Brexit: Risks to NHS Sustainability

Lord Warner Excerpts

Wednesday 12th July 2017 Lords Chamber

Asked by

[Lord Warner]

To ask Her Majesty’s Government what assessment have they made of the risks to NHS sustainability arising from the United Kingdom’s departure from the European Union.

[Lord Warner (CB)]

My Lords, we now come down to earth from outer space. This debate combines two public policy areas with what I would say are well above average risks of disaster and on which there seems to be a collective governmental denial of the seriousness of the challenges and dangers we face in both areas. Even without Brexit, the NHS has to cope with major challenges to its sustainability, which is why this House set up the Select Committee on this subject. I was a member of that committee which, after collecting and analysing a massive amount of evidence, published on 5 April its report, The Long-term Sustainability of the NHS and Adult Social Care.

Let me start with what that evidence revealed. We have unrealistic and inconsistent funding for both health and social care, relative to the demands placed on both by the disease profile of an ageing population. The UK has historically spent less per capita on health than France, Germany, the Netherlands and Sweden. There is no long-term strategy to secure an appropriately skilled, well-trained and committed workforce. We have expected staff to work, for approaching a decade, under a system of unrealistic pay restraint; and we are overdependent on EU-trained staff for whom, since the Brexit result, the Government have shown little appreciation.

The NHS performs poorly on many acute area indicators compared with similar European countries in terms of survival rates from stroke, heart attacks and cancer. We are on a trajectory of worsening service access and increased rationing of that access. There are wide variations in provider performance; and the NHS is often a slow adopter of innovative technologies that could save money and improve patient care. Significant health inequalities persist, and we have failed to protect public health and prevention budgets in the middle of an obesity epidemic that could easily overwhelm us—and we are still restricting those budgets.

The provision of publicly funded adult social care is now at a tipping point, which presents the biggest immediate threat and challenge to the NHS. The Government’s proposed funding increases to 2020 are at least £2 billion too little, and they come too late; service providers are leaving the publicly funded care market in big numbers; and quality is falling, often to unsafe levels. A longer-term solution looks as far away as ever after the election fiasco on social care, and the Government will not even commit to a Dilnot cap on personal liability for social care costs, despite having the powers to do so.

The British public still strongly support a tax-funded NHS, free at the point of clinical need, and the Select Committee could find little international evidence to change fundamentally this funding system. But the public are losing heart and now 55% of them expect the NHS to deteriorate. Both these services—health and social care—need a much more consistent funding system, agreed on a more long-term basis, with a stronger real-terms link to GDP growth, which in turn requires an economy that is growing.

There is strong evidence that the way in which we deliver health and care services has to change radically and rapidly if the NHS and publicly funded adult social care are to be sustainable. We have to integrate fully health and care, with much more care delivered in primary and community care settings, and with a greater focus on public health and prevention, especially with our obesity epidemic. All this requires investment and the Government paying attention quickly to the kind of changes set out in the Select Committee’s report, with 32 significant recommendations for the changes required. Crucial to that service transformation are service transformation plans, which are now at various stages of development and implementation around the country. Many are controversial with local communities in terms of closure of hospital beds and services. They often need a supportive and robust Government to amend the failed Health and Social Care Act 2012, which all too easily hampers local reforms. A weakened Government now lack the authority and capacity to do this, as the Queen’s Speech made clear.

I am not going to discuss the Select Committee’s recommendations now. They are matters for debate another day, when the Government finally get around to responding to our report. What I am trying to do today is demonstrate that our health and care system is not in a good place. It requires a lot of political investment of time and money, preferably on a cross-party basis. It also requires a buoyant economy over the next few years to provide the investment that these critical and publicly supported services need. Yet the Office for Budget Responsibility last year projected a £15.2 billion hit to the public finances by 2020-21 after the UK leaves the EU, which would mean a loss of about £2.4 billion a year to the NHS—and even more if there is a more severe economic downturn than the OBR thought.

The harsh Brexit reality is that we face an exit from the single market, with poor transitional arrangements, the loss of trade with our near neighbours, fewer tax-producing financial services jobs, higher inflation and a shrinking economy. We have a dysfunctional Government with no credible plan for leaving the EU without serious damage to our economy over the coming years and not even any agreement on a sensible transitional arrangement. This Government continue to delude themselves about the willingness of the EU to compromise on its fundamental, treaty-prescribed principles.

I do not usually quote trade union leaders, but the head of the Transport Salaried Staffs’ Association seemed to me to sum things up rather well when he said:

“If Brexit goes ahead, future historians will look back and see a carpet-bombing of the British economy and the freedoms enjoyed by people living here”.


This set of circumstances does not bode well for our already fragile health and care system, and the prospects could become worse as a result of other things the Government seem willing to sacrifice in their rush to the EU exit. We have already virtually lost the EU pharmaceutical regulator—the EMA—from London, with the loss of high-quality jobs and the adverse impact on our life sciences sector that this brings.

The Government’s obsession with escaping from the European Court of Justice’s jurisdiction has led to the bizarre and ill-considered decision to quit Euratom, with no credible alternative civil nuclear regulator in prospect and—by the Government’s own admission, it would appear—without any proper assessment of the impact of quitting Euratom. Leaving Euratom now poses another threat to the NHS and its patients, as the Royal College of Radiologists has pointed out. Thousands of NHS cancer patients rely for diagnosis and treatment each year on radioactive isotopes imported from EU countries. The safety regulator for this activity is Euratom, governed by an EU treaty. The best interests of the UK and its citizens would be served by us remaining a member of Euratom, but the ideologues in No. 10 seem to have decided otherwise—despite the European Court of Justice never having made a ruling on Euratom.

On top of this, the health and care system depends on about 150,000 doctors, nurses and other care staff from the EU, because of our failure to train and retain enough home-grown staff. About 7% of our doctors are EEA-trained, and 40% of social care staff in London are from the EU. But the biggest problem may well be a shortage of nurses, because we import about 10,000 nurses a year from the EEA. Already the number of EU nationals registering as nurses in England has dropped by over 90% since the referendum. All this is becoming a serious problem. Because of the Government’s failure to move quickly to reassure EU nationals of their right to remain here after Brexit, many of these EU nationals no longer trust the Government’s belated assurances—in part because EU political leaders do not trust them, either.

In conclusion, this is a hell of a mess. A fragile health and care system badly needing reform and new investment from a growing economy is now facing economic retrenchment, political uncertainty, loss of a key staffing source and collateral damage from ideological obsessions with the ECJ. This is today’s reality, in contrast with the leave campaign’s lies on its red bus about Brexit providing £350 million a week more for the NHS. In the coming months, more people will realise where the Government’s approach to Brexit is taking this country economically and its implications for public services. Then we will see how committed they really are to Brexit. I ask the Minister: what plans do the Government have to protect our fragile health and care system over the next two or three years of great political uncertainty?

Adult Social Care Services

Lord Warner Excerpts

Thursday 6th July 2017 Lords Chamber

[Lord O'Shaughnessy]

I reiterate the point I made to the noble Baroness, Lady Wheeler. I completely agree that safety is paramount: it is the beginning of any good care setting. As I said, the new regime highlights issues of safety where they exist so that operators and commissioners, whether that is local authorities or whoever, can demand turnaround in those services. As I said, the response to that has been demonstrated.

I mentioned that more staff are, of course, getting the national living wage, which will continue to attract people to the sector. The noble Baroness is quite right about skills, which is why we have the skills for care programme.

It is also worth pointing out that one thing the CQC report did show, as indeed you would hope it would, is that 79% of settings provided either good or outstanding care. There is no doubting the motivations of the people who work in this sector, and we all pay tribute to them. It is about making sure that there are enough of them and that they are properly skilled. That is precisely why we have put additional money into social funding, to enable real-term increases over the next three years to address the fact that we have an ageing and growing population.

[Lord Warner (CB)]

My Lords, I declare my interest as a member of the Dilnot commission. I am sure we all welcome the idea of a longer-term set of proposals for consideration later. However, does the Minister not realise that the money the Government have said they are putting in over the next three years, including the current year, merely puts back a lot of the money that was taken out before, and certainly does not meet the proposal for immediate funding made by your Lordships’ Select Committee on the sustainability of the NHS and by the King’s Fund? This year, the Government are about £1.5 billion to £2 billion short to meet the needs. Does the Minister understand that this is not just about quality but about quantity? People working in publically funded care are leaving in droves. Is this on the Department of Health’s risk register? What are the Government going to do if the tipping point is reached on providers not providing publically funded social care?

[Lord O'Shaughnessy]

First, I congratulate the noble Lord on the work he did on the Dilnot commission in setting out the challenges we face and the kinds of solutions that we need to put the sector on a long-term footing. I merely reiterate the point that extra funding is going in, at a time when we are still addressing the £150 billion deficit that the Government inherited in 2010. That is enabling real-terms increases. Of course we need to keep going with that, because there are more older people and their care is increasingly complex.

I want to come back to the changes we are making on delayed transfers of care. Making sure that the interface between the NHS and social care is as quick, smooth and suitable for patients as possible is critical. That is why there is renewed emphasis to make sure that the money going in is addressing one of the major problems that is preventing the quality of care that we want.

Queen’s Speech

Lord Warner Excerpts

Thursday 29th June 2017 Lords Chamber

[Lord Warner (CB)]

My Lords, the gracious Speech raises more questions than it answers as far as the NHS and social care are concerned. These questions relate to funding and workforce issues but also to the modernisation of professional regulation and mental health services. I will focus on these issues.

First, on funding, £124 billion a year is spent on health services in England. By the end of this Parliament, the Government have promised to spend another £8 billion. On the Minister’s own figures, this is a real-terms increase of less than 1% per year for five years. This proposed increase makes it impossible to lift the 1% pay cap, given that two-thirds of the NHS budget goes on pay. The Labour Party did rather better: it promised another £11 billion. On present forecasts, it would cost another £13 billion for the NHS to keep up with GDP growth. This was the recommendation of the House of Lords Select Committee’s April report on NHS sustainability, to which the Government have yet to respond. None of these figures, however, matches the OBR forecasts or realistic estimates of the increases in NHS costs and demand. Can the Minister tell us whether the Government will reconsider their position on the £8 billion, in the light of the evidence of its inadequacy from your Lordships’ Select Committee and elsewhere?

Secondly, there is the crucial area of social care, which a number of people have mentioned and which was handled with such crassness by No. 10 during the election. Even after the council tax precept increases and the extra £2 billion for social care over the next three years that the Government have already announced, there will still be a shortfall of at least £2 billion by the end of 2019-20. Publicly funded care providers—residential and domiciliary—are now leaving at scale, as the recent ADASS survey shows.

More than a million older people now have unmet social care needs, which means that the hard-pressed NHS will find its acute hospitals even more full of older patients who should not be there and do not want to be there. We will all be interested to see the Government’s promised consultation paper on the future funding of social care—let us hope it is a bit more convincing than their manifesto. But social care needs more money now—this financial year in fact—to halt the attrition of publicly funded social care providers.

If the Government can produce in a fortnight or so an extra £1 billion for Northern Ireland, which has less than half the population of Greater Manchester, they should be able to do no less for the elderly and disabled people across England. Can the Minister say whether the Government will try to find for the next three years, starting now, at least £2 billion for English adult social care over and above the money already promised? Will they keep on increasing the adult social care budget at least in line with the growth of the NHS, which is another recommendation from this House’s Select Committee?

