REGULATION OF PRICES (TRANQUILLISING DRUGS) (NO. 3) ORDER 1973

HL Deb 05 July 1973 vol 344 cc423-64

5.15 p.m.

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

My Lords, I beg to move that the Regulation of Prices (Tranquillising Drugs) (No. 3) Order 1973 (Statutory Instruments 1973 No. 1093) dated June 21, a copy of which was laid before this House on June 22, be approved.

This Order relates to drugs sold by the Roche Group, comprising Roche Products Limited, SAPAC Corporation Limited and F. Hoffman-La Roche and other associated companies, mainly as Librium and Valium. The purpose of the Order is to give effect to the Report of the Monopolies Commission which recommended substantial reductions in Roche's prices for these drugs. It may be helpful to the House if I summarise briefly the events which have led to the making of this Order.

During the 1960s there were difficulties between Roche and the Department of Health and Social Security about the prices of Librium and Valium. After discussions in the context of the voluntary price regulations scheme with the D.H.S.S. about the prices for these drugs had broken down it was decided that a reference should be made to the Monopolies Commission. This was done on September 14, 1971. The Commission's Report was received by the Secretary of State on February 27, 1973 and published on April 12 this year. The Commission found that Roche held a monopoly position with 99 Per cent. of the market for these drugs and that this gave them considerable influence over price levels. Their investigations led them to conclude that the United Kingdom prices were manifestly too high and that profits were excessive. The Commission therefore recommended substantial price reductions.

Accordingly, on April 12 the Secretary of State laid before Parliament the No. 1 Order which reduced the prices of Librium and Valium in accordance with the recommendations of the Monopolies Commission. The Order affected only companies in the Roche Group and was found by the Special Orders Committee to be hybrid. Roche, as they were fully entitled to do, presented a Petition which was considered by the Committee at hearings, lasting five days, held between May 14 and June 8. The Committee's Report showed that members were divided in their views. While four members thought that a Select Committee with narrow terms of reference should make a further inquiry into the single issue of whether the Order prices made sufficient allowance for the allocation of research and development costs, three members did not think that a Select Committee should be set up.

Your Lordships will recall that the Report of the Committee was debated by this House on June 22, and your Lordships finally decided, by a substantial majority after a very full debate, not to set up a Select Committee. The managing director of Roche Products Limited wrote a letter to The Times, published on June 22, suggesting that there was something unfair or improper about the decision. On this I would only say that the views of those of your Lordships who took part in that debate cut across Party lines. My noble friend the Leader of the House explained the background and the procedures, and I believe that the Government have acted with scrupulous fairness. The Lord Chairman of Committees, who had voted in the Special Orders Committee against the setting up of the Select Committee, himself moved the Motion. It was made perfectly clear that the Government left the decision whether or not to set up a Select Committee to a free vote in your Lordships' House, and my noble friends the Leader of the House and Lord Aberdare, and I myself, as Ministers from the Departments specially concerned, abstained from voting on the Motion. The Government Whips also abstained. I can only regret that against this background the managing director of Roche Products Limited has seen fit to suggest that the recommendation of the Special Orders Committee was frustrated by a Party political manœuvre or that it was in some way improper for some Members of this House to vote according to their own individual views of this matter.

This House is now able to consider the No. 3 Order. I should perhaps mention that the Order was approved in another place yesterday, and I should inform the House of three other developments which have taken place which will be of interest to your Lordships. First, the Roche Group have begun proceedings in the High Court against the Department of Trade and Industry in connection with this Order and the two earlier Orders. Among other things, they seek a declaration that the proceedings of the Monopolies Commission were contrary to natural justice and that the Orders are therefore void. They are also claiming damages for losses suffered in consequence of the making of the Orders by the Secretary of State. These legal proceedings will have to take their course. Although the issue is sub judice, I am advised that this need not prevent your Lordships' consideration of the No. 3 Order. The House is, as I am advised, free to discuss legislation, including subordinate legislation, even though the issues with which it is concerned are the subject of court proceedings.

The second development is that in a letter of June 25 from their solicitors, the company gave notice to the Government that they proposed to raise their prices in breach of the Order unless the Government agreed to certain conditions in connection with the possible repayment of moneys to Roche representing the difference between the pre-Order prices and the prices fixed by the Order. My right honourable friend the Minister of Trade and Consumer Affairs placed a copy of this letter in the Library of another place on June 27, as he said in answer to a question by Mr. Wedgwood Benn. As a result of this letter, the Government have moved for an injunction to secure compliance with the Order. Proceedings began on July 3 and were adjourned until next week. Roche are abiding by the Order and have undertaken to do so pending next week's hearing. In the circumstances, your Lordships will understand why I would not wish to say more about the details of the issues which will be raised in the court proceedings.

The third matter is the question of the provision of information. The House will recall that there has been much discussion about certain figures which were not made available to the Monopolies Commission. The Commission referred to this question in paragaph 156 of their Report. They had asked for four things: first, the value of world-wide sales of ethical products; secondly, the value of world-wide research costs for ethical products; thirdly, the world-wide sales of chlordiazepoxide and diazepam respectively by value; and fourthly, the world-wide sales of chlordiazepoxide and diazepam respectively by weight in kilograms. Roche thought that the information would be of no use. The Monopolies Commission thought it might be useful and quite naturally wished to reach their own decision on its usefulness, and their own conclusions about how far it was necessary for a proper understanding of their Report to publish the information. The Monopolies Commission are, of course, used to handling commercially sensitive information and do not publish it unnecessarily. But that is all in the past.

I am now able to confirm to your Lordships that in a letter dated June 29, Roche's solicitors presented to my Department the figures referred to in paragraph 156 of the Report from which I have quoted. Our preliminary consideration does not suggest that these four particular figures could call in question the conclusions the Monopolies Commission were able to reach without them. We have, however, passed the information on to the Department of Health and Social Security, to which Roche signified they had no objection. I am glad that the firm have now provided the information, and it is now being studied. It is a pity that the information was not made available without conditions in the past, either to the Department of Health and Social Security in the discussions under the voluntary price regulation scheme, or to the Monopolies Commission.

