Health Service Medical Supplies (Costs) Bill

Lord O'Shaughnessy Excerpts

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

[Lord Hunt of Kings Heath (Lab)]

My Lords, I want to express some sympathy with the remarks of the noble Lord, Lord Lansley. I am not sure whether he has got the terms of his amendment right; my noble friend Lord Warner has an amendment in the next group which, in a sense, covers the same ground.

The noble Lord, Lord Lansley, knows that I am sceptical about whether these powers should be extended to non-medicines but the issue here is that they are very broad, as he says. As far as I can see, there are absolutely no safeguards regarding how these powers will be used. The safeguards are not in the Bill or the 2006 Act, and certainly not in the draft regulations as far as I can see. We are looking for the Minister to table amendments on Report to build in thresholds or safeguards to stop the department simply undertaking fishing expeditions. That would give us some sense of proportionality. I am not sure whether the noble Lords, Lord Lansley and Lord Warner, have got their amendments quite right but I am certain there will be a consensus for building in some safeguards over the use of these powers.

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

My Lords, it is nice to be back with you again today to finish the Bill’s Committee stage. I am grateful to my noble friend Lord Lansley for tabling his amendments, and for his support for the Bill’s ultimate purpose: more rigorous gathering of data to support voluntary and statutory schemes and pharmacy reimbursements. That support is very welcome. I have huge sympathy with his argument. It is because we agree with the need properly to set out the information powers that we have published two sets of illustrative regulations to help Parliament scrutinise the information powers in the Bill. Reflecting on those, I believe that I can reassure my noble friend about the concerns behind his amendment.

I start by addressing the general proposition that a UK producer should be provided with an information notice every time the Secretary of State seeks to require information from that producer. Many noble Lords have expressed concerns about the regulatory burden the Bill might impose, and the amendment could exacerbate those worries. Regarding routine information collection, the Government already collect information on prices and volumes every quarter to support the operation of the PPRS and statutory schemes, and to inform reimbursement prices for community pharmacies. The Bill would expand routine collections to inform reimbursement prices to enable us—as my noble friend pointed out—to use data from more companies, to make the reimbursement of community pharmacies fairer and more robust, and to set reimbursement prices for more products.

For the purposes of requiring information on a routine basis, the illustrative regulations clearly set out what information would need to be provided, the form in which it would need to be supplied, the period of time it would need to cover and the date by which it would need to be supplied. Where information is required on a non-routine basis, the illustrative regulations demonstrate that the Secretary of State would notify a UK producer of that request. The regulations set out the notice that the Secretary of State would give a UK producer, the form in which the notice would be given and the type of information that would be required. The regulations would also require the Secretary of State to inform UK producers of the time period the information would need to cover and the time within which the information would be required.

Turning to the purposes for which information can be required and the persons to whom confidential and commercially sensitive information can be disclosed, I reassure the Committee that the Government take these matters very seriously. We have sought clearly to set out in the Bill the limited purposes for which information can be required and the persons to whom confidential or commercially sensitive information can be disclosed in relation to those purposes. The Bill makes it clear that information can be required for only three purposes: first, to reimburse community pharmacies and GPs; secondly, to support the PPRS and the cost-control provision in the NHS Act 2006; and thirdly, to ensure that healthcare products provide value for money.

The information that we would collect under the first two purposes would generally involve routine collections, to operate the reimbursement system and our voluntary and statutory schemes. However, assuring ourselves that products or the supply chain provide value for money would be done through ad-hoc collections. This is where we get to the critical issue of thresholds. Those collections would be triggered by evidence from existing data that there may be an issue with pricing—for example, when the reimbursement price we set in primary care is increasing without obvious reasons—or patients, clinicians, commissioners or the industry raising concerns, for example about price rises without obvious reasons or access problems. I hope that that makes it clear that this is not intended for fishing expeditions, to use the expression of the noble Lord, Lord Hunt.

[Lord Hunt of Kings Heath]

Have I missed this? Are those qualifications for the use of the provisions set out in the Bill?

[Lord O'Shaughnessy]

They are not. I am using this opportunity to set out on the record the reasons why information would be sought.

The Bill is also clear about with whom confidential and commercially sensitive information can be shared. This is restricted to other Government departments, the devolved Administrations and specific NHS bodies and persons providing services to any of these bodies. The information can be disclosed to these bodies only for the purposes set out in the Bill—which I just reprised. The Bill also enables the Secretary of State to share information with trade bodies, and Regulation 11 of the illustrative regulations sets out the trade bodies with whom the Secretary of State might want to share information, and the type of information that he would want to share with them.