Thirdly, there are the serious workforce issues caused by Brexit mishandling. There are some 60,000 EU nationals working in the NHS, many of them doctors and nurses, as well as 90,000 working in social care, a high proportion of them in the London area. Registrations of nurses from the EU are falling significantly, and many doctors qualified in EEA countries—who amount to about 7% of the NHS’s medical workforce—are seriously considering leaving the UK. This flight of valued professionals is entirely of the Government’s own making, through their failure to produce any credible reassurances to EU citizens living and working here. The new White Paper looks unlikely to do that, and when the proposed immigration Bill comes to this House, we may have to help the Government do a proper job in this area. In the meantime, can the Minister tell us what bespoke measures the Government will take to give greater reassurance to staff from the EU currently working in the health and care sectors?

Fourthly, there is considerable need for clarification on the gaps between the Government’s manifesto and the gracious Speech on regulatory matters. Legislation to reform outdated laws on mental health, now 34 years old, was promised in the manifesto, but is not in the Queen’s Speech. When are we going to see that legislation, at the very least in draft form? Again, the manifesto promised to,

“reform and rationalise the current outdated system of professional regulation of healthcare professions, based on the advice of professional regulators”.

Legislation is badly needed, by both the GMC and many other regulators. Can the Minister say when we will see the legislation to reform this antiquated system— which is, again, 34 years old, and again as recommended by this House’s Select Committee?

Finally, I draw the attention of the Minister and his senior colleagues to the latest British Social Attitudes survey, published yesterday. This shows that an increasing majority of people in this country support higher taxes for better public services, especially education and health. I remind the Minister that it was penny-pinching on the NHS in the 1990s that contributed to the Conservatives’ landslide loss in 1997, helped of course by a Labour leader who knew how to actually win elections—three on the trot, as I recall.

Health Service Medical Supplies (Costs) Bill

Lord Warner Excerpts

Ping Pong (Hansard): House of Lords
Wednesday 26th April 2017 Lords Chamber

[The Parliamentary Under-Secretary of State, Department of Health (Lord O'Shaughnessy) (Con)]

My Lords, I beg to move Motion A. In doing so, I apologise to the House for the late change to the running order. Noble Lords who were expecting—or indeed hoping—that my noble friend Lord Nash would be taking the Bill through will have to make do with me.

We are here again to consider whether and how the Government can take into account the impact that exercising the powers in the Bill will have on the life sciences industry and on access to new medicines for patients who may benefit from them.

When we last debated these issues, I set out clearly the Government’s reasons for disagreeing with Amendment 3B. As I explained at the time, it would undermine one of the core purposes of the Bill by undermining the Government’s ability to put effective cost controls in place. This could encourage companies to bring legal challenges where cost controls have not in themselves promoted growth in the life sciences industry, seriously hindering the Government’s ability to exercise their powers effectively to control costs. This would have a detrimental effect if the Government were to take action to control the price of an unbranded generic medicine where it is clear that the company is exploiting the NHS, because the Government might be challenged on the basis that the action does not promote the life sciences sector. Nevertheless, as I am sure that all noble Lords agree, in such an instance it would of course be the right thing to do for the NHS, for patients and for taxpayers. The powers in the Bill that enable such action have received universal support in both Houses throughout the Bill’s passage.

Through our previous debates on this issue, we clarified that there was no intention to undermine the core purposes of the Bill; rather, the intention is to ensure that a mechanism is laid out in the Bill to ensure that the Government pause to reflect on the impact of any proposed statutory price control scheme on the life sciences industry, and on access to cost-effective medicines. With this clarity, the Government have now put forward their own amendment in lieu which will achieve just that, without undermining the Bill’s core purpose.

Consultation requirements are already set out in Section 263 of the NHS Act, prior to the implementation of any statutory price control scheme for medicines. Our amendment, which received support from all parties in the other place, would mean that the Bill would amend the NHS Act to include particular additional factors that must be consulted on. These are: first, the economic consequences for the life sciences industry in the United Kingdom; secondly, the consequences for the economy of the United Kingdom; and, thirdly, the consequences for patients to whom any health service medicines are to be supplied and for other health service patients.

The requirements are framed in this way in order not only to consider the economic consequences for the life sciences industry and for patients who may benefit from new medicines but to balance these factors against wider considerations. I am sure that we can all agree that, although a thriving life sciences industry and access to new medicines are highly desirable, it must not come at any cost and it is the Government’s responsibility to achieve the right balance and to be held to account for it. As with all consultations, the Government must give all responses due consideration before finalising policy. Setting these requirements out in the Bill does not limit the scope of any consultation on a statutory pricing scheme, offering both the Government and consultees the opportunity to give all relevant issues proper consideration.

The amendment is specific to Section 263 of the NHS Act—that is to say, the powers to put a statutory scheme in place for medicines. Where action is being taken against a specific instance of high prices, it would not be appropriate for it to be subject to such a wide-ranging consultation. In such cases, the NHS Act requires consultation with the appropriate industry body or bodies prior to the exercise of the powers.

With this amendment, the Government have therefore addressed the real intent behind Peers’ concerns, giving assurance of proper, balanced consideration of the effects of any statutory pricing scheme on the life sciences industry and patient access to medicine without undermining the Government’s ability to operate such a scheme. I hope that it will meet with the approval of the House.

Before closing, I thank the many noble Lords who have contributed not only to the development of the amendment but to the Bill as a whole. I thank the noble Lords, Lord Warner and Lord Hunt, and the noble Baroness, Lady Walmsley, as well as my noble friend Lord Lansley and the noble Baroness, Lady Finlay, for their contributions to improving the Bill. Finally, I also thank other noble Lords who have made important contributions to the debate, including the noble Lord, Lord Patel, and the noble Baronesses, Lady Masham and Lady Wheeler. I believe that we have worked in a constructive and open spirit and, as a result, the Bill is better and stronger than when we found it. I beg to move.

[Lord Warner (CB)]

My Lords, I am grateful to the Minister for the further thought that he has given to the amendment that your Lordships passed at an earlier stage. I am also grateful to him for his courtesy in showing me the amendments before he went forward with them; I very much appreciate that. I accept the Government’s arguments for the new approach that they have provided on the set of concerns that we had across the House about the adequacy of the provisions in the Bill on the life sciences industry and on speedy access to NICE-approved drugs. I accept their arguments that the original amendment was to some extent too restrictive on their freedom of manoeuvre when they need to act on unreasonable high prices. The Government have skilfully met the concerns of your Lordships’ House and I am very pleased to be able to support the amendment.

While I am on my feet, I will also thank the Minister for the courteous way in which he has listened to concerns throughout this Bill and taken the issues away, considered them with his officials and come back and tried to respond to many of the concerns. Across the Benches of this House, we are grateful for the way in which he has conducted the discussions during the passage of the Bill.

[Lord Lansley (Con)]

My Lords, I am glad that my noble friend is on the Front Bench to see this Bill safely through. I share with colleagues an appreciation of how he and officials from the department have worked consensually, carefully and considerately to try to make the Bill as good as we can make it. I welcome the amendments in lieu; they point to a sensible way forward in relation to the consultation on the statutory scheme. I would ask that my noble friend is equally clear that, in the negotiations leading to any voluntary scheme, Ministers will have regard not only to their statutory duties, as we have discussed, but to these considerations reflected in this amendment. One purpose of the Bill is to make a voluntary and a statutory scheme entirely consonant, one with the other.

The only other point that I would make is that, of course, when one passes legislation it is about not just the law but the administration that follows and accompanies it. In that context, it is important that Ministers take these powers, but it is equally important that in the administration of those powers, not least in working with NHS England and NICE, they work in the same constructive fashion to see that the impact on the life sciences industry and the accessibility of the best available treatments for patients, at a price representing value for money, are integral to the purposes of the legislation. I hope that they will equally be part of the further action that the Government take with NHS England and NICE to ensure that, however they manage the budgetary impacts as they must, they do so in a way that has the interests of patients and the country at heart.

Health Service Medical Supplies (Costs) Bill

Lord Warner Excerpts

Wednesday 5th April 2017 Lords Chamber

Moved by

[Lord Warner]

At end insert “and do propose the following amendment in lieu—

3B: Insert the following new Clause—
“Duty to take account of 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 take account of 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.””

[Lord Warner (CB)]

My Lords, the amendment removes the requirement on the Government in the original amendment passed by this House to have “full regard” to the considerations relating to life sciences and access to NICE-approved medicines and treatments. Instead, it requires the Government to “take account of” those considerations in discharging its responsibilities under the Act. This responds to the Government’s concerns that the original wording was too inflexible to respond to all the situations with which they might be confronted in controlling the price of medicines and medical supplies. I suggest that the revised wording gives them the flexibility they seek while retaining some requirement to pause to consider the impact and implications of a price cut to NHS-purchased medicines and medical supplies on the UK’s important life sciences sector and on patient access to NICE-approved medicines.

We passed the original amendment and placed it at the front of the Bill because of our central concern that the legislation seemed overpreoccupied with driving down the price of drugs and medical supplies to the NHS and was in serious danger of losing sight of the importance of the life sciences sector to UK plc, despite the Minister’s protestations—and, together with that, the related issue of ensuring that patients have speedy access to the most cost-effective therapies.

Delaying patients’ and NHS access to new proven therapies will only drive life sciences away from the UK at a time when pharmaceutical investment here is already on a downward trajectory, and at the very time when we need this investment to be increasing under the Government’s own industrial strategy post Brexit, as the Minister has rightly said. But the money is going down from big pharma investing in this country and the Bill has not helped reverse that trend. Delaying patients’ and NHS access to new proven therapies will only make things worse.

The danger of this Bill passing without a pausing mechanism of the kind I am suggesting is that the Act will become yet another example of the short-termism that is criticised in this House’s Select Committee report on NHS sustainability, published today. I recommend that noble Lords read that report about the short-term focus of much of the action taking place in the NHS today. I declare an interest as a member of that Committee.

The Bill has made the ABPI and the pharmaceutical industry worried that it signals the end of the voluntary PPRS system for settling the price of research-based medicines in this country. Only this week the ABHI published a report on a strategy for a thriving med-tech industry outside the EU, calling for the NICE technology appraisal programme to be expanded to assist NHS take-up of new technology. Little did it know that it was this very week, as the Minister recognised, that the Government, through the agency of NHS England, had introduced a new “budget impact test” for NICE-assessed products. That is yet another hurdle to be jumped by British science and research and before NHS patients can benefit.

I have been probing this new system which in plain English is a new affordability test grafted on to the NICE appraisal process following discussions between NHS England and NICE, under, I suggest, a good deal of pressure from the Department of Health. I tabled a Question on this on 14 March, to which the Minister answered on 28 March. I still have concerns about that Answer, which I am pursuing through further Questions. But I want briefly to share those concerns with the House because they are relevant to why we should send the Bill back to the Commons with a new amendment.

First, there is the very real issue of how big a part NICE-approved medicines actually played in the 20% rise in the drugs bill between 2010-11 and 2015-16 that the Government are so concerned about. Were these appraisals the villains or were there other explanations for that increase in the drugs bill? We do not know. Nor do we know whether the costs of these appraisals were actually offset by savings derived from the new treatments. The danger is that an unexplained rise in the NHS drugs bill can cause a panic reaction in the department, which will then use this new legislation to curb access to new drugs.

