HC Deb 29 June 1981 vol 7 cc666-74

10.3 pm

The Minister for Health (Dr. Gerard Vaughan)

I beg to move, That this House takes note of the proposed European Community Council Directive 7583/80 (COM(80) 267 Final), on the parallel importing of proprietary medicines, and endorses the Government's view that further consideration of the directive be postponed until progress has been made on price structures and harmonisation of manufacturing standards. This debate was recommended by the Select Committee on European Legislation &c., which advised that, because the directive raised questions of legal and political importance, it should be considered by the House before further discussion in the Council of Ministers.

I have to confess that it is not the most exciting subject. It is complicated and technical, but it is of considerable importance to our pharmaceutical industry. I shall speak briefly and explain merely our objections to the directive.

I should first explain what is meant by parallel importing. It occurs when an entrepreneur is able to buy a proprietary medicine in one country where the price is low and sell it in another European country at a higher price. No benefit comes to the patient or to the manufacturer, and any profit is taken by the importer, the wholesaler or the retailer.

There is, however, a difficulty for the importer, in that he has to have a licence, to obtain which he needs to have information, which is often confidential, from the manufacturer. If the directive is accepted as it stands, it would remove the barriers to free movement which arise if the manufacturer refuses to give the information.

There was a test case in 1976, when the European Court of Justice ruled that national rules which have the result that only certain traders can import medicines amount to a restriction within the terms of article 30 of the Treaty of Rome. The court gave a certain number of other rulings on this. The court rulings have not been implemented by member States, for reasons to which I shall come. So the European Commission concluded that a directive was necessary to force member States to accept the ruling, and that is the directive that we are considering today.

Since then, the European pharmaceutical committee, which has experts on it from all the member States, has looked at the directive but cannot agree on its content. Thus, the directive does not have the support of the majority of member States. In fact, virtually all member States are opposed to it.

We believe that the directive is faulty for a number of reasons. I shall not go through them all, but I shall briefly mention the main ones. We think that it is not only faulty, but mistimed. We do not accept that confidential information—that is, information that is confidential to the holder of the licence, the manufacturer—should be made available to the parallel importer. If there is to be a registration scheme, we believe that the information should be made available only to the regulating authority of the country concerned.

Secondly, we believe that there should be much tighter controls on the importer. For example, he should not be allowed to break up and mix batches of medicines and he should have a proper system to trace and recall batches if they are suspected of being faulty.

In our view, there are also a number of unreasonable requirements in the directive over not allowing the composition of medicines, for example, their colouring, to be varied by the manufacturer.

Finally, there are two other important reasons why we believe that the directive is mistimed. The first is that if there were no price differences there would be no, or very little, parallel importing. The Commission itself is setting up a study into price differences of medicines in the Community. The second is that we believe that any further action on the directive should await the results, not only of this pricing study, but of a study of the harmonising of manufacturing standards and the inspection of manufacturing premises. The Commission recently set up a working party as a result of an initiative by this country. Here again, we believe that this directive should wait until the working party has completed its task.

Mr. John Page (Harrow, West)

Is parallelism the same as piratisation? Is my hon. Friend referring to the pirating of a formula by a company that does not have a licensed agreement, or is he merely saying that one is cheaper than the other?

Dr. Vaughan

It is a kind of pirating which could be of benefit in some circumstances, because it could lead to greater competition in the distribution of medicines. However, it is open to many abuses. It is, in fact, the stepping in, between the manufacturer in one country and the consumer in another, of an entrepreneur, a business man, who imports from a country where the price is low—often it is this country—and sells in another country where the price is higher. As I said in my opening remarks, the profits do not go to the manufacturer to be ploughed back into research and development. They do not go into lowering the cost to the consumer. They go entirely into profit between the entrepreneur and the wholesalers and retailers in the country that is operating them.

Our pharmaceutical industry is one of our major assets. I have explained why we believe that the directive would be damaging to the standards of safety and quality that we have established in the manufacture of medicines, and why we think that the directive is mistimed. I ask the House to endorse our view that further consideration of the directive should be postponed.

10.10 pm
Mrs. Gwyneth Dunwoody (Crewe)

I had expected to have a little more time to gather my thoughts on the subject before discussing it. The subject is important. I can put the Minister's mind at rest. I believe it to be a bad directive and in no circumstances do I intend to suggest that we should proceed with it this evening. Nevertheless, it throws up a number of detailed and important matters. I am not sure whether the Minister has made clear some of the worries expressed about the directive.

We should be examining the price of pharmaceutical products. It is amusing that a Government who make a god of the entrepreneur and the man who uses his initiative to make a profit and who invented the word "privatisation"—which is a monster in itself—should suddenly say that, although it is all right for some people to make a profit, it is not right for people to make a profit against British business men.

