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Health Service Medical Supplies (Costs) Bill

Volume 778: debated on Tuesday 7 February 2017


Amendment 1

Moved by

1: Before Clause 1, insert the following new Clause—

“Remuneration for persons providing special medicinal products: England

In section 164 of the National Health Service Act 2006 (remuneration for persons providing pharmaceutical services), after subsection (8) insert—“(8A) Regulations may impose requirements in relation to remuneration in respect of special medicinal products.(8B) Such regulations may, for example, require determining authorities to ensure—(a) that remuneration is to be calculated by reference to the outcome of prescribed procedures, or(b) that determinations do not provide for or permit remuneration to be paid in prescribed circumstances.(8C) Procedures prescribed by virtue of subsection (8B)(a) may include the person to whom remuneration is payable, a health service body or a determining authority—(a) carrying out inquiries to ensure that remuneration is reasonable, or(b) estimating an amount of remuneration that is reasonable (whether or not the estimated amount corresponds exactly to expenses in respect of which remuneration is to be paid).(8D) Circumstances prescribed by virtue of subsection (8B)(b) may include circumstances in which special medicinal products are made available to persons who provide pharmaceutical services under this Part—(a) by a health service body, or(b) under an arrangement for the supply of special medicinal products to which a health service body is a party.(8E) In subsections (8A) to (8D)—“health service body” has the meaning given by section 9(4);“special medicinal product” means a product which is a special medicinal product for the purposes of regulation 167 of the Human Medicines Regulations 2012 (S.I. 2012/ 1916).””

My Lords, I am bringing forward this amendment and others in this group in response to the matters relating to specials raised in Committee by the noble Baroness, Lady Finlay, who regrettably is not able to be here with us today, the noble Baroness, Lady Masham, and others. I must thank noble Lords for the work they have done to explore these issues by bringing them forward for debate in a most constructive manner. I also take this opportunity at the start of Report to thank noble Lords for the generally constructive debate in Committee, and in other meetings since then.

A special is a medicine manufactured to meet the specific needs of a specific patient. By nature they are bespoke and therefore do not have the same economies of scale during manufacture and distribution as licensed medicines. In Committee, the noble Baroness, Lady Finlay, presented a strong case that the current arrangements for reimbursement of specials are not sufficiently effective at securing value for money for the NHS. In England, reimbursement prices for the most commonly prescribed specials are listed in the drug tariff. Those reimbursement prices are based on sales and volume data, which the department currently obtains from specials manufacturers under a voluntary agreement. By setting a reimbursement price we encourage pharmacy contractors to source products as cheaply as possible because it allows them to earn margin, which in turn creates competition in the market. As a result, reimbursement prices decrease. Since these reimbursement arrangements were introduced in 2011, we have observed that in England the average cost for specials listed in the drug tariff decreased by 39% between 2011 and 2016.

Basing reimbursement prices on selling prices from more manufacturers than we do now would make the reimbursement system more robust. For specials, we currently rely on information from those manufacturers that have signed up to our voluntary agreement. There have been talks with NHS manufacturers to provide information on a voluntary basis. However, we have not been successful so far in securing data from NHS manufacturers on this basis. The Bill would enable us to retrieve information from all manufacturers, including NHS manufacturers. Once we receive data from NHS manufacturers, we will be able to assess whether it is appropriate to include them in calculating reimbursement prices.

However, through our very constructive debates on previous stages of the Bill and the further discussions I have had with the noble Baronesses, Lady Finlay and Lady Masham, I am persuaded that we need to do more. The unique nature of specials and their manufacturing arrangements means that we need to do more to ensure that the prices paid by the NHS represent good value for money for all these products. I am therefore bringing forward amendments that will enable alternative approaches to be developed to address this issue.

The amendments make changes to Section 164 of the NHS Act, which relates to the remuneration of persons providing pharmaceutical services. Proposed new subsection (8A) provides for a new regulation-making power in respect of special medicines. This would enable us to develop options that will secure the improved value for money that we all wish to see. Proposed new subsections (8B), (8C) and (8D) go on to provide illustrations of how that power might be used but do not restrict its application to those approaches.

A number of different options may be considered. The example the noble Baroness, Lady Finlay, gave in Committee, drawing on the Scottish experience of using a quotes-based system, may be one option, although we recognise the potential difficulties with such an approach—in particular, the burden it may place on the pharmacist, who has to seek the quotes, and the potential delay it may cause to patients getting their medicines. We will draw on the Scottish experience and the knowledge and expertise of stakeholders to develop and clarify the options.

I reassure noble Lords that we are legally obliged to consult the body that represents those providing pharmaceutical services—dispensing contractors—the Pharmaceutical Services Negotiating Committee, and will consult other interested stakeholders before making a decision.

I hope your Lordships will understand that, at this stage, I am bringing forward a legislative framework which I believe to be fully justified by the need for action that was so clearly expressed by the noble Baronesses, Lady Finlay and Lady Masham, and other noble Lords. The detail of any new arrangements will need to be drawn up and consulted on with those who represent providers of pharmaceutical services, but I can give every assurance that I fully intend to explore the options provided by these powers to improve value for money for the NHS, which I know we all wish to see.

I thank the noble Baronesses, Lady Finlay and Lady Masham, and other noble Lords for bringing this matter forward. I beg to move.

My Lords, I thank the Minister for his helpfulness and the work he has done on this amendment about specials. I also thank him on behalf of my noble friend Lady Finlay of Llandaff, who has to help her pregnant daughter who has had an emergency health problem. She had hoped to be here. I hope this amendment will help patients get the specials they need at a reasonable price.

My Lords, the noble Baroness, Lady Finlay, is so grateful to the Minister that she asked two of us to convey her thanks for the time he has given to addressing her concerns. She is very happy with these amendments.

My Lords, I am the third person to congratulate the Minister. I add the support of these Benches for these amendments, which address unlicensed special medicines, and I congratulate the noble Baroness, Lady Finlay, on her tenacity in pursuing this issue and securing an important concession from the Government. I am sorry she cannot be here, but we can be pretty sure she will be reading Hansard to make sure we have got it right.

It has been hard to understand why the Government were refusing to recognise the need for urgent action on medicinal specials, particularly in view of the substantial price variation between hospital and community care, the many patients in community and primary care who are currently denied access to some specials, and the potential savings across the NHS that introducing a cheaper and more cost-effective whole-market procurement system will provide.

We are very pleased that the Minister has now recognised the need for the Bill to address this important issue in England and Wales. I welcome the legislative framework he has presented. As he pointed out, he has an extensive consultation exercise to conduct on all parts of the Bill, and this will certainly be included in that.

I am truly touched to have been thanked personally by proxy by two noble Baronesses. I am grateful for that, and I am grateful for the support for these amendments, which are a testament to the tenacity of the noble Baroness, Lady Finlay.

I do not think it is quite fair to say that the Government did not recognise the need for action. The amendments tabled by the noble Baroness, Lady Finlay, disinterred a work programme that had been put on pause in order to deal with the Bill and discovered that lots of interesting work and thinking was going on, so we have been able to bring that to the fore, which is a fantastic thing, and the way legislation should work.

Amendment 1 agreed.

Amendment 2

Moved by

2: Before Clause 1, insert the following new Clause—

“Remuneration for persons providing special medicinal products: Wales

In section 88 of the National Health Service (Wales) Act 2006 (remuneration for persons providing pharmaceutical services), after subsection (8) insert—“(8A) Regulations may impose requirements in relation to remuneration in respect of special medicinal products.(8B) Such regulations may, for example, require determining authorities to ensure—(a) that remuneration is to be calculated by reference to the outcome of prescribed procedures, or(b) that determinations do not provide for or permit remuneration to be paid in prescribed circumstances.(8C) Procedures prescribed by virtue of subsection (8B)(a) may include the person to whom remuneration is payable, a health service body or a determining authority—(a) carrying out inquiries to ensure that remuneration is reasonable, or(b) estimating an amount of remuneration that is reasonable (whether or not the estimated amount corresponds exactly to expenses in respect of which remuneration is to be paid).(8D) Circumstances prescribed by virtue of subsection (8B)(b) may include circumstances in which special medicinal products are made available to persons who provide pharmaceutical services under this Part—(a) by a health service body, or(b) under an arrangement for the supply of special medicinal products to which a health service body is a party.(8E) In subsections (8A) to (8D)—“health service body” has the meaning given by section 7(4);“special medicinal product” means a product which is a special medicinal product for the purposes of regulation 167 of the Human Medicines Regulations 2012 (S.I. 2012/ 1916).””

Amendment 2 agreed.

Amendment 3

Moved by

3: Before Clause 1, insert the following new Clause—

“Duty to have regard to the life sciences sector and access to new medicines and treatments

In discharging, through the provisions established or amended by this Act, its responsibility to secure best value for the National Health Service in purchasing medicines and medical supplies, the Government must have full regard to the need to—(a) promote and support a growing life sciences sector within the United Kingdom economy; and(b) ensure that patients have rapid clinical access to new clinically effective and cost-effective medicines and treatments approved by the National Institute for Health and Care Excellence through their technology appraisal process.”

My Lords, Amendment 3, in my name and those of the noble Lords, Lord Patel and Lord Hunt of Kings Heath, and the noble Baroness, Lady Walmsley, is very straightforward. At the start of the Bill, it would lay a clear duty on the Government, in discharging the Bill’s provisions, to have full regard to promoting and supporting a growing UK life sciences sector and to ensuring patients have rapid clinical access to new medicines approved by NICE through its technical appraisal process.

This is to ensure that the Bill does not just focus on driving down the price of NHS drugs regardless of other considerations—which, in my view, there is a clear danger of given the way the Bill is framed. I made absolutely clear at Second Reading and in Committee that I fully support the Government acting through the Bill to prevent the NHS being blatantly ripped off under the statutory scheme when a branded drug comes off patent, as happened with Flynn Pharma when a Pfizer anti-epilepsy drug came off patent. The ABPI has never challenged actions in cases of this kind. However, the broad wording of the Bill goes well beyond closing this particular loophole. The Bill gives the Government the power, in the statutory scheme, to replace a list-price discount system with one in which a company repays the Government a percentage of net sales, with as yet no clear indication of what this level will be.

That might well be an acceptable approach if the system was applied solely to the statutory scheme, but not if it is then used in the voluntary PPRS. The industry’s concern is that this statutory scheme provision will create a precedent that could be applied later by the Government to the voluntary PPRS. My reading of the Bill is the same as that of the ABPI, namely that the legal precedent could enable a future Government to try unilaterally to apply the same approach to the voluntary scheme when a PPRS period ends, whatever assurances the current Minister may give. This would effectively abort a negotiated system of settling NHS drugs prices and encouraging research and innovation that has worked well for industry, UK plc and successive Governments for over 50 years. Ministerial assurances that this will not happen have not convinced the pharmaceutical industry or me that this could not happen. We both believe that stronger legislative safeguards are needed.

I think I can speak with some authority on this issue, having been a Minister with responsibility for the pharmaceutical industry and NICE, and having had, perhaps unlike the Minister, to negotiate a PPRS settlement with the industry, which achieved a 7.5% price cut in branded drugs prices for the NHS. I do not think anybody in the industry would see me as a soft touch for big pharma, but I knew that my job, like the Minister’s, was to balance a number of factors and not just get the cheapest drugs for the NHS. These factors involve the safety and value for NHS money of new medicines, but they also involve helping the UK life sciences industry to grow and flourish and to secure speedy access for patients to new drugs approved by NICE.