My second concern is over the actual legality of this new system and the damage being done by it to NICE’s reputation for independence. As I understand the 2013 regulations governing NICE functions, they impose a three-month period for NHS implementation of NICE-approved technology appraisals. It is only NICE that can extend the period of implementation, not the Secretary of State and not NHS England. So we are going to see a system being developed under which NICE is regularly put under pressure by the Department of Health or NHS England to extend the three-month implementation period.

I welcome any light that the Minister can throw on these concerns, but it is not just me or this House that he needs to satisfy—or even industry. He also has to convince patient interest groups such as Breast Cancer Now, Prostate Cancer UK and Diabetes UK, which are all very concerned about the budget impact test and what it means for patients’ speedy access to new proven therapies and their rights under the NHS constitution. I am not convinced that what the Minister has said this afternoon will convince them that they should not be suspicious of these changes.

The more events unfold, the more this looks like a piece of legislation originally designed legitimately to tackle a major NHS rip-off from a generic scam which was then rapidly expanded in scope to give the Government more powers to drive down NHS prices for medicines and medical supplies. From our earlier consideration at different stages of the Bill, I suggest that there has been a lack of proper consultation with many interested parties, and the measure provides powers whose exercise could well have some highly undesirable outcomes. The budget impact test could well illustrate what we might expect without some counter-influence; my Amendment A1 strives to do that but without over-restricting the Government’s legitimate freedom of action when there are outrageous increases in drug prices to the NHS. I beg to move.

[Baroness Walmsley (LD)]

My Lords, I support the noble Lord, Lord Warner, in his amendment. I thank the Minister for how he has worked with your Lordships’ House on all sides to improve this Bill; it is unfortunate that we remain with one point of disagreement. We certainly support the policy objective of the Bill in general and very much welcome the list of actions in the Minister’s introduction to promote research and drug development in this country. But in listening to his outline of his particular responsibilities, it occurred to me that no policy area is ever an island; they always impact on other things. The Minister’s responsibility to achieve best value for the NHS actually impacts on other responsibilities that he and his department have—in particular, in relation to this amendment, on the thriving life sciences sector, on which we all depend, and the access of patients to cutting-edge medicines.

Both those things are suffering from particular threats at the moment. One is Brexit, which I shall not go into now; we have discussed it on many occasions. The other is the recent £20 million affordability test that the Government are introducing. Although £20 million sounds like a very large amount of money, if it is applied to medicines where the population of those needing the medicines is very large, such as some of those mentioned by the noble Lord, Lord Warner—diabetes, breast cancer and other things—the individual cost to an individual patient does not need to be very high to be caught up by the affordability test. The Minister used the word “only”; he said that it would affect only one in five of medicines, but I think that that is an awful lot of medicines, and we should be very concerned about it. That is why we feel that it is important to press the Minister on this issue.

I congratulate the noble Lord, Lord Warner, on offering the Government a compromise, which I hope would avoid what the Minister is clearly worried about: being taken to judicial review by a pharmaceutical company about efforts to push down the price of a medicine. I draw the Minister’s attention to the word “sector” in paragraph (a) of the proposed new clause, which asks the Government to take account of the need to,

“promote and support a growing life sciences sector”.

The word “sector” makes it unlikely that any pharmaceutical company trying to take the Government to judicial review would succeed if the Government had, in all other respects, promoted a thriving life sciences sector in this country. It is highly unlikely that they would do so.

I therefore hope that the Minister will think again and not resist this amendment. It is essential, given the current threats to patients in this country—and very large populations of patients too, in particular those coming towards the end of life—to pharmaceuticals, to treatments and access to medicines. I therefore hope that the Minister will reconsider, and, if the noble Lord, Lord Warner, wishes to test the opinion of the House, he will have the support of these Benches.

[Lord Lansley (Con)]

My Lords, I intervene in this instance not to agree with but, I am afraid, to disagree with the amendment in the name of the noble Lord, Lord Warner. However, I will also make some important points that are relevant to the issues raised in this Motion and the amendment.

I am against the amendment to the Motion because I entirely agree with my noble friend the Minister that Lords Amendment 3, which the Commons disagreed to, was flawed in the sense that—in relation to the specific responsibilities under the Act for the PPRS and pricing medicines and supplies—it would have put into legislation a set of statutory requirements to have regard to, or indeed to take account of, that are partial and disjointed. Over many decades we have argued that the Secretary of State’s responsibility under the PPRS is not to create an industrial strategy. If we had said that that was the objective, it would have been regarded as a state aid, and it was never regarded as such.

It is not the job of the Secretary of State, through the PPRS, to deliver a successful industry. There are many ways—my noble friend illustrated them better than I could have—in which the Government can discharge that wider responsibility, and should do so. That responsibility is to secure the best value for the NHS in purchasing medicines and supplies. We should all be in favour of that and not wish to see it abridged.

[Lord Warner]

Perhaps I may just ask the Minister to explain how, under the PPRS, incentives are often given through R&D tax allowances. Does he not consider that state aid?

[Lord Lansley]

I am perfectly happy if the Minister wants to reply but, from my point of view, I do not regard the PPRS as state aid. If R&D tax credits are available, they should be made available. When the Office of Fair Trading reviewed the PPRS back in 2008-09, I think, it concluded that it was neither a state aid nor a spur to innovation but was actually all about managing the drugs budget. That is what this legislation is all about: managing the drugs budget.

It is, however, important to recognise that the statutory duties in Lords Amendment 3 do not include the one which the Secretary of State should have specific regard to: affordability. It is deficient in not providing for that. Noble Lords will recall that, at an earlier stage, I tabled an amendment the purpose of which was to insert a more complete set of statutory duties for the Secretary of State to have regard to. Affordability must form part of that, but it is not present in this amendment. I am therefore against the amendment.

In the course of this legislation we have discussed other important issues which are still coming to a head. It is absolutely right, as my noble friend said, that the Government are setting out to promote innovation and the life sciences sector, and there are many ways of doing that. The Conservative Party manifesto of 2015 stated:

“We will increase the use of cost-effective new medicines and technologies”.


It also stated:

“We will speed up your access to new medicines”.


It is important that we do that as it is in the interests of patients, our life sciences industry and ourselves as a world leader in science in this area. However, we have on the stocks the accelerated access review—which, ironically, took too long to be produced, was delayed in its publication and has not yet been replied to. We also have a life sciences strategy. The many positives in that run the risk of being negated by the way in which NHS England and NICE have gone about the consultation.

As I said at an earlier stage, it is possible to see how NICE and NHS England can work together in ways that would give industry greater confidence as it would mean that it could get early engagement with NHS England about the managed entry of new medicines into the NHS, including, as my noble friend said, on issues of importance to industry, such as the volume of purchasing of new medicines in the early stages of access. However, the budget impact test, at £20 million, is probably not one-fifth of all new medicines; it is one-fifth of all new medicines regarded as cost effective by NICE. Therefore, this is not a case of any old medicine that might be very expensive; it just happens to be medicines which are cost effective but have relatively high volumes, which is exactly the point to which the noble Baroness, Lady Walmsley, referred.

However, the issue for NHS England should not be the cost of introducing new medicines that are cost effective and in the voluntary PPRS, as the purpose of the pharmaceutical price regulation scheme, as currently designed, is—through the clawback—to give government assurance about the overall increase in the drugs budget. As a consequence, that money is made available as part of the overall funding provided to NHS England. Therefore, NHS England should in theory have in its budget the money that is necessary to meet the drugs bill, including new medicines as they come on stream, because there is clawback for that.

We have this Bill in front of us partly, but not entirely, because the drugs budget was rising much faster than anticipated, and much of that growth was outside the voluntary PPRS. This Bill plugs that gap and sorts that out. However, in doing so—and here we are at the beginning of April—once this Bill is on the stocks and secures Royal Assent and the Secretary of State is able to align the statutory PPRS with the voluntary PPRS, there is no reason why NICE and NHS England should continue to apply an overall budgetary impact test. I say to my noble friend that I think the Government should step in at that point and say, “Where this product has come through a PPRS where a clawback is applied and we have a budgetary mechanism in place—redress—for any extra cost to the drugs bill in the course of this PPRS through to the end of 2018, NHS England should not interpose any extra delay, or seek any extra delay, through NICE in introducing that medicine to the NHS”. I am afraid that if it continues to do so in the way that it is at the moment, that will have a severe negative impact on the view held by the boards of major corporations in relation to the take-up of new medicines by the NHS.

I am sorry to say to the noble Lord, Lord Warner, and other noble Lords that the remedy is not contained in this amendment. The remedy is in the Government’s hands if they choose to make that point very clearly to NHS England in relation to what this legislation enables us to achieve in controlling the drugs budget.

--- Later in debate ---

[Lord O'Shaughnessy]

My Lords, I am grateful to all noble Lords for the points they have made in the discussion we have just had. I will try to deal with as many of them as I can in my response.

I am afraid that we do not agree with the first point of the noble Lord, Lord Warner, about the change of wording to make it more flexible. Such wording as exists in the current amendment would increase the risk of judicial review. As my noble friend Lord Lansley pointed out, it would impair our ability to crack down on those companies that are abusing the NHS by raising prices in a completely unwarranted way. I cannot believe that this is what noble Lords want.

The noble Lord, Lord Warner, referred to the Bill providing a pausing mechanism. It is important to point out and remind noble Lords that the Bill requires a consultation before the beginning of any new statutory scheme. One of the key amendments that we made—indeed, I accepted proposals from others in Committee and on Report—was to introduce an affirmative resolution on extending price controls into the devices realm. So those consultations and pauses already exist—and they do so in a way that is appropriate to the core purpose of this Bill, which is to control costs.

The noble Baroness, Lady Walmsley, referred to the balance that is being struck. She is quite right that there is a balance to be struck, but that does not mean that the balance needs to be struck in each and every item of government policy. As my noble friend Lord Lansley pointed out, this Bill is not the right vehicle to achieve support for the life sciences and industry and to improve patient access. These aims are achieved through other routes, as I have outlined, and the Government are doing a huge amount of work on them.

I wholeheartedly agree with all noble Lords on the importance of the life sciences sector and of improving patient access. The noble Lord, Lord Hunt, was right to point out that, post Brexit, it will be more important than ever. The noble Baroness, Lady Masham, said that this is not just a macroeconomic point; it is about the lives of humans, often in great suffering, who need to have access to medicines. I thank her for bringing that out. It is precisely why the Government are developing an ambitious strategy and a sector deal; and it is precisely why I have been keen to ensure that the NHS is seen as a partner and beneficiary of that deal. Rather than this being seen as something that is done to it, it has to be a counterparty, as it were. I disagree with the noble Lord, Lord Hunt, because we are seeing improvements in uptake for the reasons that I have outlined.

In the course of dealing with the Bill, while I have had complaints from the life sciences sector about certain things that we have done—I will touch on those in a moment—it is fair to say that I have not received any complaints from the industry that this Bill will affect it negatively. It understands that the Bill is about providing equality between the statutory and voluntary schemes, cracking down on those who seek to abuse the system and making sure that there is proper information to inform the price control schemes that we have.

Looking further ahead, from 2019 onwards we will need to look at the medicine and pricing regulation system in the round—and we will be doing so from a position of being outside the European Union. It is therefore absolutely essential that we have a world-leading price and regulatory environment. I am looking at all aspects of that now and talking to industry and others. As my noble friend Lord Lansley pointed out, it is only right to consider the changes introduced by NICE and NHS England as we look to a comprehensive solution from 2019 onwards.