I now turn to the Order itself. Its purpose is to implement the Monopolies Commission's recommendations that Roche Products' selling price for the reference drugs should be reduced, and its effect is to reduce the prices of Librium and Valium to the highest levels which the Commission regarded as justified. The Order requires an Affirmative Resolution in both Houses. It may be helpful if I go through the Order and describe its operation. It has been necessary to make a series of Orders to maintain the status quo while procedures in the Committee of your Lordships' House, which prevented the earlier Orders coming for approval, were completed.

Articles 1 and 2 of the Order define the products and the companies to which the Order applies. Relevant products are at present sold in the United Kingdom only by Roche Products Limited. The Order is extended by Article 2 to the whole Roche Group to prevent supply at higher prices by other companies in the Group. Article 3 limits prices for the relevant medicines when sold by any of the Roche companies to the prices specified in column 3 of the schedule. The Order prices for Librium and Valium are those recommended by the Monopolies Commission as "fair prices" and more than adequate in the light of the facts revealed in the Report". The prices for other reference drugs containing Librium or Valium were, as recommended by the Commission, calculated as corresponding proportions. Article 4 precludes the Roche Group of companies from imposing on the sale of reference drugs any conditions requiring the purchase of other pharmaceutical products; and Article 5 is necessary to ensure that, in a market where resale price maintenance is authorised, the wholesale and retail prices are reduced in parallel with the manufacturers' selling price to which the Order principally applies. It was obviously not necessary to repeat the provision in Article 5 of the No. 1 Order requiring agreements to maintain the resale prices of these drugs to be abandoned within seven days of the commencement of the Order. The only other changes between this and the original Order take account of the different dates of commencement.

The Order does not touch on the question of repayment by Roche for past overpricing, and the new prices are not designed to include provision for such recovery. This is a matter for negotiation with the Department of Health and Social Security. The Order, however, ensures that from the time of its coming into force, the prices of the reference drugs in the United Kingdom market are reduced to the level which the Monopolies Commission recommended.

There have been suggestions in the Press and in another place that in some way the Government are hounding, or operating a vendetta against the Roche Group. This certainly is not the case. The managing director of the United Kingdom Company, Dr. Marks, in his letter published in The Times of June 23, to which I have made reference, appealed for Whitehall to play fair. But, my Lords, is it the case that Roche has played fair? I would ask your Lordships to look at the history of negotiations between the Government and Roche. To some extent this is set out in Appendix 8 of the Monopolies Commission's Report. There is a long history of negotiations between the company and the Department of Health and Social Security. As long ago as 1966, the D.H.S.S. informed the company that in their view there was room for reduction in the prices of Librium and Valium. In 1967 a cash rebate of £200,000 was accepted by the D.H.S.S. in lieu of price reductions. In 1968, a further cash rebate of £500,000 was accepted. In 1970, a rebate of £900,000 was made by the company on the understanding that this would be the final settlement up to the end of 1969—I repeat, 1969. Because of the unsatisfactory nature of the discussions between the company and the D.H.S.S., the matter was referred to the Monopolies Commission for a full and thorough investigation in September, 1971. Your Lordships know that during the course of the investigations by the Monopolies Commission, certain information was refused to the Commission by the company. The whole history of these negotiations I think shows clearly that any allegation of unfairness is one that can most effectively be made in the reverse direction. But the Government for their part have played entirely fairly throughout. The Secretary of State for Health and Social Security negotiated with the company with great patience, but, I am sorry to say, with little success for many years. Having received the Commission's Report which disclosed a serious abuse of its monopoly position and excessive profits, the Minister of Trade and Consumer Affairs made the Order, as he was entitled to do, under the Monopolies and Mergers Act of 1965.

The Order has gone through and is going through the due process of Parliamentary procedure. The Order is also being disputed by the company, as it has a perfect right to do, in the High Court, and the Government are, of course, ready to defend their action in the Court. Throughout, as I say, we have played fair, and I therefore reject the managing director's suggestions to the contrary. Indeed, as was stated in another place yesterday, we stand entirely ready to receive any new evidence that the company may adduce since the Monopolies Commission reported. I repeat that offer. We shall be glad to see the company in their turn play fair with us.

LORD HARVEY OF PRESTBURY

My Lords, I am much obliged to my noble friend for giving way. He referred to various gestures made by Roche. Is it not a fact, if my memory is correct of the Monopolies Commission Report, that these two drugs, Librium and Valium, were accepted by the Government free on behalf of the armed forces? Could that be cleared up?

THE EARL OF LIMERICK

My Lords, yes, this is true. It is difficult for somebody who has to deal with large quantities of such drugs to refuse an offer like this. It has been the subject of comment in the Report, and indeed it is correct.

My Lords, if the House approves the No. 3 Order, it will not lapse, as did the previous Orders; but, as my honourable friend the Parliamentary Under-Secretary of State for Industry and Consumer Affairs indicated in another place yesterday, if Roche were to come forward with any new evidence of a material change in the relevant circumstances since the Commission reported which might justify some future modification of the Order prices, then my right honourable and learned friend would naturally be glad to consider it. And clearly the prices that the Orders set may not be appropriate for all time.

The Government do not believe that the current court proceedings need in any way prevent Parliament from approving this Order. Roche have exercised their right to challenge the Order in the courts, but in the meantime the Government believe that it is right that the status quo should be maintained and for the prices set by the Order to continue in force. I therefore invite the House to approve the Affirmative Resolution before it.

Moved, That the Regulation of Prices (Tranquillising Drugs) (No. 3) Order 1973 be approved.—(The Earl of Limerick.)

5.34 p.m.

LORD PEDDIE

My Lords, I listened with great interest to the noble Earl presenting the Order, and I was particularly attracted to the points that he rather diligently raised which emphasised that the Government are now in possession of information which the Monopolies Commission did not possess, but which did not prevent them from making recommendations. I wanted to emphasise the fact to the House that a statement has now been made in both Houses that there is the possibility of the Government changing their attitude in the light of the information that they now possess. I make no further comment on that at this particular moment.