The Government have not done a spectacularly good job with their consultations on the Bill in showing the industry that they understand this balancing act. They certainly have not convinced the industry, and suspicions have been raised by the inclusion of elements that were not in the 2015 consultation on the Bill. The effect has been to foster distrust within an industry that UK plc badly needs to nurture at this time of massive economic uncertainty. This has been made worse by a negotiation currently taking place with the industry to slow the introduction of NICE-approved drugs if they exceed a certain financial threshold. Why is this so important? Why should the Government not just focus on getting the cheapest drugs they can for the NHS at this time of financial constraint?

The pharmaceutical industry invests over £4 billion a year in R&D in the UK, more than any other sector. It employs 62,000 people with a geographical spread outside London and the south-east. Pharmaceutical manufacturing employees have the highest gross value added of any high-technology industry, at over £330,000 per employee. One in four of the world’s top prescription medicines was discovered and developed in the UK. All this will be put at serious risk by Brexit, as the Prime Minister seems to recognise in the new industrial strategy that she recently announced.

We know that through Brexit the UK will lose the European pharmaceutical regulator, the EMEA, but there are also many other threats to the UK life sciences industry from Brexit. We could lose market access for our innovative products and there could be a flight of researchers and research. At such a time, the last thing this highly successful UK sector needs is a rather indifferent piece of legislation proposing what are in my view unnecessary regulatory burdens and creating uncertainty about the future arrangements of settling NHS prices for new drugs.

The second leg of the amendment covers the issue of speedy patient access to new drugs approved by NICE. I will not detain the House on this issue because others will probably want to say more about it. However, I remind the House that we already have a poor record on the take-up of new NICE-approved medicines. For every 100 European patients who can access new medicines in the first year that they are available, just 15 UK patients have the same access. Even when NICE has approved drugs and treatments, the NHS take-up still lags behind what it should be, despite the legal obligations.

To be fair to the Government, they seem to recognise the threat to the UK life sciences industry that Brexit poses. In the industrial strategy they identify life sciences as one of the five world-leading sectors that they wish to cultivate, and they have asked Sir John Bell—I can describe him only as brilliant—to lead work on early deals in this sector. That only makes the timing of this rather scrappy piece of legislation all the more surprising. However, we are where we are. The best thing we can do is put a protective overarching duty at the beginning of the Bill, and that is what Amendment 3 does. I hope the Minister considers that the amendment is helpful to the Government’s industrial strategy and the work Sir John is doing, as well as being a reassurance to the life sciences sector. It also needs to be the first clause in the Bill. I beg to move.

My Lords, in supporting the amendment, I reiterate my support for the general purpose of the Bill, which is to ensure good value for the NHS. However, there is a danger that it could result in reduced access for UK patients to new drugs and treatments if badly handled by the Government in future. As usual, the devil is in the detail—and, in particular, how the Government use the powers given to them in the Bill. That is why I support the imposition of a duty to ensure the continued growth of the life sciences sector and to protect access for patients to new medicines and treatments.

I share the concerns of the noble Lord, Lord Warner, about the effect of Brexit, which I mentioned in my Second Reading speech. In the light of the hard Brexit on which the Prime Minister is intent—without a mandate—there are many hazards to this industry, on which we depend for a major contribution to our economy, and to the future of medicine in the UK, so it is vital that the Government have that in mind when operating the Bill when it becomes an Act.

I have in mind as an example the new biosimilar medicines that the noble Lord, Lord Carter, pointed out in his report have the potential to save the NHS a vast amount of money while providing the same or even better treatment. He said that one new biosimilar drug alone can save the NHS £60 million a year. These biologic drugs currently account for six out of the top 10 medicines by spend in the UK, and I gather that five out of the top seven biologics will come out of patent by 2020—so there will be enormous potential for the development of generic biosimilars for many diseases. These drugs cost about 100 times more to research and develop than other generic drugs, but the current pricing system does not take that into account. They are different and, because of their enormous cost-saving potential and the competitive environment in which they will be marketed, which could bring down the cost even further, I think that they need special consideration from the Government.

Amendment 7, tabled by the noble Lord, Lord Lansley, which I support, could achieve this if the Government were inclined to use it, but I think we need to go further and put at the heart of the Bill a duty on the Government to protect future cutting-edge medicines when they first come into the market. Unless that is done, UK patients could become the last in the developed world to get these medicines. We want to be first, not last.

A healthy, competitive market will deliver tremendous cost savings to the NHS in the long term, but this requires sufficient—not excessive but sufficient—financial returns to compensate for the high cost of R&D. Otherwise, we will not have enough companies prepared to compete over a long period. This will prevent the NHS benefiting from the potential savings offered by these medicines. For those reasons, I support the amendment.

My Lords, first, as we are entering Report, I declare my interests as president of the Healthcare Supplies Association and of GS1, the barcoding organisation.

Like the noble Baroness, Lady Walmsley, and the noble Lord, Lord Warner, I make it clear that in supporting the amendment, the Opposition support the core purpose of the Bill. The recent fines imposed by the Competition and Markets Authority on two companies, which essentially exposed a loophole, left the Government with no option but to act—we agree with that. I have to say that it is interesting to note that the powers that the Government have taken upon themselves in the Bill will give them draconian influence over drug prices in future.

The Bill allows the Government to institute price controls. It states that the Government may have reached a voluntary agreement with industry over pricing but can none the less come in and impose price controls over that agreement. To cap it all, it massively extends the Government’s powers to ask for information about any health service product sold to the NHS. Such information could cover prices, discounts, rebates, revenues and profits, and could apply to millions of products every year.

It is a socialist dream of state intervention. Speaking here as a great believer in central state intervention, my heart warms to the Minister’s vigour and enthusiasm for regulation. It gives an idea of the nirvana of post-Brexit, light-touch regulation from this Government. Perhaps we should dream of EU directives in future, because this Government are so bent on their home-grown regulation.

We will come to the issue of proportionality, because many of our later amendments involve whether the Government have been proportionate. For me, this amendment is essentially about access, because I do not think you can talk about price controls on drugs without talking about patient access to innovative drugs and treatments. At the moment we are seeing an unprecedented level of rationing, both locally and nationally. Locally, clinical commissioning groups are making some really perverse decisions, ranging from cutting out health promotion programmes to being incredibly restrictive on operations and restricting access to innovative drugs.

A fairly recent report that I read by leading charities Breast Cancer Now and Prostate Cancer UK, for instance, showed that NHS cancer patients are missing out on innovative treatments that are available in any comparable country to the UK. One example is the PrEP drug. The reluctance of NHS England to fund the use of this extraordinary preventive drug in relation to the treatment of HIV is another example of the problem that we have. When the previous Labour Government set up NICE, it was designed to speed up the introduction of innovative new treatments. But since 2010, access to new drugs approved by NICE has been increasingly impeded, which has culminated in the current consultation that if a NICE-approved treatment is expected to exceed a cost of £20 million in any of the first three years of its use, NHS England can ask for a longer period for its introduction.

We also have a consultation on the introduction of a QALY threshold of £100,000 for evaluating highly specialised technologies. My understanding is that no other country in the world uses such a threshold in evaluating ultra-rare disease treatment. The almost universal view is that this form of assessment is not appropriate and would effectively stop the flow of new medicines reaching patients with rare and complex processes.

Of course, the noble Lord, Lord Warner, is right that the drugs budget cannot be open ended and that the NHS must achieve value for money—and I, too, have engaged with industry over the years in seeking to get the drug budget down. We all understand that. The tragedy is that a ground-breaking agreement reached by the last Government in 2014 with drug companies could have led to many new drugs being introduced. The pharmaceutical industry guaranteed to hold down drug costs for a five-year period and, if the costs went over the agreed limit, the industry would pay back a rebate every quarter. To date, £1.5 billion has been handed over.

I know how irritating it is to point to Scotland and Wales and say that they are doing something better—but something like the Scottish fund that has been established from the rebates to fund the introduction of new medicines would have been a preferable way in which to go forward in the situation that we have in England, where restriction after restriction is taking place in the use of better drugs for patients.

You then have to link the issue to our investment in R&D and life sciences. Sir John Bell, regius professor of medicine at the University of Oxford and chair of the Office for Strategic Coordination of Health Research, who is playing an absolutely pivotal role in this area, spelled this out recently. As he said, the last 30 years have witnessed an unprecedented number of major innovations in healthcare that have resulted in significant extensions in life expectancy and quality of life. The problem is that the National Health Service has been unable to adopt this new innovation effectively and, as a result, many improvements in healthcare have been put in jeopardy.

This is not an easy issue. Sir John Bell says—and I agree—that one problem is that our current model too often layers the cost of supporting the innovation needed to help discover new healthcare innovations on top of existing practice. So, unlike in other sectors, in the health service innovation always seems to cost money. This is a very important issue when it comes to thinking about how we can afford the kind of changes that will fall to health and social care in future.

I will also quote Keir Woods, head of oncology at the major pharmaceutical company Merck. He points to that company’s investment in the UK—20% of its global venture capital is invested in the UK—and he celebrates the UK’s position as a global power in health, with our world-class universities, centres of excellence in clinical research and some of the top medical journals, which has a positive impact on investment. We are home to 4,800 life science companies, with the largest pipeline of new discoveries in Europe. That is something to celebrate. Dr Woods says that we can build on that, but there are two provisos. First, we have to be able to secure the cream of international talent. The discussions around Brexit are very important in relation to that. Secondly, we have to increase the uptake of these new innovations in the UK.

The frustration that I and many others have is that the UK is a wonderful place for innovative and ground-breaking new treatments and drugs, but the fruits are increasingly being enjoyed by patients in other parts of the world. Currently, the UK has developed around 14% of the top 100 global medicines. That is something to celebrate—but 20 years ago we were responsible for about one-quarter of the global medicines that had been developed. The noble Lord, Lord Warner, referred to the £4 billion invested by pharma R&D. However, up to 2011 it was £5 billion—so we are seeing a deinvestment that is very much linked to the hopelessly poor record of adoption of new medicines in this country.

I know that the Minister will talk about some of the initiatives he is taking and I am sure that he will mention the accelerated access review, which aims to make the UK the fastest place for the design, development and widespread adoption of innovations. This is entirely laudable, but the problem is that this approach will take a few items and accelerate access while the NHS goes about crudely rationing a whole host of other innovations and putting at risk our life sciences, R&D investment and, of course, the quality of patient care.

That is why this amendment is so important. We support the Bill and its aims, but what has been lacking so far is any recognition by the Government that there are three planks to this. The first is better value for money in terms of drugs and health service products; the second is the quality, range and health of our life sciences and R&D investment; and the third is access to treatment by patients. So far the Government have not been prepared to grip this last issue. That is why the amendment is so important and I support it.