While we are talking about the outcome of that consultation, I should point out that it was provided in response to the Public Accounts Committee and that there is no threat to the independence of those organisations. I completely agree with the noble Baroness, Lady Finlay, in applauding the reputation that NICE has around the world and the fact that the life sciences industry values getting NICE technology approvals.

The changes being made are consistent with the NHS constitution. I explained in my opening statement how this will work and I have addressed the misconceptions. This is not about delay or reducing uptake, it is about costs, and indeed the changes bring about a variety of positive and welcome benefits to commercial agreements and to a fast-track appraisal process.

The noble Baroness, Lady Finlay, asked what proportion of the growth in the drugs bill has been driven by branded drugs. She will know that that is quite difficult to define because of the issue of what are known as parallel imports. These are branded drugs that are outside the schemes which come in, but of course they make a contribution to the bill. As a country we are one of the best, if not the best, in the OECD in terms of the use of generic drugs, which of course is one way of holding down the bill and creating headroom for innovative drugs. There is a good story to be told about that.

The noble Baroness also mentioned orphan drugs and she is quite right to highlight them. There is the highly specialised technology route. I should also point out that there are routes and specialised commissioning within NHS England, including the commissioning through evaluation programme. These routes have been invented by NHS England to facilitate access to drugs, not to delay it.

To conclude, I want to return to the amendment itself. I should stress to noble Lords that this is not a cost-free amendment and it is not simply a declaratory piece of legislation. It would increase costs to the NHS for drugs for no benefit. No more drugs would be bought and no more people would take them up. Indeed, it would take money away from other care settings. The Government cannot agree with an amendment that would put the NHS at such a disadvantage. I do not believe that it would be in the interests of either patients or the health service. The House of Commons was right to reject the first version of the amendment and this version does not substantively change the intent. I hope and trust that noble Lords will take the same approach in rejecting it, but before that I would like to ask the noble Lord, Lord Warner, on the basis of the arguments that I have made in response to his key points, to withdraw it.

[Lord Warner]

My Lords, this has been an interesting debate and I thank noble Lords for their contributions. I do not interpret this amendment in the same way as the Minister and I am slightly surprised that he thinks there is a happy mood in the industry about all this because that certainly does not square with my contacts. I would also like to draw his attention to a comment made during a pink ribbon conference recently by the oncologist who heads chemotherapy commissioning for NHS England. He was talking about the budget impact test: “That is why we expect the £20 million figure to hit cancer drugs much more than other drugs”. I think that that is quite an interesting revelation which suggests that some of those who are closer to this than perhaps the Minister and me take a different view about how the budget impact test actually works in practice.

The Minister would have had plenty of time, if he had accepted the principle behind the amendment, to negotiate with us a form of wording that would deliver its intent. He has spent his time trying to get us to take it out of the Bill. He has more access to draftspeople than I do. If he had accepted the principle, we could have come up with wording that is more to his taste. Neither he nor his officials have co-operated with that kind of approach. I believe that this amendment as it stands would be of benefit to patients, to UK plc and to the industry. I wish to test the opinion of the House.

Adult Social Care: Funding

Lord Warner Excerpts

Thursday 16th March 2017 Lords Chamber

Asked by

[Lord Warner]

To ask Her Majesty’s Government when they expect to produce their proposals for a longer-term solution to the funding of adult social care.

[The Parliamentary Under-Secretary of State, Department of Health (Lord O'Shaughnessy) (Con)]

My Lords, in order to meet the demographic challenges facing this country, the Government are committed to establishing a fairer and more sustainable system for funding adult social care. We will bring forward proposals in a Green Paper later this year.

[Lord Warner (CB)]

I thank the Minister for that Answer, but can he confirm that the review which is ongoing will examine the lessons from Japan and Germany, where populations and politicians have recognised that, as we live longer, we have to prepare earlier for funding our long-term care? Can he also assure the House that, in securing a new funding system for social care, regard will be paid to the impact of that on the long-term sustainability of the NHS?

[Lord O'Shaughnessy]

The noble Lord has done much work on the sustainability of social care, including his work on the Dilnot commission. He is quite right to point out that there are lessons to be learned from other countries, and certainly we will be learning them from Japan, Germany and elsewhere. He will know that the measures announced in the Budget are specifically designed not only to help adult social care but also to help the interface between the NHS and social care to provide exactly the kind of sustainability he is talking about.

Health Service Medical Supplies (Costs) Bill

Lord Warner Excerpts

3rd reading (Minutes of Proceedings): House of Lords
Thursday 23rd February 2017 Lords Chamber

[Baroness Walmsley (LD)]

My Lords, we on these Benches are also happy to support the amendments. Like the noble Lord, Lord Lansley, I have no intention of detaining the House with long-winded thanks. However, I want to voice my recognition that the Minister, in his new role, has both understood and responded to the issues raised on the Opposition and Cross Benches about the shortcomings of the Bill, which had been through the House of Commons without anybody noticing or trying to amend its unintended consequences, rather like the Article 50 Bill that we debated in this House on Monday and Tuesday.

[Lord Warner (CB)]

My Lords, I thank the Minister for listening so intently during the proceedings and for his response. I am also grateful to those on the Front Benches opposite for their co-operative approach—they are a shining example to their colleagues in the Commons of how to be effective in persuading the Government to change their mind. I hope the Minister’s emollient approach will continue when the Bill leaves this place in relation to the new clause that we have put in at the front of the Bill, despite the advice he was given. I hope that good will will continue to operate as the Bill completes its passage through both Houses of Parliament.

[Lord Hunt of Kings Heath (Lab)]

My Lords, I too welcome the amendments. Clearly, the Opposition will support them. I must remind the House of my presidency of the Health Care Supply Association and GS1 UK.

First, I thank the Minister and his officials for their warm co-operation. The ability to have a number of meetings has been much appreciated. This has been a very good example of cross-House co-operation. Various noble Lords, including the noble Lord, Lord Warner, and the noble Baroness, Lady Walmsley, worked very hard together on the core issue of ensuring that NHS patients get access to effective new medicines. I say to the Minister that I hope Clause 3 will remain in the Bill when it comes back to your Lordships’ House, if indeed it needs to come back—I take the point of the noble Baroness, Lady Walmsley, that this House has done the job it is here to do: it has revised and scrutinised the legislation. I would have thought that the other place should simply accept the Bill as it is, and I hope the Minister will be able to confirm that when he responds. I also thank my noble friend Lady Wheeler for her tremendous support, and Dan Stevens, our health researcher.

It seems to me that the Minister has shown himself adept at handling health legislation in your Lordships’ House, and so we look forward to the next health Bill. If he is looking for suggestions, we are going to have the great repeal Bill and perhaps we can look forward also to the repeal of the Health and Social Care Act 2012. That would bring great joy to many.

Health Service Medical Supplies (Costs) Bill

Lord Warner Excerpts

Report stage (Hansard): House of Lords
Tuesday 7th February 2017 Lords Chamber

Moved by

[Lord Warner]

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.”

[Lord Warner (CB)]

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.

[Baroness Walmsley]

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.

--- Later in debate ---

[Lord Hunt of Kings Heath]

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.

[Lord Warner]

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.

--- Later in debate ---

[Lord O'Shaughnessy]

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.

[Lord Warner]

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?

[Lord O'Shaughnessy]

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.

--- Later in debate ---

[Lord Hunt of Kings Heath]

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.

[Lord Warner]

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?

[Lord O'Shaughnessy]

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.

--- Later in debate ---

[Lord Hunt of Kings Heath]

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.

[Lord Warner]

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.

Health Service Medical Supplies (Costs) Bill

Lord Warner Excerpts

Committee: 2nd sitting (Hansard): House of Lords
Wednesday 25th January 2017 Grand Committee

Moved by

[Lord Warner]

33: Clause 6, page 5, line 32, at end insert—
“( ) The Secretary of State may require information falling within subsection (4)(d) from a UK producer under circumstances where a specific health service product has significantly increased in price and where there are reasonable grounds to believe that the National Health Service is not receiving value for money.”

[Lord Warner (CB)]

My Lords, this amendment creates a trigger mechanism before the Secretary of State can require companies to submit to the new information requirements set out in this Bill. In effect, the Secretary of State has to be satisfied that a particular health service product has significantly increased in price and has reasonable grounds to believe that the NHS is not receiving value for money. In those circumstances, he can require the information falling within Clause 6(4)(d), on page 5 of the Bill.

It is possible of course, as the noble Lord, Lord Hunt, has mentioned to me, that I have been a shade too lenient with the Secretary of State and should have required this trigger to be applied to a wider range of products. I suspect that he may want to probe that area a little later on. However, I will explain the reasoning behind my amendment, which follows serious concerns expressed to me—strongly and convincingly—by the ABPI. From the concerns that were expressed, it is clear that the association supports the department’s intention to bring all information requirements under a statutory footing to ensure that the reimbursement system is run effectively. There is no dispute over that. However, it is very concerned, as has already been expressed in Committee, that the Bill will require information from all pharmaceutical companies, which is beyond what is required to fulfil this aim.

UK pharmaceutical companies already provide comprehensive information to the Government on profits they make at company level. The Bill would require companies to allocate profit figures to individual products. The sector believes that this approach is totally disproportionate compared to what is needed to fulfil the Government’s policy intention, for a number of reasons. First, the information requirements would extend to a company’s global business. Secondly, information on distribution costs of individual products is not currently recorded by pharmaceutical companies at product level. Thirdly, it would be extremely difficult for companies to share information at this level, with any information obtained likely to be estimated. Fourthly, such costs typically bear no relation to the cost of medicines to the NHS or reimbursement schemes. The Government have signally failed to convince the sector that what they are doing is both proportionate and necessary for their aims. I found the sector’s claims extremely convincing, which is why I have suggested a trigger mechanism of the kind set out in Amendment 33.

The Minister and the department have not got right the information provisions in the Bill and have signally failed to convince the industry that they have done so. Therefore, not only are the information provisions regulatory gold-plating, as has been suggested by the noble Lord, Lord Hunt, but they could be said to be rather ineffective and cheap gold-plating at that. The industry strongly supports a provision of this kind and I think it is perfectly prepared to sit round the table and discuss alternatives. Others may also want to apply this trigger to other parts of the Bill. I am certainly not a proud author, and if noble Lords want to try that, they can by all means go ahead.

I do not think that the Minister can get away with the argument that I suspect he may use, which is that the details of these arrangements can be sorted out in regulations and guidance. The truth is that the Bill gives the Secretary of State wide powers to require information, and it is the sweeping nature of those powers that I and others are challenging. It is also worth mentioning that one could regard the Government’s proposals as a recipe for gaming the system. If you make this stuff so complicated that it is very difficult to assure things, or you accidentally provide incentives to game the system, that is where you end up. I am not saying that on behalf of the ABPI, but I have been around in government a long time and have seen well-intended actions leading to very unexpected and unsatisfactory consequences. I am sure that most people will not do this, but if the Government choose to proceed with a disproportionate system of information collection, they should not be surprised if it happens.

The Minister mentioned in his response to the amendment in the name of the noble Lord, Lord Lansley, that the Government can give a range of assurances on how they will and will not use this information. I have to say to the Minister that we have been round this track on many pieces of legislation in this House. The warm words that one set of Ministers give about safeguards too easily get forgotten when they move on to other things and it suits a government department a little later in history to use the powers that are there. We have already seen with the Bill how the Government have found some inadvertent powers that no one can explain and which have been knocking around since 1977 with which to build an edifice in the Bill on information collection. Therefore it is not foolish to consider the possibility that the Minister’s assurances, which are not in the Bill, could still lead to abuse of this system later.

