Medical Devices (Fees Amendment) Regulations 2026
(1 day, 8 hours ago)
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Baroness Merron
That the Grand Committee do consider the Medical Devices (Fees Amendment) Regulations 2026.
The Parliamentary Under-Secretary of State, Department of Health and Social Care (Baroness Merron) (Lab)
My Lords, I am glad to introduce these regulations, which will take effect from 1 April. These regulations will amend the fees structure for the relevant medical devices regulations and provide for a new annual medical device fee to replace an existing fee. The fee will enable funding for the MHRA’s strengthened post-market surveillance—or PMS—activities in respect of medical devices. I want to clarify that, for 2026-27, the fee will be part-subsidised by the Department of Health and Social Care, with the intention, subject to further ministerial and parliamentary approval, to move to a fully cost-recovering annual fee from 2027-28.
Why are these regulations needed? Post-market surveillance refers to the work that the MHRA does to collect, review and act on safety and performance issues relating to devices on the market. The Independent Medicines and Medical Devices Safety Review highlighted the need for a high-quality PMS framework. That is necessary because the framework strengthens the medical devices safety and surveillance framework, improving patient safety and supporting the Government’s risk-proportionate, pro-innovation approach to regulation. The framework is estimated to increase the MHRA workload by 60% to 70%, at an annual cost of around £17 million, so it is vital to get the right level of funding. Historically, PMS activities have been funded mainly by subsidy from the DHSC, and partly by the current device registration fee.
I should say that subsidising ongoing regulatory activity through general taxation is not the usual approach of the MHRA to fees and services. The usual approach is based on HM Treasury’s Managing Public Money guidance, which states that fees should be set on a full cost-recovery basis. Therefore, as noble Lords will appreciate, these regulations reduce subsidy by introducing an annual fee, so that those who benefit from access to the market fund the regulatory activity that supports it.
I turn to how the regulations are intended to operate in practice. The new annual fee apportions the overall costs of the MHRA activities by using the Global Medical Device Nomenclature system, or GMDN for short. The fee will be calculated using the number of registered devices with the MHRA. In practice, the MHRA will charge based on the number of chargeable GMDN categories in which a manufacturer has registered devices. If a manufacturer has multiple devices within the same category, it will be charged once a year for that category.
A consultation was done by the MHRA on this fee as part of its last statutory fees uplift, so this is a new fee rather than an additional increase to a fee in the last fees uplift. The consultation ran from the end of August to 24 October 2024, and it was widely promoted, including through an SME webinar. In the consultation, the annual fee was proposed at £210 per GMDN code, using the most granular level of the GMDN structure. Several changes have been made following the consultation feedback, which we appreciated, in response to the concerns that were raised. The MHRA set up a group of industry representatives to assist with this, to discuss the approach and to seek advice on implementation. This has been welcomed and has provided useful feedback and assurance.
To meet the concerns that were raised, the fee is being phased in. It will give the sector time to adapt, as I outlined in my earlier comments. The costs have been fully subsidised in 2025-26, and this instrument introduces a part-subsidised annual fee for 2026-27. The fee was remodelled to be charged at a higher grouping of GMDN category, rather than individual codes, resulting in the costs being more equitably spread. The MHRA estimates that 56% of manufacturers will pay £300 a year and 82% will pay no more than £900 a year. Small and medium-sized enterprises are likely to pay only £300 a year, as they are likely to have a more limited range of products compared to larger companies.
Let me put this in context. The medtech sector generated an estimated £48 billion in turnover in 2023-24, and the total PMS cost of £17 million represents about 0.035% of this. I recognise that businesses would prefer to avoid any additional costs, but I am satisfied that moving to a fair, predictable, cost-recovering approach, along with the changes that have been made, will help address the key concerns and make the measure workable and fair.
On implementation and readiness, the MHRA has been working with the sector. The phased rollout has given the sector time to get ready. The MHRA published guidance explaining the new fee, how it will be calculated, what account holders need to do to ensure that their registration data is accurate, and how and when payment will be made. The MHRA is improving its systems currently, so that businesses will be able to see their GMDN categories, which will help them understand what they will be charged for by 1 April this year.
In closing, these regulations introduce a necessary and fair new annual fee from 1 April to help fund the MHRA’s strengthened PMS work. The approach has been improved in response to consultation feedback—for which we are most grateful, as I said—and is being introduced in a phased way, giving the sector the time it needs to adapt while ensuring that the MHRA has the resource it needs to protect patients and maintain confidence in the market. I beg to move.
Lord Kamall (Con)
My Lords, I am grateful to the Minister for introducing these regulations. Although we support a strong and properly resourced system of post-market surveillance for medical devices, I am afraid we have significant concerns about the Government’s approach to this instrument.
