§ 9.26 p.m.
§ The Under-Secretary of State for Trade and Industry (Mr. Peter Emery)
I beg to move,
That the Regulation of Prices (Tranquillising Drugs) (No. 3) Order 1973 (S.I., 1973, No. 1093), dated 21st June 1973, a copy of which was laid before this House on 22nd June, be approved.
As one hon. Member said to me as we came into the House, it seems that we have been here before. These matters are all the subject of current proceedings before the courts. For that reason I am certain that the House will understand it if I restrict my remarks to a summary of the circumstances that have led to the making of this order. The House will recall that the No. 1 Order—
§ Mr. Anthony Wedgwood-Benn (Bristol, South-East)
May I ask you, Mr. Speaker to clarify the situation? The Minister referred to the current court hearing. Clearly there are problems of jurisdiction here. I hope you will accept that since the House is asked to approve an order we must be free to bring our minds to bear on the matter and should not be restricted in any argument by the fact that it is being tried in another court, recalling that in this sense this House is the High Court of Parliament.
§ Mr. Speaker
I, or perhaps those who advise me, thought that this point might arise. I am, therefore, equipped to deal with it. I rest upon the ruling of my predecessor of 25th October 1966 when he ruled that:The rule that matters awaiting adjudication by a court of law should not be brought before the House by a motion did not apply to Bills or delegated legislation.There is no sub-judice limitation about this debate.
§ Mr. Emery
I am certain, Mr. Speaker, that both sides of the House will thank you for that ruling. It is in accordance with the legal advice given to the Government and the Opposition.
The House will recall that the No. 1 Order, which reduced the prices of certain drugs sold by the Roche Group following a report by the Monopolies Corn-mission, was made by my right hon. Friend the Secretary of State and laid before the House on 12th April, coming 644 into operation on 23rd April. The order was debated in the House on 3rd May and received an affirmative resolution.
In the meantime, as a result of proceedings in another place, the order was not approved by both Houses within 28 days and the No. 2 Order and, subsequently, the No. 3 Order, had to be made to continue the price reductions without pause.
The No. 3 Order follows the form of the No. 1 Order with only minor differences, which it might be helpful for me to outline. It was obviously not necessary to repeat the provision in Article 5 of the No. 1 Order requiring agreements to maintain the resale prices of these drugs to be abandoned within seven days of the commencement of the order. The only other changes take account of the different dates of commencement. The events preceding the No. 1 Order were fully discussed when the House approved that order on 3rd May. I explained then that the commission had reached its unanimous conclusions after a full and thorough inquiry; that it was satisfied that Roche's prices were manifestly too high and that the company had made excessive profits for itself in this country; and that the Government took the view that the state of affairs disclosed in the report justified urgent action to reduce the prices of Librium, Valium and related products.
The House will not wish me to go over the detailed ground again. Nothing that has happened since then has led the Government to change their views about the correctness of the action that they have taken. The House may find it helpful if I briefly touch on developments since May.
The order that was debated on 3rd May affected only companies in the Roche group and was found by the Special Orders Committee of another place to be hybrid, that is to say, broadly speaking, one that is not of general effect but concerning a particular individual or company. It is open to those affected by hybrid orders requiring an affirmative resolution to petition in another place against the order. Roche, as it was perfectly entitled to do, presented such a petition, which was considered by the Special Orders Committee of another place at hearings lasting five days, held 645 between 14th May and 8th June. The members of the committee were divided in their views.
Three members, including the chairman, felt that there was no case for setting up a Select Committee to inquire further into the matter. Four members felt that there should be a limited inquiry by a Select Committee with narrow terms of reference restricting its consideration to the single issue of whether the order prices made sufficient allowance for the allocation of research and development costs. The report of the committee was debated in another place on 22nd June, and their Lordships finally decided by a substantial majority after a full debate not to set up a Select Committee.
The Managing Director of Roche Products Ltd. wrote a letter to The Times, which was published on 27th June, suggesting that there was something unfair or improper about their Lordships' decision. I wish immediately to repudiate the implications of this letter.
I say only that the views of Members of another place cut across party lines. My noble Friend the Leader of the House in the other place explained the background and the procedures, and I think that the Government acted with scrupulous fairness. The Lord Chairman of Committees, who had voted against the setting up of the Select Committee in the Special Orders Committee, himself moved the motion on the basis that it was normal practice for the House to adopt the reports of its Committees. It was made perfectly clear that the Government left the decision whether or not to set up a Select Committee to a free vote in their Lordships' House and my noble Friend the Leader of the House, my noble Friends Lord Aberdare and Lord Limerick, being the representatives of the two Departments concerned, the DTI and the DHSS, and the Government Whips abstained from voting on the motion.
On this basis I can only regret that the Managing Director of Roche Products Ltd. has seen fit to suggest that the recommendation of the Special Orders Committee was frustrated by a party political manoeuvre, or that it was in some way improper for my noble and learned Friend the Lord Chancellor, for 646 example, to vote in the way he did. The suggestion that any member of the House, including the Lord Chancellor, was not free to vote according to his conscience is quite monstrous.
Both Houses are now able to consider the No. 3 Order.
§ Mr. Peter Rees (Dover)
Can my hon. Friend cite any instance on a previous occasion when the House of Lords has similarly emasculated the recommendation of its Special Orders Committee?
§ Mr. Emery
There have been only two occasions when the other place has considered an application to the Special Orders Committee. In the first of them it was quite plain that the applicant was in no position to put his case and in that case the Committee's recommendation was adopted. In the second case no decision was made, because a General Election intervened. However, I think it would be quite wrong of anyone to believe that there is any precedent in the fact that this matter was dealt with in the way that it was. Certainly it would be a precedent for anyone to suggest that the other place always approved the decisions of all its Committees. That is not the case.
I should inform the House of three other developments that have taken place and which may be of interest to hon. Members.
The Roche Group has begun proceedings in the High Court against the Department of Trade and Industry in connection with this order and the two earlier orders. Among other things the group seeks a declaration that the proceedings of the Monopolies Commission were contrary to natural justice and that the orders are therefore void. It is also claiming damages for losses suffered in consequence of the making of the orders by the Secretary of State. These proceedings will have to take their course.
The second development is that the company gave notice to the Government in a letter of 25th June from its solicitors that it proposed to raise its prices in breach of the order unless the Government agreed to certain conditions in connection with the possible repayment of moneys to Roche representing the difference between the pre-order prices and the prices fixed by the order.
647 My right hon. and learned Friend the Minister for Trade and Consumer Affairs placed a copy of this letter in the Library of the House on 27th June, as he said he would do in answering a Question by the right hon. Member for Bristol, South-East (Mr. Benn). As a result of this letter, the Government have moved for an injunction to secure compliance with the order. Proceedings began yesterday and were adjourned until next week.
Roche is abiding by the order and has undertaken to do so pending next week's hearing. I have been fairly comprehensive in what I have said on this matter, and in the circumstances the House will understand that I wish to say no more about it tonight.
The third matter is the question of the provision of information. Hon. Members will recall that there has been much discussion about certain figures that were not made available to the Monopolies Commission.
The Commission referred to this question in paragraph 156 of its report. It had asked for the value of world-wide sales of ethical products; the value of world-wide research costs for ethical products; the world-wide sales of chlordiazepoxide and diazepam respectively by value; and the world-wide sales of chlordiazepoxide and diazepam respectively by weight in kilograms.
