HC Deb 12 November 1975 vol 899 cc1543-7
The Secretary of State for Prices and Consumer Protection (Mrs. Shirley Williams)

I will, with permission, Mr. Speaker, make a statement about a settlement which has been reached between the Government and the Hoffman-La Roche Group concerning its ethical pharmaceutical products, including librium and valium, the prices of which have since April 1973 been controlled by Order.

The House will recall that following a report by the Monopolies and Mergers Commission, which was a landmark in the history of monopoly policy, the then Minister for Trade and Consumer Affairs, the right hon. and learned Member for East Surrey (Sir G. Howe), made a statement on 12th April 1973 accepting the Commission's recommendations and announcing the making of an Order reducing the price of librium to 40 per cent; of the 1970 price and the price of valium to 25 per cent. of the 1970 price.

Under the procedures of another place the Roche Company applied to the Special Orders Committee for the appointment of a Select Committee to inquire into the Order. This application was rejected and the Order was approved by Parliament. Subsequently the Company started proceedings in the High Court against the Government and the Commission, alleging unfairness and breach of natural justice and applying to have the Order declared void.

In April 1974 out-of-court negotiations began about the price of the drugs in question to see whether a settlement could be reached. It was desirable to bring Roche back into the Voluntary Price Regulation Scheme of the DHSS as early as possible. During the course of the negotiations we obtained from the Company a great deal more information than it had given to the Monopolies Commission. I am glad to inform the House that agreement has now been reached as a result of which:

First, the Company will repay to the Government the sum of approximately £3¾ million, in addition to the payments made earlier in respect of the years 1967–69; the figure of £3¾ million is an overall settlement which takes account of excessive profits over the period 1st January 1970 to 23rd April 1973, the date of the coming into force of the Order. In respect of that period the sum is £12 million, but we for our part have accepted that since the Monopolies Commission reported the Order prices have become unduly low and that under normal VPRS guidelines an offset of £8.25 million is due to the Company. The figures on both sides include interest payments;

Second, the Company will come back into the VPRS for all its ethical pharmaceutical products;

Third, the Company has accepted that the new prices of librium and valium will be put at approximately half the 1970 level, which was the base line from which the Monopolies Commission inquiry started, and that it will settle with the DHSS price changes for its other medicines within the provisions of the VPRS; the new prices of librium and valium will be less than half those ruling anywhere in the rest of the world;

Fourth, the Company has informed us that it intends to continue its research and investment in the United Kingdom and that it plans to spend several million pounds on improved research, production and administration facilities both at Welwyn Garden City and at Dairy, Ayrshire, and thus continue its valuable contribution to medicine. It is also considering a further major expansion at Dairy of its vitamin and chemical production facilities for Europe and other world markets.

Fifth, the Company has undertaken to withdraw its legal action against the Crown and the Monopolies Commission together with any allegations of impropriety.

This agreement is clearly incompatible with the continuance in force of the 1973 Order and consequently is subject to its effective revocation.

I believe this to be a satisfactory resolution of our differences with the Hoffman-La Roche Group of companies, and under the provisions of the Fair Trading Act I am therefore publishing the statutory notice of my intention to make an Order to revoke the 1973 Order.

In conclusion, I wish to pay a particular tribute to the Monopolies and Mergers Commission for the important work which it has done in this case. I believe the solution will be in the interest of the public both here and abroad.

Mrs. Sally Oppenheim

Will the right hon. Lady accept that my right hon. and hon. Friends will want to be associated with the tribute which she has paid to the Monopolies and Mergers Commission? Will she also accept that we want to associate with that tribute my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe), who played an important role in bringing about the report and the subsequent agreement? Will the right hon. Lady further accept that we welcome the fact that the negotiations have finally been concluded and that the result of them would appear to be highly satisfactory both in respect of the sums that are to be repaid and with regard to the Company's compliance with VPRS in future?

Will the right hon. Lady confirm that in accepting the agreement with the Company she will not in any way preclude our position in respect of the Directorate of Competition in the EEC Commission, which is presently investigating the Company in relation to any proposals that it may make in future which we would like to implement in respect of the Company, particularly as wider application of the Commission's competitive policy will help to safeguard consumers and reinforce and extend the benefits of our monopoly legislation?

Mrs. Shirley Williams

I am glad to say that nothing in the settlement affects in any way the investigation being undertaken by the European Commission into alleged breaches of the competition rules of the Treaty of Rome. We were represented at the recent meeting of the Community's Competition Policy Committee which was investigating the so-called royalty rebate system which Roche had applied to a number of its customers in the European Community countries.

Dr. M. S. Miller

I congratulate my right hon. Friend on the part that she has played in exposing what is quite obviously another unacceptable face of capitalism. Is she not astonished at the level of profit that was made by these companies in the National Health Service, companies which depend to a great extent on the NHS? Would it not save the Government and the British people a great deal of time, trouble and money if we nationalised the drug industry or at least set up a nationalised drug industry of our own?

Mrs. Shirley Williams

There is no doubt that the profits made by the Roche Company prior to the 1973 Order were exceptionally high. My hon. Friend will know that the other part of the question is not a matter for me.

Mr. Penhaligon

Is it not the case that valium is now out of patent production? Perhaps it can be argued that a new price agreement is more to the advantage of the Company than of the British Exchequer? Is it not a fact that the drug is being replaced by another one which I understand is called diazepan, which is patented and is now being strongly promoted within the industry? Is there not a possibility that the whole business which has just come to an end could be started all over again? Will the right hon. Lady let the House know what is being done to stop such matters happening again?

Mrs. Shirley Williams

I should explain that although the patent has run out for librium, it has not run out for valium. The price now being set for Roche will be below that of its competitors which supply these drugs in this country. I think that the settlement is a reasonable one, quite apart from the lump sum which has been repaid to the Department of Health and Social Security. With regard to whether the problem might arise again, I can only say that this sort of settlement should be regarded by any company that attempts to make very high profits as a suitable indication of what might happen if that path were followed.

Mr. Mike Thomas

How confident is my right hon. Friend that there are not other numerous examples of this particular form of exploiting the consumers of the National Health Service and the public purse? What steps is she taking to investigate them? Will she confirm that the figure in the agreement that she has reached will mean that we shall be paying half the going rate in the rest of the world for the drugs concerned? That seems to be an unbelievable discrepancy.

Mrs. Shirley Williams

I think that my right hon. Friend is satisfied that this is an exceptional case. Indeed, the VPRS exists to prevent extreme profits being made. I think that the House will like to know the new price of librium. As a result of the settlement it will be half that of the price in France, a third of the price in Germany and about a fifth of the price in Australia. The new price of valium will be less than half the price in France and Italy, about a quarter of the price in Germany and a fifth of the price in Australia.

Mr. Churchill

In view of the prima facie evidence that the right hon. Lady has produced this afternoon of gross incompetence within one or more Government Departments in tolerating such a situation and in signing such contracts with foreign drug firms, has she any intention of instituting an inquiry into the Departments concerned?

Mrs. Shirley Williams

I think that the hon. Gentleman will appreciate that there are problems about this administration making a retrospective inquiry into the Departments of another administration. It was in 1970–73 that these large profits arose on which repayment is now being made. I would wish to pay my tribute to the right hon. and learned Member for Surrey, East for having drawn attention to this matter. I am bound to say that it arose at the time primarily under his own administration.