As the Minister said, these regulations introduce a significant shift in how medical device registration is funded. As she outlined, manufacturers will now be required to pay an annual fee of about £300 per device category, replacing the previous one-off registration fee of £261. A further annual maintenance fee of £300 will also apply. This is a substantial change to the cost base for manufacturers. Of course, while large companies may be able to absorb these costs, there is huge concern among the small and medium-sized enterprises that make up a large part of the UK’s health technology sector.
The Government argue that these fees are necessary to fund the MHRA’s post-market surveillance functions. We do not dispute the importance of ensuring that devices used across the NHS are safe, effective and properly monitored. We also do not oppose the notion of charging fees. However, the question before us is not whether surveillance matters but whether the Government have provided the evidence and analysis required to justify the scale, structure and timing of these new changes.
I am afraid that, both here and in the other place, we are concerned that the Government fall short on these. The most striking omission is the absence of the full impact assessment. Instead, the Government relied on de minimis assessment on the grounds that the fee remains partially subsidised for one more year. Of course, we welcome that, because it helps to cut the costs for some of the manufacturers but, at some stage, manufacturers have to be weaned off these subsidies—or what some people term “corporate welfare”. Yet Ministers have already confirmed that the subsidy will be removed in 2027-28, when the full recovery model will be introduced. We think that this is an extraordinarily short-term approach for a regulatory change with such long-term consequences. It is difficult to understand how the Government can justify this new fee regime, when it clearly imposes additional costs on businesses without providing Parliament with a full and transparent assessment of its impact.
The Minister will know that industry bodies, including the Association of British HealthTech Industries and the British In Vitro Diagnostics Association, have repeatedly raised concerns about the uncertainty surrounding long-term fee levels. It is only right, therefore, that we raise their concerns here. The BIVDA has warned that, under the original proposals, some IVD manufacturers could have faced fee increases of up to 5,000% due to the granularity of the GMDN categories. Let us be clear: we are grateful that the Government have since moved to a higher-level categorisation—they should be given credit for that—but the underlying uncertainty remains. The MHRA’s own modelling suggests that the full cost recovery could require charges of more than £800 per device category. This is not a marginal adjustment for some of those small companies. It could be the difference between entering the UK market and walking away from it.
The Minister will be aware that these concerns were echoed in a Delegated Legislation Committee in the other place. Yet, despite these legitimate questions, the Government have still not provided clarity on how the new fee structure will affect different types of manufacturers. Unfortunately, they have also still not provided clarity on how they intend to mitigate the risk of reduced product availability, particularly for low-volume devices, including those used in diagnosis of rare diseases.
This is not an isolated change; it follows recent regulations on post-market surveillance on in vitro diagnostic devices. The cumulative effect is a regulatory environment that is shifting rapidly without the stability or predictability that businesses need in order to plan investment and product development.
We are disappointed by these regulations—not really their content but more the lack of the full impact assessment. The Government have not provided clarity on the long-term fee levels, addressed industry concerns about the risk of product withdrawal or given Parliament the information that it requires to scrutinise the consequences of this new fee regime. A proper impact assessment should have been conducted to avoid problems later.
Noble Lords will know that I take an interest in the phenomenon of unintended consequences. They will be aware of the “dash to diesel” when, in 2001, the then Chancellor of the Exchequer introduced a system of car tax to incentivise motorists to switch to diesel cars in order to meet lower CO2 emissions targets. That was understandable, but it was later found to have also led to an increase in emissions of harmful nitrogen dioxide and particulates. The reason I raise this is that, at the time, it had been claimed that some civil servants raised concerns about this consequence but were ignored.
This is not a party-political issue. The question is whether Governments of any colour have learned the lessons from that incident. How do we make sure that, when potential consequences are raised with the Government, they are seriously taken on board, particularly in terms of a full impact assessment? Given the current concerns that have been raised, rather than introducing these new charges now only to find out that, as a result of the consequences, they will have to be reversed or tweaked, surely it would be better for the Government to pause the process to introduce the new charging regime until a proper and full impact assessment has been conducted.
We understand that the running costs of the MHRA have to be met somehow and we agree with the Government that they have to wean companies off those subsidies in the adjustment. However, in the other place, my honourable friend the shadow Minister for Health, Caroline Johnson, pointed out that previous calculations of the cost base of the MHRA had not taken account of, for example, the impact of the rise in NI contributions on the running costs of the MHRA, so the Government have had to find some extra money to plug that gap. Perhaps that is why this SI has been rushed through without a proper, full impact assessment, although it may well not be.
My honourable friend also asked about a consultation that revealed widespread concern, with only 10% support. The Minister replied that changes had been made following discussions with a “trusted advisory group”. My honourable friend then asked:
“Who is in the trusted advisory group? Whose voices from micro and small businesses were heard in that group?”.—[Official Report, Commons, Third Delegated Legislation Committee, 21/1/26; col. 7.]