I still cannot see that the Government have made the case for this potentially massive increase in information requirements Bill that the Secretary of State can impose on the sector in the Bill. That is why we need to curb the Department of Health’s enthusiasm for this kind of collection of information, which could lead to fishing expeditions, no matter how the Minister tries to assure us in Committee. I beg to move.

[Baroness Finlay of Llandaff (CB)]

My Lords, I have some sympathy with the amendment of the noble Lord, Lord Warner. It strikes me that the information being asked for in the Bill requires a degree of detail that probably is not going to reflect reality. This is very often a global industry, so defining a “UK producer” will be quite difficult. If we make the information requirements too difficult, I see a risk of some of the larger companies deciding to produce more offshore rather than here.

The other difficulty with the pricing of any medical treatment that comes to market is that it has often had a very long lead time—over years. So the true cost of that particular item becomes almost impossible to disaggregate from all the other costs. Then, once it is produced and packaged, there are distribution costs, the mark-up at wholesale level and so on. I can see how a producer, in wanting to keep a cost high, could potentially move around its budgeting line to protect itself. But the problem is that if you do not have a trigger, you may get so much data that you cannot actually extract the true knowledge and the important information from them. I understand why you would want to have a lot of data to be able to move the cost and map it efficiently, but there is only any point in mapping it if it has accuracy attached to it.

I have a question for the Minister. In all these information requirements, how will a “UK producer” be defined, as distinct from an international producer from elsewhere? I may have missed it, but I could not find it defined in the Bill; I can see only products defined.

It will become almost impossible to know where the true cost is, but if a cost is going up, that becomes counterintuitive. Generally, for medication that is out there on the market, the cost should fall. Usually, production costs drop, because, for example, antibiotic production used to be incredibly expensive and is now very much cheaper because of efficiencies and the way that the science has moved forward. So you would expect, with bulk sales and technological advances, that the cost should come down. I therefore have a question for the noble Lord, Lord Warner, on the trigger mechanism. Is his price absolute—in pounds—or is it also considered relative to other products in that field that may be on the market? For example, we have seen some major discrepancies with ophthalmic products. Eye drops for glaucoma have been incredibly expensive compared to exactly the same substance that is being used in oncology and has been priced at a much lower rate. The question has to come up as to whether the price is being held and maintained inappropriately, rather than having gone up.

[Lord Warner]

In response to the noble Baroness’s point, I would not claim to have actually considered the detail of what level of pricing we will use. My point in this amendment is to try to establish the principle of a trigger mechanism, and I am happy to be advised on ways of improving it.

[Baroness Walmsley (LD)]

My Lords, the noble Lord, Lord Warner, is right that we need to have a trigger mechanism. This is gold-plating, and not very effective gold-plating. As the noble Baroness, Lady Finlay, just said, it will produce an absolute mass of information. The question is how to find, among that mass of information, situations where there is malpractice, abuse or unwarranted price rises. It is the same sort of argument as we had when the police wanted to collect everybody’s internet information. Really, it is like looking for a needle in a haystack. It is much better to have it targeted, where there is a reason to believe that there is something going on.

How will the department identify from this mass of information those situations that it needs to investigate further? Will it apply some sort of algorithm to the information at any point along the production or distribution line when there is an increase of more than a certain percentage or a certain percentage related to the average—or what? How is it going to be done? These companies have quite enough to tackle with Brexit coming along the track and do not need a further burden such as this.

--- Later in debate ---

I hope that I have been able to explain under what circumstances we intend to ask for additional information relating to revenues and profits, as set out in the regulations and the Bill. I hope that I have reassured the noble Lord, Lord Warner, and other noble Lords that we are not seeking powers that will allow us to interfere unduly in the operation of businesses serving the health sector in the normal way. The amendment as it stands would make it impossible for us to run the current cost and price control schemes. On that basis, I ask the noble Lord to withdraw it.

[Lord Warner]

I am grateful to the Minister for his detailed explanation, although I am not totally convinced. The intention was to apply my amendment to the new information requirements, not the existing routine collection. That is a drafting issue rather than an issue of principle. If I got the drafting wrong, we can sort it out.

I still think we need some kind of trigger safeguard in the Bill. I am not particularly wedded to this provision. I am quite attracted to a trigger mechanism, linked to the information notice and appeal idea suggested by the noble Lord, Lord Lansley. I am certainly very happy to discuss with the Minister and other colleagues on the Committee how we might improve this.

The Minister cited the example of abuse of the PPRS system, but if there were such abuse and the Government or the department were aware of it, nothing in my amendment would stop them intervening. Those would be the reasonable grounds for expecting abuse which this trigger mechanism provides. Therefore, it would not be that the Government’s hands would be tied behind their back when they had some reasonable grounds for thinking that the NHS was being abused. The trigger mechanism does not stop intervention when there is evidence; it just requires the Secretary of State to have some prima facie evidence that some kind of abuse is going on that requires the collection of more information. That is where the ideas of the noble Lord, Lord Lansley, fit in rather well. You would then specify exactly what you need to deal with the abuse you suspect is going on, but which you do not have enough information to prove. That would enable you to act way before a case came to the CMA. You would need only some reasonable grounds for issuing the kind of information notice that the noble Lord, Lord Lansley, wanted to see what was going on.

The Minister mentioned the consultations with the ABPI, but if those were such a success, why does the ABPI come to people like me and say that it is highly dissatisfied with the system that now appears in the Bill? The messages must have got lost in the night somewhere along the way, because the Minister certainly did not convince it to be comfortable with what is proposed in the Bill.

We need some kinds of safeguard, whether it is this trigger mechanism or a blend of that and the idea of the noble Lord, Lord Lansley—

[Lord Hunt of Kings Heath]

It seems from this debate that you could put together into an amendment the appeal mechanisms suggested by the noble Lord, Lord Lansley, the general thrust of the amendment in the name of the noble Lord, Lord Warner, and the three examples the Minister gave of what would trigger the investigation. The Minister clearly has “resist” on every briefing for every amendment. However, this is the House of Lords and basically, we are either going to put an amendment through ourselves, which will win on Report, or the Minister will sit down with us to try to agree something. If the Minister is not able to give way on anything, frankly, it is pretty hopeless and departs from what your Lordships’ House is about. That is what I find frustrating. It is quite clear that there is a broad consensus that we need to see a trigger mechanism of some sort in the Bill. We would like to work with the Government, otherwise we are left with no option but to construct something ourselves.

--- Later in debate ---

[Lord O'Shaughnessy]

On that point, two separate issues are in play here. One is about the information required to be routinely collected for the purposes particularly of community reimbursement, but also for the operation of the schemes. It is welcome that that information will be put on a statutory basis and there is clarity about the kind of information that might be required. In doing so, it will provide for better information and better pricing. Then, there is the separate discussion that the noble Lords, Lord Hunt, Lord Warner, and other noble Lords have alighted on: the collection of non-routine data. Effectively, the question is, what are the circumstances under which that kind of non-routine collection would be justified? Assuming I have interpreted that correctly, I would be happy to talk to noble Lords about how we do that, as I committed to doing during the last sitting. My desire throughout is to make sure that, despite the fears of the noble Lord, Lord Hunt, the Bill is proportionate in its efforts to achieve our aims.

[Lord Warner]

Those interventions from the noble Lord, Lord Hunt, and the Minister were helpful. It certainly should not be difficult or beyond the wit of man for the department and the industry to have an agreed set of routine information collections. What goes on top is the issue, as the Minister rightly said. I would be very happy to participate—as far as I can, because I shall be away on holiday tomorrow, although I am sure my representatives on earth will be able to cover this very satisfactorily. If we can make progress on this issue, it would avoid our having to table amendments on Report. In the meantime, I beg leave to withdraw the amendment.

Amendment 33 withdrawn.

Health Service Medical Supplies (Costs) Bill

Lord Warner Excerpts

Committee: 1st sitting (Hansard): House of Lords
Monday 23rd January 2017 Grand Committee

Moved by

[Lord Warner]

1: 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 regard to the need to—(a) support a flourishing life sciences sector within the United Kingdom economy; and(b) to ensure patients have speedy access to new medicines and treatments approved by the National Institute for Health and Care Excellence.”

[Lord Warner (CB)]

My Lords, Amendment 1 is in my name and those of the noble Lord, Lord Hunt of Kings Heath, and the noble Baroness, Lady Walmsley. First, I welcome the Minister to his first health Bill as a Minister. I am sure that the noble Lord, Lord Hunt, will have a great deal of sympathy with his position of having copped the Committee stage of a Bill in which he had had no previous involvement, because I did exactly the same to him when I left office and left him with the Mental Health Bill—having made, of course, an extremely brilliant speech at Second Reading to introduce the Bill.

I sympathise with the Minister’s position, but that does not mean that we will not probe forcefully on a Bill that is definitely a curate’s egg which does not seem to have left the Commons in as improved a state as it might have done. I am afraid that earlier this morning I separated Amendment 1 from Amendments 2 and 4. I hope that that has not caused too much trouble. I wanted to focus in this amendment on life sciences and the PPRS scheme and on their importance.

Amendment 1 is very straightforward. At the start, the Bill lays a clear duty on the Secretary of State, in discharging the Bill’s provisions, to have regard to supporting a flourishing UK life sciences sector and ensuring that patients have speedy access to NICE-approved new medicines and treatments—a subject to which I think we will come back on a number of occasions. As I made clear at Second Reading, the Department of Health Minister with responsibility for the pharmaceutical industry does have to balance a number of factors, and not just get the cheapest drugs for the NHS. This is what I had to do when I had those responsibilities, and the position is the same today, as I understand it. These factors involve the safety and value for NHS money of medicines, but they also involve helping the UK life sciences industry to grow and flourish and securing speedy access for patients to new drugs that have been approved by NICE.

It is clear that the Government have not done a spectacularly good job with their consultation on the Bill in showing that they understand this balancing act. They certainly have not convinced the pharmaceutical industry—hence this amendment at the start of the Bill. Suspicions have understandably been raised by the inclusion of elements in the Bill that were not in the 2015 consultation on the Bill, including enforcement powers for future voluntary pricing schemes that operate outside the statutory scheme. There is also the issue that the range of products covered by the Bill seems to have been extended, along with the disproportionately bureaucratic information requirements that have now found their way into the Bill.

We will come to many of these issues later, but I will focus here on safeguarding life sciences and the PPRS. Why is this so important? I will start with the life sciences issue. The pharmaceutical industry invests more than £4 billion a year in R&D—more than any other sector. It employs 62,000 people, with a geographical spread that is well outside London and the south-east. Pharmaceutical manufacturing employees have the highest gross value added of any high technology industry, at more than £330,000 per employee. One in four of the world’s top prescription medicines was discovered and developed in the UK. It is a very important and powerful industry for this country.

All this will be put at serious risk by Brexit, as the Prime Minister seems to recognise in the new industrial strategy that she announced today. We know the UK will lose the EMEA through Brexit, but Brexit also poses many other risks to the UK life sciences industry, which could lose market access for its products and see a flight of researchers and research. At such a time the last thing the sector needs is a piece of ill-considered legislation imposing unnecessary regulatory burdens—again, something the Prime Minister said in her industrial strategy that she wants to reduce.

