HC Deb 27 January 1983 vol 35 cc1123-48 8.27 pm
Mr. William Hamilton (Fife, Central)

The debate that I am about to initiate is, by coincidence, closely related to the one that has just ended.

As the House will know, our Public Accounts Committee works with the advice and guidance of the Comptroller and Auditor General and his staff of about 800. We are debating that matter tomorrow. I hope that we shall overturn the Government's attempt to deprive the House of powers that it wants back over the control of public expenditure. The CAG and his staff present reports to the House and the Public Accounts Committee on matters pertaining to the expenditure incurred by the various Government Departments. Those reports are known as Appropriation Accounts. They are not as dry as my description might imply. The CAG reports on those accounts and the Public Accounts Committee investigation is based on those accounts.

Mr. David Crouch (Canterbury)

I would be grateful if the hon. Gentleman would let me know what he is talking about. Normally, the Order Paper contains advice on the title of the subject that an hon. Member seeks to raise on the Adjournment. I understand that the hon. Gentleman's subject has not been notified in writing because of the time factor.

Mr. Hamilton

In the next two minutes, it will be abundantly clear what I am talking about. Yesterday, the PAC took oral evidence from the Department of Health and Social Security and the Scottish Office on the subject of drugs in the National Health Service; how the prices of those drugs are arranged between the Government and the drug companies; how those prices, profits and costs are controlled; and how effective those controls are. We also discussed transfer prices—the charges that a company makes when it passes goods to an affiliated company in the same national or multinational group—and various other matters that I will not bother the House with tonight.

We discussed the pharmaceutical price regulation scheme which is a voluntary system designed to ensure fair and reasonable drug prices in the Health Service, while at the same time enabling an efficient and profitable pharmaceutical industry to be a major employer in the United Kingdom and to contribute substantially to the export trade". The Comptroller describes the first objective of the PPRS as being: To secure the availability of safe and effective medicines at fair and reasonable terms to the National Health Service". We were told that 65 large and small companies operated within the purview of the PPRS.

Sir Michael Shaw (Scarborough)

On a point of order, Mr. Deputy Speaker. I am a member of the Public Accounts Committee. The hon. Gentleman is seeking to discuss what went on in the Public Accounts Committee relating to matters that have not yet been terminated. Is it proper, and would it not be an undesirable precedent, if the hon. Gentleman were to seek to skirt round the subject of the discussions and investigations with which the Public Accounts Committee is at present concerned?

Mr. Deputy Speaker (Mr. Ernest Armstrong)

The evidence was reported to the House yesterday, so the hon. Gentleman is not out of order.

Mr. Hamilton

I am surprised at the hon. Gentleman's naivete and ignorance. The press was there in scores listening to every word that I am about to say. The hon. Gentleman will be glad to know that I shall not divulge anything that we were told in our confidential session. Everything I am now saying was heard by the press and was reported in the newspapers this morning. That was a contemptible but typical intervention.

We took evidence of a confidential nature, which I shall not divulge, about 65 large and small companies. It is clear that this is a large and lucrative business. The figures are contained in the Comptroller and Auditoror General's report for 1979–80. The DHSS estimated that the value of the United Kingdom sale of prescription medicines by more than 60 of the larger manufacturers was £1,665 million, including profits of £252 million. That represented a return on costs of 17.8 per cent.

When the DHSS thinks that the profits of a company are excessive, price reductions may be agreed with that company or there may be profit rebates. However, the Comptroller and Audit General says in his report that very few profit rebates are made. The figures were given in a parliamentary answer to my hon. Friend the Member for Central, Ayrshire (Mr. Lambie) a few weeks ago.

The DHSS economists were unable to decide what constituted a reasonable profit; nor were they able to decide on the extent to which the amount of risk-taking incurred by the companies should be reflected in profit margins. Despite those reservations, the DHSS considered that on the basis of the criteria agreed with the Treasury for the PPRS the pharmaceutical industry did not earn excessive profits". That is said in paragraph 52 of the Comptroller and Auditor General's report.

Another part of the report deals with the overall effectiveness of the PPRS. According to the Department, that scheme is satisfactory and represents good value for money, although it was conceded that it had its limitations and was open to review and refinement. The committee was given many figures in confidence, and I have no intention of divulging them in public. In due course, the committee will decide what statistics and evidence will be published. That will be decided by us. However, the Comptroller and Auditor General questions the high level of profits and points to the uncertainties surrounding the efficiency of the drug industry generally.

Those facts were given to the press and the public. Any member of the public who cared to attend our meeting yesterday was able to listen to that evidence. Even if the public did not attend the meeting, they could read the evidence in the report that is available in the Vote Office. I was quite startled by some of the figures. No wonder that in this deepest of recessions very few drug companies are going into liquidation.

I shall quote from the Financial Times of 2 June 1982, which is a favourite newspaper of the hon. Member for Scarborough (Sir M. Shaw). An article on pharmaceutical firms was headed: The pharmaceutical industry has passed through the recession almost unscathed. The world market for its products is now estimated to be around $90 billion and to be growing at six to eight per cent. a year. The first sentence of the article reads: At a time when so many major industries are still being torn apart on the rack of recession, the companies that originate and produce the world's key medicines have every reason to be confident about their current performance and prospects. They can say that again.

In the earlier debate, the Minister was eager to make a fair point about which I have no complaint. He said that we must recognise that the costs of research and development in the drug industry are very high. It is a high-risk industry. In a capitalist society, such high-risk industries must obtain high profits to pay for the failures. A recent example of a drug failure was quoted in the same Financial Times article. The firm concerned was Fisons and the anti-allergy drug was Proxicranil, on which the company spent £12 million before finding that it was unsafe. Fisons had to write off that sum. However, Fisons makes extremely high profits from its drugs division so we need not shed too many tears for the company.

About 10 per cent. of the bill for our National Health Service is spent on drugs and, by and large, those drugs are supplied by the 65 companies to which I have referred, of which only 11 are United Kingdom firms. Those 11 firms account for nearly one-third of drugs sold in the United Kingdom, predominantly to the Health Service. American companies had a greater share of the United Kingdom market than that. I am not at all sure that our publicly owned and publicly controlled National Health Service is providing rich pickings for those American companies.

A closely related subject is the Greenfield report that was referred to in the evidence given yesterday. The report's full title is The Report of an Informal Working Group on Effective Prescribing. The Secretary of State has been sitting on that report for a very long time and we do not know why, although we can guess. What is the problem? Why should the report not be produced forthwith? Leaks in the press about the Greenfield report suggest that effective prescribing of drugs within the National Health Service could cut the drugs bill by £170 million a year. The leaks suggest that the cut could be achieved by discouraging doctors from prescribing expensive brand-name drugs, some of which have been mentioned earlier and, instead, prescribing much cheaper, and equally effective, generic equivalents.

Mr. Andrew F. Bennett (Stockport, North)

Is it not very odd that a Government who, in their election manifesto and in an early commitment from the Prime Minister, said that they would encourage open government should refuse to publish such a report so that there could be an informed debate before the Minister made his decision? They appear to wish to hide the report until it coincides with a Government announcement.

Mr. Hamilton

My hon. Friend has a good point. He might be interested to know that a few days ago I applied to HMSO for a copy of the report. I received a letter from the Stationery Office this morning, saying, first, that the Stationery Office will not publish it, secondly, that it will not even be placed in the Vote Office—

Mrs. Gwyneth Dunwoody (Crewe)


Mr. Hamilton

—and, thirdly, that there will be a few copies available to hon. Members in the Library. That is absolutely outrageous. Every Member of Parliament and every member of the public should have the opportunity to read the report. Everyone is interested in the financing of the Health Service and the profits that are made out of it by American and other drug companies. It is an outrage that it should be allowed to go unchallenged. Moreover, we do not know when it will be published. There were exchanges in the House a week last Tuesday about this when the Minister said that the first step was to publish the report. Of course, that is the first step; it is his responsibility to ensure that it is published forthwith. I understand that it may be published next week, but we shall have only a few copies in the Library for which hon. Members must scramble, and if it goes on to the book stalls the price will be phenomenal—like the Black report, at £8 a time. During the exchanges last week the Minister said that it must be published, that he must then have consultations with the pharmaceutical industry and the medical profession, and that he must make recommendations. What will the time scale be—one year, two years, three years or perhaps never? I hope that that answers my hon. Friend's point and I am glad that he intervened.