I regret the fact that immediately following the discussion on contraceptives, and just prior to the noble Earl opposite rising to his feet, there was a general exodus. I should be the last person to suggest that there is no importance in the matter of contraceptives, but I would emphasise that during the course of this debate I am quite certain a number of facts will be highlighted concerning the subject of research in drugs, which is just as important as the provision of contraceptives, no matter how important that might be.

I believe that this Order being presented to-day is a further step in an unfortunate series of decisions that reflect very little credit on those responsible, and in my opinion expose this House to the criticism that it has failed to ensure that justice is seen to be done. The Order states, that the prices charged in the case of goods of the classes to which the report relates … are or have been such as to operate against the public interest. That is the statement in the Order based upon the recommendations of the Monopolies Commission. Whether the cost of Valium or Librium is 31p per 100 or 80p per 100 or 40p per 100 is certainly of great importance to the purchaser. That I do not deny. But at the same time I would emphasise that the true and complete public interest is not confined to that aspect alone. There is something else just as important. The most important aspect of this problem is the one that was considered in detail by the Special Orders Committee, of which I was proud to be a member. We were concerned with the true relationship between the price charged and the justifiable expenditure upon research into ethical drugs. And yet, although it is acknowledged that that is of special public interest, there is not the slightest reference to that aspect of public interest in this Order. It is not mentioned at all, the whole emphasis being that public interest is centred upon one thing only; that is, whether you pay 31p or 20p, or whatever it may be.

I would also indicate to the House that although there is no reference to the research, the dominant factor and the kernel of the problem, you do not need the Monopolies Commission to decide that the selling price of drugs—almost any drug—far exceeds its prime cost of materials. You do not need the expertise of the Monopolies Commission to prove that; we know that before they start. But we do want to know what is the composition of the price. I point out that the Commission themselves did not give obvious emphasis to this point. Indeed, paragraph 9 of the questionnaire which they sent to Roche—which I have here, a very formidable document indeed—consists of three lines. This is the three-line question: Please give a brief account of the research and development work carried out by the group and the company in general, and in particular such work connected with the reference products. The fact that "brief" is stated gives a clear indication that the Commission themselves did not consider that the aspect of research looms very large. They spent far more time on the question of promotion costs; and yet the promotion costs could have only a marginal effect on the price of the drugs. Indeed, if you halved the promotion costs of Roche in connection with these drugs, it could only at the most have an effect of 4 per cent. on the price.

Furthermore—and I think it essential to recognise this—the Commission recommended that the reduction in the prices of these two drugs should be as a percentage of the selling prices in 1970: I believe in the case of Librium not more than 40 per cent., and in the case of Valium not more than 25 per cent. of the selling price in 1970. They went on to say they had no reason to think that the cost increases since 1970 as against 1973 should significantly affect the general picture. I should like the House to bear that in mind: they had no reason to think that any change in costs would significantly affect the picture—in spite of the fact that Roche, and many others, have indicated that research costs have gone up by far more than 10 per cent. That statement indicates the complete fallacy behind the investigation conducted by the Monopolies Commission, the fallacy being that their whole concentration was upon the cost of the basic materials that went into the product itself. It was perfectly obvious that if there was an increase of 50 per cent. in the cost of the basic materials from 1970 to 1973 it would not materially affect the price. I think that that in itself gives a clear indication of the illogicality that lies behind the investigation of the Monopolies Commission.

The Commission complained—and I say that they complained with justification—that Roche were unwilling to supply all the facts. We have heard a great deal about that, and the noble Earl laid great emphasis upon it in his comments. I think that the full circumstances of that should he known; and I hold no brief for Roche. I knew nothing at all about the company until I was called upon to conduct this particular activity on the Special Orders Committee. I would say that one has to take into account that Roche offered that information in confidence. The Commission refused to accept it on the terms of confidentiality, and proceeded to make a judgment without that information.

I know, as we all do, that Swiss law regarding the law of disclosure is different from ours, and I agree that that in itself could not be sufficient to justify the action of Roche. However, I contend that the Commission could have accepted that information in confidence and proceeded to make a judgment upon fuller information, and they need not have published it. Then, if Roche contested the decision of the Monopolies Commission, they themselves would have been free to publish such information. Indeed, I would remind the noble Earl that the Prices and Incomes Board had cause to make inquiries that were just as sensitive, and indeed probably far more sensitive—and I quote one—in the price of detergents, when two monster companies were involved, and we had to give, and did give, a complete assurance of confidentiality. Indeed, in every single case when information was supplied by a company, an assurance was given that there would be no publication of such information if it was considered detrimental to the interests of the company that supplied it. Therefore, I do not accept the argument of the Commission. They should have ensured that they got the full facts, and should not have come up later with a judgment based upon their "guestimates".

The appeal, as the noble Earl stated, was considered by the Special Orders Committee, and we met for five days, dealing with a mountain of evidence. We recommended one aspect that we considered deserved further consideration in the public interest, and that was the significance of research costs in the fixing of prices. The House rejected our recommendation, and I believe that it was the first time—certainly within living memory—that that was done. I speak for myself, but I believe that the circumstances of the debate were most unsatisfactory: the real point at issue was ignored. True, there were chunks read from the Monopolies Commission Report, but the attack was based solely on the belief that Roche prices were too high. True, they may be too high; I am not suggesting they are not. I say merely that this particular aspect of considering the involvement of research costs was not dealt with. The question of whether Roche could maintain their prices was not before the House on that occasion. Roche had indicated publicly that, pending the decision of such a Select Committee, the difference between the current and the possibly reduced prices could be held in reserve and returned if the decision went against them. I merely mention that to indicate that at that discussion, when the recommendation was rejected, there was no suggestion of any possible loss to the community. The sole issue was a demonstration of fairness, and at no cost to the community except the time of the Select Committee.