Roche, superimposing its judgment on that of the Monopolies Commission, thought that the information would be of no use. The commission thought it was necessary for its inquiry and quite naturally wished to reach its own decision on its usefulness and its own conclusions about how far it was necessary for a proper understanding of its report to publish the information.
The Commission is, of course, used to handling commercially sensitive information—it has to do so probably in every inquiry—and does not publish it without the best of reasons.
But that is all in the past. I am now able to inform the House that, in a letter dated 29th June, Roche's solicitors presented to my Department the figures referred to in paragraph 156 of the report, from which I have quoted. Roche would prefer them not to be published. We have, however, passed the information on to the Department of Health and 648 Social Security, to which Roche signified that it had no objection. I am glad that the firm has now provided the information, which is being studied.
It is a pity that such information was not made available in the past, either to the Department of Health and Social Security in successive discussions over a number of years under the voluntary price regulation scheme, or in response to the request from the Monopolies Corn-mission in case it would have assisted it in its inquiries.
§ Mr. T. H. H. Skeet (Bedford)
If the information has been disclosed, and is rather material, about the research money spent around the world, apart from total sales, surely this matter was never considered by the Monopolies Commission and therefore the commission's findings may have been based on an error.
§ Mr. Emery
I never wish to belittle any argument put by my hon. Friend the Member for Bedford (Mr. Skeet) and, of course, that could be one conclusion. However, it may well be that exactly the opposite is the case. That is why I believe it right that I should have said that the matter has now been passed to the Department and we have now reached the position in which both Houses can approve the No. 3 Order.
I should add that if Roche was to come forward with any new evidence of another important change in the relevant circumstances since the commission reported, which might justify some modification of the order prices, my right hon. and learned Friend would naturally be glad to consider it. Clearly, the prices that the order sets out may not be appropriate for all time and it is right and proper that the Government should say that we very much hope that the House will show its support for this order, as it did for the No. 1 Order, by approving it tonight.
§ Mr. Nicholas Ridley (Cirencester and Tewkesbury)
My hon. Friend says he has received these figures, which have been required for some time. If they are so relevant, why does not my hon. Friend reveal them to the House so that we can form our judgment on whether we should pass this order? He has the benefit of knowing whether those figures are relevant and helpful, or have any 649 bearing on the matter. We do not, but it is we who are being asked to pass the order tonight.
§ Mr. Emery
Yes. I fully understand the point that is being made by my hon. Friend. There are two things. First, the company that has supplied the information which has been so consistently refused has asked that the matter be not made public. In the proceedings as they are at this moment it would seem to me, when accusations are being made against the Government, that it is right and proper at this moment that we should take the action we have. The figures have been passed to the Department of Health and Social Security so that an assessment can be made of them. At this stage of the proceedings I do not believe that it would be right or proper to publish them—
§ Mr. Emery
May I first of all finish the sentence I am in the middle of? That does not preclude the fact that in the fullness of time it may be thought necessary to publish them, but with all the information which is considered to be of a highly commercial nature and which the company which has supplied it has specifically asked should not be made public. I believe that at this stage of the proceedings the Government would be in no way considering the position of Roche by allowing me to comply immediately with the request of my hon. Friend.
§ Mr. Ridley
I am afraid that I must take issue with my hon. Friend on a point of fact. As I understand it, Roche has said that it would be quite happy for the information to be made public but would like the Government to inform the company before doing so. So my hon. Friend is not right in saying that Roche has asked for the information to be kept secret. I would, therefore, suggest to him that it would be much better if he brought the order forward on a day after he has had time to tell Roche that he intends to publish the figures, and so that we may be asked to pass this order with full information at our disposal.
§ Mr. Emery
My information is clear and definite, and I would not wish to mislead the House in any way. The company has made it quite clear to the Government that it would prefer us not to publish the figures. There is no doubt whatsoever in my mind that that is the case. If Roche wishes to publish the figures, it is entirely up to the company. It is not anything I have to do. Why should I be held to be in any doubt when this information is easily available to this company to make public if it wishes to defend itself? I do not believe it is right for the hon. Gentleman to suggest what he is suggesting when the Government are complying with a request of that company, when that company is able to make public its own figures. If I may suggest it, the hon. Gentleman is on a false point.
§ Mr. Peter Rees
My information is—and no doubt my hon. Friend will correct me if I am wrong—that the figures that the Ministry was anxious to obtain and for which the Monopolies Commission asked were sent to the Secretary of State on 29th June, to use as he sees fit but with the invitation not to publish them without good reason—which seems to be reasonable—and with the suggestion that if they were published the reasons for doing so should be stated at the time. Perhaps my hon. Friend would confirm, not necessarily at this point of the debate but, perhaps, later, if he can catch your eye a second time, Mr. Deputy Speaker, that that is the case, because that puts a slightly different construction on this point, which is of particular importance when the House has to make up its mind on this order.
§ Mr. Benn
Before the hon. Gentleman replies, and while he is considering the advice that has reached him from the Box, may I ask him in his reply to clarify the position? As I understand it, information was sought by the Monopolies Commission from the company, which declined to publish it. The information was not made available to another place when the Special Orders Committee considered the matter under the special hybrid procedure. It was not made available to another place when it considered the report of the Special Orders Committee. It was not made available by the company to 651 another place, therefore, when that other place was trying to decide whether it should take the advice of the Special Orders Committee and set up a Select Committee. It is now available to the Minister with a special request that it shall not be published without giving to the company notice that it is to be published.
§ Mr. Benn
But at any time. If the fact that the Monopolies Commission asked for this information does not constitute good reason, I would like to know what is a good reason. I should, however, like the Minister to confirm that this information has been denied to both the Monopolies Commission and a Select Committee of another place and is denied to this House tonight, at the request not of the Minister but of necessity of the firm concerned. Can he confirm that?
§ Mr. Emery
I should like to clear this up, because I believe that a red herring is being drawn across the whole subject and I would not want to mislead the House or have anybody suggest that the Government were not acting absolutely properly in the matter of these figures. I should like to make it absolutely clear—I have the letter before me—that Roche wrote to the Department saying:Nevertheless these are, as you are aware, figures which our clients as a matter of policy have never disclosed for general publication. Our clients' view is that no useful purpose would be served by making the figures public knowledge.If that is not a fairly strong view of the company urging us not to publish, I do not know what is.
§ Mr. Emery
I am not giving way at this moment but, if I may answer the hon. Gentleman who was on his feet at the same time as I was, I will say what is absolutely clear: that if the company wishes to publish the figures, it may do so. It is up to the company. I would say to those who want to come to this House and defend the company, or who argue that there is something wrong because the company is supposedly not having a fair deal, that it rests with the 652 company itself to publish the figures. There can be no doubt about that. It is within the control of the company.
Secondly, there is as far as we know—we have had time to make only a partial study of the figures since we received them—nothing at all startling about them which makes the Government think that the Monopolies Commission's figures were wildly wrong. It is important that that should be clearly understood. I hope that the House will show its support for this order as it did for the previous orders.
The Government do not believe that the current court proceedings need in any way prevent Parliament from approving the order tonight. Roche has exercised its right to challenge the order in the courts. That is its right. In the meantime, however, it is, I believe, right for the status quo to be maintained and for the order price to continue in force. Therefore, in commending the order I should conclude by repeating what I said earlier.