The prescribing of generic equivalents as against branded drugs would save the Health Service about £170 million, which is a considerable sum. Of course, the drug companies dispute that figure. As someone said in another context "They would, wouldn't they?" However, even the drugs firms concede that a saving of £50 million could be made if generic drugs were prescribed. That sum would be worth something to the Health Service, which is now in very straitened circumstances. Every penny will be acceptable to health authorities.

An article in The Guardian on 25 January stated that the NHS could save £29 million a year by substituting generic equivalents for only 11 branded products. That claim was made by Mr. Alan Smith, the chief executive of the Pharmaceutical Societies negotiating committee. The Greenfield committee said that £170 million could be saved over a much wider area. What is the Minister's estimated saving if there were a complete substitution of generic drugs for brand name drugs? An estimate must be available somewhere in the Department.

The drugs were all named by Mr. Smith, according to the article in The Guardian. Three of the 11 branded drugs were specifically mentioned. One is Flosint, an anti-arthritic drug, which is being introduced this very day to doctors in Liverpool. The makers, Farmitalia Carlo Erba—that does not sound British—have hired Henry Ford's yacht for the purpose. The Health Service will pay for that. The cost will be met by old age pensioners and increased prescription charges. The most outrageous bribery and corruption are practised on doctors by drug companies who try to persuade them to use these drugs. No doubt many of them resist for the very good reasons the Minister gave earlier; their professional conduct and independence would make them resist, but the pressures are remorseless. The cost eventually must be met out of the pocket of the British taxpayer.

To be fair, doctors said that the drug Flosint would cost £15 for 100 tablets, the dosage being one to three tablets a day, compared with £5.40 for the generic equivalent. If that were translated for every branded drug used in the hospital service one can see immediately that the savings would be enormous. Mr. Smith says that the Government encourage generic prescribing and that it now accounts for 22 per cent. of all prescriptions. I do not know whether that figure is accurate. Perhaps the Minister could confirm it.

The drug companies say that their research and development would be inhibited if they could riot get branded drugs imposed or inflicted on the Health Service. They maintain that they will not be able to do the amount of research and development that is essential. If the figure of 22 per cent. is right for generic prescribing in the Health Service, what protests have been made about it by either the medical profession or by the public? According to Mr. Smith there has been none. The proportion in the United States is higher than 22 per cent. with no adverse effects on the activities of the drug industry. The only people who are protesting are the manufacturers of the expensive, profit-spinning branded drugs. If the Minister is encouraging the prescription practices advocated by Greenfield, I hope he will give short shrift to the drug companies who make representations in the opposite direction.

It is useful that we have had these two debates on health matters and the Health Service. No doubt during the forthcoming general election Health Service issues will be thrashed out by the public.

The Conservative party has sought, is seeking and will continue to seek to increase the private, profit-making element from laundering and catering to private profit-making hospitals and to capitalist drug peddlers from the United States, Italy and elsewhere. After the next election the Labour Government will rebuild the Health Service and, as the Prime Minister said when she was referring to the Falklands adventure, we shall do it whatever the cost. We shall show little sympathy for the privateers in whatever activity they may be in this wonderful Health Service of ours.

8.55 pm
Mr. Michael Morris (Northampton, South)

Unlike the hon. Member for Fife, Central (Mr. Hamilton) I did not expect this subject to be debated this evening. It is perhaps fortunate that the Public Accounts Committee, of which I am a member, had a session yesterday on drug pricing. Before I go into that, let me say that the only reason that the NHS employs the private sector for laundering, catering, cleaning or any other work, is that the private sector does it better than the public sector. If the hon. Gentleman does not believe that he will presumably be making complaints to the Comptroller and Auditor General or the district auditor—whoever is relevant—and will have evidence to prove the contrary. [Interruption.] The hon. Member for Fife, Central has had a good go so perhaps he will quieten down for a second. I have looked at cleaning contracts in some detail and it is a fact that the cleaning of hospitals is done better and more cheaply by the private sector.

It is misleading for any hon. Member to quote figures without quoting the manufacturers' selling prices. If we are to challenge the drug companies it is the manufacturers' selling price, not the wholesale or the retail price, that is relevant to the drug companies. The figure that we should be dealing with for 1982 is the manufacturers' selling price of £1,200 million.

As the hon. Gentleman has said, drugs make up around 10 per cent. of NHS costs. It so happens that earlier this evening, before I knew that the debate would take place, I was reading an interesting article in the journal of the Office of Health Economics about a survey that was done—[Interruption.] I dare say that it is sponsored by the drug companies. I do not deny that at all. An interesting survey was conducted by an independent market research organisation on people's perceptions of what NHS medicines cost in relation to the total costs of the NHS. I do not challenge the independent nature of that research, but what is interesting is that 42 per cent. of doctors got the answer about right. They thought that the proportion was about 10 per cent. Nineteen per cent. thought that it was about 20 per cent. and 25 per cent. thought that it was between 30 per cent. and 40 per cent. Thirteen per cent., who must be out of touch, thought that it was 50 per cent. or more. More worrying though was the public's attitude, and the survey covered about 400 members of the public as well. Three per cent. did not know and only 18 per cent. thought that it was around 10 per cent. Even more worrying is that 38 per cent. thought that it was 50 per cent. or more and on top of that 28 per cent. thought that it was between 30 per cent. and 40 per cent. Therefore, 66 per cent.—two-thirds—of the general public believed that drug prices form about 30 per cent. of NHS costs. The hon. Member for Fife, Central fuels that debate by adding to that misconception of the percentage costs of drugs in relation to the NHS.

I shall tread warily because, like the hon. Gentleman, I have received a fair amount of material in confidence. In fact, the hon. Gentleman mentioned in public session a figure that we were asked not to divulge. That will be on the record, and if he wants to check it he will find that he disclosed in the questioning yesterday a figure that we were asked not to disclose. I am not prepared to repeat it now. He will have to carry the can for that.

It is true that the PPRS is a scheme whereby the DHSS, with guidance from the Treasury—that is an important element; this is not a pioneering job done only by the DHSS, but one that is done in conjunction with and with the agreement of the Treasury—produced a basis whereby there should be an average return on the pharmaceutical industry's average historic capital employed. It is right and appropriate, and not just in the National Health Service—it applies equally in the Ministry of Defence and in other areas of major Government expenditure—that Governments should have a view on what the private sector's return should be. As a member of the Public Accounts Committee I would find it unacceptable if there were not a yardstick by which both the Treasury and the Department involved set a means of analysing the costs and profitability of companies servicing the public sector. I hope that Opposition Members agree that there must be some such basis.

The question then is whether the figure established is too generous in relation to the public interest—not the fact that it is there, because without it there would be enormously excessive profits. That basis was set, and it is interesting that it was set originally in July 1977. A figure was established, and it was enhanced by a percentage, because this industry is in the risk-taking business. The hon. Gentleman mentioned one company, but there are many. I suggest that all of the 60-odd companies that are involved must have failures in their development programmes. I suspect that in a screening process they screen hundreds of thousands of compounds before they come up with one successful product. So, by its nature, it is a risk business. It is not a business in which one can say to oneself "I shall look at this area and know for certain that if I screen 10,000 compounds in that area I am bound to come up wih a dozen winners". One could screen 10,000 compounds in one area and come up with no product successes at all. One could screen 10,000 compounds in another area and come up with one or two that are successful.

Above the target that is set, there is a grey area. Sometimes a company reaches that area if it increases its efficiency, or increases its exports, because it has generally improved its performance. We may disagree across the Floor of the House, but it is my view that if a company, by its own efforts, increases its efficiency and thereby its profits, it would be an disincentive to claw back the profit in the year in which it occurs. If it is a continual process, it is a different kettle of fish. If it is a one-off, or a near one-off, one must surely retain the incentive element, or there will be no investment in the future.