My Lords, I will speak briefly on this amendment, although there are later ones in my name which will allow me to say more about the way in which the Bill proposes that the Secretary of State exercises his or her duties. The idea that it is not part of government strategy—back in 2014 or now—to promote the life sciences sector through the structure of the PPRS is absurd. It is self-evidently the Government’s intention, and was in 2014. The structure of a negotiated, voluntary PPRS was designed to achieve that. The issue that has emerged since 2014 and the application of the new voluntary scheme is that the industry was looking for stability for the Government in terms of the budget; freedom to price at introduction, and action on access to new medicines. It is in that third area that there has been a lack of progress. In many ways, I agree with what noble Lords have been saying about the desirability of achieving that access. It has not been restricted since 2010, although the noble Lord, Lord Hunt, tended to construct it that way. For example, we introduced the cancer drugs fund in 2010 precisely because prior research by Mike Richards had demonstrated that patients in this country were failing to have access to new cancer medicines at the time when patients in other European countries did. It is not a new problem: it has been around a long time. The cancer drugs fund was intended to meet that gap by 2014 and the PPRS should have taken over, but it did not. After Innovation, Health and Wealth in December 2011, and the accelerated access review now, we are now seeing efforts to try to make that happen and they should be thoroughly supported.

The second limb of the amendment does not help, because it is just about access for patients to those new treatments which have been approved and recommended by NICE. That is only one part of a much wider issue about the adoption and diffusion of new technologies across the NHS more generally, often in circumstances where NICE has not been involved. I find the new consultation proposal on NHS England’s budget impact threshold something of a double-edged sword. The measure could erect another hurdle to be cleared before patients can access new medicines, and we have to avoid that. However, it may have the positive effect of encouraging NHS England, as the budget holder, and NICE, as its pharmacoeconomic evaluation mechanism, to work together with companies at an early stage to arrive at a negotiated price at an early point. That would be much to the benefit of the industry and the NHS given that we are aiming, through this legislation and beyond, to obtain patient access to medicines on reasonable terms that the NHS can afford. If the measure were used in that way, it would have the right benefit. However, I fear that this amendment, particularly its latter limb, does not take us any further in that direction.

My Lords, there is considerable frustration on the part of patients and the industries when NICE approves new drugs which can be important for preserving life but which patients cannot get. We need to encourage the development of new drugs as there are so many complicated and rare conditions which need them. It takes time and effort to submit the drugs to NICE. Noble Lords can imagine the frustration when they are approved but then not used. I support Amendment 3.

My Lords, I support this amendment, to which I have added my name. I do not agree with the noble Lord, Lord Lansley, that the second part of the amendment is not crucial. I take a completely opposite view. I consider that that is the crucial part of the amendment. The proposed new paragraph (b) refers to the need to,

“ensure that patients have rapid clinical access to new clinically effective and cost-effective medicines and treatments approved by the National Institute for Health and Care Excellence through their technology appraisal process”.

The terms “clinically effective” and “cost-effective” are important. I would insert the word “thorough” so that the amendment reads “thorough technology appraisal process”. That is what NICE does. That is what we set it up to do. Parliament agreed that if NICE approved a drug that was cost effective and clinically effective, it should be available to patients. Now we are saying that that should occur only if certain provisions apply, and in certain circumstances they do not. So what are we saying? What message are we sending out if NHS patients cannot get medicines and treatments that are deemed to be clinically effective and cost effective, including drugs and treatments developed by our own scientists and produced by our own life sciences industry? People from our own industry have told me that when the NICE-approved drug is not available in the United Kingdom and we try to market it in other countries, their competitors say, “Why is it not available in your country when you’re trying to persuade us to use it?”. As has been said, many drugs are often available in countries such as Germany, France, Canada, Austria and many others that are not available in the United Kingdom. The noble Lord, Lord Hunt of Kings Heath, mentioned cancer drugs that are not available. Some would say that that leads to the poor cancer outcomes in our country compared with those in some other countries.

Recent proposed changes relate to the budget impact threshold of £20 million over two years. The noble Lord, Lord Lansley, is right that this sword has two sharp edges. Whichever way you tackle it, the patient gets hurt. Around 20% of new treatments with a positive NICE recommendation could have their introduction delayed if we adopt NHS England’s new proposals. For example, about 35,000 patients suffer from secondary or metastatic breast cancer. However, a drug costing £1.56 per patient per day would meet the budget impact threshold of £20 million. It would therefore be delayed for introduction to treat these 35,000 patients. For most of them, their life—quality life—could be prolonged by about six months to a year, but they will be dead before the drug is made available at a cost of £1.56 per patient per day. That is what this proposal of £20 million means. It is a budget impact threshold.

People with rare diseases will fare even worse. There are about 7,000 known rare diseases. Treatment exists for only about 5% of those patients. The British company Shire, for example, has about 30 products in its pipeline to treat rare diseases. But why would it manufacture them at some cost when it might find that it falls foul of the new arrangements even if the new drugs prove effective?

I recognise the economic challenges that the NHS faces. I have heard the 20,000 pages of evidence given to the committee that I chair on your Lordships’ behalf and which we will soon be publishing. We need a system that prepares the United Kingdom to deliver the next generations of innovative medicines, including gene and cell therapy. If we are going to do that, it is important that pharma and the industry have certainty of patient access. That is crucial when companies make decisions on new investments in research and manufacturing.

Regarding proposed new paragraph (a), I would simply say that as we prepare to leave the EU, the delivery of an internationally competitive industrial environment for the bioscience and life science sectors is more important than ever. By making it more difficult for patients to access highly innovative, first-to-market, cost-effective and clinically effective medical products, we not only deny our patients the treatment they need but risk the future of our world-leading life science industry. I am sure we do not want to do that.

The Prime Minister’s industrial strategy, which will invest in science, research and innovation, has already been mentioned. The life science sector—not the pharma industry, which the noble Lord, Lord Warner, mentioned —brings in over £60 billion a year and employs over 220,000 people. British science, with investment in genomics, gene sequences, diagnostics, and now the production of gene and cell therapy, is again investing huge sums of money. To promote this, the Higher Education and Research Bill, which is currently going through your Lordships’ House, creates UK Research and Innovation to do research and innovate therapies, all of it in life science. As to our charity sector, the Wellcome Trust invests probably in the region of £1.3 billion a year in science, which will go to innovation. Cancer Research UK is about to announce four grand challenges. It makes awards of £20 million to find causes and treatments for cancer, and the British Heart Foundation also makes an enormous investment.

Hitherto we have had a pact that operates for the public, the NHS, the scientists and the industry on the availability of medicines and treatments for both diagnosis and treatment, delivered at a cost that is fair, transparent and appropriate. When we break that pact by not making available treatments to patients even though they are cost effective and clinically effective, we are denying treatment to many patients. The fundamental basis of the pact—which Parliament approved when agreeing to how NICE should operate—is that if NICE deems that a medicine is cost effective and clinically effective, patients should get it. That is why I strongly support the amendment.

My Lords, I am grateful for the quality of the debate on this amendment. Before I turn to the specifics of the amendment, I join noble Lords in reflecting on the success of the UK life sciences industry. The UK has a lot to be proud of. We have a world-class science base and an excellent reputation for the quality and rigour of our clinical trials and the data they produce. The UK has one of the strongest life sciences industries in the world, generating turnover of more than £60 billion each year. Indeed, it is our most productive industry. This Government are deeply committed to supporting that industry to flourish and, in doing so, to provide jobs and transform the health of the nation. That is why it was a Conservative-led Government which introduced the first life sciences strategy in 2011.

More recently, we have introduced a range of measures through the taxation system to create good conditions for business growth and to encourage business investment. These include: R&D tax credits for small and medium-sized enterprises; R&D expenditure credit for larger firms; the patent box; a permanent annual investment allowance; and the seed enterprise investment scheme, the enterprise investment scheme and the venture capital trust scheme, as well as entrepreneurs’ relief.

Take just one of those examples: the patent box. Phased in from 2013, under a Conservative-led Government, it incentivises companies to develop and manufacture new, innovative patented products in the UK by giving an effective 10% corporation tax rate on UK profits derived from the product’s qualifying UK and EU patents and equivalent forms of intellectual property. In 2013-14, a total of 700 companies claimed relief under the patent box, with a total value of £342.9 million, with 64% of those in manufacturing. In 2013, GSK decided to invest more than £500 million in the UK after the patent box was announced. Its CEO Sir Andrew Witty said:

“The introduction of the patent box has transformed the way in which we view the UK as a location for new investments”.

The Government’s R&D tax credit is one of the biggest sources of financial support for innovative UK companies and one of the most competitive in the world. It is widely commended and, in 2014-15, almost 21,000 companies claimed tax relief, totalling £2.45 billion, with R&D expenditure used to make these claims reaching £21.8 billion. The Autumn Statement announced £4 billion of additional investment in R&D, specifically targeting industry-academia collaboration, which is so important in the life sciences. We would expect the life sciences industry to be a substantial beneficiary. I am sure your Lordships will agree that these are bold, new, high-value measures which demonstrate that the Government are serious about attracting inwards R&D investment into cutting-edge industries like the life sciences.

This determined action is reaping rewards. The UK ranks top in major European economies for foreign direct investment projects in the life sciences. Just last week, Danish drugs company Novo Nordisk announced a new £115 million investment in a science research centre in Oxford. This comes on top of £275 million additional investment announced by GSK in June and AstraZeneca reaffirming its commitment to a £390 million investment in establishing headquarters and a research centre in Cambridge. As the noble Lord, Lord Patel, mentioned, we are also working on the creation of UK Research and Innovation to enhance this further. These are examples of the positive policy changes that are supporting the life sciences industry and transforming the health of our nation.

Looking ahead, Professor Sir John Bell, whom several noble Lords have mentioned, has agreed to lead the development of a new life sciences strategy for the long-term success of the UK. The formation of the strategy will bring together broad representation from across the sector, including from industry, charities, academia and the health and care system. It is aligned with the industrial strategy announced recently by the Department for Business, Energy and Industrial Strategy. The strategy will outline what the life sciences industry can deliver for the UK economy and for UK patients and set out what actions government needs to take to set the framework on the road to success. Building on a sector deal for this diverse and complex sector, the life sciences strategy will be bold and ambitious as befits the needs of a global Britain. We will seek to make the UK the global home of medical innovation, creating jobs, improving health outcomes and transforming the NHS.

As all noble Lords have mentioned in the debate today, the issue of access to or uptake of new medicines in the NHS must be a key part of that life sciences offer. I recognise and share the desire of noble Lords to ensure that the NHS is at the forefront of innovation, and that medicines which have been approved by NICE are made available quickly to the patients who could benefit from them. This Government have been very active in improving access, and have already taken a number of important steps to do so. The early access to medicines scheme, introduced in 2014, provides a platform for drugs that do not yet have a licence to get to patients at a much faster rate than before. We have now seen 29 promising innovative medicine designations, and 10 positive scientific opinions have been awarded by the MHRA, the regulator. As my noble friend Lord Lansley mentioned—and I must give him credit for the introduction of this policy—the cancer drugs fund, created in 2011 and renewed in 2016, has provided over 95,000 patients with access to innovative cancer drugs that would otherwise not have been available.

NHS England’s test beds programme, launched last year, is providing an opportunity to link new technologies with new ways of delivering care. It involves life sciences companies such as MSD, Phillips and Verily working with forward-looking NHS organisations to design new care pathways that support cutting-edge life sciences technology. We have also developed the innovation scorecard, to track the uptake of new medicines and benchmark different NHS organisations against each other. This is helping to support NHS England’s RightCare programme, which is addressing variation in clinical practice across the country to ensure that high standards and access are consistently being met.