The illustrative regulations currently limit the information that we can share with trade bodies to aggregated data that cannot be led back to a specific company. Furthermore, the Bill enables the Government to prescribe in regulations any other person to whom the Secretary of State can disclose information. The flexibility provided by this regulation-making power allows the Secretary of State to disclose information to other persons who may become involved in payment or reimbursement for health service medicines, medical supplies or other related products, including, for example, in circumstances of regional devolution. Again, it would be possible to disclose confidential or commercially sensitive information to these persons only for the purposes set out in the Bill. We will have further opportunities to discuss these powers of disclosure when we discuss the amendments relating to the report of the DPRRC. In summary, we would not be able to disclose information to bodies not listed in the Bill or prescribed in regulations, so the legislation will restrict to whom we can disclose information.

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[Lord Lansley]

I am grateful to the noble Lord, Lord Hunt, and my noble friend for their response to this amendment. I can see from the illustrative regulations that, as I said earlier, there would be a general scheme for the collection of information, and I am not looking for the amendment to replace a general scheme with a requirement to issue individual information notices. That would be excessive and burdensome. However, under the illustrative regulations there is, in addition to the general scheme, what is effectively the restatement of the power for the Secretary of State additionally to require specific information from companies that breach the requirements of the general scheme—frankly, for any other purpose that the Secretary of State is looking for. That is in draft Regulation 19(2), which really just restates what is already in the legislation: that there is this general ability to say “just give me this information”.

I entirely understand the point that my noble friend is making about the appeal against enforcement, but there is no appeal against such a specific information notice. I may not have got it absolutely right, but in the case outside the general scheme of information, when the Secretary of State asks a company to provide specific additional information, I was proposing not an appeal against enforcement of request, where the company resisted, but for the company to be able to appeal against the information notice on the basis that it is an excessive use of powers; that is, rather than a judicial review, an appeal against that specific information notice.

My noble friend referred to the Delegated Powers and Regulatory Reform Committee’s view, which relates specifically to the question of with whom the information may be shared. The illustrative regulations really do not add anything from that point of view; they do not tell us, beyond what the legislation already states, with whom they may be shared. From any company’s point of view, there is little reassurance in the restrictions that the Minister has just referred to. The information could end up in all sorts of places. Remember, we are talking about an NHS body and, of course, all NHS bodies always behave absolutely properly in the use of information under all circumstances—I am being ironic.

From the point of view of a company engaged in selling these products, we are talking about a monopoly purchaser—a single payer—and a set of organisations with tremendous financial leverage in relation to the products that are being sold. If we are simply handing all the information over to the Secretary of State in the expectation that he could—I am not saying that he would—hand this information on to NHS bodies which are themselves the purchasers of these products, it could significantly skew what would otherwise be a proper commercial relationship between seller and buyer.

Companies must have a point at which they can cry foul, but I am not sure that we have yet given them the ability to do so at the appropriate stage when the information is being asked for. In a way, my amendment does that. I was rather comforted by the DPPRC’s report, in that it seemed to me that my amendment at least sought to make clear how the DPPRC’s recommendation in relation to the Bill might be met. I am implying in what I say that I can see how the amendment is not right; we could go further.

[Lord O'Shaughnessy]

I thank my noble friend for that clarification. I think that we are talking about the same thing, but we should have the opportunity to explore it between Committee and Report. Certainly, we will talk about the DPPRC issues. It is understood that the powers as currently set out need to be looked at.

[Lord Lansley]

I am again grateful to my noble friend. On the basis of what I have explained, there is a conversation to be had and I hope that we may be able to resolve this satisfactorily before Report. I therefore beg leave to withdraw the amendment.

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[Lord Hunt of Kings Heath]

My Lords, my noble friend is right because he goes to the heart of the argument about this Bill. I think we have all said that we support the core aim, which is to deal with branded products becoming generics and the issues that were identified. The question is whether the Bill is a proportionate response to that and what impact it will have on future investment in this country.

I have been wracking my brains to puzzle out why this was first legislated for in 1977. My noble friend will remember that that was the time of the prices and incomes policy. Lady Williams of Crosby and my esteemed noble friend Lord Hattersley were Secretaries of State for Prices and Consumer Protection. I would not be at all surprised if it had something to do with that. I have to say that it was not altogether successful as a policy, and I am not sure that it is a great precedent for the Minister to rely on now. Certainly, in 1979 the electorate did not think that it was a very successful policy, that is for sure.