The target returns were originally constructed on a basis that was almost identical to the real rate of return looked for by the nationalised industries. That comparison was drawn, and that was the basis on which it was done. So if it is wrong for the drug companies, it was wrong for the nationalised industries. That is a valid point that hon. Members on both sides should bear in mind.

The hon. Member for Fife, Central was very flip about the role of the pharmaceutical companies in the private sector in this country. The tenor of his speech was that most of them are multinational, out to rip off everyone in sight and that they make little contribution. They employ directly about 70,000 people. It is not an insignificant number. In 1980 their exports were worth £523 million. I believe that they have increased since. They are profitable, but they pay tax. We obtain some clawback in corporation tax. The figure was not readily available within the DHSS. It will be interesting to see what has been paid in corporation tax when the figures are published.

This country survives by its exports. There is no hon. Member who does not believe that. We have a group of successful companies which do an important job for the nation. The hon. Gentleman says that they have done well out of the National Health Service and that the DHSS has been rather slothful in obtaining adequate rebates from those companies which have made excessive profits. It is a pity that the hon. Gentleman did not balance his remarks. Yesterday, in the public session of the Public Accounts Committee he was told specifically by the permanent secretary that the success of the negotiating ability of the DHSS should not be judged alone by the sum of rebates received. Its success should also be judged by the amount by which it had prevented price increases being imposed on the NHS by those companies that had wished to do so.

I do not have the exact figures, but the information given yesterday was that whereas the RPI, during the period that this scheme has been in existence, had increased by about 370 per cent., the index for drug prices had increased by only 230 per cent. The permanent secretary made great play of the fact that the Department worked extremely hard to ensure that any price increases were justified. The hon. Gentleman did a slight disservice to those who gave evidence yesterday by not explaining that dimension of what we were talking about yesterday.

The hon. Gentleman talked about the Greenfield report. I take no exception to him complaining about delays in the production of the report. I agree that if a report has been on the Minister's desk it should be published after a reasonable length of time. However, I take exception to the hon. Gentleman saying, sotto voce, that there are quotations in the press of savings of £175 million to £200 million if we went on to generic drugs. When that question was raised yesterday, the permanent secretary and his officials made it clear in their evidence that they were in no position to verify any of those figures.

Mr. Andrew F. Bennett

Why not?

Mr. Morris

I do not know why not. It is not my responsibility to say why not. The hon. Gentleman should come to the Public Accounts Committee one day. He might learn a little. We expect officials to come briefed on the subject with which we are dealing. The report is not yet published, and it is wrong for the hon. Member for Fife, Central to go on about figures quoted in press reports because they have an unhappy history of sometimes being wide of the mark. Sometimes they are right. These reports may be right.

Mr. Bennett

The hon. Gentleman is complaining about press reports. Does he agree that the Government have a simple answer? They should ensure that the original report is published as soon as they get it. That discourages this sort of leak.

Mr. Morris

I could never agree that any Government should publish a report as soon as they receive it. Any Government, whether Labour or Conservative, must be given a reasonable time to assimilate a report and formulate their views on it.

Mr. Laurie Pavitt (Brent, South)

How long?

Mr. Morris

I do not know how long the report has been on the Minister's desk.

Mr. Pavitt

A year.

Mr. Morris

The hon. Gentleman may be right, but I do not know whether the report has been on the Minister's desk for a year. I do not think that the hon. Gentleman's assertions, which are based on press speculation, are necessarily useful.

I understand that there may be people who want to use wholly generic drugs in future. I am sure that the Co-operative Society and others could produce a generic drug. Many people suffer from allergies and reactions to drugs. There must be dozens of antacids on the market. If the hon. Member for Fife, Central is saying that every antacid is an identical product, he is talking absolute bunkum. If he is not saying that, he is saying that there is a role for branded products and that there must be a variety of products to meet individual needs.

I declare an interest, as I am married to a busy general practitioner—

Mrs. Dunwoody

If I were married to the hon. Gentleman, I would be very busy also.

Mr. Morris

I only wish that the hon. Lady's surgery was as busy as my wife's surgery. The vast majority of doctors welcome a visit from a medical representative. The hon. Member for Fife, Central may laugh, but I have a survey supporting that view. Admittedly, it was carried out in 1975 and is seven years old, but I do not think that attitudes have changed. Provided a medical representative has made an appointment, he is welcome. Doctors find it a problem keeping up to date with developments, and there are a great many developments in drugs. It is vital that medical practitioners remain up to date and the medical representative plays a key role in that.

The hon. Member for Fife, Central may say that we should fire all the representatives. Presumably, with generic drugs, we would not need them. We could fire the lot of them, which would save some money. In Committee yesterday, the hon. Gentleman referred to advertising costs. It was made clear in evidence that they are controlled so that they are no more than 10 per cent. of the cost price of the product. I suppose that one could suggest that all advertising and promotion was banned.

Comments were made yesterday in Committee about foil packaging, and it was suggested that all pills should be put in bottles. Thankfully, that suggestion was hit on the head by the chief medical representative of the DHSS. He said that pills were put in that sort of packaging for child safety and dosage reasons. The hon. Gentleman does not do service to Britain when he runs down a successful industry. I am all for catching the profiteer. I am sure that he will agree that I am prepared to put questions in the Public Accounts Committee as toughly and as strongly as he is.

The drug industry is successful, but there is much pioneering work to be done. There are many people still suffering, in this country and across the world, from diseases for which we have no known cure. It does no service if, for the sake of saving a couple of million, we stop further research work on some of these crucial studies. Neither the hon. Member for Fife, Central nor I know what those crucial studies will be, or which company will come up with the answer. It is in the nature of this type of research that one cannot tell. Therefore, he does not do a service to the country or to the NHS patients by pursuing the line of questioning that he has followed this evening.

9.15 pm
Mr. Laurie Pavitt (Brent, South)

I shall take up some of the points that the hon. Member for Northampton, South (Mr. Morris) has made. He knows that the Office of Health Economics has been a subsidiary part of the Association of British Pharmaceutical Industry ever since its inception. Therefore, although it does excellent work in some regards, all its reports for the past 20 years lean over backwards to explain and apologise for the drug industry.

With regard to the possibility of clawback, I remind the hon. Gentleman that the PPRS—which used to be the VPRS—has, under all Governments, run rings around the DHSS. As a consequence, my hon. Friend the Member for Fife, Central (Mr. Hamilton) is right in saying that we are paying far too much for our drug bill. Only two Ministers ever attempted a clawback, both of them Conservatives. One was the right hon. Member for Down, South (Mr. Powell), who got into considerable difficulty for doing so.

The second person who attempted this was the present Chancellor of the Exchequer. He had a battle with Roche, which took him through all of the courts to the House of Lords. Eventually, the right hon. and learned Gentleman clawed back £3 million of excess money that the Health Service had paid to Roche. Twelve months later I presented to him a list of the price increases that Roche had put on all of its products. That meant that it finished up with a profit on the deal. Part of the problem is that the efficient organisation of the drug companies is such that they run rings round us most of the time.

The World Health Organisation has published a list of 200 essential drugs. However, all the vaunted research has meant that under the NHS over 20,000 drugs have to be kept by the pharmacists for the doctors to prescribe. All of that has been the result of the research that we call "me too"—one takes a drug and changes a compound of it, which results in another drug to be part of the armoury of the pharmacist. Unfortunately, it means a great deal of expense in terms of the stock that has to be held by the pharmacist.

My hon. Friend the Member for Fife, Central talked about the selling price and about the rip-off that takes place. At the moment, the Council of Europe is seriously discussing the problem of the rip-off by the drug companies whose market in the Western world has been diminished. Instead, they are selling drugs to the Third world, which it very often does not need and cannot use, but out of which the companies are making a profit.