Several noble Lords mentioned NICE thresholds and the consultation on those. I repeat the point made by my noble friend Lord Lansley, who has great experience in these matters. The proposal not only balances the important considerations around the benefits of the life sciences industry and cost considerations for the NHS, but brings those discussions of cost into NHS England at an earlier point, and benefits can flow from that.

There is clear evidence that our work is having a real positive impact. The latest innovation scorecard, published in January, showed that in the 12 months to June 2016 the use of medicines to treat acute coronary syndrome increased by 19%, medicines used to treat multiple sclerosis increased by 76% and the use of new oral anti-coagulants in primary care increased by 110% and in secondary care by 37%. Of the 77 medicines on the scorecard that are measured individually, over half saw growth in uptake over 10% year on year. I make those points about access because I want to demonstrate that the Government not only take this issue seriously but are acting robustly, and we are seeing positive results. There is more to come, as we will publish our response to the accelerated access review as part of our plans for the life science strategy.

When discussing access to innovative drugs, it is only right that we also talk about costs. Noble Lords will know from discussion in Committee that my policy brief encompasses both life sciences and medicine pricing and regulation. There is a tension between those two considerations that I grapple with every day. We must be clear that, in a time of fiscal restraint, medicines spend is rising much faster than other areas of the health budget. Last year, overall spend on medicines, after payments from the PPRS are taken into account, rose by 5.5%. This year, spend is forecast to rise by 8.8%. This compares with an increase in overall health spend of 3.4% and 2.9% respectively.

To put it another way, 30% of the additional funding for the health system in England over the last two years is expected to have been devoted to additional spending on medicines, and most of this additional spend on medicines is going on newer drugs. So the NHS is making a real financial commitment to medicines, at a time when it is striving to make difficult decisions and efficiencies elsewhere. It is simply not accurate to say that the NHS is not supporting uptake. On the contrary, given the fiscal environment, it is going above and beyond its overall funding growth to support the adoption of new medicines, and that is because everyone involved in the healthcare of the nation understands that it has a positive and symbiotic relationship with a thriving life sciences sector.

I hope that I have been able to persuade noble Lords of the Government’s commitment both to the life sciences sector and also to addressing the specific issue of access to new medicines. I now address the amendments specifically. As I have set out, I have a great deal of sympathy with the intent, but I am concerned that the amendment itself is not the right way to achieve it and would be damaging to the core purpose of this Bill.

The effect of the noble Lord’s amendment would be to require the Government to design price control schemes in such a way as to deliver growth in the life sciences sector in the UK. I believe that we are united in our desire to see such growth, but the evidence suggests that the most important factor in attracting companies to invest in research in the UK is the availability of world-class scientific expertise. That will clearly be an issue that noble Lords will raise in our Brexit negotiations. It remains a key focus of the Government’s effort to ensure that the UK remains at the forefront of global research and development.

Strengthening and putting beyond doubt the Government’s ability to operate price control schemes is a core purpose of this Bill, and I am grateful for the reiterations of support for that core purpose that have come from all sides of the House. This amendment would undermine one of the core purposes of this Bill by undermining the ability of the Government to put effective price controls in place. That is because controlling the price of medicines cannot in itself promote the interests of the life sciences sector and deliver growth, so the effect of the amendment would be that any price control scheme could be challenged in the courts. The amendment would take a carefully struck balance that is already set out in legislation between, on the one hand, the need for medicines to be available on reasonable terms to the NHS and to take account of the R&D costs of the life sciences industries, on the other, and overweight it in favour of industry. It would create an asymmetry that would lead to higher costs to the NHS, less money for patients and lower uptake of new medicines. This serves no one’s purpose.

I turn to the second part of the noble Lord’s amendment, concerned with the rapid uptake of new medicines. The Government share the desire to see NHS patients benefiting from swift access to new innovations, particularly those medicines which have been recommended by NICE through its technology appraisals. It is for that reason that NHS commissioners are legally required to fund drugs and other treatments recommended in NICE technology appraisal guidance, normally within three months of final guidance. Throughout our discussions on the Bill in both Houses, we have emphasised that its provisions and wider government policy relate to maintaining the supply of existing effective treatments and improving the uptake of new cost-effective medicines.

Concerns were raised in Committee that CCGs were rationing medicines, and the noble Lord, Lord Hunt, has raised the point again today. No CCGs should be rationing medicines approved by a NICE technology appraisal and we are not aware of this happening. However, if noble Lords have evidence, they must send it to me and I will raise it with NHS England.

As I have set out, the Government have strong ambitions in this area, but the uptake of medicines is dependent to a significant degree on the prescribing choices of individual clinicians, who need to be aware of new drugs and persuaded that they may be a better option for individual patients, taking into account other conditions each patient might have and other medicines they are taking. We need to change the culture and behaviour of those clinicians who may be reluctant to use innovative medicines, but legislation is not the right way to effect behaviour change. Rather, it is working with the NHS, regulators, arm’s-length bodies and the medical colleges to create a professional environment that is more receptive to innovation, and of course continuing with a policy approach that supports uptake and access in other ways, as I set out earlier.

To conclude, I applaud the intent of the noble Lord in bringing forward the amendment. In their contributions, noble Lords have quite rightly drawn attention to policy objectives that this Government view as a critical priority and on which we are taking action. As I outlined earlier, a number of programmes are underway to influence prescribers and improve the uptake of NICE-approved drugs that are unrelated to pricing, but this amendment would undermine the core purpose of the Bill, which is supported in its main intent on all sides of the House, by undermining the ability of the Government to have effective price control schemes. I would therefore ask the noble Lord to withdraw his amendment.

Did I understand my noble friend to say that, once a medicine or treatment has been approved by NICE through its technology appraisal process for clinical and cost effectiveness, it is supposed to be available to patients within three months?

My Lords, given that I took the order through Parliament many years ago, I can confirm that the whole intention was that the NHS had 90 days to prepare for funding a medicine that had been designated by NICE as both clinically and cost effective. The problem is that, subsequently, in particular over the past few years, clinical commissioning groups have done everything they can to avoid this responsibility. Alongside that, the purity of the 90-day rule is being eaten into, and that is at the heart of the concern of this amendment.

My Lords, I am grateful to all my colleagues for the powerful support they have given to the amendment. I do not doubt the Government’s commitment to the life sciences, which I acknowledge from what they have put in the industrial strategy and the person they put in charge of leading that work. However, they have not convinced the industry with the Bill. They seem to be sending out separate messages.

The amendment is meant to tackle the two issues of supporting a flourishing life sciences industry and guaranteeing patient access to drugs that have been approved by NICE. It is very clear that that second part is not working well and is getting worse. It does no harm whatever to reinforce that message in the Bill with this amendment.

On life sciences, I say to the Minister that it is a funny way to show he is supporting that industry, at a critical time for this country, by bringing along a Bill that, as the noble Lord, Lord Hunt, made very clear, overdoses on regulatory requirements, price control and information requirements. This is a pretty strange message to say to a load of international companies when you want them to settle here and do your research.

I have listened to the Minister very carefully. I am much more persuaded by my colleagues’ supportive speeches, for which I am grateful. I wish to test the opinion of the House.

Clause 3: Statutory schemes

Amendment 4

Moved by

4: Clause 3, page 2, line 32, at end insert—

“( ) After subsection (1) insert—“(1A) When making a scheme under this section for controlling the cost of health service medicines, or determining any amount to be paid to him or her, the Secretary of State must take account of any voluntary scheme in force under section 261 (powers relating to voluntary schemes), and should seek, so far as is practicable and relevant, to secure comparable effects in relation to products in the statutory scheme as would apply if those products were participating in the voluntary scheme.””

My Lords, even though the House has just divided, the Bill has been characterised by a substantial measure of agreement on the purposes we are trying to achieve and I am sure that will be reflected in the further amendments that are to be discussed. I neglected earlier to draw attention to the register of interests and, in particular, to my position as an adviser to MAP BioPharma, which is not itself a participant in the PPRS in any way.

Let me make the purpose of Amendment 4 clear to noble Lords. The Government, in bringing this legislation, were prompted in part by the fact that expenditure on medicines was rising somewhat faster than the Government had anticipated, the amount of the rebate being achieved by way of payment back to the Government was less than was anticipated, and the difference was, in part, explicable by virtue of the transfer of certain products into the statutory scheme. In the statutory scheme they had a price cut applicable but no rebate scheme applicable and the Government did not feel that they had the necessary power to amend the statutory scheme to make a rebate apply.

The purpose of the legislation is to make the two schemes broadly equivalent. As the Minister told the Committee, the Government’s intention was to make the revenues being rebated back to the Government from the two schemes broadly equivalent. However, in my view that would potentially have the perverse impact that certain products in the statutory scheme would end up with a much higher rebate percentage being applied to them as a consequence—or, alternatively, that products outwith the price control under the voluntary scheme, because they were introduced after December 2013, would have the price control applied to them under the statutory scheme. So a discontinuity would apply, potentially either way, by applying the broadly equivalent proportion of cost of sales being returned to the Government in the form of a rebate.

I have therefore suggested that it is a perfectly reasonable principle on the Government’s part, as we explored in Committee, to try to make the two schemes equivalent so that there cannot be gaming, as it were, by moving into one scheme rather than the other. That should be applied, as the amendment specifies, by means of asking the Government, wherever a voluntary scheme is in place—which is an important caveat—to ensure that a statutory scheme should seek, so far as is practicable and relevant, and it will not be precise, so I do not think it can be regarded as too rigid, to make it so that the equivalent effect is applied at a product level: not at a company level or a whole-scheme level, but in relation to the individual products. Individual products, whether they are in the voluntary scheme or the statutory scheme, should expect to have broadly the same overall treatment applied to them. The net effect would therefore be that the schemes will become equivalent and the scope for gaming will be reduced. I hope that explains the amendment and I beg to move.

My Lords, the noble Lord, Lord Lansley, has raised a very important point. For me, the question is: what is the future of the voluntary scheme? Over the years it has clearly served its purpose well. In Committee, the noble Lord acknowledged the benefit of the PPRS, which is the voluntary scheme, and said that it showed how Government and industry could work together to develop solutions. I draw the noble Lord’s attention to a piece written by Sir John Bell recently. When talking about what we have just discussed, the dynamic between access, cost and life-science investment and the problem the NHS has in investing in innovation, he said:

“A solution for both parties is necessary and must come from healthcare systems and innovators working more closely together, sharing risk and cost and attempting to use innovation to take cost out of health systems wherever possible”.

This is a wider issue than drug costs and PPRS, but it would be good to hear about the context in which the Minister thinks a potential new PPRS is going to be agreed. Many in industry think that the Government are not really committed to a new PPRS. It would be interesting to get some sense from the Minister as to where he thinks things are going.

My Lords, I am grateful to my noble friend Lord Lansley for bringing this amendment and for the opportunity to talk about the intentions of the Bill. He is quite right to highlight that the reason for bringing the Bill forward is to stop the behaviour of switching between schemes in order to reduce liabilities. That has characterised behaviour in the past few years and has had an impact on the successful operation of the PPRS. I will discuss the PPRS towards the end of my speech.

Amendment 4 is about the relationship between the voluntary and statutory schemes. I thank noble Lords for their views in this area. This amendment would require us to secure that, for any given product, the voluntary and statutory schemes would have an equivalent impact. It presents a slightly different approach to securing equivalence between the voluntary and statutory schemes, but I understand that, fundamentally, equivalence is what the amendment is seeking to achieve. I gave my views on this matter in Committee and I am happy to respond in similar terms on this occasion.

