HC Deb 03 May 1973 vol 855 cc1603-27

10.10 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) Order 1973 (S.I., 1973, No. 720), a copy of which was laid before this House on 12th April, be approved. The order relates to drugs sold by the Roche Group—Roche Products Ltd., SAPAC Corporation Ltd., and F. Hoffmann-La Roche and other associated companies—mainly as librium and valium, chlordiazepoxide and diazepam. The purpose of the order is to give effect to the report of the Monopolies Commission which recommended substantial reductions in Roche's prices for these drugs.

I should like at the very beginning to take the opportunity of paying tribute to the thoroughness of the Monopolies Commission's work and the clarity of its report.

Before I deal with the order itself, I think the House may find it helpful if I describe the events which led to the reference to the Monopolies Commission and summarise the commission's main conclusions and recommendations.

The prices of medicines prescribed under the National Health Service are controlled under the arrangements of the Voluntary Price Regulation Scheme, whose terms are negotiated between the Health Departments and the Association of the British Pharmaceutical Industry. The major drug-supplying companies are asked to provide the Department of Health and Social Security with annual financial returns duly certified by independent accountants giving the breakdown of sales, costs and the capital attributable to their business in National Health Service medicines, supported by and reconciled with the published accounts for their whole business.

The Department then assesses the profitability of each company's sales to the National Health Service in relation to the capital allocated to that part of the business, taking particular account of research, as well as investment and any other costs. Additionally, in the case of foreign-owned companies, the transfer prices are considered where they occur. If the Department considers that profitability is too high, negotiations are opened with the company to secure the price reductions which the Department considers acceptable.

The House should know that there had been difficulties about the prices of librium and valium during the 1960s. During this time Roche had made repayments to the Department of Health and Social Security in respect of over-pricing. When the time came for Roche to provide information for 1970 it refused to do so voluntarily, and a statutory direction had to be issued in July 1971 to compel it. The information was eventually provided in December 1971.

In the meantime, during the spring and summer of 1971 the Department of Health and Social Security, carrying out further investigations, found that the active ingredients of these two drugs of a good quality had become available in some overseas countries at much lower prices. As soon as the information was fully confirmed it was decided that a reference should be made to the Monopolies Commission. This was done on 14th September 1971.

The commission's report was received by my right hon. Friend the Secretary of State for Trade and Industry on 27th February 1973 and published on 12th April. The commission's investigation was, as its report shows, full and exhaustive. It was in no doubt that monopoly conditions existed, since Roche supplies 99 per cent. of the reference products in the United Kingdom. It also found that Roche's monopoly position led to its being able to determine the level of prices within much wider limits than most suppliers.

The Monopolies Commission was concerned to establish whether the company's prices for the two drugs were unreasonably high. In considering this it was concerned with the costs which are or should be chargeable against sales of the drugs and the resulting profit margin.

The starting point was the massive discrepancy between the manufacturing costs of the active ingredients of the products—approximately £9 and £20 per kilo respectively—and the transfer prices paid by the United Kingdom company to the Group—over £360 and £900 per kilo in 1970.

The Monopolies Commission encountered certain difficulties in obtaining information which it thought necessary to support the group's claims as to the proper charge for research expenditure, and it found the published accounts of the group exceptionally uninformative.

Nevertheless it emphasised that its calculations had been made on a conservative basis.

Nor did it think that cost increases since 1970 should significantly affect the general picture. It thought that profits implying a return on capital on the trade in reference goods in excess of 70 per cent. had been achieved. Even then it emphasised that this was a conservative estimate which did not take into account its reservations about the acceptability of the cost figures involved in the calculations.

I should make it clear that the Monopolies Commission fully recognises, as does the Department of Health and Social Security, that the financing of research is an essential activity in the ethical drug industry. It cannot be said that the commission ignored or gave too little weight to the importance of this consideration. But—and the Government endorse this view—as regards research expenditure in general, the commission did not accept that in the virtual absence of price competition there was no limit to the price and profit levels a manufacturer was justified in setting himself so long as he used the proceeds to expand his research.

The figures for research cost which the commission had identified were substantially higher than could be accepted as reasonable in relation to fair selling prices. As regards innovation, it recognised that there was justification for high prices in early years. But it considered that, after a few years during which a very high rate of profit might have been achieved, exploitation could be kept within reasonable limits by adequate regular price reductions.

It was a matter of judgment at what stage undue exploitation of success can be said to begin but the commission had no doubt that in the present exceptional case this stage had long been passed.

Prices of librium have not been reduced since the introduction of the drug in 1960. Prices of valium were maintained from the introduction in 1963 until mid-1972, when the average selling price was reduced by about 30 per cent. This did not, in the commission's view, bring the price down to a fair level. I am of course aware that there has been a further reduction in the prices of valium since the report.