I assure the House that the Government will continue to believe that they have acted correctly in this matter. Therefore, the order should have the support not only of the House but of the country as a whole.
§ Mr. Peter Rees
Before my hon. Friend concludes, will he read the letter from which he quoted selectively?
§ 9.56 p.m.
§ Mr. Nicholas Ridley (Cirencester and Tewkesbury)
I must first declare a rather oblique interest because when this reference was made to the Monopolies Commission I was in the shoes now occupied by my hon. Friend the Under-Secretary of State. I think that it would not be breaking the terms of the Official Secrets Act to say that the recommendation was mainly made by the Department 653 of Health and Social Security. Therefore, in no sense do I wish to criticise the making of a reference, but I wish merely to say a few words about the report and the position we have now reached on Roche.
I am of course against monopoly. Nothing would please me more if there were no monopoly and free competition throughout our economy. Nevertheless, I slightly dislike the sort of hectoring tone adopted by the Government on this matter, and some of the things said by my hon. Friend the Minister tonight seemed to smack of an attitude that they were determined to clobber this company without being quite certain whether they were right to do so.
I must first refer to the competitive situation in respect of tranquillisers. Although Roche has 60 per cent. of the world market, there are three or four tranquillisers which compete. One is Serenid, which is more expensive, another is Meprobamate, which is slightly more expensive, and there is Integrin, which is four times as expensive as Valium and Librium on the British market. Therefore, one must conclude that these tranquillisers are competitive in price with their competitors. Understandably there has been a heavy stocking up of the tranquillisers by members of the public while these orders are in force. It seems to me to demonstrate that at present prices the public are getting good value for money and do not expect supplies to continue to be so cheap for long.
The tranquillisers are protected by a United Kingdom patent. What is the point of a patent if it does not offer protection to those who have spent large sums of money in developing a product of this sort? It seems curious that we have stuck rigidly to our patent laws and enforced them, and are now taking action of a vicious sort in direct contradiction to the rights granted by Her Majesty in Letters Patent. These are marvellous drugs which have brought great benefit and comfort to millions of people.
I wish to ask three questions. Are we wise, in the interests of the British consumer, to pass this order? We are bullying this company and—no doubt this is a surprise to the Department of Trade 654 and Industry—the company is showing itself remarkably unhappy about the bullying and is refusing to knuckle under. Could it be that we may be forced to obtain drugs from competitors if we proceed with this order and Roche will not make its tranquillisers available? If that were to happen not only would we have to pay more but we would probably have less effective tranquillisers for doctors to prescribe. They might be up to three times more expensive.
I wonder, indeed, whether people realise how cheap Roche sells its tranquillisers in this country compared with the price in other countries. The price of a standard dose of Librium is 1.5 in the United Kingdom, ranging up to 4.1 for the same dose in Australia. That is the retail price in pounds per 100 tablets of capsules. When one looks at all the drugs, not only those made by Roche, one finds the same pattern. We obtain drugs at extremely cheap prices compared with those paid in many other countries for important patented drugs of this sort.
I know that my hon. Friend the Member for Barkston Ash (Mr. Alison), together with his Department, has been waging successful campaigns to bring down the cost of drugs to the National Health Service, but how wise is it to pursue that too far, and are we in danger of being the only member of the international club who is not paying a fair share of international research into drugs?
The second question which the House must ask itself is whether we have the right to bully this foreign company—this horrid multinational, as Labour Members will no doubt describe it. We do not have full information about this matter. We know that we are vulnerable, because drugs made by British pharmaceutical companies in this country and sold cheap here are much more expensive abroad.
What happens if Sweden, Australia or Switzerland starts to pass orders such as this one against the products of British firms which are charging three times as much abroad as they are charging in the home market? Would that he conducive to employment or profit in British drug companies, or to the further development and research which leads to more drugs to help mankind?
655 The National Economic Development Office report on pharmaceutical companies states:However, persistence of the apparent current lack of alignment of prescription medicine prices in the United Kingdom with those in comparable overseas markets, in so far as this affects profitability and the assessment by pharmaceutical companies of their future prospects, could cause a reduction in the share of the world pharmaceutical industry's new investment located in the United Kingdom.Those are further risks that we run.
The third question, and much the most important one, is whether we are right in our judgment of the prices that should be charged. Assuming that we are right in answering my first two questions, are we right in the prices which the order lays down for the sale of these drugs? I put forward the view that, if the figures that have been produced are relevant it is imperative that the Government should bring them before the House and let us have them.
I shall not support the order in the absence of any figures which may shed new light on the problem. I think my hon. Friend was wrong to suggest that Roche had asked for them to be kept confidential. On receipt of the letter containing the figures on Friday, my hon. Friend could have telephoned Roche and said that he had to move an order in the House of Commons on Wednesday and he must inform hon. Members, if these figures threw new light on the problem, what they were. I say that because it would clarify the issue very much if we had a little more information about the economic judgment which underlies the prices in the order.
I find the Monopolies Commission report exceptionally abstruse and unconvincing on the question of what are the right prices for these drugs. The two assumptions which it seems to make are in conflict with the National Economic Development Office report on the pharmaceutical industry. The two assumptions seem to be that all that matters is the profit that is being made on these two drugs and not the profit being made by the group as a whole, and secondly, what the company is making out of its United Kingdom sales as opposed to its world-wide operations. The Monopolies Commission apparently came to a conclusion, through much 656 unconvincing arithmetic, that the company was making a whacking profit from the sale of Librium and Valium in this country alone—nothing else seemed to interest the commission—and it went on to recommend these very strong reductions.
This has really nothing to do with me because I am not representing the country in which La Roche has its headquarters and pays it taxes and where monopoly laws affect it. But if we use this technique against foreign companies of this sort, I quail to think what would happen if they were to start using it against us. If we are to do it, we have to satisfy ourselves that the decision to which we come as to how much is being spent on research by this company is at least based on the true facts and is reasonable in the light of the continual escalation in the costs of research which we know is taking place in this industry.
I remind the House that, although the running costs of research are shown before the profit is drawn, a very large proportion of the profit is reinvested into capital facilities for doing further research. From the figures in the company's accounts, one finds that almost the smallest item in the appropriation account is dividends. The company is not paying the money out to people; it is ploughing it back into further research, and research which, it is freely admitted, would not be done if there were to be a cutback in the profits it could make.
§ Mr. Ridley
My hon. Friend will no doubt develop that point. I do not want to take up too much time. But one could go on to a whole series of questions which, if we are to be fair-minded and responsible about the order. we should be asking.
If I had been a member of the Special Orders Committee of another place—after this speech I suppose that my chances have increased rather than reduced—I would have voted with the four and not with the three. We do not have enough information to enable us 657 to decide whether we are acting here in a hysterical way and slashing the prices of the company's drugs resulting possibly in a cutback in research which we do not quite comprehend. No figures have been put before me that convince me about the level of prices. Perhaps it should be lower. I am not saying that it should be higher or lower, but the information does not seem to be sufficiently convincing for making such a bold stab in the dark on what would be a proper price.
Irrespective of the legal proceedings, which do not debar us from talking about this matter, I ask my hon. Friend to produce some better facts and figures before he proceeds with any order on a permanent basis. Whether he gets his 658 order tonight does not seem to be very important. What is very important is that another place, which has the power to do so, should examine this order with a great deal more care than we can examine it, because we have no procedure for setting up Select Committees or for suggesting that the order is hybrid. It is the very hybridity of the order which makes that procedure in another place so very valuable. Indeed, if I would not be out of order, I should like to suggest that we should adopt hybridity powers in relation to statutory instruments in this House, too; but that is not for tonight.