For example, Ciba-Geigy Ltd produces a drug called Entero-Vioform which we had in this country for many years, but which has now been banned. However, it is still exported to the Third world. After a great deal of pressure from the World Health Organisation, the company has agreed to withdraw the drug, after three years. In other words, it will clear the stocks of a drug that we will not have in this country and which the United States has banned, by selling it to the Third world.

The evidence on research is that in the past two years research into diseases prevalent in tropical countries has now been reduced to a minimum. The London School of Hygiene and Tropical Medicine is one of the most important in the world for research into tropical diseases. However, because of cuts it is in danger of having to close the reseach department, because the emphasis is now on drugs for the civilised, Western industrial countries, and a place such as the school is being clobbered.

I wish to say how grateful the House should be to my hon. Friend the Member for Fife, Central. This is not the first time that he has forced a debate on a report that the Government have tried to sweep under the carpet. As long ago as July 1980, he raised the question of the Black report. It took nearly two years before hon. Members were able to obtain a full debate. Irrespective of whether we are talking of a limited number of drugs or the whole range, the Government say it is important to save. They make the erroneous claim, in my view, that charges to overseas visitors will produce £6 million. This has meant introducing an elaborate increase of administration. Yet when there is a possibility of saving between £29 million in respect of 11 drugs and £175 million for a larger number, the power of the industry is such that the Government are impotent.

I feel certain that when I introduce my Bill on generic prescribing my hon. Friend the Member for Fife, Central will be one of my sponsors. Ever since Nye Bevan introduced the Health Service, every Minister of Health, Labour and Conservative, including lain Macleod and Kenneth Robinson, has made a plea for use of the British pharmacopoeia and the British national formulary and advocated generic prescribing rather than brand names. After 30 years, 80 per cent. of prescribing still consists of brand names.

An obvious advantage is the chance to eliminate a large sum in commercial expenses. It is amazing that for every nine general practitioners in this country there is one commercial traveller calling upon them and getting them to prescribe drugs. I can think of no better selling job than calling upon a man to sell him something that he does not have to pay for. If the Minister consults general practitioners in any area and goes to the pharmacist, he will discover which representative has been visiting the area. The drugs dispensed indicate the salesmen who are selling their drugs of a particular brand.

The saving that could be made is fantastic. At the risk of wearying the House, I should like to give a few figures. One of the drugs used most these days is Mogadon. The National Health Service is paying a price of 210p per 100. Under generic prescribing Nitrazepam costs 110p per 100. I can go down a list of drugs. Aldomet costs 495p per 100. Under generic prescribing, the cost is 235p. Inderal costs 420p per 100. Under generic prescribing the cost is 120p. Indocid costs 555p per 100 compared with 180p under generic prescribing. Lasix costs 540p. per 100. Under generic prescribing, the cost comes down to 80p. The difference is phenomenal.

When we talk of a saving of millions of pounds we are talking only of what is practicable. I have been pleased to hear about the discussions taking place in the Public Accounts Committee. A limited amount of generic prescribing could mean a saving of £29.7 million on only 11 drugs. There are 300 drugs in popular use. If generic prescribing were introduced, I consider that saving of £175 million to £200 million would be a conservative estimate. It is fantastic that we pay half as much again for our pharmaceutical services, our drugs bill, as for the whole of our general practitioner service. The balance is wrong.

I have a love-hate relationship with the drug industry. I know that the chairman of the ABPI does not look for Reds under his bed. I know that instead he looks for me. I accept that the use of drugs can avoid sending a patient to hospital but that is not a reason for having 10, 20 or 30 different drugs on the market that do the same sort of job. Generic prescribing would produce significant savings and still prevent some hospitalisation.

A problem that we would have to face with generic prescribing would be the preservation of the quality of generic drugs. There need be no great difficulty about that. The substitutes would of necessity have to be tested, and it would be possible, with the help of the Pharmaceutical Society of Great Britain and the Royal College of General Practitioners, to reach comparable ways of preserving quality.

Clinical freedom has always been a stumbling block. No Minister in successive Governments has ever been prepared to interfere with doctors' clinical freedom to prescribe what they want. If we had general substitution by qualified pharmacists, the doctor could still preserve his clinical freedom. He would have only to write across his prescription form, his FP10, "No substitutes". That would safeguard his clinical freedom and at the same time it would enable the pharmacist, who very often has far more knowledge of these matters than the doctor, who is concerned with wider responsibilities, to employ his skill and knowledge.

Many of the drugs that we use are unnecessary and this adds to the drugs bill. A recent study took place in the Federal Republic of Germany. There are 600 products sold in Germany that claim theraputic value in treating heart diseases. The study revealed that about 400 were of no value. It evaluated 567 drugs and judged that a full 70 per cent. were not to be recommended and that it was a waste of public money to make prescriptions for them.

My hon. Friend the Member for Fife, Central talked about the profits of the drug companies. We have always heard the argument that is based on research. It is interesting to compare the profits of drug companies with other companies in every section of trade and commerce. The drug companies have been at the top of the league for the past 25 years. Over the past 10 years their research has been absorbed before their profits are stated.

The research in which the companies engage is not all to their own credit. The Under-Secretary of State knows that from 1970 onwards the Medical Research Council in its pharmacological units, has had contracts with the drug companies. A good deal of the research that eventually finds its way into the drug companies has been part of the research that has been funded through the Medical Research Council's individual pharmacological units.

I have details of most of the large national drug companies profits, including the profits of Lilly, the company that was discussed by my right hon. Friend the Member for Stoke-on-Trent, South (Mr. Ashley). Last year it probably made another $12 million from Opren. It seems that commercial rewards are the first consideration. The care of the sick and the disabled and the restoration of good health are not issues that should go to the market place to be bandied about for profit. It is a civilised responsibility and it is time that the Government faced the fact that we cannot continue to bolster the huge profits of drug companies on the ground of research and on their export results, which are quite good. I have no quarrel with their export performance. Nevertheless, the pharmaceutical industry's profits are made at the expense of public expenditure and the NHS. The NHS is comprehensive. The total expenditure of £14 billion is limited and once one allocates to any one section of the service, it is inevitable that funds are not available for the rest of it. The excessive cost of drugs and pharmaceutical services means that other sections of the Health Service are deprived. One example is renal dialysis which is deprived because we are spending our money in the wrong direction. Savings on the drugs bill could rectify some of the present NHS financial shortages.

9.30 pm
Mr. Frank Haynes (Ashfield)

I too congratulate my hon. Friend the Member for Fife, Central (Mr. Hamilton) on raising this debate. It gives the House a valuable opportunity to discuss the pharmaceutical industry.

I was privileged to serve on several committees and bodies outside the House before I came here. We often examined the pharmaceutical industry, the massive profits that it made and the cost of drugs to the NHS, the Government and, in the final analysis, the public, who must foot the bill. Ever since I have been here, Secretaries of State for Health and Social Security have announced increases in prescription charges. The reason they give for the increase is the cost of drugs.

I was lucky enough to serve on the Committee on the Health Services Bill 1980. The previous Minister for Health said much in that Committee because hon. Members asked many questions about the pharmaceutical industry. He promised the Committee that he would act on the cost of prescription charges.

It is all very well for the hon. Member for Northampton, South (Mr. Morris) to talk as he did. He appeared to have his head in the clouds. He is a member of the Public Accounts Committee yet he does not know what is going on. I thought that members of the Public Accounts Committee got all the information that they required to do their job. I have heard today that that is not quite true.

The Greenfield report has been on the Secretary of State's desk for a year. He is not yet prepared to let the Public Accounts Committee examine it. That is disgraceful. I believe that it is being withheld for a purpose. Many people and the media are talking of the possibility of a June election. Perhaps that is the reason. I do not know. The Public Accounts Committee certainly does not. Some hon. Members have asked why they cannot have a copy. My hon. Friend the Member for Fife, Central wrote to the Stationery Office and asked for a copy of the Greenfield report. He was told that it was not available but that it might be in the future. Things have come to a pretty pass when one cannot do one's job properly.

