HL Deb 24 June 1968 vol 293 cc1127-31

3.58 p.m.


My Lords, I will, with permission, repeat a Statement which is being made by the Minister of Health in the House of Commons about the recommendations of the Committee under the chairmanship of Lord Sainsbury, which inquired into the relationship of the pharmaceutical industry with the National Health Service. The Statement is as follows:

"This relationship is very different from the normal relation between Industry and the Government as purchasers. The Health Departments do not determine the demand for the drugs paid for under the service, since decisions as to what to prescribe rest with individual doctors. The hospital service apart, there is no contractual relationship with drug suppliers. Successive Governments have been concerned about these problems and the associated issues of prices, sales promotion, research costs and patents, and we are greatly indebted to the Committee for their authoritative and balanced Report.

"Many of their detailed recommendations related to the establishment and functions of a Medicines Commission, and our conclusions on nearly all of them have been announced during the proceedings on the Medicines Bill. The exception is the recommendations that responsibility for classification of drugs according to their efficacy should pass from the Macgregor Committee to the Medicines Commission, and that there should be a British Classification of Medicines. The Bill in its present form would enable these recommendations to be implemented, but the Government wishes to consult the Commission before reaching a final decision on them.

"We doubt the need for a separate Economic Development Committee for the pharmaceutical industry, as the Sainsbury Committee recommended, but propose instead to invite the Chemicals Economic Development Committee, on which the pharmaceutical industry is already represented, to establish a separate working party for the industry.

"As the Committee suggested, certain patent questions have been drawn to the attention of the Committee on the British Patent System and Patent Law. The extension of the Crown use provision of the Patents Act to the general medical and pharmaceutical services, on which the Sainsbury Committee made a specific recommendation, will be considered further by the House "—

that is the House of Commons—

"during the passage of the Health Services and Public Health Bill."

That is, during the House of Commons' consideration of Lords Amendments. The Statement continues:

"As regards prices and profits, the Government accept the Committee's general conclusions that there are serious weaknesses in the present voluntary scheme for regulating prices of ethical proprietary medicines and that the conditions under which these medicines are supplied to the National Health Service do not always ensure that prices and profits are reasonable.

"The Committee recommended that prices should in future be regulated by a system of direct negotiation, based on standard cost returns for individual products and related to annual financial returns for each company showing the results of trading with the National Health Service. They envisaged that such a system would involve considerable addition to the Ministry's staff and recognised that it would be for the Government to decided whether this was the best use of additional Civil Service manpower. There are practical considerations which would make it difficult to negotiate prices on a basis of standard cost returns, but in any event, shortage of manpower would be a major obstacle at the present time. The industry are however willing to co-operate in alternative arrangements based on the annual financial return also recommended by the Sainsbury Committee, under which information, in far greater detail than hitherto, would be provided by individual firms about the overall costs and profitability of their business with the National Health Service, as the basis for price negotiations. Subject to agreement on detail, we would accept a revised voluntary price regulation scheme on these lines, running perhaps for a minimum of three years. Although we reserve the right to reopen the question of Standard Cost Returns for individual products, the industry will have a chance to demonstrate that these new arrangements can safeguard the public interest.

"The Committee also recommended that there should be no brand names for new pharmaceutical products. We share the Committee's view that there are disadvantages in the use of brand names in association with heavy sales promotion expenditure, but we believe that the abolition of brand names by Britain in isolation could well have more serious economic consequences than the Committee envisaged, and would in fact be likely to put British-based firms at a disadvantage in export markets. Any amendment of the trade mark law also needs to take account of our international obligations. Before reaching final conclusions on where the balance of advantage lies, we propose to explore other possible ways of achieving the Committee's objectives, in particular through greater restraint in sales promotion.

"Present sales promotion involves a good deal of waste and total expenditure is higher than is necessary for the main objective as far as the National Health Service is concerned, namely informing doctors about available medicines. We accept that the industry should have a reasonable degree of freedom in promoting its products to doctors, but we shall expect a very substantial reduction in the amount of promotional expenditure, particularly that which is taken into account in assessing a firm's costs and profits under the revised price regulation scheme.

"There will need to be further negotiations on this and other matters but I am confident that the decisions taken by the Government will go far to remedy the weaknesses identified by the Sainsbury Committee."


My Lords, I am sure that the whole House will be grateful to the noble Lord, Lord Kennet, for repeating to us this very long and complicated Statement. In addition to being long and complicated, it is, of course, a most important Statement about the Report of the Committee of the noble Lord, Lord Sainsbury. I do not think Lord Sainsbury is with us at the moment, but I suspect that if he were he might agree with me that the most notable characteristic of the Governments conclusions on his Report as now announced is the extreme caution running through the Statement. This is welcome to me, although I am not quite sure whether it would be equally welcome to the noble Lord, Lord Sainsbury. But in the circumstances I propose also to be cautious in not commenting in any detail until I have made a longer study of these somewhat Delphic phrases.

I would, however, make just one comment. It seems to me that the penultimate paragraph of the Statement is rather unhappily phrased. I realise that the Government are entitled to take the view that they should form an opinion on the amount of promotional expenditure which should be properly taken into account in assessing a firm's costs and profits under any revised price regulation scheme, but the sentence in which that point is made is prefaced by the observation: We accept that the industry should have a reasonable degree of freedom in promoting its products to doctors… I should have thought that the industry should have absolute freedom to promote its products as it thinks right in the interests both of the doctors and of the patients—which is a different matter from saying how much expenditure the Government will be prepared to accept in their calculations.

My Lords, the Statement said: The extension of the Crown use provision of the Patents Act to the general medical and pharmaceutical services. Sainsbury Committee made a mendation, will be considered House "— that is, the other place— during the passage of the Health Services and Public Health Bill. Like the noble Lord, Lord Kennet, we all know that that must happen by virtue of the fact that your Lordships removed from the Bill the relevant clause. I should like to ask the noble Lord whether the fact that the Statement made it necessary to repeat that very obvious fact is just a desire to make the Statement longer than it would otherwise be, or whether it indicates that the Government have had a welcome change of heart on the use of the Section 46 procedure.


My Lords, I thank the noble Lord for his caution and for the brevity of his observations. I regret the absence of my noble friend Lord Sainsbury this afternoon. I should have welcomed the opportunity of stating to him in full House the gratitude of the Government for his Report. I understand that he is unavoidably abroad but that he will be back shortly.

With regard to the two points raised by the noble Lord, Lord Newton, first, as to the expenditure on promotion, it might not be out of place if I were to remind the House that I understand that in 1965 the total expenditure was £15.4 million, and this was no less than 13.9 per cent. of the total home sales. The cost of promotional representatives amounted to an average of £250 per doctor in the country per year. On the question of the use of Section 46 powers and the Patent Law I should not like to prejudge what my right honourable friend will have to say to the House of Commons about this shortly.