As I made clear at Second Reading, I am not saying that the Government should not act to prevent the NHS being blatantly ripped off under the statutory scheme when a branded good comes off patent, as happened with Flynn Pharma and a Pfizer anti-epilepsy drug. The ABPI has never challenged action in cases of this kind. However, the broad wording of the Bill goes well beyond closing this loophole. It 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. The industry’s concern is that this will create a precedent that could be easily applied to the voluntary PPRS scheme. Ministerial assurances that this will not happen are simply not the same as legislative safeguards. My reading of the Bill is the same as the ABPI’s, namely that this legal precedent could enable a future Government to unilaterally apply the same approach to the voluntary scheme when a PPRS period ends. This would end a negotiated way of setting prices and encouraging research and innovation that has worked well for industry and successive Governments for more than 50 years.

The second leg of Amendment 1 covers the issue of speedy patient access to new drugs. We will come to this matter later on other amendments so I will say little now, except to remind the Committee that we already have a poor record on the take-up of new approved medicines. For every 100 European patients who can access new medicines in the first year they are available, just 15 UK patients have the same access. Even when NICE has approved drugs and treatments, NHS take-up still lags behind. The first page of Friday’s Times showed the sector’s concerns, with one-fifth of new drugs being rationed and drug companies now openly saying they will no longer launch new drugs early in the UK. Whatever we do with other parts of this Bill when we come to them, I urge the Government at this time of great uncertainty for UK life sciences to put at the beginning of this Bill a statement of intent and reassurance of the kind embodied in Amendment 1. I beg to move.

[Baroness Walmsley (LD)]

My Lords, I support this amendment and compliment the noble Lord, Lord Warner, on his comprehensive introduction of it. I have no intention of repeating everything he said. However, I have a few points. I, of course, support the Government’s intention to try to make sure that the health service is not ripped off, but point out that a very large fine has just been imposed on Pfizer by the competition law regulations in relation to the case mentioned by the noble Lord, Lord Warner—so even without this Bill, that is working and we must bear that in mind.

What I am particularly concerned about is the potential effect on the life sciences sector, particularly—as the noble Lord, Lord Warner, said—in the light of Brexit. There are dangers to our markets and to our researchers. Our research is going elsewhere and researchers from other EU countries coming to us are all in danger because of the Prime Minister’s determination to take us out of the single market and the customs union, which I do not believe is what the public voted for.

The particular issue that concerns me is that although we were told in some of the meetings we had that there had been consultation and there will be more consultation before elements of the Bill are implemented, parts of the industry tell us that they are very concerned that they were not consulted. They do not feel that the level of consultation before the Bill is implemented is anything like good enough. We have to support our life sciences industry. We are very good at life sciences. It is one of the things that we can lead—and have led—the world on, but we must make sure that it is not in danger.

The other point is on access to treatments—not just drugs but other treatments. I am told by GPs that rationing is already in place, either by these referral management companies—private companies—that are being placed between the GP and his or her recommendation and the consultant, or by the consultants having pressure put on them to refuse consultation over certain patients referred to them by GPs. We already have rationing and we need to make quite sure that we are not affecting our pharmaceutical industry. We must ensure that our industries involved in research, medical implements, treatments, machines and devices and all those things that we are so good at inventing are not damaged by the Bill. It is really important that we have a statement of intent in the Bill. It will place on the Government the responsibility to make sure that they consider this terribly important sector. I have not had a chance to read the industrial strategy yet, but I would be surprised if the money follows the intent. I do not think that we will be able to look to that for any comfort, so we need this amendment.

--- Later in debate ---

In discussing later amendments—in particular, from my point of view, Amendment 10—we will come back to the question of value. It seems to me that value-based pricing was not reflected in the structure of the PPRS this time round, but that it will be possible for us to do so in further revision of the PPRS in future. To that extent, the issues under Amendment 1 are very well raised. I do not personally support the structure by which it would be incorporated into the legislation, but I think it was very helpful to get that overall picture at this first stage.

[Lord Warner]

Will the noble Lord clarify something for me? The point of my amendment was, in a sense, not any particular PPR scheme but the principle of a PPR scheme, which is a negotiation between government and the industry. No one is arguing that the PPR scheme should be set in stone for ever and a day. What the industry is concerned about is that Government are getting ready to impose a system as an alternative to a negotiated system. The amendment is not meant to enshrine a particular PPRS but to encourage the idea of a negotiated deal with the sector. Does the noble Lord accept that that is a good principle?

[Lord Lansley]

The short answer is yes. We should aim for what is a price paid by the NHS to the industry for the medicines that it uses that is reflective of value and is designed to promote innovative medicines—that is, as we will discuss in a later amendment, those that meet unmet need or add substantially to therapeutic benefit and are not the “me-too” drugs that are very similar to existing medicines but have a slightly different method of operation or delivery. Paying for what innovation gives by way of therapeutic benefit is where we want to be.

However, the amendment is right in the sense that one has to do that alongside supporting the life sciences sector. That is where freedom of pricing at introduction is important. I have accepted the principle of a PPRS which delivers a budget to the NHS and delivers freedom of pricing to the industry. We are not legislating precisely for the structure of the PPRS, but let us assume that those are continuing features. However, through the operation of the rebate or some other means, it seems perfectly possible to incorporate some of the criteria that will be the subject of our discussions on a number of amendments, as is reflected in the second limb of the amendment.

--- Later in debate ---

[Lord O'Shaughnessy]

I thank the noble Baroness for that point, with which I completely concur. This is obviously a big moment in time, for several reasons. Our current price regulation systems for pharmaceuticals run until the end of 2018 and, in 2019, we will leave the European Union. These things are bundled together and co-dependent; making the right decisions on each of the factors will have a knock-on effect on the rest. I very much understand the point. As I said, my job has the tension of both responsibilities, including health, and the trick is to square the circle.

[Lord Warner]

My Lords, I am grateful to the Minister for his response but I was not convinced and I am not sure that the industry will be convinced. Over time, the industry is seeing the legal requirement to implement NICE being watered down by NHS England in effect introducing a cost-control system on top of the legal requirement. It is seeing the Government fixated with cost rather than innovation and patient interest. Companies are seeing their investment drop and their involvement in this country being called much more into question by their boards. That is the issue. It is not about whether the Minister can convince me or this Committee; it is whether he can convince the outside world in this sector. At the moment, I am inclined to pursue this on Report, but in the meantime I beg leave to withdraw the amendment.

Amendment 1 withdrawn.

--- Later in debate ---

[Lord Warner]

My Lords, I support these amendments, to which I have added my name. I do not want to go over again what has just been said, but the issue of access is critical. It is why companies have invested in this country. They criticised NICE when it was first set up; they were highly hostile but have been wooed over, have stayed with the game, played in it and continued to make products which are of great benefit to NHS patients. However, having jumped that hurdle they now see a new one, which is driven not by cost-effectiveness but by cost—a straightforward capping of expenditure at an arbitrary figure of £20 million. The noble Lord, Lord Hunt, was a little critical of NHS England. I would be if I thought that it was only NHS England but I do not believe that the Government are not behind this, putting pressure on it. We already have a massive difference of view between the Conservative chairman of the Health Select Committee and the Prime Minister over how much extra money has actually been put into the NHS. The noble Lord, Lord Lansley, winces, but such measures are being introduced basically to stop the NHS carrying out a legal obligation to implement NICE recommendations. I totally support the amendments in the name of the noble Lord, Lord Hunt, because they are a way of trying to ensure that, where repayments are made, they go back to where they should be, which is in the NHS and helping patients to access new drugs.

[Baroness Finlay of Llandaff]

I have added my name to the first of the amendments. I would have added it to the second, but there was not room—there were already four names there. I strongly support them. The debate so far has related to the pharmaceutical industry, to pharmacies—that is, chemists in the community—and to the NHS but these amendments go to the heart of it, which is access for patients.

One problem with what will feel to a patient like almost arbitrary rationing is that they will know that they have a disease or condition and that there is a drug which, if they lived in other parts of the world or had more money, they would be able to access and which, for one reason or another, they cannot. We must recognise that any costing system for medicines is relatively arbitrary and does not cost in all the social costs of disease progression, or of more severe versus less severe forms. Nor does it factor in the cost to the whole family of the distress somebody feels when they need medication and cannot access a drug which has gone through an appraisal process and whose criteria they can see they fit.

I hope that the Minister will look sympathetically at the principles behind this amendment. If you save money but do not put it back into access to medicines, you are effectively bleeding that area to plug other gaps or deficits in the NHS. As for the patient with the condition who knows that there is medication that probably would help them, although they are well aware that they could be a non-responder, no one should underestimate the anguish to them and their families, or the knock-on effect on society in the long term of failing to ensure access to effective medications.

--- Later in debate ---

[Lord Hunt of Kings Heath]

That is very interesting. It has always struck me that when you chair a board of an NHS foundation trust, for instance, there is a philosophy that says that spending on doctors and nurses is a good thing but spending on drugs is a bad thing. It is a ludicrous position. I agree with the noble Lord, Lord Lansley, that there is a big problem. Spending on drugs is seen as a cost pressure, so automatically everyone’s emphasis is on keeping that spending down, whereas a rather more sophisticated approach would take the view that, if you have spent your money on drugs that have had a hugely positive impact on the throughput of patients, cost-effectiveness and efficiency, that might be a good investment. The question when we come to the next group is whether our current arrangements have come to the end of the road and whether we need to move on to something rather more sophisticated.

[Lord Warner]

What we set up a long time ago was, effectively, NICE to be the arbitrator, and we controlled the flow of technology appraisals into it. I used to sign off a limited number of drugs that would go into the NICE process. We have that system, which has now been legally enshrined. It is also open to NICE to withdraw drugs from use, as it has from time to time, or to change procedures. We have a system enshrined in our law in which the NHS is required to commit to introducing NICE-approved technology appraisals, so the idea that we should let the Treasury arbitrarily reduce and control the small bit of that total NHS budget on those grounds seems bizarre. I agree with the noble Lord, Lord Lansley: we have ended up obsessing about this relatively small part of the NHS budget when we have set up a system to ensure that the NHS gets value for money through the NICE appraisal process. We are getting into a strange situation, which is why we are scrabbling around to make amendments to try to make a pretty crazy system slightly less crazy.

[Lord Lansley]

There is a risk of going on about this, but the structure of the amendment in the context of the PPRS as presently constructed is illogical, because the PPRS is constructed around budget control. The point, however—we will no doubt come back to this, not least on the next group—is that we should be thinking about how we can arrive at a negotiated price for the NHS to buy medicines which may well be marketed initially or globally at a given price, but the amount that the NHS should pay should reflect value. I have said it before and I will keep coming back to it.

I would not be as disparaging of the current consultation between NHS England and NICE at the noble Lord, Lord Hunt. It could have the effect that he describes: adding additional jeopardy because one has to meet not only all the normal criteria for an effective medicine but the NICE threshold, and NHS England might step in with hobnailed boots and say, “But we are not going to make it available and you must change the funding direction”. But it might recognise reality. The consultation, in my view, may have the effect of avoiding arbitrary post hoc rationing of medicines, because the NHS should be up front, negotiating price discounts on medicines, regardless of the rebate. That means engaging with the industry at an early point.

If the industry understands the consultation properly, it will understand that the budgetary impact for the NHS under current circumstances cannot be ignored. The best way to deal with that is not to go through all these processes and then find, at the end of the day, that the NHS cannot afford it, or that NICE has to say no through the application of the threshold. Rather, it is to use the pharmaco-economic evaluation and the health technology assessment properly alongside NHS England and say: “Here is something that is valuable and we want to be able to use it, but we must recognise the budgetary impacts”. There may well therefore be some risk-sharing processes or discounting processes to enable the product to be available to the NHS at an early stage and to give industry and the NHS all the information they need subsequently to be able to make sure that they have got the pricing right.