Unfortunately, she has not had an answer.
Baroness Merron (Lab)
I am grateful to the noble Lord for his interest in this important subject and for expressing his concerns, which I will address. I know that he is more than supportive of patient safety and taking a risk-proportionate and pro-innovation approach —I hope that is not putting words into his mouth, but that is my experience of him—and that is what this is about. I have heard his request to defer consideration of these regulations. I would not want to agree to that, not least because of the timetable we have set out. In running the consultation and responding very directly to the concerns raised, which were very real and appreciated, as well as by working with industry and being transparent and prepared, we feel that it is time for these regulations.
The noble Lord, Lord Kamall, referred to substantial additional costs on businesses. The impact on business is estimated at £4.3 million a year in total. Of course, de minimis assessments are not usually published. However, we have included that figure in the Explanatory Memorandum and committed—I hope that this will be helpful—to a full impact assessment for the fully cost-recovering fee in 2027-28. I hope that that will go some way to assist the noble Lord.
Lord Kamall (Con)
I completely understand if the Minister cannot answer this now, so maybe she could write, but can she explain why the Government have committed to the full impact assessment then, rather than now?
Baroness Merron (Lab)
My Lords, the noble Lord, Lord Kamall, asked further questions about the timing of the full impact assessment and why it is not being done this year. The reason is that the full impact assessment will refer to 2027-28, when the fees will be paid in full. Currently, because they are being subsidised for one year only, a de minimis assessment is required, but, when we have the full-fat version, that will be the right time for the impact assessment.
The noble Lord raised some questions that had been asked in the other place by Dr Caroline Johnson MP. I assure him that my ministerial colleague with responsibility for this area, Dr Zubir Ahmed MP, will reply to that Member of Parliament, and I will of course make sure that the noble Lord sees a copy of that response.
A question was raised about obsolescence and PMS. In response, I can say that if a manufacturer stops supplying a medical device, the company or its UK responsible person must update the MHRA registration by removing the product or stating that it has stopped being sold. Devices already on the market can stay in the supply chain or be used, as long as they are not recalled, and manufacturers are responsible for post-market surveillance duties. So, if the manufacturer no longer exists and has no legal successor, these duties do not transfer. For manufacturers outside the UK, the UK responsible person has to keep and provide plans and reports if requested. If there are any concerns, the MHRA will continue to monitor device safety and can act. The main summary is that manufacturers themselves or the UK responsible person are responsible for updating the MHRA.
The noble Lord, Lord Kamall, asked about the impact on small and medium-sized enterprises. I recognise, as I said in my opening, that new regulatory costs can be felt more sharply in this area, and that is why the MHRA listened carefully. It is also why the fee has been designed to spread costs more equitably across the sector, and why, once we had the consultation and the feedback, charging is to be based on a number of the GMDN categories that a manufacturer’s registered devices fall into, rather than the much more granular GMDN code. That matters for small and medium-sized enterprises because they are more likely to have closely related product variants that may attract multiple level 5 terms that sit within a single level 2 category. Under this approach, multiple products that are in one level 2 category are charged once a year, reducing repeat charges for minor product variations, which is important to SMEs. To re-emphasise, the MHRA estimates that about 56% of manufacturers will pay a single unit fee of £300 a year. It is SMEs that are most likely to fall into this lower charging group because they typically have a narrower product range than larger companies.
I can say to the noble Lord, Lord Kamall, that, as I said earlier, the charge is designed to be proportionate. I should say that if there were to be any waivers— I know that he did not specifically ask that but raised general concerns—that would simply shift costs elsewhere. We need to keep the charge predictable and proportionate, and to phase it in.
My final point is that SMEs stand to benefit from a stronger PMS framework. It will mean earlier identification of issues, fewer surprises and a more risk- proportionate, predictable regulatory approach. That is what supports responsible innovation, and I know that is of concern to the Grand Committee.
Taken together, these regulations put the funding of a strengthened PMS on a clearer, more sustainable and fairer footing, so that those who benefit from access to the UK market contribute fairly to the ongoing regulatory work that supports that access, because that regulatory work has to be paid for in some way. I cannot emphasise enough how the fee has been redesigned following the consultation. Often, noble Lords question the value of a consultation and whether it really makes change. I can say that, on this one, without a doubt, it has done, and I am grateful to all those who contributed.
Today, these regulations, if agreed by your Lordships’ Grand Committee, will mean that we can maintain confidence in the safety and performance of medical devices, support continued access, and ensure that the MHRA has the capacity to act quickly and proportionately should issues arise. For those reasons, I hope noble Lords will support these changes.