The only point I want to put to the Minister is this: I think there is a consensus in the Committee that there needs to be some trigger mechanism. We have had elements of that. The noble Lord, Lord Lansley, proposed an amendment that included appeals. He suggested what would trigger action, which was very helpful. In his amendment, my noble friend suggested another approach. The Delegated Powers Committee is concerned about the general terms of this clause. It said:

“We consider the general power to be inappropriate unless the Minister is able to explain why it is not feasible to specify the further bodies to whom information may be disclosed on the face of the Bill, and why it is not feasible to limit the kinds of bodies to whom disclosure may be made”.


That picks up the point raised by the noble Lord, Lord Lansley, and I agree with him about NHS bodies,

The question is this. The only satisfactory safeguards will be in the Bill. This House has no influence on regulations. The Minister will know that only six or seven statutory instruments have ever been defeated, so regulations in themselves provide very little safeguard. This is our only opportunity to provide safeguards in the Bill. Essentially, the choice for us is to press on with amendments at Report or to come to some agreement with the Government about what is appropriate. That we need something in the Bill is not in doubt.

[Lord O'Shaughnessy]

I thank noble Lords for that very good debate, which has again got to the heart of why we are all here. While we are reflecting on the 1970s, we have an industrial strategy again, so who knows? The wheel turns.

I am grateful to the noble Lord, Lord Warner, for his amendment and understand that he seeks to minimise the burden on businesses; we agree with him on that aim. However, the amendment would have serious unintended consequences. I will set out why I believe that to be the case and in doing so, I hope to respond to other noble Lords’ questions.

The amendment would restrict the circumstances under which the Government could ask for information on revenues or profits accrued in connection with the manufacturing, distribution or supply of UK health service products. We have been clear throughout that the information that we seek for routine data collection does not go beyond that which would be required for tax purposes. That is the reassurance that we provide on the overall burden and how it would affect businesses. I appreciate that there is a separate question about non-routine data collection, which I will come to, but the overall intention is not to create any additional burden.

The amendment would restrict the information-gathering powers to where a specific health service product has significantly increased in price and where there are reasonable grounds to believe that the NHS is not receiving value for money. However, it would prevent us operating our cost and price control schemes. The reason for that is that the Government collect information on revenues from companies as part of the various cost and price control schemes to be able to determine the sales of those companies to the health service. This enables us to identify the savings achieved through price cuts and which, in our reformed statutory scheme, would be a prerequisite for calculating the payments due from individual companies.

The Government require this information at product level to satisfy ourselves that the terms of the scheme are being applied correctly. As noble Lords know, this model has been in operation through the PPRS for many years, and we have not heard concerns from industry about the burden that it places upon it. Indeed, it is precisely this mechanism which demonstrated to both the Government and the ABPI that the current PPRS was not operating as expected during 2016—something to which the noble Lord, Lord Hunt, referred during our previous sitting.

We had constructive discussions with the ABPI during 2016 about why the spend measured by the PPRS and used to calculate payments under the scheme had fallen, compared to the real growth in NHS spending on branded medicines, which continues to rise. Joint analysis of company data by the ABPI and the Department of Health shows that the NHS is spending more than ever on branded medicines, with spend growth in 2016 likely to be around 5.3% of the budget.

It became clear that the cap mechanism was not capturing significant areas of branded medicines spend—in particular, parallel imports. Also, some companies left to join the statutory scheme, or divested individual products from the voluntary to the statutory scheme, but this growth was not captured by the PPRS methodology. Without action, this would have led to a significant drop in income from the scheme while branded medicines spend continued to rise, which is obviously against the spirit of the agreement. After a short period of very constructive negotiation just before Christmas, we agreed a new deal with the ABPI to cover the last two years of the scheme, details of which I set out in a Written Ministerial Statement published last week, I think—it has been only three and a half weeks, but it feels longer. This shows how well industry and the Government can work together to develop and maintain voluntary arrangements, but we can do so only with the right information available.

We have provided illustrative versions of both the information regulations and the statutory scheme regulations. I emphasise that these regulations show that the Government have no intention of routinely collecting information on profits. They do, however, set out the circumstances in which the Government might want to collect information about profits.

First, the illustrative regulations set out that we would be able to ask for information related to products where a company asks for a price increase under the statutory scheme regulations. To agree such an increase, the Government require assurance that the product is no longer profitable at its current price. Information on profitability is therefore crucial to determine this.

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[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.

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[Lord Hunt of Kings Heath]

My Lords, I have a little list, which is a bit bigger than the Minister’s list.

