Branded Health Service Medicines (Costs) (Amendment) Regulations 2023

Lord Hunt of Kings Heath Excerpts

Thursday 25th May 2023 Lords Chamber

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[Lord Hunt of Kings Heath]

That this House regrets that the Branded Health Service Medicines (Costs) (Amendment) Regulations 2023 propose a 27.5 per cent claw back rate which significantly exceeds that required by comparable countries, and which risks seriously damaging future investment in the research and development (R&D) of new drugs in the United Kingdom for the NHS, investment in the life sciences more generally, and the manufacture of branded medicines and their availability to the NHS; further regrets the short and insufficient consultation period for these measures of just 39 days over the Christmas period; and notes with concern that the UK’s share of global pharmaceutical R&D has fallen by over one-third between 2012 and 2020, and that the UK’s medicine production volumes, clinical trial delivery, and global share of new medicine launches have also all declined in recent years. (SI 2023/239)

Relevant document: 34th Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument)

[Lord Hunt of Kings Heath (Lab)]

My Lords, I am very glad to introduce this debate, and thankful to noble Lords who have stayed to take part in it. Underpinning this debate is a major concern about the current state of the UK economy, beset as it is with low growth, low productivity, workforce shortages, regional inequality and a dilapidated infrastructure; yet we have no industrial strategy. The Government have raised corporation tax; it is little wonder that Sir James Dyson recently accused the Government of having a “stupid” and “short-sighted” approach to the economy and business in the UK. Indeed, as Theresa May’s former chief of staff, Nick Timothy, put it on 8 May, there is an alarming decline in manufacturing as a percentage of GDP.

We ought, at least, to welcome the Prime Minister’s launch of the Government’s plan to create the UK’s place and cement it as a science and technology superpower by 2030. My concern is that the Minister and his colleagues in the Department of Health and Social Care are doing everything they can to inhibit that ambition. The life sciences industry is one of the most successful and important pillars of the UK economy, contributing more than £94.2 billion a year and 200,000 jobs in this country. Two-thirds of this is generated by the biopharmaceutical sector. The industry’s pipeline of new medicines is equally impressive.

We are at great risk of seeing this economic success falter under the watch of the Government, as companies are reducing their level of investment because of the imposition of a massive clawback that equates to one-quarter of sales revenue. We are already seeing very worrying trends in investment levels. From 2012 to 2020, the UK’s share of global pharmaceutical R&D spend decreased by more than a third. Since 2018, the UK has been falling down the global rankings across all phases of industry clinical trials. UK manufacturing production volumes have fallen by 29% since 2009. We all know that the NHS is far too slow to adopt new innovation and new medicines.

The UK is falling behind comparable countries as an early-launch market. Companies are making decisions to delay, or even not to launch, in the UK. These can be clinically important medicines that address many of the NHS’s priorities. Compared to leading countries in Europe—Italy, Spain, Germany and France—we have experienced the largest decline in our global share of new medicine launches between 2016 and 2021. This is the background to the statutory instrument that we are debating today.

I believe and hope this debate can influence the negotiations that have just started with the industry over the next phase of the voluntary scheme, otherwise known as VPAS—various noble Lords used to know it as PPRS. Under these regulations, companies in the statutory scheme will be required to pay to the Secretary of State 27.5% of their 2023 net sales income received for the supply of those medicines to the NHS.

The Government’s argument is that continued high sales growth in 2022 has led to an increase in the payment percentages in the VPAS scheme from 15% in 2022 to 26.5% in 2023, which is higher than was projected at the time of the 2022 statutory scheme consultation. As a result, the Government have ratcheted up the statutory scheme required payment rate. My argument is that both the voluntary and statutory schemes—companies have to be in one or the other, and can switch between them—are becoming a major impediment to future investment in the UK. The proposed rate of 27.5% will place the UK as a global outlier. In countries that operate similar clawback arrangements, current rates include 12% in Germany, 7.5% in Spain and 9% in Ireland, and all those countries spend more on medicines per head than we do. How on earth can the Government’s stated aim to grow the life sciences industry, as set out in the Life Sciences Vision and just recently articulated by the Chancellor, be delivered if industries expect to pay twice the level here that they do in Germany?

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[Lord Hunt of Kings Heath (Lab)]

My Lords, I am very grateful to the Minister. I think he has responded in a positive way, which is gratifying and, I hope, sets the foundation for a proper negotiation with the industry to get a jointly owned voluntary scheme which will incentivise global pharma to invest in the UK.

For me, two or three themes come from this. First, the noble Lord, Lord Lansley, talked about the curiosity of a fixed drugs budget, and I found it curious when the Minister said we need value for money on medicines in order to have resources for front-line services. But medicines are a front-line service. Why is it a good thing to increase the number of doctors and nurses and buy more medical equipment, but it is suddenly shock-horror to spend more on medicines? What would we do without medicines? It is curious. I have never understood why the Department of Health has such a downer on the medicines budget, when it has just said—and I declare an interest as a member of the GMC—that it wants to see a massive expansion in medical school places. Why is the medicines budget regarded as such a negative factor? It defies all understanding; of all the great advances we have made in healthcare, how many have been made through new medicines? And I have to say that new medicines are rather easier to get than extra staff.

[Lord Markham (Con)]

May I just clarify? I completely agree that medicines are of course valuable. My comments were not about not spending money on medicines but about getting value for what we spend on medicines—not the quantity, not the quality, but the price that we are paying. I think that all noble Lords would agree that we want to make sure that we are getting the best value on pricing.

[Lord Hunt of Kings Heath (Lab)]

I fully accept that, but the sentiment that comes through is something that is shared throughout the National Health Service: that drugs expenditure, per se, is something to be held down. That is why, even though we have NICE, and bilateral negotiations—as the noble Lord, Lord Lansley, said—between NHS England and pharma companies in relation to specific drugs, at local level you have formularies and all sorts of mechanisms designed to ration medicines to patients. It is a curiosity about our whole approach. I agree with the Minister that one needs to start with a health budget. If we have—and I hope we do—new medicines coming on in relation to, say, Alzheimer’s, we will need to spend extra money in order to invest in them.

My second point—also made by the noble Lords, Lord Warner and Lord Allan, and my noble friend Lady Wheeler—is that it is very important that this is seen as a cross-government approach. If this is seen simply an issue for the Department of Health and NHS England in terms of the NHS budget, we will never get the kind of agreement that we need. If the Prime Minister is true to his word in terms of trying to reset the relationship—as the Minister implied—that is very welcome indeed.

This has been a very useful debate and I am very grateful to the Minister and other noble Lords. I beg leave to withdraw my Motion.

Motion withdrawn.