The Government’s intention is for the two schemes to deliver a broadly equivalent level of savings as a proportion of the total sales covered by each scheme. However, to require the terms of each scheme to be the same, in so far as possible, is inappropriate and would restrict the scope of the two schemes to operate in a complementary manner. Requiring equivalence to operate at product level, as the amendment suggests, would be even more restrictive.

The voluntary scheme is a matter for negotiation with industry. As such, there is scope to have a range of measures included that reflect the priorities of both sides at any point. It may be helpful to the House if I reiterate some of the examples I set out in Committee. The current voluntary scheme, the PPRS, includes a range of provisions, developed through negotiation with industry, that sit alongside the payment mechanism. This includes price modulation, which enables companies to put prices up and down as long as the overall effect across their portfolio is neutral. This has commercial value to companies, which may be willing to accept a higher payment percentage as a result.

In another example, while new medicines in the PPRS are excluded from PPRS payments, the PPRS payment percentage level itself is set at a level to achieve the agreed level of savings across both new and older medicines. This means that each company’s share of the income due to government will vary depending on the balance of new and old products in their portfolio, with companies that have mainly new products paying less than companies with mainly old products. However, it would be very challenging to replicate this model in the statutory scheme, as many fewer companies are affected by the statutory scheme regulations than are members of the PPRS. As a result, there is a much smaller pool of companies with older products. To achieve the same level of savings overall from the statutory scheme as from the PPRS while exempting newer products would require an extremely high payment percentage. This provides an example of where minor differences in terms may be required in order to deliver an equivalent level of savings across the two schemes overall. As noble Lords know, as we discussed in Committee and as I now repeat, the detail of how any future statutory scheme will work will be subject to further consultation.

As was discussed here and in the Commons, the freedom to negotiate the voluntary scheme has been valued greatly by both industry and government. As the noble Lord, Lord Hunt, reminded us, I said as much in Committee. Our intention for the future of the PPRS is to work collaboratively and constructively with industry on future medicines pricing arrangements when the current PPRS comes to an end.

This time, will NHS England be a full partner in the discussions and negotiations? Clearly, unless it owns the solution as well, you have the problem that an agreement can be reached but it does not quite translate itself into action on the ground. I realise that this is traditionally a negotiation between the Department of Health and the industry but it would be useful if NHS England were fully part of that.

The noble Lord makes an excellent point. Clearly, as the budget holder, NHS England ultimately must be a key part of negotiations for any future schemes. We intend that any future voluntary scheme should be established through negotiation in this way, but linking the payment mechanisms would inevitably place a restriction on that freedom.

I am grateful to my noble friend for raising this issue and I hope I have reassured him on equivalence, while also explaining why I believe the amendment goes too far by focusing specifically on products. On that basis, I ask my noble friend to withdraw his amendment.

I am grateful to my noble friend for his helpful response setting out the Government’s continuing position. The exchange with the noble Lord, Lord Hunt, was also useful. I said in debate on the previous group that earlier engagement and development of NHS England’s role in trying to assess what is a reasonable price and what is the value proposition in relation to new medicines that are being adopted by the NHS would be helpful at the same time in trying to develop the shape of a new voluntary scheme. I am sure that the industry, having been frustrated in the outcome of the 2014 PPRS, would want the principles for 2019 to be broadly similar: freedom of pricing and introduction; the ability to modulate prices in the way my noble friend referred to; the Government’s desire for a stable overall budgetary outcome; but also access to new medicines and diffusion across the NHS.

If we are going to meet those principles together—and balance them, as we discussed in the last group—NHS England should be at the table when the scheme is being designed. I am sure it was frustrating in the previous scheme that Scotland and Wales had identifiable resources for access to new medicines and NHS England had those resources but not in an identifiable form. It would be helpful for the new scheme to see the rebate, if it is rebated scheme, being specifically directed towards promoting access. I do not think that that is an unreasonable objective.

That said, the Minister has very kindly reiterated that the Government consider it desirable to have broadly equivalent proportions of sales in the two schemes being rebated and not disaggregated to product level. I can see that if you disaggregate to product level, you have a problem with price modulation between products for companies. That is a practical issue. However, as an inevitable consequence of the Government’s approach to equivalence, the schemes will not be the same. Generally speaking, once the legislation goes through, the statutory scheme will be less attractive.

That may well be the Government’s intention. Indeed, the Government may well like to have a situation where they can encourage companies to provide the necessary payments back through the rebate in the voluntary scheme with the threat of putting them into the statutory scheme. That might be something that the Government have occasionally thought of doing. I do not think that it is a desirable situation. The effort—I put it at no more than that—to define the equivalence of the two schemes should be a continuing effort. I know my noble friend the Minister has that in mind. It is not his intention to create two schemes that diverge in ways that could potentially be difficult for the industry if the Government were so minded in that direction.

It has been a useful debate but I certainly do not want to pursue it any further. We have had two opportunities to explore important issues that, frankly, we should attempt to resolve in the design of the new scheme rather than in legislation. I beg leave to withdraw Amendment 4.

Amendment 4 withdrawn.

Amendment 5

Moved by

5: After Clause 3, insert the following new Clause—

“Report to ParliamentAfter section 264 of the National Health Service Act 2006 (statutory schemes: supplementary) insert—“264ZZA Report to Parliament(1) Where the Secretary of State enters into a voluntary scheme under section 261, 263 or 264A, or makes a statutory scheme under section 263 or 264, he or she must lay a report before each House of Parliament, setting out how the scheme concerned will enable the Secretary of State to fulfil his or her statutory duties under section 266(4).(2) The report must also cover the impact of the scheme on the statutory duties of the National Institute for Health and Care Excellence under section 233 of the Health and Social Care Act 2012 (general duties).””

Amendment 5 refers back to the discussion we had on Amendment 3 about the duties that the Secretary of State must meet in relation to the scheme. This is another aspect of that but a more particular one.

In Committee, I explored the idea that the Secretary of State should pursue through the voluntary scheme—or indeed the statutory scheme, as necessary—pricing that was related to value. There were a number of criteria for what value is. In response to that, my noble friend said that many of the aspects that constitute value are reflected in existing statutory duties. For example, in Section 266(4) of the National Health Service Act, which is concerned with the price control mechanisms we are amending through this legislation, the Government are required to bear in mind,

“the need for medicinal products to be available to the health service on reasonable terms”—

the value proposition and access proposition that we have just been debating—and,

“the costs of research and development”,

which of course are important to the industry in promoting innovation. We do not need to replicate those. But my noble friend the Minister also said that there were other statutory duties: for example, that under Section 233 of the Health and Social Care Act NICE is required to have regard to,

“the broad balance between the benefits and costs of provision … the degree of need … and … the desirability of promoting innovation”—

all of which are indeed very much part of the overall value proposition. But because they are statutory duties relating to NICE, they are not necessarily factors that the Secretary of State must have regard to in the formulation of the PPRS, which is what we are dealing with here.

The purpose of Amendment 5 is to say that there are these existing statutory duties applicable to the Secretary of State. Separately, there are statutory duties applicable to the National Institute for Health and Care Excellence. The Secretary of State, when making a scheme and reporting on such to Parliament, should state how those statutory duties, both in respect of the Secretary of State and as they might impact on NICE, could be met through the design of the scheme. In that sense, it is a mechanism for trying to ensure that the value proposition gets to the heart of the assessment of what the price control mechanism should seek to achieve. I beg to move.

I am grateful to my noble friend for his amendment and for raising the issue of reporting requirements and how that relates to the responsibilities of NICE.

Under the current PPRS, the Department of Health regularly publishes information relating to the operation of the voluntary scheme. For a future statutory scheme, as my noble friend is aware, the illustrative regulations, which we have published alongside the Bill to assist in scrutinising the provisions, already include regulations for both the statutory scheme, in Regulation 32, and the information regulations, in Regulation 14, for an annual review of the regulations and a requirement to publish our report of each review. Our illustrative regulations require an annual review to,

“set out the objectives intended to be achieved … assess the extent to which these objectives are achieved; and … assess whether those objectives remain appropriate”.

These requirements will be tested through the consultation on the regulations and we will of course take account of those views.

I assure my noble friend that that review would take into account the duties under Section 266(4), which currently are,

“the need for medicinal products to be available for the health service on reasonable terms, and … the costs of research and development”.

Of course, subject to further consideration of the Bill, there may be further duties. I accept that reporting is an important principle but setting out the requirements in primary legislation is too restrictive. Over time, it is to be expected that both the statutory scheme and the information requirements will be amended through their respective regulations to reflect changing circumstances. It is essential that the review and reporting arrangements be able to be similarly flexed, so that they remain appropriate to the schemes in operation. My noble friend has suggested that we report every time there is a new voluntary or statutory scheme. I believe the annual reviews as set out in the illustrative regulations would provide more frequent review than the amendment proposes, at least for the statutory scheme.

Secondly, my noble friend has proposed that we would cover the impact of a price control scheme for the duties of NICE under Section 233 of the Health and Social Care Act 2012. In Committee, we discussed reporting requirements at length and in particular whether it would be appropriate for any report or review to address matters relating to the NHS duty to promote innovation. As I set out at the time, this would not be appropriate. Similarly, it would not be appropriate to address the duties that have been put on NICE through reports relating to the operation of the Bill, which is ultimately about controlling the cost of medicines and medical supplies.

The Health and Social Care Act 2012 puts duties on NICE in relation to its functions, including a duty to have regard to the broad balance between the benefits and costs of the provision of health services or of social care, and a duty to have regard to the desirability of promoting innovation. The Government’s priority is to make sure that we get the best possible results for all NHS patients with the resources we have, which means using taxpayers’ money responsibly and getting good value for money. NICE will continue to make its valuations on that basis and look at how best to promote access to effective medicines, through its recommendations and guidance to the NHS.

In developing its guidance, NICE of course takes account of all health-related costs and benefits, including benefits to carers. As I am sure my noble friend will recall, in 2014 NICE considered changes to its methods to capture better the wider costs and benefits to society of new drugs and treatments, known as value-based pricing. During the consultation some significant concerns were raised—for example, about the potential implications for products that offer limited life extension without associated gains in quality of life for those with terminal illnesses. The consultation highlighted a significant diversity of responses, demonstrating that this is a complex issue.

It is critical that stakeholders continue to have confidence in NICE’s work. I agree with NICE that these issues require careful consideration before making changes to the way it assesses medicines. That is one of the reasons why I do not believe it appropriate for the reporting and reviewing structure of the schemes that could result from the Bill to incorporate the duties of NICE. The statutory scheme has no link to the duties that the 2012 Act places on NICE.

I hope I have been able to address the issues that my noble friend has raised. I know he is a passionate proponent of the importance of value-based pricing, and look forward to continuing to work with him to see how those considerations could be included not only in future NICE assessments but in the operation of any pricing control Bill. On that basis, I ask him to withdraw his amendment.

I am grateful to my noble friend. I entirely take his point about the structure of reporting and review proposed through the regulations, which I will not necessarily pursue. On the second limb, however, the duties relating to NICE, there is a gap. The reality is that the development of a value proposition through the structure of the PPRS, or outcome-based pricing—that may be the next iteration, to try to take out some of the complexities associated with the broader value-based pricing structures that were consulted upon—means having a direct relationship between the pricing structure under the PPRS and the ability of NICE to make recommendations that drugs are cost-effective. We have just had that debate and I will not go through it all again.