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[Lord Lansley]

The purpose of Amendment 5, in my name, is to recognise that the Government have brought forward legislation to do a necessary thing, which is to address the discontinuity between the voluntary scheme and the powers available under the statutory scheme. As such, where companies were operating under the statutory scheme with a pre-existing discounted price, often in the hospital sector, the effect of the statutory scheme imposing a given price cut did not impact on their effective price to their customers. Therefore, they did not make a contribution, in that sense, to the budgetary control that was being looked for. The purpose of the legislation is to bring equivalence to the voluntary and statutory schemes. But if we are creating equivalence between the voluntary and statutory schemes, we should be clear that the legislation does precisely that. The noble Lord, Lord Warner, quite accurately referred to this issue at Second Reading, if I recall. There are companies under the statutory scheme—Gilead is a particular example—with products that would, under the voluntary scheme, not have a PPRS control applied to their pricing because they would not contribute to the rebate as they have been introduced after December 2013. Under the statutory scheme, however, they are required to contribute.

As I understand it, the objection to bringing the two schemes to an equivalent place is that under the statutory scheme, as things stand, there are relatively few products and a significant proportion of them have been introduced since December 2013. Therefore, under the statutory scheme, the effect on the rebate of the rest of the companies would be excessive. That can be dealt with. The powers are available. If we legislate in the form that I propose, the Government can modulate the rebate between the two schemes in order to arrive at a similar result for those companies that have to contribute to the rebate and apply a common percentage. As a matter of principle, if we are legislating for the two to be equivalent, it is desirable to do so.

I am slightly worried about Amendment 3 because it assumes that there is a voluntary scheme. We do not know. There may or may not be a voluntary scheme. But a voluntary scheme will not always be in place at the point at which the Government, in order to protect the NHS, may require there to be one. I do not think that we should be in that position. There would be a flaw in the powers available to set a methodology for a rebate under a statutory scheme. In Amendment 6, which the noble Lord, Lord Warner, has not yet had a chance to speak to, he clearly understands that there needs to be a relationship between these two, but I fear there is a risk of gaming on that amendment because the industry may say that if it does not agree a voluntary scheme there cannot be a statutory scheme. Therefore, there is no scheme, and I do not think that that we want to get ourselves into that position. It will not surprise the Committee that I can see reason for my own amendment even if I am not necessarily in favour of everyone else’s.

[Lord Warner]

My Lords, I reassure the noble Lord, Lord Lansley, that I see excellent reasons for his amendment. If the purpose of the Bill is to achieve equivalence between the two schemes, the Bill should secure that. At the moment, it does not. The industry does not think that it does. I am not sure, technically, whether the noble Lord’s amendment secures it, but I think it does. If it is not quite right, no doubt the Government can amend it. I tabled Amendment 6 to push the Government a little more on their commitment to a voluntary scheme. That is its purpose. We have had a good canter over that particular area. As I said when we discussed Amendment 1, I was not totally convinced by the Government’s position, but I want to set out briefly why this is important.

The scheme has stood the test of time as a basis for a relationship between an industry and government where that industry has a much bigger set of customers and a much bigger presence outside the UK. We have actually punched above our weight in securing the presence of that industry in this country, partly through the NHS, but partly because a system was imposed on the industry in terms of the research-based drugs industry. There was a negotiation. Amendment 6 is not meant to say in any way that a particular type of PPRS should be enshrined in legislation for all time. It is trying to get the Government to say, clearly and unequivocally, that for the foreseeable future, there will be some form of voluntary scheme in which a negotiation takes place in an open and transparent way with this particular sector in order to keep this sector being attracted to setting up, doing research and developing pharmaceuticals for the population at large and for the NHS in particular.

Amendment 6 is trying to get out of the Government rip-roaring support for the foreseeable future, a little stronger than the Minister said earlier on, for a voluntary scheme that presents an opportunity for government and the sector to agree the basis on which they operate in a life sciences industry producing drugs that can be made available quickly and speedily, when proven, to the NHS and its patients.

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[Baroness Walmsley]

My Lords, I am in favour of this group of amendments. The Government plan to introduce new regulations and duties on the industry at a very difficult time, so the Minister cannot be surprised that the industry is concerned and that parliamentarians would like to take the opportunity to hold the Government to account based on what happens after the Bill becomes an Act.

For some of the things that we have been talking about, I have been told that the Government already have powers but have not used them—they are just refining and clarifying them and making them more proportionate. Of course, that makes the industry worry that they are planning to use them, even though they are not saying so. We need to know what will happen to all these issues of availability, access, proper supply and cost to the NHS once the Bill has passed. In the interests of transparency and post-legislative scrutiny, will the Minister accept that the Government should report back to Parliament?

[Lord Warner]

My Lords, I have added my name to Amendment 14, but I also support in principle Amendments 9 and 10A in this group. Each of these amendments does something slightly different and they need some consolidation. They are, however, a reflection of a deep sense of unease over where the Bill is taking us and a strong wish to monitor its consequences. The Government are imposing a lot of requirements on the industry for information. The quid-pro-quo is that we would like a lot more information from the Government on how this has worked in practice.

There seem to be three features that that kind of reporting back should cover. The first is the scale of payments made; the second is the use to which the money has been put; and the third is the impact of the Bill on the access to new medicines of NHS patients. It would not be right to try to draft this off the tops of our heads, but it would be helpful if the Government would accept that there should be some kind of monitoring of key issues around the Bill that are then reported back to Parliament and the public on a regular basis—let us say annually—and if we could get together with the Government to help draft something for Report in this kind of territory.

[Lord O'Shaughnessy]

My Lords, I am grateful to noble Lords for raising the issue of reporting requirements. We will address at the end the issue of access and my sympathy to reporting requirements, but I first want to deal with the amendments as they stand.

Under the current PPRS, the Government regularly publish information relating to the operation of the voluntary scheme. Of course, for a future statutory scheme I draw attention to the regulations that we have already discussed, in which there are annual reviews of the regulations and a requirement to publish a report on each review. The illustrative regulations require an annual review that will: set out the objectives of the scheme; assess the extent that our objectives have been 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 totally accept that reporting is a critical principle, but believe that setting out the requirements in primary legislation is too restrictive because of the potential to change from year to year what the priorities are within a sector and within the NHS.

Turning to the specifics of Amendment 9, I reassure noble Lords that the content of annual reviews would not be restricted to reviewing objectives. They must also be able to address key issues arising during the year that might affect the operation of the scheme, so there is flexibility there. We also intend for the annual review to be published and put before Parliament, so there is the opportunity for that to be seen and discussed. On the details of what it is proposed to report—in particular, how the payments are used—to achieve the specific aims of the amendment, the department would need to ring-fence the funds and monitor where the payments are used. I do not want to rehash our discussion about ring-fencing. I take seriously the point that noble Lords make about driving access to innovative drugs but we do not think this is the right way of doing it.

Nor do I believe that, through these means, it is right to address matters relating to the NHS duty to promote innovation. This Bill is ultimately about controlling the cost of medicines and medical supplies. The NHS Act 2006 puts duties on the Secretary of State to take into account both the need for medicinal products to be available for the health service on reasonable terms and the costs of research and development, which is a big factor in innovation. By taking into account these factors, the Secretary of State is looking at the needs of the industry to support the R&D base as is necessary to support the development of innovative medicines and technologies.

The NHS duty to promote innovation is different. It is about promoting innovation in the provision of health services and there is an extremely broad agenda that goes well beyond medicines. We have already said that we all want to make the UK the best place in the world to design, develop and deploy life sciences products. We do not believe that the Bill will have a negative impact on our doing so. We have also talked about the accelerated access review, so I will not go over that.

Turning to the specifics of Amendment 10A, the supply of medicines is highly complex, and pricing is one part of it. Other issues of course include rigorous safety and quality standards. Difficulties faced in the take-up or availability of medicines can be influenced by a number of reasons which are nothing to do with pricing. There can be manufacturing problems, such as batch failures; changes in guidelines, such as antibiotic switches; and raw material problems, as well as regulatory changes.

For example, in 2015, there was worldwide withdrawal of a branded antipsychotic injection, Piportil, due to a global shortage of the active pharmaceutical ingredient. Sanofi was unable to find an alternative source of this ingredient and had to discontinue the product. I set that out to illustrate the point that it is not always easy to link changes in pricing to issues of availability or access: there are other things to take into account. That is why we do not believe that we should set out, either in primary legislation or beyond the commitments made in the illustrative regulations, specifically to assess the impact on availability, access and so on.

Leaving all that aside and returning to the recurring theme of the debate, I understand the desire for greater transparency, which is undoubtedly the right approach to access. We must think about how we can improve access to innovative medicines for NHS patients and, in doing so, improve the operating conditions, if you like, for the life sciences industry—the win-win situation to which we keep returning. I would be happy to meet noble Lords either individually or collectively to think about what more we could do, whether through the Bill or looking ahead to the life sciences strategy, to ensure that we deliver on this promise. I take very seriously the warnings that many noble Lords have issued; the Government absolutely want to address this. On that basis, I ask noble Lords not to press their amendments.

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[Lord Warner]

My Lords, I am very interested in this part and added my name to that of the noble Lord, Lord Hunt, in opposition to the clause. He sparked my interest by accusing me of taking through the 2006 Act. Only on further reflection with my ageing brain did I find that I had not taken it through the House when I was a Minister because it was a consolidation Act. As far as I can recall, it went through both Houses of Parliament without any direct consideration, because there were no amendments to any of the legislation covered by the Act.

The noble Lord, Lord Hunt, in a very Sherlock Holmes manner, has been pursuing where this all came from. As far as I can see, it came from 1977, after a period in the Callaghan Government when there was great excitement about the relationship between the NHS, private practice and the private sector, following my period as private secretary to Barbara Castle. It comes from that generation. As the Minister and his officials indicated in a helpful meeting that we had, it has never been used. We are talking about a provision that comes not just from a long time ago but from a totally different context. We have Whitehall picking up a piece of legislation which it thinks may be useful and slotting it into the Bill with an amended purpose.

As the noble Lord, Lord Hunt, said, the medical devices sector does not think that there has been adequate consultation. It cannot understand what the Government are up to on this. The only justification it seems to have been given is that the department is modernising—whatever that means—a particular piece of old legislation. Modernisation is one of the words that one treats with a certain amount of caution, particularly when it affects public services. We are very unclear why the devices sector has attracted the attention of the Department of Health.

We are clear what the mischief is on the medicines side that the Government are trying to address. We are not clear what the mischief is on the devices side—medical supplies—that has caused the Government to go rootling around in the archives to find a bit of legislation that enables them to place a considerable requirement on the devices sector, which has been quietly minding its own business with a kitemarking system and the usual tendering processes for selling its products to the NHS.

I think we need to be a lot clearer than we are now as to why the Government need this modernising legislation. I remember that when I was a Minister one of the things I was trying to do was reduce the regulatory burden on the NHS and the health sector. I confess to having slipped up a bit in that I totally missed this 1977 regulatory burden. I wish I had spotted it, because we could have struck it out of the legislation while we were tidying up other things. Having got that off my chest and owned up to it, I would really like to know why the Government want this gold-plated provision on regulating a sector which, as far as I can see, has not caused any great problems. Perhaps the Minister can tell us why they have suddenly gone in for this attention and whether they have actually been neglectful of the sector. Has it been ripping off people a great deal for the past seven or eight years? Should we have acted sooner?