Why is the Commission pushing ahead, apparently on the basis of a decision taken by the European Court of Justice, if there is such obvious disarray in the Commission's committees? It is extraordinary when a number of States have real worries about the directive that the Commission should seek to push through the directive with a view to its being put into operation. Have the British Government made it clear that they will oppose the directive and that they have no intention of putting it into operation without more consultation?

Mr. Keith Best (Anglesey)

Is the hon. Lady aware that in the plenary session of the EEC social committee in October last year the directive was opposed by 36 votes to nine, with seven abstentions? Does she agree that the European Parliament is often more representative of the true feelings of the EEC than is the Commission?

Mrs. Dunwoody

I do not think that the European Parliament is representative of anything very much.

If the member States have so many reservations, 'why is the Commission insisting on going ahead with the directive? The Minister mentioned some difficulties but he did not mention trade marks. Is there a working party on trade marks? That will have a bearing on whether the directive is put into operation.

Evidence was given by the pharmaceutical industry to a House of Lords Committee on the aims of the proposed directive. The industry was worried about a number of aspects on which I should like clarification. In its evidence the industry said that in the United Kingdom the Government were the major customers and therefore were able significantly to influence price levels downwards. It also said that the low price in the British market would make it a ready target for the sort of sharp business man—about whom the Minister spoke—who wanted to buy products in Britain and sell them cheaper somewhere else without taking responsibility either for the correct marketing or the creation of research into new products.

I am worried about that line of argument. During Question Time recently one of the Minister's colleagues made it clear that in Britain alone the price of some proprietary drugs had increased by 46 per cent. If that is the percentage with drugs, has there been a similar price increase in proprietary medicines? If so, is the evidence given by the pharmaceutical industry still absolutely accurate, or has it been changed by the passage of time? I ask that question not through academic interest but because there is a grey area in the marketing of drugs in Britain.

The correct administration of the Medicines Act 1968 is important in Britain. It ensures proper safety and marketing and protects the patient. Those are tremen-dously important criteria, which must be adhered to at all costs. What worries me about the directive is that it appears to say that it will be possible for some business men to sidestep the existing safety rules for products if some aspects of the directive are put into operation. If that is so, and if the directive reaches the statute book in its existing form, will it be possible for business men not using the normal safety procedures in operation in Britain to sidestep the machinery and put on to the market in Britain goods that for some reason or another are not easily identifiable? The Minister commented on the question of repacking but he did not mention batch identification marks.

It is essential that the Commission should be made aware of the fact that if, in any way, we lower the standards of safety in Britain by adhering to such commercial practices we shall return medical practice in Britain almost to the Dark Ages. It is important that that should not happen. Will the Minister say whether it will be possible, if the directive comes into operation in its present form, for an entrepreneur to buy a drug more cheaply in a member State and repack, relabel and, in some instances, remove identification marks? If that is so, it is a great danger that should be resisted at all costs.

What effect will the directive have on product liability? The manufacturers will be at the sharp end of any difficulties that arise. They will be responsible under the directives on product liability. What effect will that have on British manufacturers?

There is another area that the industry is concerned about to which I wish to refer tonight. There is a suggestion in the directive that small changes in colouring matter or in odd ingredients should not be made. Some of us are worried about what are called the "me-too" drugs and the manufacture of more and more of them. If the directive encourages the manufacturers not routinely to change five or six products that are similar except in one tiny, non-important ingredient, it might be a point in the directive's favour rather than against it. I want to know the Government's attitude to that.

It is important that the evidence of the Department of Trade on trade marks should be discussed in the House. There is no point in the Commission's trying to push forward legislation without having considered the effect that a change of the sort proposed in the document before us will have on trade mark legislation. If we set a precedent when dealing with medicinal products it will be used in other trade mark legislation. It seems typical of the Commission that it has not been prepared even to discuss that aspect.

We should be giving consideration to the pricing of drugs. I would not be prepared to resist Community legislation that I thought would lower the price of drugs for medicinal products to the National Health Service if it meant that we could maintain the same standard of safety and lower the overall cost to the Health Service. The Government and others who advocate cutting Health Service expenditure have a responsibility to ascertain whether there is a cheaper way of providing drugs to the patient as long as that is a safe and sound process. This piece of legislation appears to be merely a means of giving one or two Continental suppliers access to a quick buck without asking them to demonstrate the normal commercial responsibility that one would expect from a properly established industry.

The directive has so much in it that is woolly. I have a number of objections to its wording. It is so vague in some particulars as positively to mislead. It is another example of all that is bad about European institutions. The European Court of Justice is a commercial court and its area of operation is narrow. It was set up merely to examine whether the Treaty of Rome worked properly between one industry and another. From time to time it makes suggestions that are damaging to the interests of the European consumer. That is what I suspect of the directive. It is a bad directive. It has not been properly thought out. It has been pushed through against the informed advice of all those who care most about safety in medicines.