I must also—and I hate to do so—in the two or three moments left at my disposal, make a complaint concerning the arrangements regarding the debate. I must do so because a colleague member of that Committee, the noble Lord, Lord Reay, made his protest and was admonished by my noble Leader, Lord Shackleton. Well, I reinforce that complaint, and indeed I do it even more strongly. The discussion of the Order was put down for a Friday. The noble Lord, Lord Stamp, and I protested at the time that it was on a non-controversial day, and also that it was on a day when we indicated we could not be present. I was at a conference, and I think that the noble Lord, Lord Stamp, was abroad. That was mentioned to my noble Leader, but no indication at alt was given of the possibility of an Amendment being put down. It was put down on the Thursday evening prior to the Friday discussion; I was not informed, and neither was the noble Lord, Lord Stamp. He would have returned from abroad had he known, and I certainly would have returned from the conference. Therefore I consider that the criticism expressed by the noble Lord, Lord Reay, was justified.

As a result, a turnover of ten or eleven votes decided this issue and not, as the noble Earl's right honourable friend stated in another place yesterday, a big majority. It was not by a big majority; it was by the turnover of ten or eleven votes on a small total vote. Let us keep that in mind and hammer it home. In essence, that debate was on the basis of "The Commission knows best". My noble friend Lord Diamond quoted the Roche return on capital of 70 per cent., whereas he said that in his experience the return, on average, in industrial operations was 11, 12, or 13 per cent. If that criticism was the basis of consideration of drug pricing, I can only agree with his further statement that 12 accountants could not come to a unanimous decision on it, because one certainly could not apply that sort of reasoning and accountancy to the determination of these prices.

My final point in referring to that debate (I am sorry that the noble Lord is not in his place, so I will modify my comments) is in reference to the comments made by the noble Lord, Lord Balogh. He stated, referring to the Commission, that it was a "clumsy sort of blunderbuss, which hits out in an unexpected way". I agree with that, but I fail to follow his subsequent logic that such a blunderbuss weapon was needed to deal with a problem that demanded precision of inquiry. He endeavoured in that debate to steamroller my noble friend Lord Stow Hill, who was left almost alone to defend our position. The noble Lord, Lord Balogh, made comments which, in my opinion, were both arrogant and inaccurate. The arrogance I can ignore, as we all do. The inaccuracy I challenge.

He compared the quality of experience of the Special Orders Committee with those of the Commission. Incidentally, the number of persons on the Commission who considered this proposition was seven; the same number as was on the Special Orders Committee. I assure the noble Lord, Lord Balogh, and anyone else, that the quality of experience on the Special Orders Committee is certainly equal to that of the members of the Monopolies Commission. It includes the noble and learned Lord, Lord Stow Hill, a lawyer of eminence, an ex-Attorney General, an ex-Home Secretary and capable of fair assessment; and the noble Lord, Lord Stamp, a Professor of Bacteriology for thirty years and an expert in medical research. There was not a single person among the seven who considered the matter from the standpoint of the Commission who was more expert in that field. The noble Lord, Lord Balogh, expressing the same views as others, referred to the fact that none of us had industrial experience. I think I can claim that my own experience in industry and commerce is certainly equal to that of anyone on the Commission and to that of the noble Lord, Lord Balogh; and I have had some little experience in industrial inquiry.

Comments were made about the time spent on our inquiry. We spent five full days. May I ask a question of the noble Earl opposite? Am I right in assuming that the amount of time that we spent—five full days—was more than the total amount spent by the seven on the Commission who were dealing with this problem over a long period of time? The final meeting, which was really the only full meeting where they met Roche, lasted for one day and one hour. It was more like an inquisition than an inquiry. I think that half-an-hour was devoted to the factor which was the whole guts of the problem: the question of expenditure on research. Therefore I repeat, in conclusion, that this whole matter is unsatisfactory.

The dispute is not about whether or not Roche should reduce its prices at this stage. The real problem before us is whether full consideration was given to the question of financial research in ethical drugs, which is a matter of tremendous interest to the people of this country. We shall never have any new drugs prepared or presented by the Monopolies Commission, or even by the Government. I do not know that any drugs of this kind have ever been produced by any Government. This is the source from which they come and it is better to give encouragement in that regard, or, at least, to cause the Commission to give far more attention to this matter than ever they did; and we should not have a blind loyalty to them merely because they have expressed a view. We should lose no opportunity to demonstrate that our judgments are not influenced by careless prejudice but are based on careful consideration.

5.54 p.m.

LORD STAMP

My Lords, as a member of the Special Orders Committee responsible for considering the Roche Petition, but who was unable to be present in your Lordships' House when their decision was discussed, I am glad to have this opportunity to comment on their findings and their reversal by your Lordships. I believe that the Roche case will go down in history as a cause célèbre, whatever the final result may be, and perhaps, therefore, some record of the impressions of those who were personally involved at any stage may not be out of place. I feel that I am one of those because, as your Lordships know, I was one of the majority of four, and each of us may feel that ours was the casting vote.

I fully appreciate the privilege of being a member of that Committee, and never more than when it was called upon to consider the Roche Order. As your Lordships know, the hearings took place on five days, including the Tuesday and Wednesday following the Spring Bank Holiday Monday, which involved the cancelling of important engagements for some of us; but of course that had to be accepted. The hearings were of unusual interest to me, particularly the aspects concerned with research, as I had been engaged in medical research for nearly 40 years and, as the noble Lord, Lord Peddie, said, for 25 years as Professor of Bacteriology at the Royal Postgraduate Medical School at Hammersmith Hospital. Latterly also, as chairman of our building and research fund appeals, I have had occasion to visit pharmaceutical firms in this country and abroad to enlist their support, and have had the opportunity of going over their laboratories. In these capacities I should like to pay a tribute not only to the vast contribution which they themselves are making to research, but also to the support which they are giving to medical research in our universities, where help is so badly needed.

In medical advances, Roche have played an outstanding part, as was recognised in the leading article in the British Medical Journal, referred to in Roche's Petition which was circulated to your Lordships. To me, it is utterly deplorable that the present state of affairs has arisen and I do not feel that the fault is all on one side. The most difficult question of all that the Special Orders Committee had to decide within their terms of reference, as was made clear by their recommendation, was whether there was substantial cause for complaint over the Commission's finding that Roche's research costs were grossly excessive. It is a moot point whether it is possible for any committee or other body to lay down specific limits as to what should be regarded as permissible research costs. But accepting that it is possible, were the Commission in a position to do so; or, for that matter, was it justifiable to ask Roche to do so?