[Lord O'Shaughnessy]

Have you seen it?

[Lord Hunt of Kings Heath]

Indeed so. In following the remarks of the noble Baroness, Lady Walmsley, this is really a probing question. Lists are generally avoided in primary legislation for the obvious reason that you need flexibility. I can see why a list of bodies has been put into paragraph (11) of the draft regulations. At this stage, I am just puzzled to know why those organisations which are in the list have been chosen and why others have not.

First, I see that the BMA is in the list. I assume that is because it represents dispensing pharmacists, but I would be grateful to have clarification. I think that may have been clarified. For instance, why is the British Healthcare Trades Association not in the list? Clearly, its membership, although sometimes the same, is rather different from the ABHI. There are other organisations that I have put down to probe how the department has come to that list. When we know that, we can then come back to the general principles that the noble Baroness has so rightly raised.

[Lord O'Shaughnessy]

I thank the noble Baroness, Lady Walmsley, and the noble Lord, Lord Hunt, for these amendments. As both have set out, it is clear that they have been tabled in response to the report of the Delegated Powers and Regulatory Reform Committee. I am very grateful to the committee for its consideration of the Bill and for providing its report. The committee has concluded that the general power in new Section 264B(1)(l) to describe in regulations any other persons to whom information may be supplied is too wide and not justified at present. I assure noble Lords that I am considering these comments very carefully, and the views expressed by the noble Baroness, Lady Walmsley, and the noble Lord, Lord Hunt, have been helpful in explaining the issues.

The amendment in the name of the noble Lord, Lord Hunt, would put in the Bill the industry representative bodies to which the Secretary of State can disclose information. The Government would prefer to prescribe these bodies in regulations and have done so in the illustrative regulations—albeit the current version includes only a limited number of such bodies and they are given purely as examples rather than as an attempt to be exhaustive. By prescribing a large number of representative bodies in primary legislation we would, as I think the noble Lord, Lord Hunt, admits, lose the flexibility to be able to add new representative bodies, if needed, in regulations.

In its report, the DPRRC was satisfied with the way the Bill was drafted in this area, and it considered the power to prescribe bodies that appear to the Secretary of State to represent manufacturers, distributers or suppliers to be a specific power. The committee thought, however, that the general power to prescribe any other person was too general and suggested that the Government limit the kinds of bodies to which disclosure may be made, as is done with the power to prescribe representative bodies. Like the DPRRC, I believe that the power to prescribe representative bodies is sufficiently specific, while still allowing some flexibility. However, we are giving serious consideration to the general power.

As noble Lords are aware, there is a balance to be struck between ensuring clarity in primary legislation and, at the same time, giving sufficient flexibility to enable arrangements to change in response to external changes to ensure that, in the future, we have flexibility to work with the right stakeholders without requiring primary legislation to do so. I once again reassure the Committee that I am considering these recommendations very carefully and will respond to the DPRRC shortly. I expect, subject to the appropriate procedures, to bring forward proposals on Report. On that basis, I ask the noble Baroness to withdraw her amendment.

[Baroness Walmsley]

My Lords, I am most grateful to the Minister, and I look forward to, I hope, being copied in to his reply to the committee. I certainly understand what he said about the representative bodies being in regulations and that it is just an illustrative list that we have before us. If the list is in regulations, it is much easier to add a new representative body. It is reasonable to assume that, some day, perhaps one or more new bodies may be set up. However, the general power is another animal altogether. I look forward to hearing from the Minister after he has considered the matter. I beg leave to withdraw the amendment.

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[Baroness Walmsley]

My Lords, I will speak to Amendment 58 and to the other amendments in the group. This group also reflects concerns expressed by the DPRRC in relation to Clause 7, which deals with information to Welsh Ministers. The substantive amendments are 58, 61 and 66; the others in the group are consequential.

New Section 201A of the NHS Wales Act 2006 will enable Welsh Ministers to require information from producers of health service products to be used in Wales. Subsection (5) of the new section allows regulations to be made for the payment of a penalty if a person contravenes these regulations. Noble Lords may have noticed that there are no equivalent provisions in Clause 6, which inserts new sections into the NHS Act 2006. There is no need, because the original Act already enables regulations to provide for the payment of penalties. However, if we look back at these provisions in the NHS Act 2006, we notice that there are some differences between the penalty sections there and those in the Bill. Specifically, under the NHS Act 2006, there is a limit on the penalty that can be imposed—I think that that is what we have been given in the illustrative regulations. Secondly, any increase in the penalty must be done by affirmative order. In Wales, we have no limit and no affirmative order.