I content myself with saying that my hon. Friend must make a better case before he makes these prices a permanent feature of our legislation.
§ 10.10 p.m.
§ Mr. T. H. H. Skeet (Bedford)
I am, naturally, concerned about the future of research and the coming on to the world market of new drugs, from whatever firms they may derive. Of course I accept the view of the Under-Secretary that it is the job of himself and his Department to assess the validity and use of the information which has been disposed by the company.
Yesterday this matter came before the High Court and an assurance was given by the company that it would not raise prices. It will come before the court again on 10th July. I should have thought that the order could be withdrawn and brought up again if there is an unsatisfactory renewal of the arrangements then.
In its report the Royal Commission said:The group's current research expenditure has been inflated by the use of excess profit to a point at which it ceases to be reasonable to regard the expenditure as fully recoverable from current sales.Earlier it said:We did not accept that in the virtual absence of price competition there is no limit to the price and profit levels that a manufacturer is justified in setting himself so long as he uses the proceeds to expand his research.On what evidence could the commission come to that conclusion? An enormous amount of money spent on research may prove abortive. An enormous amount may be spent in various parts of the world and the price is divisible among consumers.
One comes to consider the nature of the company involved. As I said in my intervention, the return on assets of this company is roughly equivalent to that of the Beecham Group in the United Kingdom. It spends more on research than most pharmaceutical companies and less on uneconomic production. The profitability of its items would compare with those of many United Kingdom companies. All that we are considering in this case is whether the commission was right, when assessing prices, to conclude that research could not be allowed beyond a specific limit. But it has not accepted evidence on this issue. In fact, it has gone quite the other way. That is what concerns me.
660 In the public interest letter sent by the Department to the company which was discussed extensively in the Committee on the Fair Trading Bill certain matters were brought up. In the case which has been presented, which many hon. Members will have received, one reads:An examination of the public interest letter shows that it contains no hint of any suggestion that the level of Roche group's research expenditure might be regarded as inflated or too high to be a proper charge against profits, or that the level of such expenditure was abnormally high for a large pharmaceutical manufacturer.Therefore, at the time when it received the public interest letter the company had no inkling of what was in the commission's mind that it would have specifically to answer. There was no call for the company to have to justify its research expenditure.
Then, of course, on 26th October 1972, at the oral hearing, the company was suddenly presented with a statement that the commission would like some evidence on this general subject. About 30 minutes was spent on a major subject which is the basis of the commission's report and from which it could not have derived any evidence from the people who were challenged. These people had no opportunity of presenting their case.
The argument, of course, is that research and development expenditure, when it is to be incorporated in a price, cannot be taken in isolation. One must consider one's worldwide expenditure and the products of a company and then assess what is the proper figure.
The other matter on which the commission would have to come to a conclusion is where there is to be a cut-off allowance for the amount of money spent on research, and where it should come in this case. The House is entitled to that information, but we have no evidence adduced on it.
The Minister has said that of course there has not been a full disclosure by the company. On page 43 of the report the company says:The Commission in criticising the Roche group for failing to provide information requested by the Commission failed to disclose that the information was material only for 661 the purpose of verifying figures provided or offered to the Commission, and that such information was in fact offered to the Commission in confidence and refused by it.I am not interested in the industry. I am not interested in a foreign company. But I am interested, as a Member of this House, to see that it is properly dealt with by a Monopolies Commission from which there can be no appeal. The company feels that it has not been able to establish the right to assess in its boardroom the quantity of money which it should set aside for research into new drugs. Many of us here will appreciate that new drugs are essential for the treatment of cancer and many terrifying diseases.
If the price is to be cut by the Government, the effect will ripple right across the world. It will have the consequence that the amount of money allocated for research will also be cut. Therefore, we are deprived of a singular advantage.
As the matter is being litigated, as it is seized by the High Court, I see no necessity for passing the order. When I put to my hon. Friend the Under-Secretary that I wanted him to assess the materiality of the evidence he has received, he said that there is nothing wildly wrong to interfere with the judgment that the Government have made. But the national Press this morning was of the view that the Department had not finished its studies and, therefore, had not reached a conclusion. Of course, I must accept my hon. Friend's conclusion, but if the Department has reached its conclusions I should have thought he could say, on the basis of what he had read, why he can vindicate the policy he put forward on a previous occasion and why he suggests that the information which has now been disclosed has no materiality.
This is a case which goes well beyond La Roche. I can see it arising with many pharmaceutical companies, not merely our own but others, and in other fields, that the State will have the right to say that there is a point beyond which expenditure on research is needless, not because the industry and those concerned know all about it but simply because the Monopolies Commission, consisting of people picked from all walks of life, is 662 prepared to lay it down and the Government in turn are prepared to say that they will sanction the report, from which there can be no appeal.
I have said enough on those points. I cannot support the order, because I do not have the information on which to come to the correct verdict. The Government should hesitate, draw back until next Tuesday, when we shall see the state of events again. They will then have the opportunity to present the whole case with full knowledge, to give my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) the full information contained in the letter, if he has not got one already, and give the House the benefit of the additional information which he has and has studied, because he disclosed that information to the House.
§ 10.20 p.m.
§ Mr. Frank McElhone (Glasgow, Gorbals)
It was not my intention to intervene, but, having listened to the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) and the hon. Member for Bedford (Mr. Skeet), I felt obliged to do so.
I take up the last remark of the hon. Member for Bedford—namely, that he will not support the order because he does not have all the information. I get the impression that the hon. Gentleman is well briefed. He was able to make comparison with Beecham's and other companies. It seems to me that he and his hon. Friend the Member for Cirencester and Tewkesbury have been very well briefed. I was reminded whilst listening to them of the defence of the private railway companies of the past.
It ill becomes any hon. Member not to support the Monopolies Commission and to give support to an abuse of commercial power by a multinational company.
§ Mr. Ridley
The hon. Gentleman says that my hon. Friend the Member for Bedford (Mr. Skeet) and I appear to be well briefed. He seems to suggest that he is not. Might it not be better if he became well briefed before supporting without question the order?
§ Mr. McElhone
That seems a fair point, but it works the other way. The 663 hon. Member for Cirencester and Tewkesbury is a former Minister in the Department of Trade and Industry. He is a predecessor of the Under-Secretary of State. He of all people should know his case better than most. For an ex-Minister of the present Government to say that he is not prepared to support the order castigates the Monopolies Commission. I hardly think that that is responsible conduct for an ex-Minister. That is especially so when he says that his decision will probably cost him a seat in another place.
The hon. Gentleman took great pains to mention other European countries. He mentioned the prices charged in Sweden and other places. My limited information indicates that the company is not too happy with the Italian side of its operations. I understand that the company does not get anything like the prices for similar products in Italy that it receives in this country.
I am very much aware of the great use of Valium and Librium. I found it strange that the hon. Member for Cirencester and Tewkesbury should say that the public is stocking up because of the price cuts which have been imposed. Surely the public is not allowed to stock up with drugs of this nature. Surely the public can obtain the drugs only by prescription from general practitioners. I hope the hon. Gentleman will take the opportunity to correct that statement. It could be lethal if it went from this House that people can stock up with these drugs. The hon. Gentleman's remark casts a slur on the medical profession. I do not think he means what he says. If his remark is read tomorrow it will reflect badly on the medical profession, which is responsible for the dispensing of drugs.