As my right hon. and learned Friend the Minister for Trade and Consumer Affairs announced in his statement in the House on 12th April, the Monopolies Commission reached the clear conclusion that United Kingdom prices for some years have been manifestly too high and that the Roche Group has accordingly obtained from the sale of the drugs in this industry profits far in excess of what is justifiable.

The Government accept the report's conclusions together with its main recommendation that the price of librium should be reduced to not more than 40 per cent. of the 1970 price and the price of valium to not more than 25 per cent. of the 1970 price, with corresponding reductions for certain other less widely used drugs covered by the reference.

In view of the serious situation disclosed by the Monopolies Commission, my right hon. Friend considered that it would be appropriate to make immediate use of the Government's powers under the Monopolies and Mergers Act 1965 to make the order which we are debating.

Obviously, this case must raise in the public mind the question: "Are there any more like Roche taking advantage of the National Health Service?"

Department of Health and Social Security negotiations with the manufacturers are based on the Voluntary Price Regulation Scheme. The current scheme, which ran from 1969, was agreed between the Department and the Association of the British Pharmaceutical Industry, and was amended in 1972.

Because of the diversity of the industry, the scheme avoids detailed criteria, and prices are negotiated on the basis of profitability, having regard to all the relevant circumstances of each individual company. I have already gone into many of those. Most manufacturers co-operate freely, but some have to be directed to supply information. Nevertheless, in all cases but this one we have been able to obtain information which has enabled us to agree price levels which are considered reasonable.

I should also re-emphasise to the House that the prices come under review annually.

Mr. Christopher Tugendhat (Cities of London and Westminster)

Am I right in thinking that among the companies that are co-operating voluntarily are other Swiss companies, and that Hoffmann-La Roche is not the only company in this position but that other Swiss companies are co-operating to an extent that Hoffmann-La Roche has so far refused to do?

Mr. Emery

I do not want to pick out Swiss companies. All companies are, as I have said, co-operating with the Department. Some have found difficulty, and direction has been necessary. In all cases but this one we have been able to obtain sufficient information to agree reasonable prices—and that covers some Swiss companies.

I now turn to the order. Its purpose is to implement the Monopolies Commission's recommendations that Roche Product's selling price for the reference drugs should be reduced. Its effect is to reduce the prices of librium and valium to the highest levels which the commission regarded as justified.

The order requires an affirmative resolution in both Houses. I am aware that certain procedures have been initiated in another place by Roche, and it is not for me to comment on them. This House, however, has a duty to reach its own decision on the order, and I do not consider that it is necessary to await the outcome of the quite separate proceedings in another place before doing so.

It may be helpful for me briefly to go through the order and describe its operation.

Articles 1 and 2 define the products and the companies to which the order applies. The relevant products are at present sold in the United Kingdom only by Roche Products Limited. The order is extended by Article 2 to the whole Roche Group to prevent supply at higher prices by other companies in the group.

Article 3 limits prices for the relevant medicines when sold by any of the Roche companies to the prices specified in column 3 of the schedule. The controlled prices for librium and valium are those recommended by the commission as "fair prices" and "more than adequate in the light of the facts revealed in the report". The prices for other reference drugs were, as recommended by the commission, calculated as corresponding proportions.

Article 4 precludes the Roche group of companies from imposing on the sale of reference drugs any condition requiring the purchase of other pharmaceutical products, and Article 5 is necessary to ensure that, in a market where resale price maintenance is authorised, the wholesale and retail prices are reduced in parallel with the manufacturer's selling price, to which the order principally applies.

The order does not touch on the question of repayments by Roche, and the new prices are not designed to include provision for such recovery. There is no power to order repayments to be made, but my right hon. Friend the Secretary of State for Social Services has already approached Roche on this subject.

The order, however, ensures that from the time of its coming into force on 23rd April the prices of the reference drugs in the United Kingdom market are reduced to the level which the Monopolies Commission recommended.

In considering the Monopolies Commission's report the Government had in mind the fact that the commission had reached a clear conclusion after a most thorough and objective inquiry and that in making its recommendation the commission saw no room for argument that what might appear to be drastic reductions were unduly severe.

The Government therefore decided that it was right to make the speediest response to the situation which the law allows.

For that reason, I commend the order to the House.

10.26 p.m.

Dr. Shirley Summerskill (Halifax)

The Opposition welcome the purpose for which the order is being introduced. We join the Under-Secretary in congratulating the Monopolies Commission on what seems to be an excellent report revealing that excessive prices for valium and librium have been producing excessive profits on a very large scale, especially as the commission was working at a great disadvantage because Roche refused to reveal either the total turnover of the company or the total research expenditure.

It is both essential and urgent that the prices of librium and valium should now be regulated.

I wish to raise various aspects relating to the findings of the Monopolies Commission, to events leading up to this order and to additional action which the Government should take.

