HL Deb 12 April 1973 vol 341 cc786-91

4.4 p.m.

THE PARLIAMENTARY UNDERSECRETARY OF STATE, DEPARTMENT OF TRADE AND INDUSTRY (THE EARL OF LIMERICK)

My Lords, with the leave of the House, I should like to repeat a Statement which is being made in another place by my right honourable friend the Minister for Trade and Consumer Affairs about the Monopolies Commission Report on the supply of chlordiazepoxide and diazepam. The Statement is as follows:

"This Report which is being published to-day deals with the supply of certain patented tranquillisers sold mainly under the brand names Librium and Valium. They are prescribed principally for the relief of neuroses and emotional problems and are taken regularly or intermittently by more than 1 million people. The current annual cost to the National Health Service is approximately £8 million. They are manufactured by Roche Products Ltd., a United Kingdom company linked with the Swiss company F. Hoffman-La Roche and Co. AG. and its associates, by whom the active ingredients, chlordiazepoxide, and diazepam, are supplied.

"On September 14, 1971, the Monopolies Commission was asked to investigate the supply of these goods and I received their Report on February 27, 1973. The Government accept this Report and I shall later describe the steps we are taking to implement its recommendations.

"The Commission concluded that since Roche Products is responsible for the supply of about 99 per cent. of the reference goods, monopoly conditions prevail; and that the determination of the level of prices results from and is designed to preserve these conditions, and operates, and may be expected to operate, against the public interest. The Commission conducted an exhaustive investigation of the prices which have been charged for the goods in the light of all the relevant factors. These included the cost of production, promotional expenditure and, in particular, the transfer price of the active ingredients from associates abroad and the contributions towards group research and overheads made by the United Kingdom company. They reached the clear conclusion that United Kingdom prices for some years have been manifestly too high and that the Roche group has accordingly obtained from the sale of the drugs in this country profits far in excess of what is justifiable.

"The Commission's main recommendations are that the price of Librium should be reduced to not more than 40 per cent. of the 1970 price and the price of Valium to not more than 25 per cent. of the 1970 price, with corresponding reductions for certain other less widely used drugs covered by the reference. The price on average of the various forms of Valium is now about one-half of the 1970 price. The Commission also consider that there should be negotiations with the Roche group for the repayment of large sums to the Department of Health and Social Security by way of remedy for the excessive prices already charged.

"I must also inform the House that, as the Report indicates, the task of the Monopolies Commission was complicated by the refusal of the Roche group to supply certain information about its costs and sales.

"The House will wish to know what action the Government are taking. In view of the serious situation disclosed by the Monopolies Commission, I have to-day made an Order under the Monopolies and Mergers Act 1965 reducing the prices of Librium, Valium and the other Roche products concerned to the levels recommended by the Monopolies Commission. This is being laid before both Houses to-day and will come into force on April 23. My right honourable friend the Secretary of State for Social Services will also be entering into negotiations with the Company about past transactions."

My Lords, that is the end of the Statement.

BARONESS PHILLIPS

My Lords, I should like to thank the Minister for repeating the Statement, and to congratulate the Government wholeheartedly on taking immediate action. This is a complete vindication of my noble friend Lady Summerskill, who has on many occasions raised this very point in this House. I am sure that to-day she will be delighted to hear confirmed the words which she has used so many times. On a purely philosophical point, it is a little frightening that we have produced a society in which one million people have enough emotional problems and neuroses to need tranquillisers; but since that is the case they must obviously be supplied within the National Health Service.

Since this company has been responsible for supplying 99 per cent. of the goods, it seems to me all the more extraordinary that the prices charged were based not only on the cost of production—which we accept—but on promotional expenditure. I wonder what promotional expenditure is necessary if you are directly supplying nearly all of your goods to a State enterprise. This is not a detergent which is being sold on the open market, but a commodity which the State needed. It would be interesting to know how the company justified any promotional expenditure in this particular context. I am not surprised, incidentally, that they did refuse to supply certain information. I think the facts speak for themselves.

My Lords, the recommendation of the Commission that the price should be reduced—and I notice that your Lordships gasped at this—to 40 per cent. of the 1970 prices and to 25 per cent. of the 1971 prices in the other case, indicates very dearly the nature of the markup. It highlights the contrast between, on the one hand, drugs being supplied within a community service by companies making profit, and on the other hand the State service itself being based on an entirely different concept. I hope that in due time the State will recognise the inherent danger of the system and see that the supply of drugs and medicines comes within the same kind of legislation as the hospitals and other branches of the service.