I should have thought that the order would have had the support of every hon. Member, and certainly hon. Members who have been ex-Ministers in the Department of Trade and Industry. The time is long past when we can accept that international companies should be able to say to the Government that they are not prepared in any way to cooperate, in spite of the fact that the record of the Department of Health and Social Security when making agreements with British and international companies 664 has always been reasonable. I consider that we have always been fair dealers when making such agreements.
§ 10.25 p.m.
§ Mr. Peter Rees (Dover)
I hope that the hon. Member for Glasgow, Gorbals (Mr. McElhone) will forgive me if I do not follow all his main points, although, by implication, I will take up some of his minor ones.
I am not concerned to make the case for La Roche, nor do I quarrel with the proposition that my hon. Friend the Under-Secretary of State should do his best—as I know he is doing—to limit the cost of drugs and medicines to the National Health Service and to private patients. There is another consideration which weighs strongly with me and which I hope will weigh with other hon. Members on both sides of the House.
The order is based on the report and recommendation of the Monopolies Commission. If the report and recommendation are open to serims criticism it follows that the order is open to serious criticism. I do not intend to criticise the panel of the Monopolies Commission which considered this problem, though possibly only one of its members was really qualified to judge the financial implications of the case.
It would be trite and absurd for me to equate the Monopolies Commission with the Star Chamber, but it is true that its processes are inquisitorial and the consequences of its recommendations can be penal. More importantly, a party does not know in any detail the case that it has to meet. It does not know the evidence given by other parties which vitally affect its case and, as my hon. Friend the Member for Bedford (Mr. Skeet) pointed out, there is no right of appeal. I contrast that position with that of the Restrictive Practices Court, which was introduced by a Conservative administration, and from which there is a right of appeal.
The reference to the Monopolies Commission was a degree disingenuous because it did not mention by name the La Roche company, but as the La Roche company had the patent for the two products which were the reference products it was obviously directed, and directed only, at the La Roche company.
665 I ask myself—and I cannot glean this from the Monopolies Commission's Report—did that company have a substantial chance to rebut the case that was clearly being compiled and made against it? My hon. Friend the Under-Secretary of State has criticised the company for not having produced crucial information I am not here making the company's case, but I understand—and this can be inferred to a certain extent from the Monopolies Commission's Report—that the only figures which were denied by the company to the Monopolies Commission at the end of the day were figures that were needed to substantiate figures that had been made available to the commission, and the figures that had to be substantiated were figures that had been agreed for tax purposes by both the United Kingdom and the Swiss revenue authorities.
Certain misinformed points have been made about the tax implications of the case. Under the Double Taxation Convention between this country and Switzerland, if a group rigs the prices at which products are transferred from, say, a Swiss parent to a British subsidiary, the revenue authorities of both countries can intervene and adjust the tax liabilities of both companies by reference to open market considerations. I understand—and perhaps my hon. Friend will correct or confirm this if he catches your eye again, Mr. Deputy Speaker—that the only figures that were not profferred to the Monopolies Commission at the end of the day were those needed to support figures that had independent support from the revenue authorities of the two countries concerned.
Beyond that—and this again may be inferred from the Monopolies Commission's Report—the figures were offered to the commission but on the basis that they were not for publication. Whether that was a proper basis on which to offer figures I do not say. It simply is not true—it could be that I am misinformed because I am not making the company's case—and it certainly is not fair for my hon. Friend to say publicly in this House that the company was as unco-operative as he led us to suppose in his opening remarks.
666 My criticism of the Monopolies Commission's Report is perhaps irrelevant. What will perhaps weigh with the House is that another place thought fit to refer the recommendation to its Special Orders Committee. I hope that the right hon. Member for Bristol, South-East (Mr. Benn) will allow me to correct him. I know that his experience in parliamentary matters is very great, and I know that his father graced the upper House and hereditarily, therefore, he may have considerably more knowledge of the upper House than I.
However, the Special Orders Committee is a quasi-judicial body almost analogous, although not similar in history, to the Judicial Committee of the House of Lords. But it is concerned only to see whether a prima facie case can be established to upset some kind of order that has been referred to it. The terms of its operations can be extracted from the Standing Orders of the House of Lords. In particular, the Committee is enjoined to discover whether the petition discloses substantial grounds of complaint. But it is not required, and nor did it do so in this case, I understand, to go deeply into the merits of the company's case.
It certainly did not hear all the evidence that had been given or could have been given to the Monopolies Commission because the whole tenor of the company's petition was that if it was found that the company's case disclosed substantial grounds of complaint the matter should be referred to a Select Committee for a further and more detailed examination of the merits of that case. This was what the Special Orders Committee found. It is as irrelevant to observe that it found by a majority as it is to observe in legal cases sometimes that the Judicial Committee decides matters on a majority vote.
What the Committee found was that the matter should be referred to a Select Committee. The clear inference from its decision was that it was dissatisfied with the way in which the Monopolies Commission had investigated the case. I do not want to put it too highly but it felt at the end of the day that possibly the commission 'had not given the company 667 a proper chance to deploy the necessary evidence on one or two crucial points.
My hon. Friend must forgive me if I say that it will not do for him to say that it recommended a limited and narrow referral to the Select Committee because the matters on which it recommended a referral went to the heart of the Monopolies Commission's decision. I quote from the report of the Special Orders Committee:Further inquiries should be limited to the issue of whether the prices recommended by the Monopolies Commission"—the prices which we are being asked to debate—make adequate provision for a proper allocation of group research and development expenditure in their sales of the reference drugs by the petitioners in the United Kingdom and if not what, if any, adjustments upwards should be made of prices recommended by the Commission in order to make adequate provision for this expenditure.That is the kernel of the matter we are asked to decide tonight. It will not do for my hon. Friend, for whom I have the greatest respect, to brush it aside and say that there was to be only a limited reference—"narrow terms of reference" he said. He went on to say that after a full debate the recommendation was emasculated—that is my word but that was the effect of his remarks—in another place. It is not for me to comment upon the conduct of affairs in another place. I hope I may be permitted to observe that in the course of that debate there was less evidence given than the Special Orders Committee had and all that another place had was the report of the Monopolies Commission.
I see no practical reason why we in this House should not have the matter referred to a Select Committee. It was against every precedent that the recommendation of the Special Orders Committee in another place was emasculated in this way, and it would be the honourable course for the Government to withdraw this order so that the matter may be referred to a Select Committee. This is the third order that has been based on the Monopolies Commission's Report.
There is, of course, another facet to this problem to which my hon. Friend the Minister has referred. Litigation is impending, and I understand that the company is contending that the conclusion 668 of the Monopolies Commission contravened the rules of natural justice. It would be improper for me—and I am in no position to do so—to say whether that case is well founded. Knowing what we do of the Monopolies Commission's procedures, it is possible through inadvertence—and I do not allege malice or bias—that points were not put to the company, and that the company was not given a chance to rebut the substantial case made against it. We shall no doubt hear next week if and when any order is made in the Chancery Division.