I acknowledge that the drugs industry has particular features. The development of a new drug is extremely expensive. The estimated cost of producing a successful and safe new drug is in the range of £5 million to £9 million, and there is a large element of risk in any development as to whether it will be successful at all.

Although the pharmaceutical industry has an above average profitability, the situation is complicated by the fact that its companies are frequently multinational and by the fact that, whereas the drugs are provided by doctors they are paid for by the taxpayer.

A study of the history of the events leading to the present situation shows that it has been preceded by a long gestation period. As long ago as 1966 the Ministry informed Roche that there was room for a reduction in prices. But the House should recall that over the years successive House of Commons Public Accounts Committees have been critical of the prices of medicines and the profits of pharmaceutical firms—not just Roche. These Public Accounts Committees have expressed strong reservations about the effectiveness of Government attempts to ensure reasonable prices.

After the 1966 attempt to reduce prices it was another five years before these were reported to the Monopolies Commission.

Appreciating that Roche is uncooperative and secretive, clearly there are weaknesses in the voluntary price regulations scheme, and one wonders whether the seriousness of the situation could not have been revealed earlier.

Has the Minister given thought to the Sainsbury Committee's recommendations concerning standard cost returns? The Sainsbury Committee reported in 1967 and made three main recommendations. The first was that the Ministry should be entitled to obtain from the manufacturer of any medical product a standard cost return in a prescribed form. The second recommendation was that these should be required for all new medicines and existing ones with health service sales exceeding £250,000 a year. The third was that the Department should compare its own estimates of costs with the standard cost return and negotiate the prices of medicines on this basis.

Mr. Deputy Speaker (Mr. E. L. Mallalieu)

Order. The hon. Lady is straying into the area of control of prices for all drugs and medicines. That is hardly in order on the motion.

Dr. Summerskill

I expected that you might say that, Mr. Deputy Speaker, and I gave it some thought. The order is based on the Monopolies Commission's report in which there are references to the whole principle of standard cost return.

Mr. Deputy Speaker

Yes. But the whole point is that it may be debated only so far as it applies to the order.

Dr. Summerskill

Referring to the order, I feel that standard cost return should have been considered. Is that all right, Mr. Deputy Speaker? Anyway, I have finished that point.

Have the Government any plans to adopt the recommendations of the Sainsbury Committee in connection with the order?

A further recommendation by the Sainsbury Committee, in connection with the order, is that there should be no brand names for new pharmaceutical products. All products, whether the subject of patents or not, should be marketed only under a name approved by the Medicines Commission.

The arguments for this, showing that brand names are an obstacle to price competition, were clearly expressed in the Sainsbury report. Conversely, it is generally accepted that the conditions and supply of medicines not sold under a brand name are such as to secure a competitive situation and reasonable prices.

I come now to the fact that the Department has been aware of prices offered by Italian producers. These prices are lower than those of Roche's valium and iibrium for therapeutically similar drugs May I ask the Minister to enlighten us about the Italian equivalents? Are they now being considered for purchase by the Department? May we have an undertaking that the Department will not in future accept, on behalf of hospitals, free supplies of any drugs, as it has done until last year of valium and librium?

The reasons for this are most clearly given in paragraph 180 of the Monopolies Commissions' report. The report, leading to the order now before the House, has revealed the weaknesses and the strengths of patent legislation in this country. Will the Under-Secretary of State tell us whether it is the Government's intention to press for the unification and co-ordination of patent legislation within the Common Market?

Mr. Deputy Speaker

Order. The hon. Lady must not go so wide. She must refer to the drugs and to the order.

Dr. Summerskill

The Monopolies Commission's Report on valium and librium draws attention to the Banks Committee's recommendations. Will the Minister tell us whether the Government intend to implement these recommendations, which I know they support?

Regarding Section 46 of the Patents Act, may I ask the Minister to tell us whether he supports its retention, and whether he will look particularly at the Sainsbury Committee's recommendation that it should be extended to include general medical and pharmaceutical services?

A particular feature of the report and the order is that classical price competition is absent in the prescription medicine market. Will the hon. Gentleman bear in mind that there are at least 13 other tranquillisers available on National Health Service prescription, apart from librium and valium? What success has tropium had since it was marketed as a version of these drugs compared with valium and librium?

I ask the Under-Secretary to refer to his right hon. Friend the Secretary of State for Social Services, who I am glad to see is here, the following points which are raised in the Monopolies Commission's report. There is the question of the doctor's freedom to prescribe. The doctors primarily concerned—

Mr. Deputy Speaker

Order. We are not debating the report. The hon. Lady is trying to debate the whole report.

Mr. Eric Ogden (Liverpool, West Derby)

On a point of order, Mr. Deputy Speaker. The Under-Secretary of State was able to refer not only to the Roche company and these drugs but to other companies which were excluded. A reference was then allowed to other Swiss companies. Is it possible to raise this matter only on business questions?