At the very least, to say that these things are unrelated therefore seems wrong. The Government should at least look at these regulations and say, “Given that there is a relationship between the structure of PPRS and the price control mechanism as it works—or the rebate mechanism, if there is one—NICE’s ability to do its statutory job should be perhaps discussed, recognised, reviewed and reported upon”. Having made that point, I know from the very helpful discussions we have had in Committee and separately that my noble friend is actively looking to promote that kind of understanding. I will leave it in his capable hands and seek leave to withdraw the amendment.

Amendment 5 withdrawn.

Clause 5: Control of maximum price of other medical supplies

Amendment 6

Moved by

6: Clause 5, page 4, line 6, at end insert—

“( ) In section 272(6)(orders, regulations, rules and directions subject to affirmative procedure), after paragraph (a) insert—“(aa) the first order under section 260,”.”

My Lords, in Committee we debated the Government’s existing powers to control the prices of medical supplies. I have listened carefully to the concerns expressed by noble Lords and tabled this government amendment to address them. Before I go into more detail about the amendment, I would like to take the opportunity to address some concerns raised in Committee about the definitions used in the Bill, including that of medical supplies.

The Bill refers to health service products, which is the overarching term for medicines, medical supplies and other related products used in the health service. The term “medical supplies” is used in the NHS Act 2006 and the existing definition covers a broad range of medical supplies, from bandages to MRI scanners. It could include ambulances, to answer a question asked in Committee by the noble Lord, Lord Warner. “Other related products” are those which are not medicines or medical supplies but are prescribed in the NHS—for example, vitamins. The Government have powers to control the costs of health service medicines and the prices of medical supplies. If the Government were to introduce any controls on those prices then we would, of course, need to define which supplies the control would apply to. This would be done within the regulations. Similarly, in the information regulations we will specify which medical supplies and other related products will be covered. These regulations will, of course, be subject to consultation.

The illustrative regulations published alongside the Bill give examples of the categories of medical supplies and other related products on which we would expect information to be kept, recorded and provided. For example, one category includes those medical supplies and other related products listed in the drug tariffs. As noble Lords know, the illustrative regulations are not in their final form and have been provided to demonstrate how we would specify which products are covered by the regulations. We have already started discussions with representative bodies of the medical devices industry about how we could restrict the types of medical supplies and other related products that the regulations cover. It is not our current intention, for example, to include ambulances in the regulations. We will carry a formal consultation to consider the products that need to be covered.

While I am still on definitions—please bear with me—the Bill also refers to UK health service products and English health service products. This reflects that the Bill has some aspects that are reserved and others that are devolved. While medicine pricing is a reserved matter with respect to Scotland and Wales, reimbursement is a devolved matter. I acknowledge that the distinction between reserved and non-reserved matters adds complexities, not least for me, but I assure noble Lords that the definitions are consistent and in line with the existing provisions of the NHS Act 2006. I hope that this explanation helps noble Lords to understand those definitions.

Regarding Amendment 6, which I have tabled, I understand the views expressed by some Peers asking why the Government need the powers to control prices of medical supplies when they are not using those powers. In the words of the noble Lord, Lord Hunt, it is a question of proportionality. At this moment, the Government have no immediate concerns about the prices of medical supplies as it appears that the market is generally competitive. Nevertheless, noble Lords will be aware of the work of the noble Lord, Lord Carter, on efficiency and variation in the NHS—indeed, it has been referenced today—and the work being done to implement that report. He concluded that there is considerable variation between trusts on the value that they extract from the procurement of goods and services, so while the market may be competitive the NHS could be getting better value for money for the products it buys. This is one area where the information powers in the Bill, which will not be burdensome, could help the NHS to save money. Again, I know that we all share this goal.

We also know that markets can dysfunction for any number of reasons and that competition will not always operate to control prices. This is the unfortunate situation we have found ourselves in with unbranded generic medicines, which the powers in the Bill will help us to deal with. I continue to believe that the Government should have the ability to intervene but only when a market is not working. As noble Lords know, as part of the 2006 Act the Government already have the power to introduce price control schemes into the medical supplies sector but concern was expressed in Committee that these powers, and how they are developed in the Bill, are not proportionate. As I have set out, we have no concerns about the current operation of the medical supplies market, so noble Lords justifiably asked whether some additional threshold or hurdle should be required before the introduction of any price control scheme in this sector.

I have listened to their concerns, which have much merit, and so have tabled this government amendment so that the first order to control the prices of medical supplies would be subject to the affirmative procedure. The order would then require the formal approval of both Houses of Parliament before it becomes law and there would be debates on the proposals, in which the Government would have to justify their case for action. This means that if the Government want to introduce a pricing scheme, they would have to convince Parliament that there were sufficient grounds for doing so. I am very grateful to many noble Lords for their engagement on this issue and I trust this amendment meets the concerns raised. I hope that noble Lords across the House will be able to agree to it.

My Lords, I am grateful to the Government for taking some modest steps in the direction we were asking them to take in Committee. My sympathies are entirely with the Minister, who had to bring forward this amendment and explain it in the way he did. It shows what a tangle the Government have got themselves into by taking some powers which they are not sure they will need but which the noble Lord, Lord Carter, may suggest they need. It represents a decision by the Government that, when they think the NHS cannot tender and run a proper competition, they will be willing to step in to control the price of a product when the NHS has failed to do proper purchasing.

This is a pretty big step because the noble Lord, Lord Carter, has shown that chunks of the NHS are not terribly good at tendering and purchasing. Are we now going into the kind of Soviet era that the noble Lord, Lord Hunt, painted a picture of on a previous amendment, in which the Government are going to step in whenever they have evidence that there is a pretty lousy trust down in Little Cullompton or wherever and start to control the price of a number of medical devices? I do not think I have exaggerated where the Government are using this legislation to take them. It seems pretty peculiar. Can the Minister reassure me about whether the Government have big plans to go about this and tell me what evidence they have that it is a serious problem?

I thank the noble Lord, Lord Warner, for the lukewarm endorsement of an attempt to improve the Bill. We seem to have zipped from socialism to communism, which for a Conservative is a fairly terrifying idea. The noble Lord raises an important point. I am not in a position to comment on the provenance of the Bill as I was not around. He is right to focus on the issues of procurement and competition. It must be the policy intention to make sure that competition works the best it can. In the generics market, we found an instance of where that is not working. Through the much-referred-to Sir John Bell, the industrial strategy is looking at issues around the manufacture of generics, biosimilars and so on, which, as the noble Baroness, Lady Walmsley, said earlier, has the ability to reduce prices through competition.

Equally with procurement, there is the NHS supply chain. The feedback is that it could do a lot better. A lot of work is going on on the future operating model—another piece of jargon. It is a thorough piece of work that is getting a lot of scrutiny to make sure that it can deliver the kind of savings that the noble Lord talks about. I agree that there are other things that a Government must do to make markets work better. It is for that reason that I insisted that the amendments we have brought forward today should involve an affirmative resolution. When they introduce the first scheme, the Government are going to have to justify exactly what they have done to make competition work, why the procurement is not working and what is going on. Obviously, I cannot anticipate at this point what that might look like. Given the experience we have had with generics, I do not think it unreasonable for that power to be there. Indeed, the power is already in the 2006 Act. This Bill circumscribes that power and makes it more reasonable. I hope I have been able to persuade the noble Lord, Lord Warner, that we are not slipping into communism, that the Government are taking a reasonable approach that understands the importance of markets, and that this power would be used only in situations where it could be justified when interventions to improve competition and procurement have not worked.

Amendment 6 agreed.

Amendment 7

Moved by

7: After Clause 5, insert the following new Clause—

“Price control: exemptions

After section 264 of the National Health Service Act 2006 (statutory schemes: supplementary) insert—“264ZA Price control: exemptionsIn circumstances where the Secretary of State considers that the price or security of supply of any health service medicine or medical supply, or category of health service medicines or supplies, may be determined most appropriately through an open and competitive tender process, the Secretary of State may exempt that product, or category products, from the application of the scheme.””

My Lords, I am grateful for the further opportunity to touch on an interesting issue which we discussed in Committee. On Report, I have proposed a different amendment that tries to meet some of the considerations that were quite properly raised in Committee. This relates to where the method of procurement for a branded medicine or product to which the statutory scheme would apply would be through a tender process and there would be an expectation that the best available price would be obtained through that process. I completely accept that previously we were looking at possibly exempting tender processes generally. The Minister quite rightly said that sometimes the tender process is used not to secure the best price, but to secure supply or procure products which are not directly comparable and where price competition would not be expected to be available.

I completely understand that, so this amendment says not that the Secretary of State under any circumstances is obliged to exempt a tender which has delivered a price outcome but that he may do so. Why do I think it is useful to do that? It is because there will sometimes be products where, for reasons of security of supply, it is important to undertake a tender process. At the moment, all companies in the statutory scheme or the voluntary scheme will have the implications of the PPRS pricing and rebate structure applying to them. As we have heard previously, the way that applies to individual products may be subject to price modulation depending upon how the company overall is affected by the scheme. It may therefore have a distorting effect on products that are offered through the tender. That is undesirable. We should want the tender process to be as transparent as possible and the price, supply and other considerations of the tender to be as self-contained as possible. That is perfectly possible to achieve if the Secretary of State has the discretion to exempt a tender process from the scheme.

As the Minister told us in Committee, the Government intend that framework agreements agreed before the regulations come into force will be exempted in any case. This amendment would helpfully give the Secretary of State the ability to exempt specific tenders from the application of the scheme. I do not want to anticipate too much, but the Minister may respond that the Secretary of State has the power to do that. If he says that the Government will actively assess where we may use such discretion to make it clear that tenders should be conducted in that way, I would be content. My noble friend instanced von Willebrand factor, where there are very similar products which are not necessarily competing on price. There is a general problem with plasma protein therapies because the cost structure that applies to them does not reflect the cost structure over the life of a product as it is reflected in patented, branded medicines generally. There is a good case for looking at an exemption in relation to products which have that high level of fixed cost rather than applying the price control and rebate in the way that happens now. I hope my noble friend will be able to say positive things about how we can maintain competition in the tender process and recognise the cost structures of certain medicines, because there is likely to be the application of the same principles to those products whether or not the company has opted into the voluntary scheme. Therefore the Government should be more willing under the statutory scheme to apply exemptions to those companies which have not opted into the voluntary scheme. I beg to move.

My Lords, as I mentioned in the debate on Amendment 3, I support this amendment because it gives the Secretary of State a bit more flexibility to take account of the specific circumstances of a company with very high fixed costs, in the interest of making sure that we have security of supply and patient access to the particular products that it produces. I do not think it undermines any of the objectives of the Bill in any way, and because of that, I hope that we will hear something encouraging from the Minister.

My Lords, in Committee the noble Lord said that he did not think that biosimilars should be excluded from the voluntary or statutory pricing schemes, as competitive tendering would not generate sufficient levels of price reductions. I had a note from one of the companies involved, Sandoz, which says that one of the issues here, alongside the fact that fierce competition is already driving significant price reductions for the NHS, is that development costs of generic medicines do not compare with those of biosimilars. Those costs can be up to 100 times those of generic medicines, partly because of the licensing process and the time needed for development. I hope the noble Lord will be able to address that and explain how the Bill aligns with recent NHS policy, which has expressed support for the uptake of biosimilar medicines, particularly through the intention for specialised services commissioning. The noble Lord’s comments in Committee on biosimilars caused some disappointment, and if he could respond more positively now that would be helpful.

