Friend the Member for South West Bedfordshire that the clauses are designed to use the device of price controls to avoid excess profit abuse by individuals in British companies, which we have seen.

I gently remind the hon. Member for Wolverhampton South West that successive Governments since 1957, including the Government whom he proudly supported for many years, had price controls in place for the cost of medicines.

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[Mr Dunne]

I believe that that is the case, but if I have misunderstood the hon. Lady’s question I shall clarify that later in the sitting, if I may. Our intention is to consult on the matter, so the precise mechanism has not yet been finalised; hence there is some uncertainty.

[Rob Marris]

On the detail, while the Minister is pondering, we talked about the date of December 2013 for the 15% price reduction—the questioning of the hon. Member for Central Ayrshire particularly related to that—but I understand that medicines launched after that date are not in the statutory scheme.

At some point—perhaps later in the sitting—will the Minister clarify whether the Government intend that medicines launched after December 2013 could be in the statutory scheme? Might it be altered in that way to encompass that possibility?

[Mr Dunne]

Companies are free to join the voluntary scheme. If they choose not to, but they want to sell unbranded generics into the NHS, they will be caught within the statutory scheme. The statutory scheme is the default scheme under which unbranded generics are sold into the NHS. It will pick up new unbranded generics as they come forward, unless their manufacturers are in the voluntary scheme and choose to have them dealt with through it.

Question put and agreed to.

Clause 3 accordingly ordered to stand part of the Bill.

Clause 4

Enforcement

Question proposed, That the clause stand part of the Bill.

[Mr Dunne]

The clause amends sections 265 and 266 of the 2006 Act in relation to enforcement. It ensures that the existing enforcement provisions in the Act apply to the contravention of any of the new powers in clauses 1, 2, 3 and 5. The maximum penalties are a single penalty of £100,000 or £10,000 per day for the duration of the contravention. The Secretary of State has the power under the 2006 Act to increase or further increase, by order, those maximum penalties.

The clause also ensures that provision can be made in regulations for companies to appeal any enforcement decisions under the new information powers in clause 6. That simply extends the possibility of appealing any enforcement decision under the information powers. Furthermore, clause 4 clarifies the fact that payments or penalties can be recovered as a civil debt through the courts.

In light of the Secretary of State’s flexibility to amend the penalty amounts in future, I hope the Committee will recognise that the proposed penalties are appropriate, but in the event they are deemed not to be appropriate, there is sufficient flexibility in the clause to allow the Government of the day to amend the penalties to whatever they deem appropriate.

On that basis, I ask the Committee to agree that the clause stand part of the Bill.

[Rob Marris]

Will the Minister—if not now, later—give other examples of where a Secretary of State has such apparently wide-ranging powers to set a penalty? In any judicial system there is often discretion among the judiciary as to the penalty imposed on a wrongdoer, but this is not a judicial system. It is a quasi-judicial system, at best. The Government seem to be taking broad powers, and it may be that Governments, including Governments under which I served, have done so in the past, but I cannot think of any examples.

I hope the Minister can provide clarity, because the Secretary of State will be able to exercise the new powers not only by making regulations—such regulations, of course, would come before the House—but by giving directions, which is a much more elastic and broader term. A little clarity on that would be helpful.

[Mr Dunne]

I can help the hon. Gentleman directly with a specific example. The Secretary of State already has those powers under the 2006 Act, which the hon. Gentleman’s Government enacted.

Question put and agreed to.

Clause 4 accordingly ordered to stand part of the Bill.

Clause 5

Control of maximum price of other medical supplies

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[Mr Dunne]

We will consult with industry on the impact of the Bill on medical supplies. Although I am not going to give the hon. Lady an absolute assurance that we can introduce a threshold for quality, which is quite hard to prescribe given the immense variety of supplies we are talking about, there is a clear intent that, if we are centralising procurement of equipment, that equipment has to meet a quality threshold in order to be acceptable to the clinician. I understand the point she makes. The intent is not to buy substandard equipment to treat patients, but to remove variability in pricing for the same equipment depending on different purchasers, which is inappropriate and means effectively the taxpayer is the funder of all these different entities.