If an order were made on the company's case by the High Court it would follow that the High Court was saying that the Monopolies Commission's conclusions and recommendations could not be relied upon. If that were so my hon. Friend and the Government would find themselves in the embarrassing position of having asked us to pass an order which the High Court subsequently found was based on a misappreciation of the true position by the Monopolies Commission. There is no justification for the order if the Monopolies Commission came to the wrong conclusion. It may be that in the end Roche has charged an artifically high price. I am in no position to judge that. I cannot check it. But I observe that the revenue authorities were satisfied, and the issue on which they had to be satisfied was very much that.
I am concerned that the company has not had a proper chance to state its case, and I find that particularly distressing because it is all too easy to project this case as another feature of the ugly and unacceptable face of capitalism, particularly Swiss capitalism. It is all too easy to have another tilt at multinational companies—an expression which has practically become a term of abuse, though why I fail to understand. It is all too easy to whip up sentiment on the basis that the National Health Service has been overcharged for drugs by rapacious monopolists. But I feel that in matters where the Government are armed with far-reaching powers they should be seen to act with scrupulous fairness.
It would be so easy for my hon. Friend to withdraw the order tonight and refer the question to a Select Committee on what he described as the narrow basis recommended by the Special Orders Committee of the other place. If he does 669 not, I shall be unable to support this order tonight—
§ 10.40 p.m.
§ Mr. Charles Fletcher-Cooke (Darwen)
Unlike many of my colleagues, I support the Monopolies Commission's Report in this matter, as I have said before. It is perfectly proper and inevitable that the Monopolies Commission should inquire into the accounts of foreign or multinational companies in the national interest, just as it can those of national companies if it can do so and if it would be impossible for it to fulfil its task if it did not. On the other hand, in view of what we have heard, this seems a very odd moment at which to bring forward this order. I support the order, but its timing strikes me as inopportune.
I say that for two reasons. The company has alleged that the considerations of natural justice have not been observed by the Monopolies Commission. It is very easy to allege a breach of the considerations of natural justice, and it may be that Her Majesty's Government feel that if they allow that sort of consideration to apply in this case it will be open to everyone who feels himself injured or damaged by a report of the commission immediately to make such an allegation, to issue a writ in the Chancery Division, and to follow the inevitable course of justice by these procedures.
If that was all it was, the Government should not sit down under it. But there is a bit more substance in it than just that. This distinguished quasi-judicial body in another place has given some sort of prima facie support to it. It is nothing to do with me, but I do not think that there is anything in it. But if the Special Orders Committee says that there is a case to answer on these questions which my hon. and learned Friend the Member for Dover (Mr. Peter Rees) has so eloquently described, and if the company has gone to the extent of taking out its writ in the Chancery Division, which is returnable very quickly, it seems to me that today rather than this time next week is very hasty.
670 I am fortified in that view by the fact that there has been, rather late in the day, a sort of death bed repentance on the part of the company to offer these figures. My hon. and learned Friend said that the company had offered these figures all the time to the Monopolies Commission in conditions of confidentiality. if that is so, it puts a very different aspect on the matter.
We in this House have felt from first to last in this matter that one of the reasons for supporting the Monopolies Commission's Report, as I did, was that the company had made no such offer. The commission is entitled and empowered to observe a strict confidence in such figures. If the figures really were offered in confidence, as my hon. and learned Friend alleges, that puts a very different complexion on the matter. If they were offered in confidence and refused, if they were offered in confidence and accepted but ignored, the whole report is different in that respect.
I shall be very interested to hear what my hon. Friend the Under-Secretary has to say in reply to what is a very serious charge by my hon. and learned Friend the Member for Dover, namely that these figures, the absence of which have caused such justifiable criticism, were offered from the beginning, offered again, and offered on Friday in terms of what almost amounts to a public offer, namely, that the company is prepared to make them public providing a good reason is shown. It is obvious what the good reason is. It is that we in the House of Commons need them. Can one have a better reason than that? If that is all that is required to let us know what these figures are, it seems to me that this moment for passing the order is an inopportune one.
I now express a personal view based only on a reading of the report and on no other sources of information or briefing. I have no doubt that at the end of the day the Monopolies Commission is probably right in its conclusions. But I have equal trouble at the moment in thinking that this Wednesday night, with this very important case coming on next week and with the figures having at last been offered quasi-publicly on Friday and perhaps all the time in confidence to the Monopolies Commission, on the 671 procedure that we are asked to adopt—not on the merits—my hon. Friend the Under-Secretary need not answer the very serious criticisms made by my hon. and learned Friend the Member for Dover.
There is one thing on which I disagree with my hon. and learned Friend the Member for Dover. I do not think it is right to refer this matter to a Select Committee of the House. I think the question of whether natural justice has or has not been observed is in very good hands in those of a judge of the Chancery Division. That is a quicker and to my mind less biased or collaterally motived affair, and I am glad to think that it will occur next week. I shall abide by the judge's decision. If, as I believe, he decides that the commission observed considerations of natural justice, I shall be happy to vote for the order. But I should like to vote for it next Wednesday rather than this Wednesday.
§ 10.45 p.m.
§ Mr. Anthony Wedgwood Benn (Bristol, South-East)
This has been a very important and somewhat surprising debate. I had come hoping to contribute modestly to the arguments which would be brought forward, but I think I am right in saying that not a single hon. Member opposite who has spoken has supported the Under-Secretary of State in his presentation of the order. Since these matters are very important, perhaps I may be allowed to comment briefly on some of the points which have been made.
First, the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) was a Minister in the Department when it referred Roche, as he frankly admitted, to the Monopolies Commission. He knows very well how the commission's inquiries take place. Indeed, he was pledged in the election to strengthen the control of monopolies.
The hon. and learned Member for Dover (Mr. Peter Rees) referred to this as a Star Chamber procedure—a curious phrase. He should compare it with the procedure which the Government have forced through, with the votes of hon. Members opposite, under the Counter-Inflation Act, by which wages are controlled by the Pay Board without its having to come back to the House of Commons at all. There is no procedure for wage controls or, indeed, for price 672 controls under the counter-inflation legislation to come back to Parliament at all.
The Monopolies Commission, unlike the Price Commission, examines its cases over a very long period. I do not know how long it was engaged in the Roche matter, but it must have been from autumn 1970 until spring 1973, which means that it was a fairly long inquiry. To describe that as a Star Chamber procedure is to do less than justice to a fairly established and fairly highly respected body of doctrine and practice which has grown up around the commission, and certainly, when the final decision is open to both Houses of Parliament by vote, does not do justice to the procedure through which the inquiry has been conducted.
§ Mr. Peter Rees
If the right hon. Gentleman had listened carefully to my speech, he would have understood that I was tentative in my analogy. I was not concerned with the policies which the Sitar Chamber was designed to implement, nor particularly with the policies which the Monopolies Commission is designed to implement. I was commenting that the consequences of the decisions of both were of extreme importance to those involved and that the commission does not, and the Star Chamber did not, adopt normal procedures used in our courts, but, instead, uses inquisitorial procedures which possibly in our experience do not give the defence the same opportunities of deploying its case as the more usual methods adopted in the High Court.
§ Mr. Benn
The hon. and learned Gentleman knows very well what connotations of the Star Chamber were to the dissenters who had their ears cut off and were generally pilloried. That is the public understanding of the Star Chamber. In the last few weeks, the hon. and learned Gentleman has trooped through the Lobby in support of the Counter-Inflation Act, which lays down that the Minister is not obliged to consult anyone about its provisions, and, although the Minister will consult, that is not to be taken as implying that further consultation is required where he is satisfied that sufficient consultation has taken place and the information available is sufficient for his purpose. In other words, the Minister can brush aside requests from any union which wants to come up with a wage 673 claim and say "No. I had these consultations months ago."