With regard to what the Minister for Consumer Affairs said about doing something about the costs of the drug industry being passed on to the consumer, I have the impression that there is a softly, softly approach. We are not prepared to take the issue by the scruff of the neck and do something about it in the interests of the people whom we are supposed to serve.

The Secretary of State for Employment, for example, has been talking for some time now about the trade union political levy to the Labour party. He can have his thoughts, he can make his speeches and he is entitled to his opinion, but there is a list of firms in the drug industry that contribute to the Conservative Party. Let us have a look at that. It cannot work one way; it must work both ways. This proves to me beyond doubt the unfairness of some of the things being said about trade unionists from the Government Front Bench. Trade unionists are involved in the pharmaceutical industry.

I am shocked at the figures presented by my hon. Friend the Member for Fife, Central of the profits that could be creamed off the industry if the Government went about it in the right way. Not long ago we were discussing the earnings of nurses and workers in the Health Service. This would be one way to solve the problem because the Government keep saying that they do not have the money. The money is there but it is being raked off, ripped off.

My hon. Friend did not use the term "rip-off" but I think it was what he meant. I am using it. The hon. Member for Northampton, South challenged my hon. Friend's remark and suggested that perhaps he meant a rip-off. This is not the one-off exercise that the hon. Member for Northampton, South, who sits on the Public Accounts Committee, thinks it is. It has been going on for a long time.

I may be open to criticism because we had a Labour Government who also did nothing about it. The Labour party is governed by its conference decisions in many ways. A Labour Government have never been given an instruction about the pharmaceutical industry. I believe that the industry should be part of the public service. I really believe that. What has been said about research is eyewash. The money will be found to do the research because that will help to find ways to create the massive profits to line the industry's pockets. That is what is going on at the expense, as my hon. Friend said, of the pensioner, and the lower-paid worker. They have to pay, unless of course they qualify for free prescriptions. But many people are making their contributions simply to provide the massive profits enjoyed by the pharmaceutical industry.

I hope that in the not-so-distant future we will have an opportunity to see the Greenfield report. I have the impression that there are matters in the report that the Government, and in particular the Secretary of State for Social Services, do not like. That is why he is sitting on the report and why he does not want it to see the light of day.

There are ways and means by which the Inland Revenue could deal with this situation. The ordinary worker is dealt with every week—every Friday when he receives his pay packet, as I used to receive mine at the pit. Those on PAYE are dealt with, and there are ways and means of dealing with these massive profits which are made at the expense of the National Health Service.

We have recently seen reports in the media—I saw it for myself on the television news—of police moving in on social security frauds. When the Department of Health and Social Security informs the police of fraud it is not long before the police are active. It is a pity that we cannot have some police action on this type of thing. There is no doubt that it is crooked.

I hope, although I doubt it very much, that as a result of what is said tonight, the Government will grasp the issue by the scruff of the neck and give those profits where they belong—to the people of the nation.

9.40 pm
Mr. Andrew F. Bennett (Stockport, North)

In the newspaper this morning two items about the Department of Health and Social Security struck me as being considerably significant. One was the report of the Public Accounts Committee and its questioning yesterday, and the other was the report on the publication of the book "Poor Law" concerning the raid by the police and the DHSS in Oxford on 2 September—"Operation Major". Those two cases illustrate nicely the attitude of the Department.

I do not approve of anyone who is ripping off the Department—in other words, ripping off the public. I would be the first to want to stop anyone taking money illegally from the Department. However, let us look at the way in which the Department behaved during the raid in Oxford. It appeared to act with a desire to maximise the impact on public opinion of the amount of money that was being ripped off. It issued false press statements about the amount of money that was missing. It broke almost every law and its rules and those of the police in hounding homeless people in Oxford. Those who have virtually nothing and no home get such treatment from the Department.

However, when more money is involved, the Department seems to treat the drug companies with great deference. The Department is not willing to chase after them to try to get back what appear to be considerable profits at the expense of the Department, the taxpayer and the people. It is high time that the Department got its priorities right. It should put a little more effort into pursuing those who are ripping off large sums of money from the Department first and then it should try to make sure that small sums are not ripped off.

I welcome the Public Accounts Committee's inquiry. I hope that it will spend a little time considering the extent of the profits of many drug companies. I get the impression that the level of profits is what the drug companies decide to show. Most of them operate in more than one country. Many of them operate in a large number of countries. It is fairly easy to move one's research costs or profits from one country to another.

In their negotiations with the Health Service, I have a suspicion that too often those companies put down a high element of research costs and then they carefully put down low profits, while in another country they show a higher profit because the Government there will not tax them as highly or will not be concerned at the level of profit, and a lower amount is put into their accounts for research and so on. Therefore, it is easy for those companies' accounts to be massaged if they have an argument with the Department about their profits. I hope that the Public Accounts Committee will look carefully into that matter.

How do the drug companies justify high profits? They say that they need them to encourage risk taking and research. Everyone thinks that research into medicine is a good thing. However, we must ask ourselves where the research is being directed. Is it being directed towards medical needs or towards making more profits? I get the impression that much so-called medical research is directed not towards meeting medical needs but towards refining or altering a drug, not to meet a medical requirement, but often to improve its appearance or to do something that will help the sales of the drug—

Mr. Pavitt

Or to break patents.

Mr. Bennett

I agree that patents are broken to try to pinch some of the profit from another drug company. If the drug companies can justify high profits to encourage research, there must be more control over that research to ensure that it meets medical needs and is not a means of feeding back profits to the drug companies.

One of the nastiest sides to the behaviour of drug companies is that they appear to be ripping off the people of Bangladesh. The Government of Bangladesh reacted to the drug companies by deciding that the majority of drugs would be produced within that country and that they would not pay any royalties. That was a sensible reaction from probably the poorest country in the world to exploitation by the drug companies.

The drug companies complained to the Governments of Britain and the United States. The British Government, I am told, tried to put pressure on the Bangladesh Government not to treat the drug companies so harshly.

We ought to have a statement explaining why the Government took the side of the drug companies against one of the poorest countries in the world instead of protecting that country. We give aid to Bangladesh, yet in the basic area of the provision of cheap drugs we appear to be saying "You have got to pay extra". Surely the developed world could afford to give Bangladesh the drugs for nothing instead of saying "Not only do we want to cover costs but we want to cover profits and make more on the side to cover research". Our behaviour was appalling. It was also disgraceful that no Minister told the House what the Government were doing.

I have spoken to quite a few doctors in my constituency and other areas. As the hon. Member for Northampton, South (Mr. Morris) said, far from welcoming the rep coming round, most doctors find it slightly distasteful. They dislike the way in which the rep comes in with a new gimmick that may keep children amused for a day or two, thereby encouraging the doctor to take one particular brand of drug and to encourage its prescribing. The doctors mildly resent that.

There is even greater resentment at the fact that if doctors go to one of the medical centres for postgraduate education they find that the vast majority of information is provided by courtesy of the drug companies. The drug companies provide refreshments, and so on. The doctors feel that much of the medical information that they require is biased and slanted as it comes by courtesy of a drug company.

It is distasteful that doctors should feel that they have been bought by the drug companies. When they want clear information, they must obtain it packaged by a drug company with a bias for selling a particular brand of drug or appliance. Most postgraduate centres must rely on that sort of thing or the in-service training of the family practitioner, but many conferences that doctors attend are sponsored by the drug companies.

If the drug companies were paying out of the kindness of their hearts, it would not be so bad, but the cost falls on the National Health Service as a result of the charges for the drugs it uses. If the Health Service pays, those events should be put on without the built-in bias of the promoting drug companies that have a vested interest in selling their brand rather than another brand, even though the two drugs may meet exactly the same need.

The Greenfield report should have been published as soon as the Government received it. There should be a proper public debate. It is perhaps true to say that the report is too harsh on the drug companies. If we had such a public debate, the drug companies and other people could put forward their views, and the Government thereby could arrive at a decision. Apparently, the Government want to decide first and allow people to react afterwards.