LORD WADE

My Lords, I should like to join in thanking the noble Lord for repeating this Statement. The questions that I would have asked have already been asked by the noble Baroness. I will not take up the time of the House by repeating them.

THE EARL OF LIMERICK

My Lords, I am obliged to the noble Baroness, Lady Phillips, and the noble Lord, Lord Wade, for the welcome they have given to the Statement. It is a reflection that this is something that affects more than 1 million people in this country. The noble Baroness raised a question of promotional expenditure. As I understand it, the bulk of the prescriptions are those which are put out by general practitioners, who often prescribe under brand names, rightly or wrongly, so that the promotion is directed at these general practitioners to cause them to write these names into their prescriptions. As to the supply of drugs by private companies, this is a matter which has been looked at from time to time, and the conclusion has always been that the service provided by these companies and the way in which they are able to plough back funds into research has well served the development of drugs. I make here only a general point, and quite clearly we must have reservations in this particular case.

BARONESS SUMMERSKILL

My Lords, before I ask the noble Earl a question, may I thank my noble friend, Lady Phillips, for that nice tribute to me? May I ask the noble Earl whether he is aware—and I am sure he is—that some of us have been agitating for many years for a change to take place?

Although we have now exposed what I consider is only the tip of the iceberg, could I know how much further the Government are going to go? When the noble Earl talks about promotional expenditure, is he aware that the pharmaceutical industry entertain the medical profession all over the country to lunches and dinners in order to promote their goods? Is he aware that doctors homes are deluged with advertisements in the shape of glossy pamphlets and drugs? Is he aware that in the other place I used to take to the Dispatch Box boxes of drugs which had been sent through the post to our family, which sometimes almost covered the top of the Dispatch Box, in order to try to impress upon the Minister the appalling waste of public money. Is he aware that in the paper yesterday one doctor said he had found 30,000 tablets in one woman's home? She had told him, "I am quite innocent. Every time I go to see my doctor, he gives me about four dozen, and what am I to do with them? I do not like to be rude to him, and they collect over the years". My Lords, is the noble Earl aware that this costs the National Health Service millions of pounds on proprietary drugs which are far from being of any therapeutic value, are often quite unnecessary, and indeed do the patient a disservice?

THE EARL OF LIMERICK

My Lords, I was not previously aware of the lunches and dinners to which the noble Baroness, Lady Summerskill, has referred. I was well aware of the deluges of literature because I have a number of friends who are G.P.s and they talk to me about it. The point here is that the voluntary price and restriction system works very well in general and, as evidence of this, one could point to the fact that in each of the years 1971 and 1972 the increases in the prices of medicine sold to the National Health Service amounted to about one half of 1 per cent. of the total sale, and this in a time of rapid cost inflation. During the same period, the return on capital to the companies manufacturing these drugs was declining, and studies carried out for the National Economic Development Office indicated that the prices of medicines in the United Kingdom are, in general, lower than in comparable markets. So, generally, I think the system has proved successful. In this case it broke down because the information was not made available. Hench the Government did not hesitate to act in laying this Order.

LORD HOY

My Lords, may I ask the noble Earl, Lord Limerick, how much the Government intend to try to recover, because, according to the figures that the noble Earl has given, it would appear that there has been an over-payment in the region of £20 million. Will he please remember that on a previous occasion, at the request of the Public Accounts Committee in another place, a British firm were made to repay many millions because the Committee had reached the conclusion that the firm had been overpaid. Is it the intention of the Government in this case to recover that sum as between 25 per cent. of the present cost and 40 per cent. of the present cost, which I make, very quickly, to be somewhere in the region of £20 million? Is that the sum they are aiming at?

THE EARL OF LIMERICK

My Lords, I should not like to comment on that figure except to say that it seems to me very much on the high side. I do not think it would be profitable at this moment to speculate about the precise figure when my right honourable friend, the Secretary of State in the Department of Health and Social Services, is about to enter into his negotiations. But it is clear that these negotiations are going to be taken very seriously. It is also clear that substantial sums must be involved.