My Lords, from time to time I have been approached by plasma companies and vaccine companies about supply issues, particularly where there have been changes in the structure of the industry and a reduction in the number of producers of some of these products, and sometimes on the point of whether British companies may start to go out of business because of some of those structural changes. My question to the Minister is whether the amendment would actually help enable the Secretary of State to deal with some of those supply problems when this becomes an issue. It becomes an issue for those patients who really need that particular product when no other will do. Is this the kind of amendment that would help with these supply problem areas, which to my knowledge have been experienced from time to time, particularly in plasma and vaccine areas?

My Lords, I am grateful to my noble friend for his amendment and for providing the opportunity to talk about this important issue. It is important to note that the substance of this amendment is different from the substance of the amendment that was tabled in Committee, which would have given a blanket exclusion, while this is much more about providing the Secretary of State with the opportunity to exercise his or her judgment to exempt a product.

I absolutely appreciate the intent of the amendment, and reassure my noble friend that we believe it unnecessary. Due to the powers in the 2006 Act, the Secretary of State already has the ability to exempt individual products or groups of products from the terms of any statutory scheme, so this amendment would duplicate existing powers. For example, the Secretary of State uses these powers in the current statutory scheme to exempt products already under a contract or framework agreement. It is currently the Government’s intention that under the new statutory scheme, products procured under framework agreements that were entered into prior to the regulations coming into force would be exempt from the pricing controls and payment mechanism. However, branded products procured after the regulations come into force would be subject to the pricing controls and payment mechanism. Like any other cost, companies would be able to take this into account when proposing a price in response to a new tender. The regulations will of course be subject to consultation.

The point here is that there may well be cases where an exemption is required, and noble Lords have given examples of what that might look like. I hope your Lordships would agree that it would not be responsible for me to try and set out a list of them now, but clearly there will be occasions where that might be necessary. Any statutory scheme must of course also be sensitive—as indeed the legislation demands that it is—to the differing R&D costs that apply to the development of different medicines.

I hope that provides some reassurance on the points that noble Lords have made. We would be able to use the powers that already exist in the creation of the new statutory scheme for whichever purposes are desired at the time. On that basis, I ask my noble friend to withdraw his amendment. I hope those reassurances have done the trick.

My Lords, before the noble Lord sits down, is he able to respond to the issue about biosimilars, which I raised in an earlier debate and which the noble Lord, Lord Hunt, has just raised?

I thought I had, when I talked about taking into account the differing R&D costs, which I think was the substance of the point made by the noble Baroness and the noble Lord, Lord Hunt. We have to take into account both getting a good price and the R&D costs, and that needs to be reflected within a statutory scheme, and would clearly apply to the case in point.

I am grateful to my noble friend and completely understand that at this stage it would be inappropriate to try and itemise in any way how the Secretary of State’s discretion to exempt products or categories of products could be used. I am grateful for what my noble friend said because it is clear that while some companies opt into the voluntary scheme, we will arrive at a situation where, in effect—force majeure—other companies with other products are in the statutory scheme without any choice in the matter. They should come out of this debate with the confidence that they can make their case to the Government. We have seen some really good examples, and I am grateful to the noble Baroness, Lady Walmsley, and the noble Lord, Lord Hunt. Biosimilars clearly have a case to make about the structure of the scheme and how it applies to them in relation to this.

As the noble Lord, Lord Warner, mentioned, the cost structure of plasma product therapies and things of that kind is very different from the cost structure of many other branded medicines that enjoy their patent life. To that extent, recognising their cost structure might require an exemption from the PPRS as it stands at the moment. We cannot just seek some of those products, particularly some of the blood products we are talking about, in isolation in Britain. There is a limited supply. We import them from abroad, and there are sometimes higher prices in other markets. It is absolutely necessary for us sometimes to say, for security of supply reasons, that this product, this tender process or this framework agreement for the delivery of products of this kind is exempted from the PPRS in the future. It does not automatically follow that they will be included. However, I gather from what my noble friend says that the power is there to do this and that this will be considered, as and when, on its merits. On that basis I certainly seek leave to withdraw Amendment 7.

Amendment 7 withdrawn.

Clause 6: Provision of information to Secretary of State and disclosure

Amendment 8

Moved by

8: Clause 6, page 5, line 35, leave out “revenue or” and insert “product revenue and aggregate UK”

My Lords, I will speak very briefly to Amendment 8 and then allow the Minister to explain his amendments. I can then perhaps come back at wind-up to refer to my own Amendment 12 to his Amendment 11.

We have discussed whether the Bill is proportionate, and this is particularly apposite in relation to this clause. There is concern that the powers may be too intrusive in requiring companies to submit profit-level information on individual products, which I understand from many of the companies involved that they consider complex and onerous to provide, and not necessary routinely for the Government. My amendment attempts to deal with this in a way which I think is proportionate and not intrusive, but which should provide the kind of information the Government want. I will be very interested to hear what the Minister says about his amendments. I beg to move.

My Lords, my name is on this amendment and I support it. I want to emphasise the point about the UK, which is in this amendment from the noble Lord, Lord Hunt. Members of the industry are concerned that they will be brought into a conflict between them and their headquarters over the pricing of particular products in the UK. The point that the noble Lord has made in his amendment about specifying the UK is extremely important.

My Lords, I am grateful to the noble Lord, Lord Hunt, for his amendments. I shall speak to government Amendments 9, 11, 25 and 26 relating to information notices and appeals, and will refer to Amendments 8, 10 and 12 tabled by the noble Lord.

We had a good discussion in Committee about the information powers. My noble friend Lord Lansley proposed information notices with a right of appeal; the noble Lord, Lord Warner, proposed to place certain restrictions around the Government’s ability to collect information on profits; and the noble Lord, Lord Hunt, proposed that those restrictions be in the form of “triggers”. As I hope noble Lords will know from the individual meetings that I have had the chance to have with them, I have been listening carefully to what has been said and I am conscious of the importance of proportionality in the Bill. In particular, I have reflected on the suggestion from the noble Lord, Lord Hunt, that we may be able to combine these different ideas into a workable solution that would deliver the sort of safeguards that I believe noble Lords are seeking. The government amendments that I have tabled would do precisely that.

There was broad agreement in Committee that the Government should be able to collect the information required to reimburse community pharmacies and to operate our cost-control schemes for medicines as effectively as possible. That includes straightforward information about sales income actually received or the amount actually paid in relation to health service products at each point in the supply chain. We already collect much of this information now under a mix of voluntary and statutory arrangements, including scheme M, scheme W and the community pharmacy margin survey.

We have discussed previously that our current arrangements need to be strengthened. The changes proposed by the Bill would allow us to expand routine collections to inform reimbursement prices. They would enable us to use data from more companies, make the reimbursement of community pharmacies fairer and more robust and set reimbursement prices for more products. Setting reimbursement prices leads to more competition—whose merits we have discussed—as pharmacies are incentivised to source the products as cheaply as possible, allowing them to retain a margin. That in turn helps us to keep the drugs bill down.

However, I have heard the concerns raised by noble Lords in relation to the collection of information on the profits associated with particular products. The noble Lord, Lord Warner, spoke about his concern that it would be burdensome for the pharmaceutical industry to apportion certain operating, development or manufacturing costs to individual products. The government amendments that I have tabled would address that concern. Amendments 11, 25 and 26 would introduce the requirement in regulations for the Secretary of State to issue an information notice for the collection of information on the costs incurred by a producer in connection with the manufacturing, distribution or supply of UK health service products. The exception to that requirement would be information on the amounts actually paid for purchasing health service products from an organisation in the supply chain. As I set out earlier, our current routine collections already cover the acquisition costs of the products themselves, as distinct from the overheads incurred by an organisation in supplying them.

Amendment 9 makes clear that in order to collect information in relation to certain types of profit made by suppliers, the Government would by necessity need to collect information on certain costs. I know that the collection of information on profit has been of concern to some Peers. Taken together, these amendments therefore make clear that the Government would be required to issue an information notice before they could collect particular types of profit-related information.

I have sympathy for the amendments from the noble Lord, Lord Hunt, that would restrict the term “profit” to aggregate UK profit. However, this approach may mean that we would be unable to collect information on the purchase costs and sales revenues that we currently collect and use to inform the reimbursement of community pharmacies and ensure that our reimbursement arrangements deliver value for money. I hope he would be willing to support the Government’s approach, which addresses the concerns raised by the pharmaceutical industry without undermining our ability to reimburse community pharmacies effectively. It might be worth adding at this point that I have had the opportunity to meet a couple of representative groups and explain the approach that we were taking in order to provide proportionality, and that approach was welcomed by those groups.

I should point out that in drafting Amendment 11 the Government have omitted to reflect that under the voluntary scheme, on a routine basis, we already obtain information from companies on profits and costs, including the costs of manufacture, R&D and distribution. This is company-level information, not product-level information. I will therefore bring forward a small amendment to Amendment 11 at Third Reading to reflect this, which would enable the Government to obtain that information on a routine basis under a future statutory scheme. I believe this would also be in line with the intention behind Amendment 8 from the noble Lord, Lord Hunt, which distinguishes between company-level or aggregated information on the one hand and information on individual products on the other.

I turn to the circumstances in which the Government may wish to collect information on costs via an information notice. In Committee we spoke about triggers, and the noble Lord, Lord Hunt, has tabled amendments along those lines. I have thought about this carefully but have concluded that we cannot set particular conditions for when we issue information notices. First, we cannot predict all the circumstances where this or a future Government may need to investigate further the value for money of a particular product or supply chain. Secondly, we may want to issue an information notice when we have an information gap and cannot properly assess whether a product or the supply chain is delivering good value for money. It would be a Catch-22 situation if we were to have triggers for an information notice in legislation that would allow us to issue an information notice only when we already had the evidence. I trust noble Lords will understand the Government’s concerns about triggers for an information notice.

However, in Committee I said I would provide examples of when the Government may wish to collect information about costs. These include where companies in the statutory scheme ask for a price increase for a particular product and we want to assess whether that is justified; where we have concerns about the high price of an unbranded generic medicine and want to assess whether the prices are warranted; or where the Government have no visibility over costs in the supply chain and want to assure ourselves that the market is working effectively. These are only some examples but I hope they illustrate where the Government may benefit from more information than that which is collected routinely to run our community pharmacy reimbursement system and to operate our cost-control schemes for medicines. The information notice would of course clearly set out what information would need to be provided, the form and manner in which the information would need to be supplied, the period of time that that information would need to cover and the date by which that information would need to be supplied. It would inform those issued with an information notice of their right of appeal.

The government amendments would introduce a right of appeal for those served with an information notice, an important point made by my noble friend Lord Lansley in Committee. UK producers could appeal an information notice if they believed the request was beyond the powers in the NHS Act 2006. That is in addition to the existing appeal mechanism against any enforcement decision made by the Government when a company refuses to submit information.