Was Roche given sufficient time to marshal all the facts regarding research costs? Should they have anticipated that this would be a major cause of criticism and come fully prepared, bearing in mind the vast amount of information that would be required and the days of expert analysis which would be involved for the Commission? The extent of the investigation, if the research activities of Roche were to be considered fully, was made clear by the summary, to which the noble Lord, Lord Peddie, has referred, of which I have a copy here, running to seven-and a-half pages, which was drawn up in answer to Question 9 of the Commission's questionnaire. Familiarity with, and amplification of, this were essential before one could even attempt to reach a verdict. How far, for example, should Roche engage in fundamental research in such fields as immunology and molecular biology on which, according to the Summary, they are spending some 10 per cent. of their recurrent research budget, apart from substantial initial capital costs?

The importance of the contribution that some pharmaceutical firms are making in these fields cannot be over-stressed, in view of recent trends in Government allocations for research, as was brought out in the debate in your Lordships' House on Government research and development in February of last year. It is so much easier to make charges of excessive expenditure on research than to lay down what the limit should be if all the factors are to be taken into consideration. Were the criteria on which the Commission based their findings, referred to in paragraphs 19 to 28 of the Roche Petition, adequate? A thorny question is: how far should present consumers of ethical products be expected to subsidise research for the benefit of future consumers?

Time will not permit me to touch on the many other questions raised in relation to research costs. I, for one, felt that I simply could not lay my hand on my heart and say that Roche had no substantial ground for complaint on this score, particularly if there was to be no further investigation. Throughout the hearing, one had to be on one's guard against being influenced by pre-conceived ideas that there had been gross profiteering on the Health Service, or being swayed by the indications of the lack of co-operation by Roche or by the attitude of their counsel in his extreme strictures against the Commission and the D.T.I.—sometimes I felt that Roche were being their own worst enemy. Nor should one have allowed oneself to be influenced by the thought that the courts, rather than a Select Committee, should be the place where the matter should be considered further. The procedure that should be followed was laid down quite clearly, whatever one thought of it. I very much hoped that a Select Committee if appointed, whatever else it decided, would recommend that all the far-reaching issues raised by the Order against Roche should be considered by a Royal Commission.

My Lords, throughout the hearing it was clear that Roche were obsessed by the feeling that they were being victimised by being selected for special treatment and that they were getting a raw deal, and even that the proceedings were being rigged. It was therefore of the utmost importance that when the Special Orders Committee's finding was debated in your Lordships' House it should be when there was a fully representative attendance and after adequate time had been given to consider the findings, so that there could be no possible cause for complaint as to how your Lordships dealt with the matter. It was a pity therefore, as the noble Lord, Lord Peddie, has said, that for this occasion when the House would be sitting in a semi-judicial capacity and with the eyes of the world on it a Friday was chosen— a day on which the House does not usually sit and then normally only for non-controversial issues, and there was bound to be a very depleted attendance. It was also a great pity that on this particular Friday two of the members responsible for the majority decision had intimated that they would not be able to be present, as the noble Lord, Lord Peddie, has said.

It was represented that this was the only possible day, owing to pressure of Government business, and that further delay was not possible. At the time this did not seem so important, as it seemed most unlikely that the House would take the unprecedented step of reversing a finding made by its own Special Orders Committee—one not involving a final decision, but rather only a request for a further limited investigation—though, of course, it was perfectly entitled to do so. It was an even greater pity—as again the noble Lord, Lord Peddie, has intimated—that notice of the proposed Amendment was given only a few hours before the House sat. I wonder how many of your Lordships would have made a point of attending had they been given adequate notice of what might happen. As for myself, as the noble Lord, Lord Peddie, has said, I should have flown back from abroad, just as to-day I have had to give up my only tickets for Wimbledon. But that is a minor tragedy compared with your Lordships' decision.

Had the decision of the Special Orders Committee been accepted, it would have provided a breathing space, and the matter could have been threshed out by the Select Committee with the aid of experts, as provided for by paragraph 3 of the recommendation. But your Lordships decided otherwise, and the verdict, it would now appear, must rest with the courts. In these circumstances it would seem that the approval of the whole Order to-day can only be a formality—unless your Lordships clearly indicate otherwise. But as things stand I cannot feel that justice has been done or has been seen to be done, and personally I would be prepared to demonstrate this in the Division Lobby, if other noble Lords took the same view.

6.8 p.m.

LORD TODD

My Lords, unlike the noble Lord, Lord Peddie, I cannot claim that I have no connection either with Roche Products Limited or with its parent company Hoffmann La Roche and Company of Basle. I have been for many years a research adviser to Roche Products and indeed was privileged only a week ago to open their new research block in Welwyn Garden City. Moreover, almost exactly 39 years ago, at a time when British industry had nothing to offer me, Hoffmann La Roche and Company. Basle, gave me what was probably decisive help in my career by offering to provide me with the raw material and the testing facilities necessary for my work on vitamin B1. So I have an interest; but come to that, my Lords, in this complex discussion I suppose I have other interests. As Chairman of the Governors of the United Cambridge Hospitals I suppose I am a kind of employee of the Department of Health and Social Security; as a member of the National Research Development Corporation I am similarly somewhat beholden to the Department of Trade and Industry. So far as I am aware, I have no interest in the Monopolies Commission.

Having revealed this wide range of interests, I should like to say that I am not speaking to-day because of these but rather as a person whose scientific life has been deeply concerned with research in the biomedical field and who has had intimate contact with the research side of the pharmaceutical industry, both in this country and abroad, for close on forty years. It was my hope that this dispute between Roche and the Monopolies Commission over the prices to be charged for Librium and Valium would have been referred to a Select Committee where the matter could have been examined in a slightly less emotional atmosphere and in the light of all the relevant facts. On June 22 your Lordships decided—as you were perfectly entitled to do—to reject this proposal made by the Special Orders Committee. Whether it was desirable or not to do that on a Friday I do not propose to discuss—I was not myself present and other noble Lords have dealt with this question pretty fully.