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[Lord Hunt of Kings Heath]

My Lords, I am grateful to the Minister for his response. I also thank him for his consultation and willingness to meet bodies before Report, which I am sure will be very welcome. I understand the first argument, which is that there is a need to ensure consistency in relation to this Bill and the 2006 Act. I fully understand that. I also understand the change from criminal to civil penalties. But we then come to the issue of whether this provision should be in statute at all. The Minister himself has acknowledged that this is a different market, with competitive tendering. It is very competitive. We can see no evidence that this measure has been used for 40 years, and as far as I can see there is no evidence to suggest that it will be used any time soon.

The Minister said that it was not thought that the switch from branding to generics would arise in relation to medicines, and therefore that we should look into a completely different sector and say that because something might happen in the future we need to have this overarching provision in the Bill. But that is not the right approach. It has become clear that there are two courses of action. One is to take this out of the 2006 Act altogether, which at the moment I rather favour. We should not regulate for something that might happen in the mystical future.

I, too, was a better regulation Minister and it was drummed into me that if you do not need it, get rid of it—and if you do not need it, do not legislate in the first place. In his heart of hearts, surely the Minister realises that this is unnecessary. The alternative approach is to take the threshold he suggested and put it in the form of an amendment so that we have some reassurance on the face the Bill that it will not be used inappropriately. Those are two particular options.

In my tour d’horizon, as the noble Lord said, I came across the comments made by the noble Earl, Lord Howe, in 1999 when my noble friend Lady Hayman was taking one of the many health service Bills through your Lordships’ House. The discussion was not about devices but about the PPR scheme, because the then Government had taken powers in relation to prices. The noble Earl, Lord Howe, said that the Government had,

“arrogated to themselves sweeping powers to bring the current voluntary scheme to an end and to control the price of any drug at will. Lower medicine prices are appealing but too much of that will kill the golden goose”.—[Official Report, 9/2/99; col. 118.]

If the noble Earl, Lord Howe, were here arguing for this Bill, I think that he would have reflected that the case had not been made for non-health service medicines to be involved. We need to find a way forward between this stage and Report, otherwise the persuasive argument will be to remove the offending sections from the 2006 Act.

[Lord Warner]

Perhaps the Minister will consider the Bill’s definition of “medical supplies”. It states that it,

“includes surgical, dental and optical materials and equipment (and for this purpose ‘equipment’ includes any machinery, apparatus or appliance, whether fixed or not, and any vehicle)”.

That seems to take the Government into any bits of kit—not just ordinary devices as we normally understand them. It covers ambulances and all sorts of fixed equipment in the NHS. Is the Minister really saying that the Department of Health needs a power to cover that range of subjects—I presume that it includes scanners—where competitive tendering may be used, and that the Government reserve the right to intervene in that? That is what the Bill seems to say.

[Lord O'Shaughnessy]

On that specific point, there are number of things—for example, supplements, cosmetics and foods—that fall outwith the categories of health service medicines or health service medical supplies but are sometimes provided or prescribed by the NHS. The intention of the part of the Bill to which noble Lords draw attention is to capture such items when they are provided by the NHS for the benefit of patients—but not in general.

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[Lord Hunt of Kings Heath]

My Lords, this is helpful. Medicines have been referred to, but I would have thought that it could be helpful with other medical supplies. I have had a letter from the British Healthcare Trades Association. It says, in relation to other medical supplies:

“We cannot think of any procurement scenario in our sector where products, on an ongoing basis, are not subject to tender or tariff procedures. The price is tested at entry and reviewed at regular intervals, and the terms and conditions pertaining to the contract or tariff arrangements will include requirements for provision of information”.


That deals with the issue of information. So the noble Lord has put forward a very interesting suggestion and I hope that the Minister might be sympathetic to it.

[Lord Warner]

My Lords, I too am sympathetic to this amendment. I have a linked amendment, Amendment 33, which is about introducing a trigger before information is required. Both amendments, I think, are intended to curb the enthusiasm of Secretaries of State to intervene in a market situation where things are working reasonably well. So I have every sympathy with the amendment of the noble Lord, Lord Lansley, and I hope that the Minister will consider it sympathetically.

[Baroness Walmsley]

I too have a great deal of sympathy with the amendment, but I just wonder what the definition would be of an “open and competitive” process—perhaps it would be defined in regulations. Does the noble Lord agree?

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[Baroness Wheeler]

My Lords, this important group of amendments to Clauses 6 and 7 covering England and Wales is intended to reduce the scope of the burdensome information requirements under the Bill by excluding medical technology and supply sectors from its provisions. The Bill itself is inconsistent throughout on how it refers to this key part of the industry, variously referring to the producing of medical supplies, of health service supplies or of health service products. This gives fuel to the widespread assumption that the medical supplies parts of the Bill were a hastily drawn-up afterthought addition to its main purpose.

Our amendments in this group—excluding Amendment 19—remove all references to “health service products” in these clauses and substitute the “health services medicines” reference consistent with the other parts of the Bill applicable to the pharmaceutical industry. Despite extensive questioning and probing of Ministers by noble Lords and in the Commons and today’s explanation from the Minister in our earlier debates we have still to hear any evidence-based justification for these heavy-handed information and disclosure requirements. Both the ABPI and the ABHI have voiced strong concern at the onerous information requirements under the Bill and draft regulations and the potentially huge impact on SMEs across both sectors.

We were encouraged at Second Reading when the noble Lord, Lord Prior, in response to the widespread and deep concerns put forward, told us that,

“the last thing in the world we want to do is to build a bureaucratic edifice … or to gold-plate regulations, information requirements and the like … we are absolutely open to all ideas and suggestions on how we can reduce the regulatory and bureaucratic requirement on companies that supply the NHS”.—[Official Report, 21/12/16; col. 1685.]

Just to remind noble Lords—a point underlined earlier by my noble friend—the Bill currently requires,

“a person who manufactures, distributes or supplies any UK health service products”,

and in England it is applicable to,

“any medicinal products used to any extent for the purposes of the health service continued under”

proposed new Section 264A(1),

“and any other medical supplies, or other related products, required for the purposes of that health service”.

In other words, millions of products and thousands of small, medium, large and very large businesses.

Within Clause 6, information may be required on:

“the price charged or paid by the producer for products … the price charged or paid for delivery or other services in connection with the manufacturing, distribution or supply,”

of those products,

“the discounts or rebates or other payments given or received … in connection with the manufacturing, distribution or supply”,

of those products and,

“the revenue or profits accrued … in connection with the manufacturing, distribution or supply”,

of these products. These are the current draconian provisions and the only response so far to the Government’s insistence that they are open to ideas and suggestions is to promise to consult the medical supplies sector after the legislation has been passed.

We will not go into the issue of the dreaded Section 260 of the 2006 Act, which already contains powers to get price control and information powers over the companies concerned, but we have still to hear a convincing argument as to why it cannot be used as a basis for seeking any further information that is required. We are told that the new provisions clarify, modernise and streamline and now, in the noble Lord’s words, “make the provisions much clearer than they currently are in the 2006 Act”, but Ministers have still to explain exactly how this is the case.

To remind the Committee, the impact assessment makes the astonishing admission that the costs of these provisions have not been quantified for manufacturers, wholesalers and dispensers. Can the Minister tell the Committee whether any further work has been done on this? Surely proposals that stand to impact tens of thousands of businesses should be part of the evidence base before the Government decide to proceed with legislation? It is crucial that the Government accept our amendments and delete the medical supplies industry from the scope of Clauses 6 and 7; only then can they have the meaningful consultations with the industry that should have taken place before the introduction of the Bill. As noble Lords have underlined, it is not acceptable for Ministers to seek to change primary legislation to give the Government new information powers when the details and impact of the new powers will emerge only in future.

Finally, Amendment 19 in this group seeks to address the huge burden that the new information requirements will place on thousands of small businesses across the country. Bearing in mind that the Government have done no work on the potential impact on SMEs, this amendment would at least introduce a threshold limiting the businesses affected to those companies with a total workforce of more than 250 employees or with annual revenues of more than £50 million in each of the preceding three fiscal years prior to the information request. This is based on the EU threshold in relation to procurement. However, given our upcoming withdrawal from the EU, it seems sensible to specify a roughly equivalent amount in pounds. The value of the pound is, of course, currently subject to ongoing fluctuations. If the Government are inclined to act on this amendment, the Minister and his colleagues may wish to give some thought to an exact figure ahead of Report.

The potential impact of the proposed powers on SMEs is significant and could come with a significant unseen cost to domestic businesses and, as a result, to patients. A small firm such as Mediplus, with 55 employees and a turnover of approximately £6.5 million, already has to meet a range of requirements to demonstrate that it is providing value for money. The Bill would increase the time and cost of demonstrating compliance with regulations without any discernible improvement in final outcome. Increasing the bureaucratic burden on SMEs could force firms to consider how they bring products to market, which could have only a negative impact on the NHS and its patients.

The Government have indicated that they would exempt businesses with a turnover of approximately £5 million. The noble Lord will appreciate that, although that sum sounds large, it is very little in comparison with the revenues of the larger pharmaceutical firms which the Bill aims to regulate. The Government’s proposed exemption will still subject a company such as Mediplus to an increased regulatory burden. As noble Lords keep pointing out, all this is completely counterintuitive, given the Government’s supposed commitment to deregulation, and can only risk the viability and innovative streak of very small businesses, which we should be supporting in the current climate. I beg to move.

[Lord Warner]

My Lords, I have added my name to the set of amendments and strongly support what the noble Baroness, Lady Wheeler, said.

The Minister is new to this legislation. He has joined the party a little late on the Bill. I ask him to stand back and look at some of the terminology used in it. It skips lightly through about four different terms: health service medicines, medicinal products, medical supplies and health service products. It zigzags in and out of those terms throughout the Bill. It then gives a set of definitions at the end which, on the most generous interpretation, overlap with each other. So we are imposing new obligations on a whole set of people in and around the NHS and the pharmaceutical industry without being very clear which group of products we are most concerned about. We are taking powers in the Bill to put obligations on all suppliers of those products to keep a lot of information in case the Government should at some point in future call on them to provide it. That does not seem to me a sound basis on which to legislate when we are trying to reduce the regulatory burden on not just small but medium-sized companies. We always talk about the small companies, but Amendment 19 is useful because it involves reducing the burden on medium-sized companies as well.

The impact assessment then adds to the problem by giving no idea of the impact of these provisions on those companies. At least these amendments narrow the focus to where there is an acknowledged problem—medicinal products—which is where the Bill started. If you read the Long Title, it looks as though it started as a Bill about medicines to which someone has tacked on “and related issues”, or similar words. I suspect that the Bill started off trying to deal with a genuine problem but has grown just in case it might be helpful to have some other provisions. Then, to add unnecessary complexity, it has moved around on what products are to be covered to the point where we are putting obligations on a very large number of organisations in case the Government come calling for information.

That is why I shall return to this subject when we come to Amendment 33, which tries, at the very least, to put some obligation on the Secretary of State to show that he has good reason for requiring the information sought in this Bill. That is a debate for another day, but the Minister should look very carefully at whether the Bill has a confusing set of definitions and a use of words that is going to cause a lot of confusion for the world outside.