Mr. Deputy Speaker

There is a difference between a debate and a reference. Short references are permitted, but not a debate on the whole subject.

Dr. Summerskill

I can only refer to the explanatory note, which says that it is not part of the order, and, therefore, I suppose the Monopolies Commission's report is not relevant. Although the order is based on the report, can I not bring in the report?

Mr. Deputy Speaker

It is possible to bring in the report by reference but not to dwell on it.

Dr. Tom Stuttaford (Norwich, South)

On a point of order, Mr. Deputy Speaker. Are we not allowed to discuss these two drugs, because, depending on the answers we get, we shall then be able to decide whether to approve the order? If we are not allowed to discuss these drugs, we shall not know whether the order should be approved.

Mr. Deputy Speaker

The hon. Member and the House are entitled to discuss the drugs referred to in the order. That is perfectly possible.

Dr. Summerskill

I shall try not to dwell on a few more points and then I shall conclude. I hope that the Secretary of State for Social Services will consider referring to doctors the possibility of prescribing other tranquillisers equally effective and cheaper which preferably do not have brand names. It has been shown that valium and librium, which have brand names, are expensive partly because of that property.

The last point I wish to make refers to the Under-Secretary of State's welcome assurance that public concern that the Roche case may be one aspect of a much larger problem can be allayed and that other prices have been agreed all of which are considered reasonable. This is welcome news. The pharmaceutical industry plays a vital rôle in the treatment of society, and in this context the National Health Service is totally dependent on it. For these reasons the industry should exercise a special degree of responsibility in its behaviour. It is for the Government and the House to be vigilant in ensuring that this is done.

10.39 p.m.

Dr. Tom Stuttaford (Norwich, South)

When we first heard of this report, one of my right hon. Friends stated that it dealt with extremely valuable drugs, and this point has not been stressed tonight. These drugs are not just "any" drugs. They happen to be drugs which are essential in medical practice. We tend to think of them as merely the opiates of the people—the modern equivalent of the Marxist view of the church's rôle. But these are not just tranquillisers. They are used in anaesthesia and also in the treatment of epileptics—and for one serious form of epilepsy the drug is probably life-saving.

We are dealing here with two things: on the one side finance, and on the other side human lives and human suffering. This is a difficult balance to achieve. Tonight we have heard only about the finance. We must be careful in making our financial point not to increase the sum of the world's misery. This is my first point; so far in this debate we have not heard very much about it, but that is what it is all about.

Secondly, we have heard that profits are excessive. I have no doubt that profits may be high and firmly believe that they may be excessive. Because of Roche's secrecy it has been impossible to say what the profits are. It has also been impossible to say what they should be. Research costs must be considered. If we look back to practising medicine before there were modern tranquillisers, it was really barbiturates or nothing for this group of diseases. Barbiturate addiction developed. This was and is a great social evil. Many forms of barbiturates were extremely expensive; and so many millions of pounds were spent on research, and that spending has now produced these relatively safe drugs.

I want to know what my hon. Friend considers to be a fair proportion of any profits from a drug which should be ploughed back into research. That is not research into the current drug which is making a profit at the moment but for the next one coming along which may save some other problem from afflicting the world. To say that profits are excessive is a hard decision to make when it is not known what a company is doing with its profits. No doubt it is Roche's fault for not telling us. We should not make that assumption until we know how the money is spent.

Is it all Roche's fault? Did the Department allow the matter to go on for too long? The hon. Member for Halifax (Dr. Summerskill) has told us about Italian drugs. The Italians manufacture similar drugs at a fraction of the cost. That has been done for many years. How is it that the Department did not know that? If it did know, why did it not take action before? That is an important matter which must be considered.

We were told that these drugs were ordered by doctors and paid for by the taxpayer. But one section of the sequence has been left out. They are drugs which are ordered by doctors and paid for by the taxpayer for the taxpayer. By paying for those drugs the taxpayer may well save someone's life.

10.43 p.m.

Mr. Laurie Pavitt (Willesden, West)

I often have the privilege of speaking after the hon. Member for Norwich, South (Dr. Tom Stuttaford). I normally find myself in full agreement with him, but tonight I am in less than full agreement. I agree with his opening comments abut the order. We should not lose sight of the fact that without some of the modern drugs like valium and librium the whole scene of treatment of illness would be vastly different.

As the hon. Gentleman rightly said, the order is not about the efficacy of the drugs or any other drugs but about profiteering. That is why the order is being made. I shall remind the House of the background to the order which the Under-Secretary of State sketched out. We must, if we are to pass the order, take into consideration the effect which it will have on the possibility of cash being available for research.