Amendment 58 puts limits on the penalties in this Bill in line with those in the NHS Act 2006, and Amendment 66 changes the relevant bit of the NHS (Wales) Act 2006 so that regulations under new subsection 5B in Amendment 58 would have to be made by the affirmative order procedure. This provides us with consistency, because the provisions in the two pieces of legislation would be similar. I am not wedded to the actual penalty limits that I have laid down, but they are the same as those specified in Section 265 of the NHS Act 2006, so they would be consistent. However, as in this case they would apply to a narrower range of people, it may be appropriate to have a different limit. The main point is that there should be a limit.

Amendment 61 deals with a different issue but reflects what I was trying to do in Clause 6 with my Amendment 49 in the last group. It relates to new Section 201B of the NHS (Wales) Act 2006 on disclosure of information. As with Clause 6, the bodies to whom information can be disclosed are not specified in the Bill. Instead, these can be prescribed by Welsh Ministers. Since there has been no information as to why it is not feasible to specify these further bodies to whom confidential, commercially sensitive information can be disclosed, can the Minister explain why not? Surely it should be possible at least to limit the kinds of bodies to whom disclosure may be made. It seems to me to be a flexibility too far and beyond what is really necessary to ensure the purposes of the Bill. The Delegated Powers Committee regards it as “inappropriate”. Can the Minister convince us of the need for this very broad power?

[Lord O'Shaughnessy]

My Lords, I am grateful to the noble Baroness, Lady Walmsley, for her sharp eyes and even sharper suggestions with regard to these amendments, which are again in response to the report of the Delegated Powers and Regulatory Reform Committee. The committee concluded that the power in Clause 7, which enables Welsh Ministers to make regulations that make provision for payment of a penalty if a provider of pharmaceutical or primary medical services contravenes regulations requiring them to record and provide information about health service products that are required for the health service in Wales, should be consistent with similar provisions in the 2006 Act.

In particular, the committee recommends that the maximum penalty that may be imposed under what would be Section 201 of the NHS (Wales) Act 2006 should be set out in the Bill and that there should be a power to increase this maximum by regulations made subject to the affirmative procedure, as the noble Baroness set out. I assure noble Lords that, as with the previous set of amendments, I am considering these comments very carefully; the views expressed by the noble Baroness have been very helpful in highlighting the issue, for which I am grateful.

Noble Lords will understand that these provisions relate to the powers of the Welsh Ministers, and it is therefore necessary for me to seek the views of Ministers in Wales on this matter. However, I acknowledge the concern that, as drafted, the Bill does not impose a limit on the penalty which may be imposed by Welsh Ministers. Noble Lords will appreciate that, in the case of penalties, the powers in relation to Wales are different from those in relation to the UK as a whole, in so far as Welsh Ministers will be able to impose penalties only on providers of pharmaceutical and primary medical services. In contrast, the 2006 Act allows for penalties to be imposed on manufacturers and distributers, and the size of any penalty should reflect this. It would therefore be disproportionate if the level of maximum fine allowed for in the 2006 Act were to be replicated in the NHS (Wales) Act. I accept, however, that the framework governing the maximum size of any penalty and increasing that maximum should be the same.

Turning to the amendment which would remove the provisions allowing Welsh Ministers to disclose information to persons prescribed in regulations, this is a matter which I understand Welsh Ministers are content to reconsider in light of the DPRRC’s recommendations. I reassure the Committee that I accept the recommendations of the DPRRC regarding limits being placed on the penalties that can be imposed by Welsh Ministers and the need to specify in the Bill the further bodies to which Welsh Ministers may disclose information. I will respond to the DPRRC in due course with proposals once I have discussed them with Ministers in Wales. I intend, subject to the appropriate procedures, to bring forward proposals on Report.

As these will be my final remarks in Committee, I thank all noble Lords for a constructive and informative debate. It has been important to be able to draw on the wisdom of so many former Ministers in making sure that the Bill is properly scrutinised and best equipped to carry out the purposes we have set for it. I have committed to consider many of the issues raised before Report on 7 February, not that far away, and I will be holding as many meetings as I can in the short time available to aid that process. My officials and I are available to noble Lords should they have any other questions or concerns about the Bill, and I look forward to bringing forward any necessary proposals on Report. To conclude on this group, I ask the noble Baroness to withdraw her amendment.

[Baroness Walmsley]

My Lords, I am most grateful to the Minister for his assurance that these matters will be considered before Report. I look forward to hearing the result of his considerations. I am very happy to beg leave to withdraw the amendment.