The Government appear to be saying "We shall put this off until we can get some answers." I hope that they will say that if the draft directive is amended by the European Parliament, the Commission and the Council of Ministers they will lay it before the House before there is any attempt to put it into operation. After four years' experience of the European Parliament I know how often solutions can be cobbled together by deals between one nation and another without the implications having been explored.

If we question the Minister closely this evening it is not because we disapprove fundamentally of considering the costing, the marketing or the safety of medicinal products—we should be concerned with all those issues. It is because, fundamentally, this directive looks like—if I may say so without being unkind—the normal Community cock-up. We should like strong guarantees before it is pushed forward either through the European institutions or through the Council of Ministers.

10.25 pm
Mr. John Page (Harrow, West)

At this hour of the evening I feel that we have been treated to a Chinese take-away. From the Minister we had spare ribs—all meat, but not a lot of it. The hon. Member for Crewe (Mrs. Dunwoody), to whose speeches I always enjoy listening—with their variety based on certain bits of knowledge and hypothesis—seems to me to be sweet and sour, especially in connection with the EEC.

My hon. Friend the Minister was kind to allow me to interrupt him. I listened to his speech with the greatest care. In doing so, I should have declared a sidelong interest in the pharmaceutical industry. It is not a direct interest in what has been mentioned tonight.

I was wondering whether the Minister would play a glancing stroke towards the harmonisation of the testing of pharmaceutical products within the EEC. I am interested in the pirating of British formulae by people who copy the pharmaceutical products. They produce them, but, as the hon. Lady said, they do not have the same verification and testing as those to which the British pharmaceutical industry adheres.

Can my hon. Friend assure me that within the EEC there is an equality and harmonisation of testing programmes for pharmaceutical products? Were he to say that there is absolute equality, if two absolutely plumb, safe and equally-tested products were produced in two EEC countries, I would feel rather reluctant to support the proposition that the product from one country should not be sold in the other. If he cannot assure me that the testing and safety are equal, however, I must go all the way with him in supporting the proposal that he has put forward tonight.

10.28 pm
Sir Anthony Meyer (Flint, West)

It is always rather disagreeable to have to agree with the hon. Member for Crewe (Mrs. Dunwoody), especially when she talks nonsense, such as the Conservative Party being the party of laissez faire. She knows that the Liberal Party is the party of laissez faire, except in terms of talking out of one side of its mouth about the importance of helping the under-developed countries and out of the other side of its mouth about the importance of shutting out their exports to us. The Conservative Party is the party of the State as the servant of the citizen, which is a different concept.

I approach this matter with mixed feelings. I wish the best of luck to anyone who can make it easier to buy decent British medicines on the Continent. When I go there, invariably I have to get a prescription to buy a disgusting mixture that does nothing to cure my ailments. I accept that the proposal in the directive is defective. We have to take it on trust from the Minister and from such evidence as we get from our Scrutiny Committee that it is defective.

If we wish to find out why the directive is defective, we have to read the proceedings of the House of Lords, which has gone to immense trouble to look into the matter in depth. It has taken evidence from all concerned. If the evidence is carefully read, as it should be, it becomes apparent that there is a strong case against the Commission's specific proposals, although it is clear that the legal situation is unsatisfactory and that something must be done.

I wish only to point out once again how immensely dependent the House is on the work done by the Scrutiny Committee of the House of Lords. I remind the Labour Party that if it had its way we should be bereft of that essential examination process, which is just the kind of thing that a revising Chamber should carry out and that the other place carries out with such remarkable and significant skill.

10.30 pm
Mr. Keith Best (Anglesey)

Like my hon. Friend the Member for Flint, West (Sir A. Meyer), I, too, shall be brief.

Conservative Members welcome anything that is done within the EEC to further its basic aim of the freer movement of goods without tariff barriers. However, we must test the viability and validity of any proposal against our national concern, and we have before us an exemplar of that proposition.

The directive seeks to overcome the problem of imports and exports, but it will not be beneficial to us. I therefore welcome the attitude of my hon. Friend the Minister for Health and am pleased that the hon. Member for Crewe (Mrs. Dunwoody) supports him. A common system of registration for parallel importers will not bring any improvement in the range or quality of medicinal products and it will cream off the price differential without meeting the research expenses. Putting that in the balance against the overall desirability of improving the free movement of goods, the balance tips against the directive.

The United Kingdom has, effectively, a discretionary monopoly, with low domestic prices as a result of the National Health Service. Prices are higher overseas because of their insurance-based medical systems.

The effect of the directive on our balance of trade has not been mentioned. We have a positive balance of trade of £500 million in prescriptive medicines, and the directive would have a disadvantageous effect on domestic prices. They would have to rise if research and development were to be maintained as foreign prices tended to fall.