I remind the hon. Member for Norwich, South that the Sainsbury Committee showed that, whereas 14.9 per cent. was being spent on promotion and on the literature which the hon. Gentleman receives as a GP, only 9 per cent. was being spent on research in general. I had the privilege of visiting the Roche factory during a recent visit to New Jersey. When I asked about the amount spent on research—I had the privilege of seeing Roche's very fine research laboratory—and asked for a comparison between Roche's promotion figures and the amount which it was spending on research, the executive gave a hollow laugh. That rather bears out the order. In fact, I did not get any more information. I could get as much information as I wanted about the money spent upon research, but no information on the amount which Roche was spending on promotion.

The background sketched by the Under-Secretary of State in his opening revealed a number of matters about the order. First, as my hon. Friend the Member for Halifax (Dr. Summerskill) said, a tremendous time elapsed before action took place. There is the whole question of the arrangements with Roche about the voluntary price regulation scheme and the scheme itself. The order, inevitably, would not have been needed had the voluntary price regulation scheme bitten. It took the time which the hon. Gentleman indicated before that occurred.

The order does not contain, as the hon. Gentleman pointed out, any ways and means of recovery of the amount of excess profits which we have had to pay. There is a precedent. Pfizers, a large international company, recently paid back £50,000 on another small drug transac- tion to the United States. When for seven years millions of pounds have been paid unnecessarily by the National Health Service, I cannot see why it is not possible not only to take the action in the order but to recover a little of what has been paid. I understand that negotiations are going on. I hope that the Secretary of State will feel that tonight's debate will strengthen his hand in those negotiations. We are strongly supporting the Minister tonight.

Incidentally, if only all orders were brought under the positive rather than the negative procedure we should have much more chance to probe this kind of matter.

The hon. Member for Norwich, South seemed to say that elsewhere everything in the garden was lovely, but I remind him that when Pfizer repaid the £50,000 it was after the Food and Drug Administration had been examining the products and found that the price was fair. We are not privy to the precise kind of argument in the negotiations with Roche so far. I recently discussed the matter with a former official of the Association of the British Pharmaceutical Industry, of which Roche is a member, who reckoned that for at least 10 years over the whole range of tranquillisers, not just valium and librium, we had been paying far more than necessary.

The Monopolies Commission's report from which the order emerges also deal with mogadon, which has quite a large sale—about £1.4 million. Yet nowhere in the order can I find anything dealing with what I believe to be an excess profit on mogadon. Should not the order deal with it? Before we pass the order, should not we have an explanation why the schedule covers librium, valium, brontrium, libraxin and pentrium, but makes no mention of mogadon?

It is well known that some of the drugs have been of immense value in psychiatric treatment in the psychiatric wards of hospitals, the psychiatric hospitals and day hospitals in particular. But it is generally understood that many of the minor tranquillisers of Roche, some of which are included in the order, are placebos.

Dr. Stuttaford

Does the hon. Gentleman agree that mogadon is not a minor tranquilliser? It has one great advantage, being the only safe sleeping pill. It is practically impossible to kill oneself with it, whereas the other sleeping pills are dangerous and addictive. Therefore, it has a very real rôle in pharmacopeia.

Mr. Pavitt

I could accept that point, but a placebo would do as well. Even with the mild tranquillisers there can be side effects—though not so bad as with thalidomide. It is far better to pre-cribe a placebo than even the mildest of tranquillisers, and save the taxpayer money.

I have been tempted to wander a little from the order. Is the order necessary, as the patents will expire before long? Some of the Roche products referred to in the report of the Monopolies Commission are not mentioned in the order. Is it because of the patent law that those items do not appear in the advice to the Secretary of State? In view of this order, it would be sheer nonsense if there were to be a change in the present patent law to the benefit of the drug companies. Roche has been involved in the pressure that has been exerted for a change in the law—pressure to change the 16-year rule to 20 years. In view of the order, such a change would be dangerous in terms of the profit making that could occur at the expense of the National Health Service, which is now paying £230 million a year for drugs.

We support the order, and we wish more strength to the Department's elbow. We hope that this is the first of many similar orders to deal not only with tranquillisers but with antibiotics and the other drugs for which we are paying far too much for the privilege of keeping up the profits of the drug companies.

10.51 p.m.

Mr. Charles Fletcher-Cooke (Darwen)

This is an excellent and strong report, as one would expect from Sir Ashton Roskill, Professor Hart and Mr. Gordon Richardson, to name only three of the members of the commission. We must congratulate them, and we must congratulate the Government for acting so promptly and so strongly so soon after receiving the report.

The only thing that is wrong with the report is its title, which is quite unpro- nounceable, and I think that the Monopolies Commission requires the services of a public relations expert if it is to give reports such as this the proper publicity and circulation they deserve.