I claim no financial or commercial expertise, and I would not wish to argue about precise price levels. I consider, too, that in certain respects Roche adopted a somewhat intransigent attitude to the Commission and their findings, and I have told the Company so; but that is no excuse for the adoption of a similar attitude by the other side, which has led to what I consider to be a rather childish confrontation, especially as some of the issues involved are of very great public importance—and if II may say here and now to the noble Earl, Lord Limerick, I am not one of those who suggest that there is any vendetta involved in this at all.

We are all aware of the tremendous improvement in the health and longevity of our people during this century. Until, I suppose, about 1950, this was due mainly to improvements in public health, sanitation and nutrition; but since then the improvements have gone on at an even greater rate and have been brought about almost wholly by advances in therapy, and particularly by the control of communicable disease through drugs. As life expectancy has increased and the population has grown, a new urgency too has developed about the control of degenerative diseases—arthritis, cancer, cardiovascular and certain forms of mental disease. Control of these diseases will come only through better understanding of the basic biology and through new drugs, and these new drugs in turn will come from the inter-disciplinary research which is characteristic of the pharmaceutical industry and will be done in the pharmaceutical industry. It is no use thinking that you can rely on universities or Government research establishments. The main source of progress in this field lies, and in my view will continue to lie, with the pharmaceutical industry. Hence any matter which may affect the pharmaceutical industry's ability and will to do research is of prime public importance.

My Lords, as medicine advances and patterns of morbidity change the conditions that call for treatment become more complex, demands for specificity are greater and there is a corresponding rise in the sophistication of research, and hence of its cost, especially at the advancing front—and this is an area where, incidentally, the Roche companies have always been active. Moreover, Governments, especially since the thalidomide disaster, have very properly laid much stress on safety in use before any new drug can be introduced. As a result, the translation of a new discovery into a marketable drug through research and development is now so costly in time and money, and so risky, that few but the very largest firms can even contemplate it. These are probably the main reasons for the falling off that has been observed in major innovations in the drug industry in the last ten years, and the trend may well continue.

I do not think that many people would question the need to pay for current research, and indeed to fund future research development, out of the profits of the pharmaceutical industry. The level of profit necessary to do this adequately is difficult to define precisely since the expenditure necessary to achieve success in any one field is to a degree unpredictable, and the rate and scale of expenditure can and does vary considerably according to the type of project which is being undertaken. It is therefore very hard to see how one can assess the legitimate rate of expenditure as a percentage of sales of only one or two products. It seems to me that such assessment can be made only on the basis of the whole of a firm's sales in its pharmaceutical business and in the light of its areas of interest and the costs involved. Equally, one simply cannot compare any percentage arrived at for one firm with that for another without at the same time taking into account the kind of research which is done by each of these firms.

There has been talk of excessive research and, presumably to support this, reference to an alleged diminishing return with increasing size of research effort. How one can define what research is excessive on a cost basis without knowing what it is, I cannot imagine; and diminishing returns in research, which is a subject about which I claim to know a little, are in my experience usually due to bad organisation and poor direction. My Lords, it is because the Report of the Monopolies Commission left me and many other scientists whom I know distinctly unsatisfied on many of these issues —indeed, some were barely mentioned and others did not receive the expert discussion that was expected—that I had hoped they could have been gone into more fully in a Select Committee, where I feel certain some agreement could have been reached between the parties concerned.

We have been told by the noble Earl, Lord Limerick, that there have been many earlier discussions; but, of course, these do not come through if you read the Report of the Monopolies Commission and in fact we do not know what they were. Now, I understand, the matter is going to the High Court—not, I imagine, the best place in which to deal with problems of research—and we are asked to prolong the Order about the prices recommended for Librium and Valium. I cannot help wondering whether, even at this late date, both parties in this dispute could not be more flexible. Perhaps there are more than two parties: there is the D.T.I. and the Department of Health and Social Security, as well as Roche, and possibly even the Monopolies Commission. I wonder if these various sides could not adopt a more flexible stance and have the matter settled by some serious discussion in the light of all the relevant information, and with people with the necessary expertise in other than the financial field present.

If that were done, not only should I, for one, be ready to accept the findings but I would hope that amendment of the patent law according to the Banks Committee's recommendations might take place, and that thereafter, or with it, one might see the entry by Roche into some generally accepted arrangement, like the voluntary price regulation scheme, to prevent this kind of unfortunate dispute arising in the future. I am convinced that this would be to the advantage, not just of the pharmaceutical industry but of biomedical research, and especially the health and welfare of our people. For, in the last analysis, it is the health and welfare of our people with which we are concerned, my Lords, and to cut back, or to force a cut-back, on research which promotes it in order to save comparatively small sums in the national budget would seem to me to be disastrous. So let us be sure of our ground in these matters; and at this moment I, for one, am not sure of the ground on which we are taking action.

When I came here to-day I was going to ask for an assurance from the Government, if I could get it, that they would consider going into this matter in an informal manner, by means of a Committee on which I would hope they would invite some members to serve other than officials within Government Departments. I think I have had something of that assurance, because I notice that in another place yesterday, when it was mentioned that some information of a financial type from Roche had now been given, it was said that this was being considered; and if I understood the noble Earl aright, he was saying to-day that the Government Departments concerned were ready to take part in discussion, and that they did not consider the figures in this Order as final. If I could have that assurance I should feel greatly relieved—much more relieved than I was when I came here this afternoon.

6.18 p.m.

LORD DAVIES OF LEEK

My Lords, I have listened with interest particularly to the last two speakers, because I know of the distinguished contribution they have made in their particular spheres. Like them, I have to declare a little interest in the drug industry as I am a director of one drug firm. With all due respect to the noble Lord, Lord Todd, nobody is suggesting cutting back research. That suggestion has not been made at all.

LORD TODD

My Lords, might I intervene? I did not say that. I said that anything which might lead to this would be disastrous and that is why I was anxious that the whole matter should be looked into.