I thank noble Lords, especially my noble friend Lord Lansley and the noble Lords Lord Warner and Lord Hunt, for helping to shape these amendments. I hope that through the government amendments I have reflected the concerns raised in Committee, and that the House will agree them. I also hope I have addressed the amendments tabled by the noble Lord, Lord Hunt, and I ask him to withdraw his amendment and instead support the Government’s amendments.

My Lords, I reciprocate my noble friend’s thanks. In Committee he said he was going to think very carefully about the subject of information and the circumstances in which it is required from companies. Having done so and engaged us in a conversation about it, he has come forward with an amendment that seems specifically designed to meet the concerns raised in Committee. From my point of view, and this is very simply put, there must be a general scheme to acquire information, but when one goes beyond it the company has a right to expect that the information notice must be specific, itemised and additional, and that, as is now provided for, there should be a right of appeal in relation to that. My noble friend has very kindly listened and brought forward an amendment to do in substance the things that we were looking for, so I am grateful to him.

My Lords, I thank the Minister. I am grateful for his amendments, because he clearly listened to the debate. I just want to encourage him to go that little bit further. I am glad that we have a government amendment on Third Reading, because that means that we can continue this debate: his amendment is amendable, which is always the issue for noble Lords on Third Reading.

The Minister said on my Amendment 12 that he was anxious not to put particular conditions into the Bill, but my reading of his Amendment 11 is that he imposes particular conditions. Its first four lines state:

“Regulations under this section must require the Secretary of State to give a UK producer an information notice if information is required in respect of the costs incurred by the producer in connection with the manufacturing, distribution or supply”.

All I want to do in my amendment is add the word “access”. I am just taking his elegant drafting and adding a bit to it. I beg leave to withdraw Amendment 8.

Amendment 8 withdrawn.

Amendment 9

Moved by

9: Clause 6, page 5, line 37, at end insert “(including, in relation to profits, the costs incurred by the producer in connection with the manufacturing, distribution or supply of the products)”

Amendment 9 agreed.

Amendment 10 not moved.

Amendment 11

Moved by

11: Clause 6, page 5, leave out lines 46 to 48 and insert—

“(5) Regulations under this section must require the Secretary of State to give a UK producer an information notice if information is required in respect of the costs incurred by the producer in connection with the manufacturing, distribution or supply of UK health service products (other than costs which relate to any transaction with a UK producer for those products).(5A) An information notice is a notice stating—(a) the period in relation to or for which, or intervals at which, information is required to be provided,(b) the form and manner in which information is required to be provided,(c) the time at which or period within which information is required to be provided, and(d) that a right of appeal is conferred by virtue of section 265(5A).(5B) Regulations under this section may require information which does not fall within subsection (5) to be provided—(a) in relation to or for a prescribed period or at prescribed intervals,(b) in a prescribed form and manner, and(c) at a prescribed time or within a prescribed period.”

Amendment 12 (to Amendment 11)

Moved by

12: Clause 6, in subsection (5), before “manufacturing” insert “access to, ”

Amendment 11 agreed.

Amendment 13

Moved by

13: Clause 6, page 7, leave out line 22 and insert—

“(l) such of the following as may be prescribed—(i) an NHS foundation trust;(ii) any health service body within the meaning of section 9(4)(not falling within any of paragraphs (a) to (k) above).”

My Lords, I beg to move Amendment 13 and am grateful to the noble Baroness, Lady Walmsley, for putting her name to this amendment and to the others in my name.

The amendments relate to the report and recommendations of the Delegated Powers and Regulatory Reform Committee, and I am extremely grateful to the committee for its scrutiny of the Bill—which, I believe, together with the government amendments, will lead to improved legislation. In my response to the committee, I confirmed that the Government would accept all four recommendations and would table amendments to take forward these actions. Once again, I am grateful for the work of the noble Baronesses, Lady Walmsley and Lady Finlay, and the noble Lord, Lord Hunt, for continuing to highlight the issues raised in the report.

I shall take each recommendation in turn. First, the committee concluded that the general power in new Section 264B(1)(l) proposed in Clause 6 to prescribe in regulations any person to whom information may be supplied is too wide, with insufficient justification. The government amendment clarifies this issue by confining the ability to prescribe in regulations to any health service body already listed in Section 9 of the NHS Act 2006 and NHS foundation trusts which are not listed in Section 9. This would have the effect of enabling government to prescribe in regulations the sharing of data with other health service bodies such as clinical commissioning groups, but not enabling other persons to be included by means of subsection (1)(l). We have made this change, as we would want to be able to share information with local health bodies, such as CCGs or hospital trusts, if we had concerns about prices—but not with others.

The committee concluded that the power in Clause 7 to enable Welsh Ministers to make regulations that make provision for payment of a penalty if a provider of pharmaceutical or primary medical services contravenes regulations requiring them to record and provide information about health service products which are required for the health service in Wales, should be consistent with similar provisions in the 2006 Act. In particular, the committee recommended that the maximum penalty which may be imposed under what would be Section 201A of the National Health Service (Wales) Act should be set out in the Bill, and that a power to increase this maximum by regulations should be made subject to the affirmative regulations. I am pleased to say that, following discussions with the Welsh Government, an amendment has been tabled which would amend Section 201A(5) to introduce maximum penalties into the National Health Service (Wales) Act 2006. We will amend the Bill to enable through regulations the power to increase the maximum penalty, and these regulations will be subject to the affirmative procedure.

Noble Lords will appreciate that, in the case of penalties, the powers in relation to Wales are different from those in relation to the UK as a whole in so far as Welsh Ministers will be able to impose penalties only on providers of pharmaceutical and primary medical services. By contrast, the 2006 Act allows for penalties to be imposed on manufacturers and distributers, and the size of any penalty should reflect this. It would therefore be disproportionate if the level of maximum fine allowed for in the 2006 Act were to be replicated in the NHS Wales Act. To address these concerns, the government amendment would limit the single penalty to £10,000 and the daily penalty to £100.

I turn to the amendment which would remove the provisions allowing Welsh Ministers to disclose information to persons prescribed in regulations. Welsh Ministers have agreed that the Bill should be amended to limit the types of bodies with whom information may be shared. The government amendment would specify the following persons to whom information may be disclosed by virtue of Section 201A. They include: a local health board or other person appointed under Section 88(3)(b) of the National Health Service (Wales) Act 2006 to exercise the functions of a determining authority under Part 7 of that Act; a National Health Service trust established under Section 18 of the National Health Service (Wales) Act 2006; any person who provides services to Welsh Ministers or to any person falling within paragraph (a) or (b); and any body that appears to the Welsh Ministers appropriate to represent Part 4 providers or Part 7 providers, as defined by Section 201A(8).

I turn to the amendment from the noble Lord, Lord Hunt, which seek to put those bodies that represent UK producers on the face of the Bill instead of in regulations. The Government will prescribe these bodies in regulations; the illustrative regulations we published merely provided some examples of representative bodies that the Secretary of State may disclose information to, and I assure the noble Lord that further work will be done on this list. We will discuss the list with stakeholders and we will, of course, publicly consult on the list to ensure that we get it right. I know that that was a concern of his.

Finally, we are proposing to table technical amendments to the Bill at Third Reading to reflect the fact that the Northern Ireland Assembly was not able to pass its legislative consent Motion on the Bill before it dissolved, despite the relevant committee having approved it. We will seek to amend the Bill to enable the Northern Ireland components of the Bill to be commenced separately through regulations once it has been possible to secure legislative consent.

As I hope your Lordships will see, the Government have addressed the concerns of the DPRRC. I also hope that I have addressed the concerns of the noble Baronesses, Lady Walmsley and Lady Finlay, and the noble Lord, Lord Hunt. I ask noble Lords who have tabled amendments not to press them and support the amendments in my name and those of the noble Baroness, Lady Walmsley.

My Lords, I am grateful to the Minister for what he has just said and for the conversations that we had about this group of amendments at Richmond House. As noble Lords will see, I have added my name to the government amendments in this group, because they achieve exactly what I was hoping to achieve when I tabled amendments in Committee. I am grateful to the noble Baroness, Lady Finlay of Llandaff, for supporting me in that intention. Unfortunately, when I withdrew my amendments in favour of the Government’s amendments, my message to the noble Baroness, Lady Finlay, did not get through, so she has unfortunately failed to withdraw her name. That is why she has asked me that, when the amendments in her name come to be put in order, I should make it clear on her behalf that they are not moved, which will achieve our joint intention. I know that the committee is also grateful to the Minister for hearing our concerns and taking action.

My Lords, I am grateful to the Minister for the way he responded to Amendment 14 in my name. I am satisfied that the Government will consult closely on the list of bodies.

Amendment 13 agreed.

Amendment 14 not moved.

Clause 7: Provision of information to Welsh Ministers and disclosure

Amendment 15

Moved by

15: Clause 7, page 9, line 32, at end insert—

“(5A) The penalty may be—(a) a single penalty not exceeding £10,000, or(b) a daily penalty not exceeding £100 for every day on which the contravention occurs or continues.”

Amendment 15 agreed.

Amendment 16 not moved.

Amendment 17

Moved by

17: Clause 7, page 9, line 41, at end insert—

“(7A) The Welsh Ministers may by regulations increase (or further increase) either of the sums mentioned in subsection (5A).”

Amendment 17 agreed.

Amendment 18 not moved.

Amendment 19

Moved by

19: Clause 7, page 10, line 11, leave out from “any” to end of line 12 and insert “of the following persons—

(a) a Local Health Board or other person appointed under section 88(3)(b) to exercise the functions of a determining authority under Part 7;(b) an NHS trust established under section 18;(c) any person who provides services to the Welsh Ministers or to any person falling within paragraph (a) or (b);(d) any body which appears to the Welsh Ministers appropriate to represent Part 4 providers or Part 7 providers (as defined by section 201A(8)).”

Amendment 19 agreed.

Amendment 20 not moved.

Amendment 21

Moved by

21: Clause 7, page 10, line 19, leave out “or 201B”

Amendment 21 agreed.

Amendments 22 to 24 not moved.

Clause 8: Consequential amendments

Amendments 25 to 27

Moved by

25: Clause 8, page 11, line 13, after second “section” insert “(other than enforcement decisions falling within subsection (5A))”

26: Clause 8, page 11, line 13, at end insert—

“( ) After subsection (5) insert—“(5A) Provision must be made by regulations for conferring on UK producers a right of appeal against enforcement decisions taken in respect of them in pursuance of section 264A and this section if the enforcement decisions relate to information notices given by virtue of section 264A(5).””

27: Clause 8, page 11, line 29, at end insert—

“(18) In section 203(6) of the National Health Service (Wales) Act 2006 (statutory instruments which are subject to affirmative procedure) after “section 25B(3)(c) or” insert “201A(7A) or”.”

Amendments 25 to 27 agreed.

Clause 9: Extent

Amendments 28 to 30

Moved by

28: Clause 9, page 11, line 33, after “Section” insert “(Remuneration for persons providing special medicinal products: England) and”

29: Clause 9, page 11, line 33, after “Section” insert “(Remuneration for persons providing special medicinal products: Wales) and”

30: Clause 9, page 11, line 33, after “7” insert “and 8 (18)”

Amendments 28 to 30 agreed.

Clause 10: Commencement

Amendment 31

31: Clause 10, page 11, line 38, leave out “Section 7 comes” and insert “Sections (Remuneration for persons providing special medicinal products: Wales) and 7 come”

Amendment 31 agreed.