Many of our chemists would be more efficient if doctors were encouraged to stick to a basic list of drugs for the majority of patients. Only where there is a clear medical need should they not use the list. Many parts of the country have great difficulty in getting chemists to remain open in less profitable areas. Chemists complain about the amount of stock that they must now carry to meet the needs of patients, even though many brands do exactly the same thing. If they were able to carry a much smaller stock from the generic list, costs would be reduced and we might be able to retain chemists in some of our marginal areas for the benefit of the sick and the elderly.

I am concerned about the cost of drugs and about the fact that many people are not well-informed about it. There would be advantages in putting the cost of the drugs on the bottle or packet once the prescription was made up. Too many people do not have a realistic view of what the NHS costs. If they had more idea, more people would be convinced that they get good value for money from the NHS.

Doctors often prescribe tranquillisers and similar drugs that cost £15 or £20 per prescription. It might do more good if they were able to give the patient the cash, as that would relieve the patient of much of his anxiety and worry. I appreciate that a professional body looks into the over-prescription of drugs. Even so, it is ridiculous that doctors can prescribe drugs with no difficulty but cannot prescribe a home help. The doctor can make such a recommendation to the local authority, which then carefully weighs up the resources involved. Sometimes it spends more than the cost of a home help for three or four weeks in deciding whether to allocate that home help. It is important to look at these facilities in the round, and not just at the drugs that can be prescribed. We should try to ensure that the doctor can prescribe all those things.

I congratulate my hon. Friend the Member for Fife, Central (Mr. Hamilton) on initiating the debate. I hope that he will pursue it. I also hope that the Public Accounts Committee will put pressure on the Government. I further hope that by then the Government will have published the Greenfield report and that they wil take some action to ensure that the NHS is not ripped off by the drug companies.

9.53 pm
Mr. Allen McKay (Penistone)

These have been two useful Adjournment debates. As usual, when time is available, we discuss subjects that are both interesting and informative. Much useful information has been gained, and we should be grateful to my right hon. Friend the Member for Stoke-on-Trent, South (Mr. Ashley) and my hon. Friend the Member for Fife, Central (Mr. Hamilton) for initiating these debates.

The pharmaceutical firm of Sterling-Winthrop is located in my constituency, and there is no doubt that it reads our debates in Parliament. I have tried to build a relationship with Sterling-Winthrop, and have gradually succeeded, as it is one of the main manufacturers of paracetamol. That company therefore has an interest in what we are now debating.

Quite often, we pay through the nose for various drugs on prescription. A recent television programme presented the possibility of going abroad and buying the same branded drugs as are sold in Great Britain at half the cost. That irony is proof that the National Health Service drugs bill could be reduced to more reasonable proportions.

I receive letters from constituents who are not exempt from paying prescription charges, but who should be. The most recent letters that I have received on the subject were not from patients but from general practitioners who were disturbed at the high cost of the drugs that they must prescribe and the high cost of some surgical appliances.

Those practitioners believe that it is time that we examined exemption certificates and had a look at what is happening in the outside world. Many people can obtain exemption certificates, including women over 60, men over 65, children under 16 and pregnant women. Mothers who have had a baby in the past 12 months are also exempted. That means that if a woman has a baby every 12 months, she can obtain a free prescription each time.

Mrs. Dunwoody

She would need to.

Mr. McKay

A list of items and illnesses are also exempt. If one is not ill before one starts reading the list, one certainly is by the time one has finished. There is the old adage about the social services which we have discussed frequently, that, if one has more than £2,000 in the bank, one is debarred from receiving free prescriptions. That area should be examined.

The Government are examining the possibility of private hospitalisation. Doubtless those who can afford to pay for private hospital treatment will pay very high prices for the drugs they obtain. It will not be a two-tier medical service but a three-tier one comprising a high income group who can afford private hospitals and high-priced drugs, a group who discover on paying for private hospitalisation that they cannot afford to pay for the drugs and who return to the National Health Service, and the remaining group in the National Health Service.

We should also consider the Government's recent Think Tank report that talked about private hospitalisation and also about patients having to pay more fully for the costs of the medicines and the drugs that they receive.

If such a system were to be introduced by the Government and succeeded in reducing the drugs bill, that would be more satisfactory until the time of a Labour Government when we can do away with private hospitalisation and bring in the free National Health Service that was originally envisaged.

Health services are under pressure and I shall be talking to an area health authority on that subject shortly. I have arranged to meet the Barnsley health authority at 10 am tomorrow and I shall have to travel through the night to ensure that I arrive on time. That authority is anxious about the cuts in the National Health Service. If we can bring overspending on drugs under control, as a result of this debate, other pressures and Government action, more money will be available for the National Health Service and for the people of whom I have been speaking.

9.59 pm
Mrs. Gwyneth Dunwoody (Crewe)

With the permission of the House, I wish to say a few words.

I, too, congratulate my hon. Friend the Member for Fife, Central (Mr. Hamilton) on raising an important matter this evening. Why are we so worried about the pharmaceutical industry? It is because, since the Government came to power, Minister after Minister has come to the Dispatch Box and announced, rather like a magic jack-in-the-box, many figures. They always manage to say that they are giving much more money to the National Health Service overall, yet each regional health authority must announce cuts in services.

The Minister of Health has made almost a career out of visiting hospitals and children's units that are about to close, and explaining to the populace at large that the Government can provide a sum of money to save that unit, although not always for very long or in a useful way. One thing that the Minister has had to do for the Government is explain the inexplicable. Why are we so concerned—

It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put

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

Mrs. Dunwoody

We have heard tonight that the pharmaceutical industry is a battered and poor industry, which understands its responsibilities to the community as a whole and is worthy of our support. Let us examine what happens in the industry. Between 1970 and 1980, this poor weakling of an industry had a growth rate of 5.8 per cent. During the same period, the chemical industry had a growth rate of 2.5 per cent., and manufacturing industry had a fall in growth so that the figure for manufacturing was minus 0.3 per cent. In 1980, the trade surplus for the pharmaceutical industry was 29 per cent. In Britain the majority of its sales are to the National Health Service.

Great play has been made of the fact that the pharmaceutical industry spends a great deal on research and development. It is said that the industry must have profits larger than other industries because it reinvests those profits in much research. However, one matter that is certain about Britain is that the National Health Service provides a safe and constant market. There is no other market in the world where a pharmaceutical industry can be so sure of selling the amount of drugs that it does. The NHS is a constant customer and provides easy marketing conditions for the representatives of pharmaceutical firms. We have the right to say to the firms, "Are you sure that you are not ripping off your best customer? Prove to us that the prices you charge and the profits you make are justifiable."

The Government must have had some reservations, because they set up an inquiry on the best and most effective form of prescribing. The report, which has come to be called the Greenfield report, has been in the Government's hands for nearly 12 months. Although there has been constant pressure from the House, no Minister has been prepared either to say openly what is in the report or to make it public. My hon. Friend the Member for Fife, Central told us that HMSO has no plans to make it public and say that the only access that we shall have to the information is for hon. Members to search for copies in the Library. Less than a week ago, the Secretary of State said at the Dispatch Box that he intended to publish the report soon. When questioned by hon. Members, he said that that was because he wished us to have an opportunity to know what the report said.

If the Greenfield report makes it clear that by moving to limited list prescribing and to generic prescribing we could save many millions of pounds for the National Health Service, the Conservative Government are failing in their duty by not making that report public as soon as possible. If wards are being closed, beds left empty and regional health authorities told to cut expenditure, we should consider not only ways of making conditions more uncomfortable for the staff and more unacceptable for the patients, but all the costs right across the board.

Anyone who knows anything about the workings of the pharmaceutical industry in Britian knows that its marketing procedures are outrageous. The hon. Member for Northampton, South (Mr. Morris) said that general practitioners welcomed the call of the reps because they bring information. He must be extremely naive. The reps bring glossy and expensively produced forms of advertising that are geared entirely to the interests of the company and very little geared to handing on accurate information to the medical profession.