LORD DAVIES OF LEEK

My Lords, if I have misinterpreted I withdraw the first expression, and certainly I accept the second. That is completely different from what I understood when I heard the noble Lord speaking. But I have also heard the three noble Lords who have spoken and, with their experience, defended—I use the word "defended" advisedly—the Roche approach; but even these three speakers have had to admit that the firm itself is partly to blame. Those of us who were in the other place know that this story does not go back a few weeks; it goes back over ten years. If any noble Lord would like to look up the report of the proceedings of the Public Accounts Committee as far back as the 1960's, he will see that this Parliament, through its Public Accounts Committee, was asking this firm to give certain particulars of their research and their development. Nobody would denigrate the magnificent progress made in the drug industry in this last generation. The whole world has to be thankful for it; but unfortunately, because of the rapidity of research and the lack of complete clinical trials there are some things such as thalidomide that must sadden us. I would add that had the Roche firm made to the Japanese Government or the United States Government the kind of Draconian approach they made to the British Government, when they rushed into print with a full page advertisement which was misleading, they would not have had the kind of careful attention and courteous approach made by the British Government, whichever Party were in power. The Monopolies Commission have a duty to the public. There is one outstanding fact we all know. Basically, they were buying this drug—never mind its trade name; as the two noble Lords who have spoken will know, it could be called anything at about £9–26 a kilogramme. But by the influence and workings of the multinational companies—I do not imply that they meant to cheat—and by the process of the selling of these goods through the multi-national companies the end price was about £400 odd a kilogramme. When the firm selling those drugs has a 70–77 per cent. (and in some cases 90 per cent.) monopoly, how could a Government of any calibre ignore that fact. They needed to look into it.

As far as the voluntary price regulations mentioned by Lord Todd are concerned, he will know as well as I that Roche were unwilling to "play the same kind of ball" as the other drug firms. When one says that Roche and others are doing a lot for the universities—so, too, do the other drug firms; so, too, does ours. We subsidise Ph.Ds. in immunology, we send students to universities, they get a degree and they work on the drugs in our laboratories or in those of some other firms. They work in the laboratory and they produce a thesis of the calibre and standard on which men like the noble Lords, Lord Stamp and Lord Todd, in their heyday would be prepared to give a Ph.D. No matter what firm they are working for, that degree is granted on the words of their professors, on the standard of work that they do. We must not just say that only Roche does this. Hospitals and laboratories and chemists like Boots and Roche and others do the same. There is no "fiddling". It is a justifiable award.

My first reaction was to be tempestuous about this. I regret that Roche made this approach and used an esoteric system of coming to this House. Every lawyer here knows as I do (and I am not a lawyer) that they could in the first instance have gone to the High Court if they so desired. But all this "cowboy stuff" in between; all this business of a multi-national company talking to a Government, is no substitution for giving the facts. I was delighted to read last week (or was it this week?) a hint in the Financial Times that, bit by bit, the information is coming forward. I think therefore we might get the kind of formula mentioned by the three noble Lords who have spoken; we might get some inside approach on this without a mass of publicity.

Let me qualify something. When a noble Lord said they gave free drugs to the Army and to the hospitals, let me say that if they had not done so, any firm, under Section 46 of the Patents Act could have gone to Italy and could have obtained the basic material at from £9 to £20 a kilogramme and pushed forward the idea with the Government's permission, if they so felt—for they could not have done it otherwise—and they could have got into the market. Let us have no sentiment about this. It paid the Roche industry to give these drugs to the Army and to sections of the hospitals.

In conclusion I would say that the Monopolies Commission did not act outside their remit. They carried out their proper function. This sad cause célèbre need not have reached the heights or attained the heat that it has if the matter had been taken a little more coolly by the Swiss firm. I hope there is no Division to-night, but if there is, not having the academic experience of the celebrated noble Lords who have just spoken—and we all know what grand work they have done—shall go into the Lobby supporting the Government nevertheless hoping that a formula might be found to cool down the atmosphere at this present moment; because a good drugs industry is needed for the future of mankind.

6.26 p.m.

THE LORD CHANCELLOR

My Lords, before my noble friend replies may I make a personal observation? I was very much surprised to-day to have it drawn to my attention that the managing director of one of these companies complained that I had voted in the Division last Friday and chose to cast doubt upon the sincerity of my noble friend when he declared the Government's neutrality in this matter. I feel I owe it to the House and to him to say what I think about that suggestion.

This was an absolutely free Vote of the House. I received no kind of pressure from my noble friends to vote in any particular direction. I should have liked very much to have participated in that debate. I did not do so precisely because the Government had declared their neutrality. I listened to the debate from beginning to end. I think I scarcely missed a single speech. Rightly or wrongly, a Member of the Government is as much a Member of this House as anybody else and. as a Member of this House, is entitled to vote and is bound to vote according to his conscience on a free Vote. I ascertained from my noble friends that I was free. Having heard the entire debate I voted according to my conscience. I do not want to go into the reasons why I cast my vote in a particular direction because it would not be appropriate to what I have to say this afternoon. I may have been right or wrong. The reasons were broadly those contained in the speech delivered by the noble Lord, Lord Fletcher.

I must say this to this House, and through this House to the gentleman who wrote that letter, that it does indicate to me a certain arrogance of approach to Parliament when he ventures to cast doubt upon the sincerity of a Government by attacking the right of the Lord Chancellor to cast his vote on a free Vote in Parliament.

LORD PLATT

My Lords, at this late hour, and in view of the speeches that we have heard, particularly that of the noble Lord, Lord Todd, because he is such an expert in this field, I think I should be as brief as possible. I have no interest whatever to declare except a general interest in the pharmaceutical industry and the enormous work it has done for medical progress in my lifetime —and I have spoken in public and written on that subject. I listened to all the speeches when the Report of the Special Orders Committee was being discussed in this House. I voted against the Government, not because I thought that Roche had come out of the issue with flying colours but because in my mind I was still not satisfied that the issues of expensive research had been properly considered. These pharmaceutical companies spend millions on research, as we all know—millions which universities simply cannot afford to spend —and we are almost entirely dependent on the pharmaceutical companies for this kind of research.