I have two small and perhaps per-nickity queries to raise on the order. I strongly support the order but, as I understand it, it is directed by paragraph 2 solely to the Roche group and its subsidiaries. Does the order go far enough? Would it be possible for Roche to sell at the old price to a totally independent company in, say, Germany or Luxembourg and for that independent company to sell in England at the old price, minus its margin of profit? The order is directed only to the Roche group. It could presumably license such an independent company to act as middle man, and that would defeat the purposes of the order. That is my first question, which perhaps tends to show that the order does not go far enough.

My second question is rather more difficult to describe, but it indicates that in one respect the order goes too far. I am all for prescribing reasonable prices in cases such as this. I think that the research argument, much emphasised by my hon. Friend the Member for Norwich, South (Dr. Stuttaford), has been brilliantly—I shall not say "exploded" —blown upon by paragraph 224 of the report. But if there are to be reasonable prices, there must be no element of retrospection of penalty. That would be ultra vires the purposes of such an order.

It may be right to try to claw back some of the profits by other means, and I should not be against that, but I should be against fixing prices for the future if such prices were to contain a penalty element for profits made in the past. As I read the report, although it is obscure on this point, I think that that may have happened.

Paragraph 218 of the report shows that the commission took three factors into account in recommending a remedy. The first was costs and the second was the level of profits which would be regarded as reasonable, both of which are right. The third was the extent to which the excessive prices charged hitherto could be brought into the reckoning.

So the commission considered that in fixing the price for the future it was considering a penal element. A further indication is given in the second sentence of paragraph 236: No future price which it is practicable to recommend for the reference drugs could take full account of the excessive profits which have been made on them at the expense of the NHS in the past". So some account was taken of this, although not full account.

That again shows that, in spits of what the Minister said, when in paragraph 237 the commission prescribed reasonable selling prices for the future, which prices have been prescribed in the order, it was taking some account of the excessive prices of the past. There is a penal and retrospective element here. I am not against that as a matter of justice, but I am warning the Government that, if my analysis is right, they may find that this may be regarded in another place and by other procedures as ultra-vires. I do not think that in fixing the price for the future the Government should or can, under the powers of the statutes setting up the Monopolies Commission, take that retrospective factor into account.

Not knowing anything about the drug industry, as other speakers do, but knowing something of the operation of the Monopolies Commission, having an abiding admiration and affection for it and being delighted that this Government, unlike the previous Government, are not attempting to dilute it with other considerations, I believe that the commission has lived up to its long and well-deserved reputation—a reputation that the Government have endorsed by their swift and drastic action in this case.

10.48 p.m.

Mr. Eric Ogden (Liverpool, West Derby)

It is not often that a Minister can bring forward a measure which has such general support. I doubt whether particularly this Minister has managed to bring forward, whether in Government or Opposition, matters which have such common agreement. The support has been critical, but in the main those who might have been expected to oppose the order are notably absent tonight.

The Minister said that there had been difficulties about the pricing of librium and valium during the 60s and 70s. That is possibly the understatement of the year. I doubt whether Roche is any more popu- lar within the British pharmaceutical industry than it is in certain parts of the Department. But the lessons will certainly be learned.

No one is denying the importance of valium and librium. This is not, as the hon. Member for Norwich, South (Dr. Stuttaford) suggested—I say this with respect for his special knowledge—a conflict between the importance of human life and simple money. It is a question of whether multiples of 40 and 45 are fair and reasonable in the circumstances.

Of course everyone will accept the importance of research, investment and all the other things. No one has yet been able to provide a general formula to say that in all circumstances something is fair and something else is unfair. But one way of judging that fairness is the willingness of a company to provide information. The vast majority of companies, as we are told, give that information freely. There is the bick stick in the background, but if there are difficulties they provide a warning light for those in the Department. A company with nothing to hide will give information and try to be helpful. If information is not coming forward as readily as it might be, it should be a warning to the Deparament.

I ask the Minister whether he is satisfied that the present prices are reasonable. We have here to assume obviously that there is no claw-back or voluntary repayment. Can his present staff, by numbers, quality and qualification, be the right sort of gathering department for this information, statistics and specialised knowledge? They have done a good job in getting the information but it took a long time and this may be the most overworked part of his Department.

After the gathering of the information, action has taken place quickly with this order. I doubt whether the Department has the strength to be able to keep an eye on these matters at all times, but it is a good thing that the order has come forward. I hope it will have a speedy conclusion and that the suggestions in it will be taken up by other parts of the drug industry.

11.2 p.m.

Mr. Christopher Togendhat (Cities of London and Westminster)

I should like to add my voice to support the order and to the others congratulating my hon. Friend on the terms in which he has introduced this order.

Not only was the report an outstanding piece of work but the way in which the Government have reacted today, as embodied in the order, is exemplary. I hope the Government will live up to the high standards set now when dealing with future Monopolies Commission's reports of similar importance.