Mr. Michael Morris

Is the hon. Lady saying that the factual statements on dosage rates and performance of products given by medical representatives are untruthful?

Mrs. Dunwoody

I am saying that if all that was in the publicity was dosage rates there would be very little objection to it and the drug companies would not have to have cocktail parties on yachts, trips on the Orient express or dinners such as are held constantly to put over that information. Any general practitioner could show the hon. Gentleman a wad of invitations to every kind of beanfeast, all of them provided by drug companies. Why? Is it because they seriously think that by giving a long dinner and a lot of alcohol they will provide factual information about dosage rates to general practitioners? Of course not. They know that what they have to get over is the specific problem with the brand name. That is what concerns the pharmaceutical industry.

Mr. Morris

I do not know whether the hon. Lady has ever been to one of these evenings. I have been to one or two. I am not a medical practitioner; I went as a guest because sometimes the wives and husbands of the practitioners are invited. I see nothing wrong in going as a husband. On the few occasions that I have been to such evenings, there has been a glass of wine and usually a buffet, but there has also been much detailed talk about the product or range of products. It is time the hon. Lady knew a little more about what happens on the ground before making assertions.

Mrs. Dunwoody

The hon. Gentleman has obviously a very interesting view of what it takes to pass on accurate information to the medical profession. If the only way general practitioners can understand facts—

Mr. Morris

It is not the only way. The hon. Lady has twisted it.

Mrs. Dunwoody

—is to have them given over a glass of wine, then the profession is in considerable trouble. The hon. Gentleman has illustrated one of the difficulties. If it was an information seminar, why was he there in the first place?

If we really want to know what is happening we have only to looked at some of the statements of companies outside this country. An American drug company gave the game away beautifully in an article which was reported in the Financial Times. It said: We look at the whole costs of research and development and we decided we were spending far too much money. We therefore decided to limit our efforts, particularly because of the development of biochemical compounds. We then found that we were not only able to produce products which gave us a great deal of profit but, in fact, we restricted the amount of money that was spent on research. So we now know that many of the amounts written in by the drug companies are unacceptable.

If we had any doubts about that we have only to consider what is happening in parallel importing. There may be considerable doubts about some aspects of that, but recently a number of pharmacists have imported drugs, identical drugs made by the same pharmaceutical companies but marketed in different parts of the European Community. They have proved that we have got the reverse of dumping. Drugs can be made here, exported to the EC and brought back for use by pharmacists at a price half that at which they are sold to the NHS.

I have today tabled a number of questions to the Department on precisely this, quoting individual drugs made by major companies, where the prices charged to the NHS are at least double the rate at which the same drugs are being marketed elsewhere. If that is not a rip-off, I should like to know exactly what it is.

Tonight we are discussing a question of such importance that we need to look hard at the facts and figures. The DHSS has told not only the Public Accounts Committee but the world at large in some of the evidence that it is not able to monitor what is happening over pharmaceuticals. Indeed, it seems that in comparison with the multinationals it is trying to monitor the price of drugs with a few civil servants and some part-time staff. When a civil servant was asked whether he was satisfied that there was no creative accounting on the part of the drug companies—the transfer pricing between one subsidiary of a multinational and another—the answer was that he was not. It is clear that the Department has a special responsibility tonight.

It is not the Labour Government who have cut the NHS. My Government regarded the NHS as of paramount importance because of the service that was provided to all the patients. It is this Government, whose strong commitment to profit means that they put the interests of the pharmaceutical companies way ahead of the interests of any other part of the NHS, who have done that. Let them explain why they have tried to suppress the Greenfields report. Let them explain to the House what they intend to do to lower the price of drugs to the NHS. But above all let them say whether it is their intention to allow the system to continue when the only people making an unwarranted profit out of the NHS are those who should be grateful to it for the market that it provides.

10.10 pm
The Under-Secretary of State for Health and Social Services (Mr. Geoffrey Finsberg)

One day the House will understand that the hon. Member for Crewe (Mrs. Dunwoody) never takes anything in. Were she capable of taking the advice of my hon. Friend the Member for Northampton, South (Mr. Morris), wine and all, she could go to a seminar and learn that it was her Government who made cuts in the NHS provision. This Government have made a real increase. She goes on and on purveying a farrago of utter rubbish and the House really pays little or no attention to her. It is sad that her hon. Friend the Member for Birmingham, Stechford (Mr. Davis), who knows far more than she does and prepares his case far better, is never allowed to speak on these occasions.

Let me try to deal with some of the facts because we have heard few tonight. My hon. Friend the Member for Northampton pointed out clearly the ignorance that exists in general about drug prices. In a way wholly unintended by the hon. Member for Fife, Central (Mr. Hamilton) the debate will enable me to put some facts on the record instead of the half truths and distortions that we have heard from so many Labour Members this evening.

The hon. Member for Brent, South (Mr. Pavitt) commented on what he called the "me too" drugs. He is one of the few Labour Members who understands such things. He might recall that even a marginal variation in a drug can lead to better clinical results or, in some cases, an absence of adverse reactions. To reduce the frequency of taking a particular pill, may be worthwhile. "Me toos" often compete in price. The long development times for drugs may mean that several companies will often be working simultaneously on the same scheme.

The hon. Gentleman then spoke about Entero-Vioform. He said that it is no longer available and that it is being exported to other countries. He knows full well that the Government do not legislate for other Governments. We are trying to support the World Health Organisation and we do not legislate against such things. It is wholly untrue to say that pharmaceutical companies do not do any significant research into tropical diseases. For example, Wellcom is prominent in the research work that it undertakes.

Mr. Pavitt


Mr. Finsberg

The hon. Gentleman will forgive me for not giving way. I have answered his point and I want to try to answer many others.

We have been told by a variety of Labour Members that the NHS is being ripped off. Let me give some facts. In 1979 savings resulting from the difference between price increases asked for and those agreed amounted to £14 million; in 1980, £6 million; in 1981, £11 million. In addition, rebates were £1.3 million, £1.6 million, £0.4 million and £3.2 million—all under this Government. I suggest that if the hon. Gentleman and his hon. Friends were to concern themselves with the facts the House would be a better place.

I want to say a word about Greenfield. I want to quote from the British Medical Journal—not, I think, the organ of the pharmaceutical industry—of 27 March 1982: As is so often the case nowadays, the working group's report has been leaked". That is a practice that I deprecate. The standards in public life of people who leak reports are abysmal. I wish that they would learn that decency is much more important.

This leak suggests that the report includes a recommendation that when prescriptions by general practitioners name a branded product the pharmacist should be able to supply a cheaper generic alternative unless specifically instructed not to do so. … We believe, however, that generic substitution will be a clumsy and ineffective way of reducing NHS drug costs and one that might discourage foreign investment in the British pharmaceutical industry". That is what the BMJ thought.

Mr. Andrew F. Bennett

What was the date?

Mr. Finsberg

I gave the date, if the hon. Gentleman had listened. It was 27 March 1982.

Let us take a look at the PPRS. First, it is not a contract. The Department does not negotiate the purchase of medicines on behalf of the NHS. That is done either by health authorities buying for hospitals, or by chemists buying medicines to be dispensed on prescription under the family practitioner services. So the PPRS does not guarantee sales of medicines to the NHS.

Second, the PPRS is concerned only with prescription medicines sold to the NHS, although it takes account of the export sales of such medicines. The scheme is not concerned with over-the-counter medicines, such as aspirin or cough medicines which do not require a prescription. Nor are we concerned with the 5 per cent. or so of medicines that are prescribed privately.

The scheme was introduced in 1978, and it succeeded similar arrangements for regulating the prices of prescription medicines that had run since 1969. Before that, health departments had attempted to control the prices of individual medicines, but that did not prove satisfactory.