The Monopolies Commission, with all its defects—no commission can be perfect—comes as near to a body making a proper examination of difficult economic and industrial problems as we can devise. It does it at length. It asks for information. Opportunities to appear before it are available, which is not true of the Pay Board or the Price Commission, and both Houses of Parliament have an opportunity of debating its reports. That is not a Star Chamber, and the hon. and learned Gentleman, who is a distinguished lawyer highly respected in this field, should not have used that parallel.
I come now to the point about the bullying of the company in defiance of natural justice. Only a few days ago, on 27th June, the Minister for Trade and Consumer Affairs had to come to the House and make a statement in these terms:Roche intends to disregard the order and to raise the prices to pre-order levels tomorrow at noon. … It has been reported that, without waiting for the Government's reply, Roche today informed pharmaceutical wholesalers that prices have been raised"—one notes the words "have been raised"—in breach of the order as from 9 a.m. todayRemembering all the speeches made by hon. Members opposite about law and order and the need for people to obey the law, when I hear a Minister telling us that this international company, in defiance of an order, which, of course, had current validity deriving from this House, intended to raise prices none the less, I can only say that that puts a totally different perspective on the matter from the one given by hon. Gentlemen in this debate.
The hon. Member for Cirencester and Tewkesbury asked whether it was wise to keep prices down. Admittedly, he gave some reason for that, but it certainly threw doubt, and the use of such phrases when studied in HANSARD will throw some doubt, upon the seriousness with which the Government are pursuing their counter-inflation policy.
The matter goes further than that. Two hon. Members said that other companies. British companies, charge profits at this 674 level. The hon. Member for Cirencester and Tewkesbury, I think it was, said that there are British multinationals charging three times as much abroad as they do here. This is getting a little like the Lonrho board. When businessmen fall out, they are quite happy to throw dirt at each other. In fact, this case is revealing for public examination a very important pricing issue which ought to be publicly discussed and decided.
I support the Minister tonight. He knows that because I indicated my support when the Question was answered a week ago. In my view, Roche has not played a very reputable rôle in this affair. I can only give my own judgment, and I think that it was not a reputable rôle.
It did not co-operate with the Monopolies Commission, although that commission represents the law of the land in the country in which the company operates. Roche is an important supplier to the National Health Service, one of its customers, and a very good one at that. Its failure to supply all the necessary information to the Monopolies Commission was, I think, wrong. The disclosure which Roche has now decided to make was, in my judgment, a product of Government pressure, and I greatly welcome the fact that the Minister, by sticking to his guns, has succeeded in getting a late disclosure, though even now it is the company which prevents him—not the Minister himself—
§ Mr. Benn
Of course, it is the company which prevents him from making this information available to the House tonight. It is no good the hon. Member for Cirencester and Tewkesbury shaking his head. Roche could have made this information available to the Monopolies Commission. It could have made it available to the Special Orders Committee of the House of Lords, had it chosen to do so. It could have made it available to the sponsoring Minister and to the customer Minister. It could have made it available to the other place when it was discussing whether to accept the report of the Special Orders Committee. It could have published it so that tonight the House could have had an informed debate.
In the light of all that, it is quite wrong for the company to present itself as an 675 aggrieved party in this matter, since it has behaved quite improperly, in my judgment, in its dealings with the Department, with the Minister concerned, and with the Monopolies Commission.
§ Mr. Ridley
I gather that the right hon. Gentleman's information only confirms that Roche can do its long division correctly. It backs up the fact that the percentages given in the report are correct. Could it be that the truth is that this information is of no value whatever and that this may be why neither the Department of Trade and Industry nor Roche seems very keen to publish it?
§ Mr. Benn
The hon. Member for Cirencester and Tewkesbury cannot have it both ways. A few moments ago he was telling the House that as the information was not available to the House it would be unfair for the Minister to ask the House to pass the order. He now says that the information is of no relevance and that there is nothing to stop the House passing the order. Since he was the Minister who was in the Department when the reference was made to the Monopolies Commission, he must now make up his mind.
I come to the rôle of the House of Lords in handling matters of this kind. It is open to serious difficulty from the point of view of the House of Commons if the hybridity rule applies to orders of this kind in another place so that the Monopolies Commission's recommendation can be subjected to intensely long and detailed discussions in a committee of non-elected members, where the House of Commons is denied such an opportunity. It would be wrong for companies to withhold information that should be given to the Monopolies Commission and to hope that by saying that the commission had not had adequate information it would lead to a further examination of the Monopolies Commission's Report in another place. Whatever may be the precedent for the Special Orders Committee's reports in respect of another place, it clearly was well within the power of another place, as it would have been within the power of this place, to reject advice given to it by one of its committees. As the hon. and learned Member for Dover must know, the House of Lords is free 676 to reach what judgment it likes on the recommendation of its own committees. This is not a parallel with the Judicial Committee nor with the House sitting in its judicial capacity.
The central question is whether the Monopolies Commission's recommendations to us should be upheld by this House by approving an order. I have no doubt in my mind that we are right to support the Minister in coming forward with this order. The argument about whether research and development is valid is not one that can lend itself to expert opinion. Anybody who has any familiarity with research and development knows that companies follow different practices in the amount they put into research and development, how they present it in their accounts, how they fund it, and how they allocate it between different products. It would not be open to either House of Parliament, based on a Select Committee inquiry, to determine the R and D expenditure or how it should be allocated within Roche.
I believe that this case is an important one because it is one of the cases—not the only case—where the sovereignty of the House of Commons, the Government and the country is being tested against the claims of a multinational company to operate, in effect, outside the law. I do net know whether there have been British companies which have declined to give information to the Monopolies Commission. I can recall no argument on this scale by any British company when asked to give evidence to the commission. Those who follow these matters know that the arrival of multinational companies produces problems of a quite different character from the problems we faced when we were dealing primarily with nationally-based companies which probably had some overseas subsidiaries but which broadly regarded themselves as being within the law of the land in which they were situated.
When one is dealing with a big motor car company, with IBM, or with any of these other big multinational companies, it is not only the trade unions which find themselves at a disadvantage. Ministers, and Governments, too, find themselves similarly placed. I wanted to participate briefly in this debate because, in speaking about the multinational, we have to appreciate the danger that it 677 poses, which is that it may threaten one Government and play off one country against another.
The danger stems not from a dislike of international industrial operations, but from the fact that we are dealing with organisations that span the world. We are dealing with new sovereign bodies which have to be recognised to be of a different order in the power structure from the old national company. That is why disclosure is so important. That is why international action may well be needed at some time in the future. Where Governments have to deal with a particular multinational company, they may have to meet to discuss how to concert their action. That is why trade unions have a part to play in wage negotiations.
The Government, somewhat reluctantly, because it is not their wish to alienate multinational companies and have broadly supported them, have stumbled through the Roche case on to an important fact, and that is that international companies must be seen as a potential threat unless they are ready to obey the law of the land in which they operate.
It is because the Government have been strong and come forward with this order, and because they are seeking an injunction in the courts to prevent the previous order from being disregarded, that I recommend to the House that we should support the order tonight, if necessary in the Lobby, so that it is known abroad that this is not merely a measure brought in by Ministers but that it carries the full support of the Opposition, too.