In saying this, one must also emphasise the nature of the people who made the report. In some newspaper reports of Roche's reaction to the Monopolies Commission's report the suggestion is made—I do not know whether it has been correctly reported—that the company tried to pour scorn on the responsibility of the report and on the degree of authority of those who produced it.

Everybody in this House and those outside, in Switzerland as well as the United Kingdom, will recognise the expertise and authoritativeness of Sir Ashton Roskill, Mr. Gordon Richardson and other members.

We all recognise that the company is outstanding and that its contributions to human happiness through its research in drugs has been considerable and that these two drugs, valium and librium, are outstanding in their field and have rendered great service to the human race.

We are concerned not with criticising the drugs, nor the company's record in this respect, but in determining whether the Government are fair and reasonable in forcing this kind of demand on the company to ensure what they regard as fair dealing.

Here, two points must be raised by all of us who are neither doctors nor lawyers but are interested in the organisation of business and in the good name of business.

The first is that it is deplorable that a company of Roche's distinction operating in many countries, with a substantial stake in the economies of many countries, should have refused to co-operate with the Commission to the extent that it did; and that the way the Government reacted in producing the report to ensure that the company must respect the criteria of fairness is no more than is absolutely necessary. That is not to say that the company's argument as put forward in the extremely expensive advertisements it has been buying in the national Press are necessarily wrong. In theory it may well be right, but the trouble is that since the company is so secretive and adopts such a superior approach in its dealings with the world it is impossible to know whether it is telling the truth. It may be telling the truth, but unless it produces some basic figures of the sort which other companies, including other Swiss companies, are able to produce it is difficult for us to judge. Since the company behaves in this way any reasonable person has no alternative but to support the order.

It must be stressed that the order will, I hope, lead other companies, not necessarily in the pharmaceutical industry, to take a more realistic and responsible attitude toward their approach to Governments in the problem of transfer prices. The problem of transfer prices is an extremely technical one, but basically when a company is charging the sort of prices which it appears Roche has been charging it is, when all is said and done, a tax fiddle. It is of the greatest importance to make sure that this sort of thing does not happen in future. I hope that the Government will bear in mind that this order may be appropriate not only in this instance but in others.

My greatest hope of all would be that this unhappy incident should be brought to a conclusion by Roche producing the figures to support its claims, and I have no doubt that if those figures supported its claims the Government would withdraw the order and change their attitude. But Roche must realise that until it brings the figures forward, until it feels it can take Governments, countries and customers more into its confidence, and approach the standards of other international companies, grave suspicion will continue about its methods here and abroad, where its prices, by all accounts, are even higher than in Britain.

11.7 p.m.

Mr. Emery

Everyone will accept that this has been an extremely helpful debate. It is certainly the first time that I have ever been able to thank all of the speakers for their support on an order.

I must now answer a considerable number of questions. I have tried to take down most of them, and I will attempt to answer as many as possible. If I miss any or if I do not know the full answers I shall write to the hon. or right hon. Members concerned in order that they may have the information they seek.

I thank the hon. Member for Halifax (Dr. Summerskill) for her helpful remarks. She cast some doubt and query about weaknesses that she said would exist in a voluntary price negotiation scheme and suggested that standard cost returns, as had been suggested in the Sainsbury report, should be introduced.

I can inform her that Mr. Kenneth Robinson, when he was Minister of Health, and this Government have both looked into the matter. We had rejected it, but we have considered it necessary in our voluntary price negotiation scheme to bring in amendments, as we did last year, in order to try to ensure that this was brought up to date with modern accounting procedures and so on.

The hon. Lady referred to the question of brand names. I have here the statement by Mr. Kenneth Robinson to the House when dealing with the Sainsbury Report. This is a matter of considerable importance which has exercised the interest of many hon. Members. The Sainsbury Committee had recommended that there should be no brand names for new pharmaceutical products, and Mr. Robinson said: We share the Committee's view that there are disadvantages in the use of brand names in association with heavy sales promotion expenditure, but we believe that the abolition of brand names by Britain in isolation could well have more serious economic consequences than the Committee envisaged, and would in particular be likely to put British-based firms at a disadvantage in export markets."— [OFFICIAL REPORT, 24th June 1968; Vol. 767, c. 44.] The matter has been reconsidered by my right hon. Friend, and he, too, holds that view.

Mr. Pavitt

Just to set the record straight, I point out that the hon. Gentleman is right about Mr. Robinson's statement, but that in the Standing Committee on the Medicines Act 1968 there was a strong revolt, which I led, and I had a very strong vote in my favour.

Mr. Emery

I was about to say that I do not necessarily believe that the view of Mr. Robinson was universally accepted at the time. I did not want particularly to put the finger on the hon. Member for Willesden, West (Mr. Pavitt), but he has now put it on himself. I am simply saying that the present Government have not changed the view expressed by Mr. Robinson.