[Rob Marris]

rose—

[Mr Dunne]

I think the hon. Gentleman is looking to intervene—or is he stretching again?

[Rob Marris]

I urge the Minister to have a greater familiarity with the quality of surgical gloves, which are great for delivering leaflets. They give a bit of weather protection. You don’t have to lick your finger to get the next leaflet, you don’t get letterbox knuckle, and—best of all—the dog gets latex, not flesh.

[Mr Dunne]

Again the hon. Gentleman strays, but not too far beyond his brief, because surgical gloves have been raised now by three members of the Committee. I am grateful for that tip. With the onset of winter weather, that could be quite useful for those of us who will be going to Sleaford and North Hykeham over the next few weeks to leaflet. I will take it upon myself to bring a box of surgical gloves when I visit.

With your indulgence, Mr Pritchard, I will take this opportunity to pick up the points made by the hon. Member for Central Ayrshire about the way the statutory scheme is intended to operate. To be crystal clear, clause 2 relates to unbranded generics and allows us to make regulations and directions to specific companies, while clause 3 relates currently only to branded medicines but could, if we wanted it to, also relate to unbranded medicines in future. The statutory scheme will be used where a company is not a member of the voluntary scheme, as I indicated to the hon. Member for Wolverhampton South West. The statutory scheme is intended to operate through setting a percentage of sales to be paid to the Government. Details of the scheme’s operation will be set out in regulations. A draft of the illustrative regulations is available to the Committee.

I will revert to the hon. Lady’s amendment 47. The Government do not currently control prices of medical supplies. As was referred to earlier, the MHRA is responsible for the safety, efficacy and quality of medical supplies. That provides some check of quality in relation to not only medicines but medical supplies.

[Rob Marris]

The Minister has lost me there. It is probably my ignorance, but I thought he just said that the Government do not currently control the cost of medical supplies. If that is what he said, is that because they do not use the power they already have under section 260(1) of a 10-year-old Act?

[Mr Dunne]

Yes, I think that is the correct answer. We do have those powers under the 2006 Act, but they have not been used, partly because generally speaking medical supplies is a competitive market. We have not seen the kind of abusive price behaviour that we are trying to address elsewhere in the Bill.

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[Mr Dunne]

Clause 5 amends section 260 of the 2006 Act, which enables the Secretary of State to control the maximum prices of medical supplies other than health service medicines. As we have just discussed, the Government have powers to control prices of medical supplies and we are not currently using those powers. It is important that we continue to have those powers, should we decide it is necessary to control prices of medical supplies in the event of market abuse.

With an increasing spend on healthcare products, the Government need the tools to be able to control prices, if there is any indication that medical suppliers do not provide value for money to the NHS and the taxpayer. The measures would ensure that the same enforcement and territorial extent provisions apply to controlling the cost of medical supplies and health service medicines.

Existing enforcement provisions in relation to medical supplies are draconian compared with those for medicines. Currently, a contravention or a failure to comply is in fact a criminal offence in relation to medical supplies, whereas it is not in relation to medicines. We are aligning the enforcement provisions to those for medicines and making them much more proportionate. That is done through clause 7, through consequential amendments. On that basis, I ask the Committee to agree that clause 5 stand part of the Bill.

[Rob Marris]

May I again congratulate the Government? This appears to be the only piece of criminal legislation I have ever heard of that apparently has a 100% deterrence rate. That is, the Government have the power to penalise a course of action and, as far as the Government are aware, no company is pursuing such a course of action, meaning that Government do not have to exercise their powers, criminal or otherwise. What a great piece of legislation passed by the Labour Government in 2006.

Question put and agreed to.

Clause 5 accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Mark Spencer.)