§ 11.2 p.m.
§ Mr. Emery
If I may, I should like to deal with a number of points that have been raised during the debate. It would be churlish of me not to try to the best of my ability to reply to them.
There is no doubt on the Government benches, and there never has been, that the drugs Valium and Librium are important. They have played a major part in curative treatment in this country, as they have in the world. Nobody is attempting in any way to cast doubt upon the company or the way in which the drags have been produced.
678 My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) said that the Government's action was of the most vicious sort and that we were attempting to bully this company. In his brilliant advocacy, my hon. and learned Friend the Member for Dover (Mr. Peter Rees) implied that he did not want to compare the Monopolies Commission with the Star Chamber, but by his own admission that comparison was made. The whole tenor of the debate has been that the Government are being unfair to multinational companies—"tilting at them" was the term used by my hon. and learned Friend the Member for Dover—and that this company has not had a proper chance to state its case.
What the Government want to ensure is that any company—Roche or any other—that is considered by the Monopolies Commission is treated fairly. That has been so with Roche, as with any other reference. Even though legal action has been taken with regard to Roche, it is still the Government's view that the company should be treated absolutely fairly.
A number of points have been raised concerning the company's ability to have defended itself.
§ Mr. Emery
As I said in the debate on the first order, this matter did not just arise at the time of the monopoly reference. It had been going on for years. It was the company's unwillingness to cooperate in supplying information under the voluntary price regulation scheme which had begun to cast doubt. All other drug companies, some with directions for information, and multinational companies and other Swiss companies had been willing to co-operate with the Department of Health and Social Security in allowing the Department to arrive at a price, but this company over the years had been unwilling. This is what gave rise to this matter.
Then, when other information came to light the Government felt it right that a reference should be made to the Monopolies Commission. That was in 1971.
The information sought by the Monopolies Commission was difficult to obtain and long and protracted in the obtaining. Hon. Gentleman who suggest that the 679 company has not been able to present its case are not facing the facts.
§ Mr. Skeet rose—
§ Mr. Emery
May I answer some of the questions and then, if there is time, I shall be delighted to try to answer other specific points.
Because I believed that it was probably unnecessary in that they had been stated before, I did not outline some of the Monopolies Commission's major findings, and these have tended to be overlooked tonight. It would perhaps seem to anybody who listened to the debate that they do not arise.
§ Mr. Emery
The Monopolies Commission found that Roche Products was responsible for 99 per cent. of the supply of Valium and Librium and that a monopoly existed. Paragraphs 194 to 217 sum up the commission's conclusions and recommendations. In paragraph 201 the commission said that it did not believe that Roche was subject to significant price competition.
In paragraph 204 the commission concluded that Roche's monopoly position gave it wider than normal freedom to determine its prices and support its monopoly.
In paragraph 212 the commission, in considering the public interest, was concerned to calculate the group profits on the reference products on a number of assumptions. The commission calculated that if Roche Products' arguments about the calculation of cost and prices were accepted the smallest group profits that could be calculated were nearly 40 per cent. on sales of Librium and about 50 per cent. on sales of Valium, equivalent to a rate of return on capital of about 60 per cent. It has been suggested that the commission did not take into account these sorts of figure. That is not the case.
In paragraph 213 the commission concluded that the group profits on the reference products were exceptionally high. I could continue. I do not have to restate the Monopolies Commission's case, but it should not go as though it did not exist, because obviously it does.
680 There has also been a degree of misunderstanding by some of my hon. Friends which I should like to clear up. As I understand it, the Standing Orders of another place afford private persons or companies an opportunity to appeal to the Special Orders Committee, which may recommend that their case may be heard before the passing of the Private Bill or, in this case, the statutory instrument. But I am informed that such an opportunity is intended to be offered when the person or firm affected by the order has, as yet, had no chance to put his or its case.
That has not been suggested in any of the argument that we have heard from some of my hon. Friends. No one can suggest that Roche has not had the chance to put its case before the Monopolies Commission, which, after all, is the statutory body whose duty it is fully to consider the arguments put to it. Surely no one can suggest that the company of Hoffmann-La Roche did not believe that it was being criticised for being a monopoly and did not believe that it was being criticised because its prices were too high.
§ Mr. Skeet
My hon. Friend is surely putting it in the wrong way. What the company did not appreciate was the case that it had to meet. Following the original document, which was a sort of pleading indicating the general argument, when it came to the oral hearing the company had no indication of the way that the Monopolies Commission was thinking and the points about research on which it would have to adduce evidence.
§ Mr. Emery
I see my hon. Friend's argument. I believe that this is the whole case that the company will be making in the High Court. That is its argument in natural justice. It is not for me to argue that particular matter now. It would probably be wrong for me to do so.
I thank the hon. Member for Glasgow, Gorbals (Mr. McElhone) for his intervention. However, his conclusions about bringing the whole of the pharmaceutical industry into the public sector are not relevant to this overall position. The position of that industry as a whole has been a great service to this country. It would be wrong for anyone on the Government Front Bench to suggest otherwise.
681 My hon. and learned Friend the Member for Dover suggested that the figures which were needed were available because they had been agreed by the Inland Revenue.
§ Mr. Emery
If I am misinterpreting my hon. and learned Friend, which is the last thing that I should want to do, I will give way.
The Revenue figures are not available to the commission. They are for tax information and are strictly confidential. I assumed—perhaps incorrectly—from the argument of my hon. and learned Friend that the Revenue figures had some relevance to the commission and, therefore, would be more easily understood by the commission. That is not the case because the Revenue figures are completely confidential.
§ Mr. Rees
As I said, I am not privy to Roche's counsels. I do not know in detail the case that the company has made or will make. But, as I understand it, the figures that it offered to the Monopolies Commission in confidence, on the basis that they should not be for publication—it can be read out of the commission's report that figures were offered to it but not for publication—were only figures designed to support other figures which were produced for the commission. The basis of these other figures had been agreed by it with the Swiss and United Kingdom revenue authorities. Therefore, those figures could have been accepted with relative ease by the Monopolies Commission.
§ Mr. Emery
I think I have cleared up the confidentiality aspect. I do not believe that I or my hon. and learned Friend are the people who should make the judgment of the commission for it. It made its judgment. It is open to anyone to say that the commission was wrong, but it is not necessarily right for the person being investigated to suggest that these figures shall not be produced because at that stage it is not believed that they are relevant.
The timing argument was the main disagreement of my hon. and learned Friend the Member for Darwen (Mr. 682 Fletcher-Cooke), whose tribute to the Monopolies Commission I was glad to hear. The timing is a procedural matter. The proceedings next week apply only to the Government application for the injunction which has been forced by Roche's threat to raise the price of its products. There is not much hope that that will be dealt with next week. According to my information, it is likely to run for a number of weeks. The substantive hearing on Roche's writ will not take place at least before October, and is then likely to run many months. So there would be no right time to take the order, if one accepted that argument.
The Government want to ensure that anyone investigated by the Monopolies Commission is treated absolutely fairly. We believe that nothing has arisen since the first order was made to change our view that this order is right and proper and should have the support of the House.
§ Question put and agreed to.
§ That the Regulation of Prices (Tranquillising Drugs) (No. 3) Order 1973 (S.I., 1973, No. 1693), dated 21st June 1973, a copy of which was laid before this House on 22nd June, be approved.