The mechanism by which these objectives are attained is as follows. First, the Health departments, with the agreement of the Treasury, and taking into account the profitability of United Kingdom manufacturing industry as to whole, and the high-risk nature of the pharmaceutical industry, fixes a target return on the historic capital employed in producing NHS medicines. The figure thus set is, in effect, an average for the industry. The second stage is to allocate target returns on capital for each of the 65 or so major companies that are covered by the scheme within the industry figure. There are separate arrangements for very small companies. In allocatiing a target to the individual company the Department takes account of four factors: investment in the United Kingdom, the value added by the manufacture of medicines, the company's research and development programme, and export earnings. Particular weight is given to exports.

The PPRS was introduced with the agreement of the industry, and while individual companies, not surprisingly, may have reservations about it, it has so far worked reasonably well. We have an effective and profitable industry that serves the country well.

Taking the 10 years 1971–81, and taking 1971 as the base year at 100, the RPI showed an increase over the period to 370, while the equivalent increase in prices of HNS pharmaceuticals was to 226. In other words, general prices had increased much faster than the price of NHS pharmaceuticals. Those are reassuring figures, but because the scheme has been running for five years and there have been important developments, both within and outside the NHS during that period, we are looking again, and we are quite determined that as pharmaceuticals account for about 10 per cent. of NHS expenditure, they should not be exempted from the search for greater efficiency to which we are subjecting the NHS.

For those reasons, we are proposing that the scheme should be reviewed by the Health Departments, in consultation with other interested Departments and the industry, to make sure that the balance of interest of the patient, the taxpayer and the industry itself is being properly served, and to propose any changes that may be needed.

This review will start later in the year, and will need to cover such considerations as the return on capital allowed to the industry, the incentives to efficiency and profit it offers to individual companies, the costs allowed as chargeable expenses under it, and the relationships to the issues raised in the report of the informal working group on effective prescribing, which my right hon. Friend the Secretary of State announced was shortly to be published.

Mr. William Hamilton


Mr. Finsberg

I said that it was to be published shortly. The hon. Gentleman should have quoted what he was told yesterday in the public session of the Public Accounts Committee. Although, he was told by my permanent secretary that there are no figures in the report, he has spent some of his time quoting a variety of figures.

Mr. Hamilton

That is unfair.

Mr. Finsberg

It was during the public session of the Public Accounts Committee.

Mr. Michael Morris

The hon. Gentleman was not listening.

Mr. Finsberg

If the hon. Member for Fife, Central had asked us about the publication of the report—

Mrs. Dunwoody

He did.

Mr. Finsberg

The hon. Lady should listen. She was told twice that he had asked the Stationery Office. The DHSS does not control the Stationery Office.

Mrs. Dunwoody


Mr. Deputy Speaker (Mr. Bernard Weatherill)

Order. The Minister is not giving way.

Mr. Finsberg

If the hon. Member for Fife, Central had asked us, we would have told him that the document will be placed in the Vote Office.

Mr. Hamilton


Mr. Finsberg

When it is published.

Mr. Hamilton

On a point of order, Mr. Deputy Speaker. The letter from the Stationery Office states specifically that it asked the DHSS what was happening. The information it gave me was based on what it had been told by the DHSS.

Mr. Deputy Speaker

That is not a point of order.

Mr. Hamilton

It is a good point.

Mr. Finsberg

I have not been in the House as long as the hon. Gentleman, but I know that if I want an answer to a question I write to the Department concerned and not to another Department.

Mrs. Dunwoody

There is a difference between something being placed in the Vote Office and its being published. Which of the two are we to understand? At Question Time in the House last week when the Minister was sitting on the Front Bench the Secretary of State was asked whether he would publish the report. He said that he would. What is the answer?

Mr. Finsberg

The report is being published and placed in the Vote Office. When the hon. Lady has served in a Government she will know that that is not an uncommon practice.

Mr. Andrew F. Bennett


Mr. Finsberg

The pharmaceutical industry attracts a great deal of criticism, much of it misdirected and some downright malicious. I want to give some of the real achievements of the industry. We are talking of a multinational industry. Only five other countries have major innovative pharmaceutical industries—the United States, Switzerland, West Germany, Japan and France. United Kingdom-owned companies supply approximately one-third of NHS medicines. The United Kingdom accounts for about 4 per cent. of world sales of prescription medicines. None the less, 10 of the 20 best selling medicines in this country were developed in the United Kingdom.

The net balance of exports over imports in 1981 amounted to about £570 million. Capital employed on the industry in the United Kingdom increased by 25 per cent. between 1979 and 1981. That is over 8 per cent. in real terms. About 70,000 people are employed in the industry. They feel much more comfortable being employed by private enterprise than if they were taken over by the Opposition, who have displayed such a brilliant knowledge of business tonight.

The Opposition do not understand how one can manage to make profits and at the same time offer increased employment. Those are important benefits to the country and the individuals. They shoulassd be set against some of the figures that the hon. Member for Fife, Central sought to read out in terms which made them seem excessive. Surely, it is time to stop wingeing about one of this country's most successful industries, both in exports and employment. It would be pleasant and, a complete change to hear a word of praise occasionally for successful British industry from the Opposition. We never do. They choose to ignore whatever facts are given to them.

It is unfortunate that over the years the Labour party has demonstrated that it does not understand how British industry works. It shows clearly that it is prepared to put the jobs of 70,000 people and £650 million worth of exports at risk. That is not the sign of a responsible Opposition. It then talks about merchandise that is being imported—medicines that have been manufactured in Britain, exported and bought back. It fails to understand that a safety element is involved. It is one of the features about which the Department, under all Governments, is especially careful. Safety is one of the most important features. One must be wholly certain that if a drug is imported—whether for the first time or if it is being reimported—the trade is properly regulated. Otherwise, there is a risk in buying medicines that are not licensed, that do not provide proper information for patients or that cannot be traced should a batch have to be recalled.

Having seen some of the forged packaging, I am not prepared, without much more careful research and regulation, to say "Of course, everything may be freely imported". We are working on a scheme that will provide the necessary safeguards.

We are also concerned to ensure that any savings that might be available to the NHS from that trade, when properly regulated, are properly secured. We shall be checking the prices being paid by retail chemists for medicines from various sources.

Mrs. Dunwoody

Is it the practice of the Department to act as a watchdog for the pharmaceutical industry? Is there any other sponsoring ministry in Whitehall that also does that? It appears that, in many instances, pharmacists are visited by DHSS or MAFF inspectors on behalf of the pharmaceutical industry.

Mr. Finsberg

As the hon. Lady has said, there is a question of a possible saving to the NHS by importing or reimporting drugs that have been exported. The Department has as its major concern a determination to ensure that every drug available in Britain is safe. Until we are wholly satisfied that the public are safe and that if anything goes wrong we can trace it, we are not prepared to say that drugs may be freely imported.

The hon. Lady, at the end of the debate, suddenly asks whether MAFF officials, or officials from any Department she cares to pluck out of the air, are visiting pharmacists. I do not know. I shall gladly find out whether MAFF is doing so. The hon. Lady began with MAFF, she moved to the DHSS and then asked whether there were any other sponsoring Departments. I have told her that I am prepared to investigate the matter and write to her with the facts. I do not know the answer because, quite frankly, that issue has not been raised in the debate. I cannot do more than that.

Mrs. Dunwoody


Mr. Finsberg

Even if the hon. Lady were on her feet, I could do no more than offer to write to her with the information.

It has been a useful debate, despite some of the wholly untrue remarks and disparaging comments made about an industry of which Britain should be proud. Indeed, the majority of ordinary people are proud of it. The views expressed by Opposition Members tonight are not those held by the majority of their constituents, who know that the NHS is good and safe under this Government. As the hon. Lady knows full well, it was the Labour Government under whom she served, who cut the NHS. Much as she would love to see cuts by this Government, she knows that when she does her arithmetic—if she is able to do it—an increase in real terms of more than 5 per cent. in expenditure cannot, even in the language that she uses, be represented as a cut. When the hon. Lady begins to understand that, the House will be better served.

All I can do is place the facts on the record. Those facts are known by people who understand such matters. I am more than content that people should understand them and understand that the Government mean to maintain a superb NHS.

Question put and agreed to.

Adjourned accordingly at half past Ten o'clock.

Back to