I was asked about the Banks Committee. The effect of patent monopoly on the supply of drugs to the National Health Service was studied by the committee, which reported in 1970. It recommended the continuation of the Section 46 (Crown use) powers, but recommended the repeal of Section 41 of the Act as being irrelevant in the present context of the arrangements for supplying drugs to the NHS, and possibly damaging to the interests of British drug companies. It is intended to adopt the committee's recommendations in the prospective legislation. Section 46 does all that can be done to eliminate the patent per se as a menace in a situation such as the present.

I do not think I should get involved in the question of other tranquillisers. I wrote down "doctors' preferences", and this is something that we must leave to the medical profession to decide. It cannot be decided by Ministers, particularly Ministers in the Department of Trade and Industry.

Another question concerned the free supply of drugs to hospitals and the Armed Forces. The Department, when accepting the free supplies of medicines from Roche between 1969 and 1972, was aware of the effect on possible sales by competitors, but it would have been extremely difficult to prevent the company from making a free gift to hospitals of a drug which they were using in substantial quantities, and which in many cases they would have no option but to obtain from the company offering supplies free of charge. Free supplies which could have the undesirable effect of keeping competitors out of that part of the market have now ceased. The Government have accepted the commission's recommendation that Roche should not differentiate unjustifiably in selling price between different classes of customer. I think that that will meet the position. Free supplies of librium and valium to hospitals and the Armed Forces have therefore, already ceased.

I am pleased that my hon. Friend the Member for Norwich, South (Dr. Stutta-ford) emphasised that these drugs are valuable. No one has ever suggested other than that. That he stressed this, with his medical knowledge, seems to be important. My hon. Friend asked me the answer to what is, in this context, an unanswerable question. The fair proportion of profits must be decided by taking into account different circumstances, different research programmes and a host of other things. How long is a piece of string? For me to try to specify any deliberate term would show a complete misunderstanding of the problem. Although that reply may not be of great assistance to my hon. Friend, it is the right and proper one.

I was also asked about the secrecy and whether this issue was the fault of Roche. If anything stands out here it is that this kind of secrecy by international companies must be disastrous and cannot be accepted. My hon. Friend the Member for the Cities of London and Westminster (Mr. Tugendhat) said that the refusal to co-operate was a great pity. How right he is. He said that he felt that if Roche had produced the figures to support its claim the Government would have considered them. That is right. This type of secrecy must cast doubt. Great doubts must be raised when, as I said, the manufacturing costs of the active ingredients of the two products were approximately £9 and £20 while the transfer prices paid by the United Kingdom company to the group were over £360 and £900 respectively. It is because of this that the Government have rightly taken this action.

The hon. Member for Willesden, West asked whether mogadon was covered by the order. Mogadon does not include chlordiazepoxide or diazepam and was, therefore, outside the scope of the Monopolies Commission's inquiry. Nevertheless, the Department is concerned to ensure—and is carrying out an investigation—that the price of this falls within the reasonable level to which I have referred.

The other matter raised was the expiry of the patents. We felt that although the expiry of the patents was pending it was right for the Government to act immediately. We have acted about as quickly as the law would allow.

I come to the legal, learned and detailed questions I expect from my hon, and learned Friend the Member for Darwen (Mr. Fletcher-Cooke). I thank him for his congratulations to the Depart-t ment for the speed with which we dealt with this. We appreciate his congratulations. He asked whether the order goes far enough, and pointed out the possibility of an independent company somewhere in Europe—let us say in Luxembourg—selling the products. It is true that the products could be sold here at a higher price, but if, as appears to be the position, Roche Products wishes to continue marketing in this country, its products will be sold at the price specified in the order. The Government are conscious that people may feel there is an element of trickery here. They will ensure that no one is allowed to take advantage of that.

My hon. and learned Friend went on to speak about retrospection. In our interpretation, the price fixed does not include retrospection. I understand my hon. and learned Friend's arguments and I refer him to the last two sentences of paragraph 236 of the Monopoly Commission's report: The prices that we are recommending could be considered more than adequate in the light of the facts revealed in our report and particularly so were there to be no repayment of past profits. We certainly see no room for argument that in recommending what may appear to be drastic reductions we are being unduly severe. The Government do not believe that the prices fixed include any element of past profits, and we are negotiating because Roche may itself consider—as it has done in the past—that it has a duty to make repayments to the National Health Service. The hon. Member for Willesden, West mentioned the American example, and Roche Products in the past has made repayments to the Department of Health and Social Security.

I have tried to reply to as many points as possible, and I commend the order to the House.

Question put and agreed to.

Resolved, That the Regulation of Prices (Tranquillising Drugs) Order 1973 (S.I., 1973, No. 720), a copy of which was laid before the House on 12th April, be approved.


Motion made, and Question proposed, That this House do now adjourn.—[Mr. Goodhew.]