Those are the matters that I wish to throw into the balance, without derogating from the fact that the EEC is beneficial in furthering the free movement of goods, and these products should be no exception. However, the deleterious effect of the directive on our balance of trade and on the research and development necessary for the proper progression of the medicines makes my hon. Friend's attitude absolutely right.

10.34 pm
Dr. Vaughan

With permission, I should like briefly to answer the main points that have been raised.

I was glad that my hon. Friends the Members for Flint, West (Sir A. Meyer) and for Anglesey (Mr. Best) stressed the importance of our pharmaceutical industry and the high quality of its products. My hon. Friend the Member for Anglesey is quite right. In 1980, our exports in this sphere totalled £745 million and our imports £222 million, giving a major trade surplus. Our exports to Europe alone were running at just over £200 million.

I was also very glad of the line taken by the hon. Member for Crewe (Mrs. Dunwoody), as this is an important subject, although rather dry and erudite in some ways. She asked why the directive had been pursued by the European Commission. I think that the answer is that the Commission is under an obligation to the court to implement its rulings. There is no appeal to the court. A fresh case would have had to be brought. The Commission was therefore in the position either of having to take each member State to the court to have its ruling implemented or of issuing a directive.

Our complaint is not against the issuing of a directive as such, but against this particular directive and its content.

Mrs. Dunwoody

Is the Minister aware that the time taken to implement directives, between court decisions and action by the Commission, varies from nil to 48 months? That answer was given to me by the Commission itself. In the case of implementation of VAT by Italy, it took 16 years. So what is so urgent about this particular directive?

Dr. Vaughan

I take the hon. Lady's point. I think that the extent of the disagreement among member States became fully apparent only recently, when the detail of the directives was considered.

The hon. Lady asked about the working party on trade marks. There is a separate Commission exercise with proposals for another directive dealing with national trade mark laws which is shortly to be submitted to the Council of Ministers.

Mrs. Dunwoody

I am sorry to keep interrupting the Minister, but is it true that this decision will not be pushed through until that working party has reported? If this directive is put into operation before the working party on trade marks reports, the decision on this case will be used as a precedent for trade marks.

Dr. Vaughan

The hon. Lady raises another reason why we think that the timing of the directive is faulty. During the discussions in Brussels we shall put the points that I made earlier and those made in the debate. Knowing the amount of disagreement among member States, we expect that the majority, at any rate, will agree with us in wanting to postpone further consideration of this directive, for the reasons that I have given. We do not wish to be unco-operative, but we believe that this country has a strong argument for a little more time being taken before the directive is put into action.

The hon. Lady then asked whether the directive in its existing form would run the risk of lowering standards of safety. The answer is "Yes, we believe that it would". The original case taken to the European Court involving the company Centrafarm BV involved importing a drug and then repackaging it and putting it out under a more general trade name than that used by the manufacturer. For the very reasons mentioned by the hon. Lady, we believe that there are insufficient safeguards on following up batches of goods under the directive, so that there would be a real risk of a faulty batch of drugs being put on the market and not being able to be traced and followed up properly. That is one of the reasons that I have given for our belief that the directive is dangerous.

My hon. Friend the Member for Harrow, West (Mr. Page) asked whether there were satisfactory safeguards for the testing programmes of pharmaceutical manufacture in the different States. Again, that is why the United Kingdom requested a working party—which has now been set up—to try to harmonise not only the standards of manufacture but the way in which inspections are carried out. We are not satisfied with the present position, and that is another reason for believing that the implementation of the directive should be delayed.

I have been asked whether product liability could be affected. That relates to another draft directive, which is also making heavy weather. We shall have to see what form that takes before we can reach any conclusions. Therefore, we have set out our reasons for hoping that the House will endorse our view.

Mrs. Dunwoody

Will the Minister address himself to my final point? Will he give an undertaking from the Dispatch Box to the effect that, before any decision is reached on the directive's contents in the Council of Ministers or in another European institution, the matter will be brought back to the House?

Dr. Vaughan

I think that I am in a position to give that undertaking, but I should like to reserve my answer and consider the matter. This is an important subject and I shall let the hon. Lady know.

Question put and agreed to.

Resolved, That this House takes note of the proposed European Community Council Directive 7583/80 (COM(80)267 Final), on the parallel importing of proprietary medicines, and endorses the Government's view that further consideration of the directive be postponed until progress has been made on price structures and harmonisation of manufacturing standards.

    c674
  1. Statutory Instruments 40 words
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    1. INDUSTRIAL DEVELOPMENT 23 words
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    2. EUROPEAN COMMUNITIES 23 words
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    3. TERMS AND CONDITIONS OF EMPLOYMENT 27 words
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    4. BELIZE BILL 42 words