As the noble Lord, Lord Todd, said, they also run extraordinary risks. I would point out to your Lordships that the risk in producing drugs of the tranquilliser type are especially great, because at present at any rate these drugs are not specific—although they may be in future—in the sense that for instance streptomycin produced by a drug firm was specific against the tubercule bacillus; therefore it was very unlikely that some other drug firm would immediately produce a better streptomycin. It is extremely likely that within the next year or two—I do not know how long—Valium and Librium will be almost entirely outdated, having been superseded by some new drug which some other drug company has spent millions on produc- ing. And the drug produced by that other drug company may last for only a short time, because a third company may have been working for the last five years on producing yet another drug. We certainly have not seen the ideal drug for the purposes for which Valium and Librium are used at present. I therefore felt that it was a great pity that your Lordships voted against the majority decision of the Special Orders Committee, and I voted on the other side.

Lastly, a thought occurs to me which your Lordships may consider irrelevant. It is that it seems unfortunate that the dispute is over a firm which, after all, is doing very good work, as we all acknowledge, a firm which is producing a product of great value, in fact many products of great value, when there are so many other ugly and unacceptable forms of capitalism which should call for much greater criticism.

6.33 p.m.

LORD FERRIER

My Lords, having taken part in the debate on Friday, June 22, I feel that there are one or two points raised in the course of this debate which are worth drawing to the attention of your Lordships. The first is the absence of a Hansard Report. The noble Lord, Lord Peddie, pointed to the emptiness of the House, but I feel certain that had there been a Hansard Report a great many Members of your Lordships' House would have been aware of what went on on Friday, June 22. But without it they were not able to grasp what had happened. I think, also, that this debate would not have gone quite so wide as it has, and covered ground which in fact was covered to a considerable extent on that Friday, had there been a Hansard Report. I agree strongly with the noble Lord, Lord Peddie, and the noble Lord, Lord Stamp, who complained about the debate being on a Friday. I do not mind confessing to your Lordships that to be here on that Friday caused me very great personal inconvenience. Although I am no longer engaged in the pharmaceutical industry, I felt that I ought to be able to place such experience as I gained when I was connected with it at the disposal of your Lordships, and that is why I venture to speak again to-day.

My Lords, the noble Lord, Lord Peddie, pointed to noble Lords on this side of the House—or was he referring to the Minister? I say it like that particularly after what the noble and learned Lord the Lord Chancellor has just said. I spoke in favour of Lord Shackleton's Amendment on that Friday and four noble Lords sitting on the same Bench voted the other way. If ever there was, from one Bench, an indication of a non-Party bias, that was it.

LORD PEDDIE

My Lords, may I offer a correction? I certainly did not endeavour to suggest that there was Party bias at all.

LORD FERRIER

My Lords, I must have misheard the noble Lord, Lord Peddie, but I thought I would mention that matter. Another point which was made in the debate on that Friday and which is apposite to-day concerns something said by the noble Lord, Lord Todd, who spoke of the necessity to reform patent law. One point brought out in the debate on Friday was that Section 41 of the Patents and Designs Act has been recommended for repeal by the Banks Committee, and that within a couple of years. Further, with the approach of closer contacts with the E.E.C. and the patent law of the Continent, there will be a revision of patent law in this respect; and to have gone to all the trouble and expense of reopening the whole of this complex matter, so well described by the noble Lords, Lord Todd and Lord Platt, in a Select Committee of this House would have been so much water over the weir.

The debate has gone rather wide and I feel that perhaps it was unavoidable, in view of the discomfort to which some noble Lords have been put. Now we have to face the question whether or not to approve this Order. I have referred to the debate on Friday, June 22, but there has also been a reference to the absence of any notice of Lord Shackleton's Amendment. Those who were present at the debate will, I think. agree with Lord Shackleton's explanation of how and why it came about that he, with all his many years' experience as a Leader of your Lordships' House and a Leader of the Opposition, should put his thoughts on the matter. He felt that something must be done, and did it. He put down an Amendment which, as I see it—to use a chemical term—distilled the essence of the matter which we were having to consider on Friday, June 22. I feel that your Lordships' House should be grateful to the noble Lord, Lord Shackleton, and to the noble Lord. Lord Diamond, for having done that in order to simplify our task on that day.

My Lords, I do not propose to go into the rights and wrongs which have been gone over again and again about this tussle which is going on. But we must accept that these are wonder drugs. They were discovered and are being manufactured by a company of incomparable reputation and skill. I need not say more in tribute to them than what has already been said by the noble Lords, Lord Platt and Lord Todd. When debating figures and percentages, one must always remember that the end product is the relief of human suffering.

I would also mention a point that was touched upon by the noble Lord, Lord Todd, and which I should like to amplify. In the pharmaceutical business, when you are researching, your "winners" have to pay for the "losers". That is something the cost of which it is impossible to estimate. A point which requires development—it was touched on by the noble Lord, Lord Stamp—is that you may develop a first-class drug and put it on the market, only to find that the next day it is superseded by another drug; and the cost of that operation cannot be estimated. It is not only a right but also a necessity that pharmaceutical companies should have ample resources for research. That has been recognised by authorities; by Lord Sainsbury's Committee and by the Banks Committee. The fact is that my right honourable friend the Minister of Health has arrived at a perfectly fair arrangement whereby, as chief customer of the trade, he safeguards the profitability of the trade and at the same time ensures that the Department of Health is not overcharged. To this end, he must have some figures from the manufacturers and these have been provided. It is good news for us that this has happened. In this case, although the company has provided these figures rather late, it will give the authorities time to think the matter out all over again.

In my view the Minister has acted with commendable fairness, firmness and restraint over a period of years. Speaking for myself, I hope that at the end of the day some middle course as to prices will be found, as was suggested by the noble Lord, Lord Todd. After all, the reductions demanded in the Monopoly Commission's Report are absolutely swingeing. They are not based on known figures as regards to turnover and research, as we now know, although that of course is Roche's own fault. As for the new dénouement, I feel one could reinforce what has been said not only by my noble friend Lord Limerick, but by other noble Lords, by quoting what the Minister said in the other place last night. … if Roche was to come forward with any new evidence of another important change in the relevant circumstances since the commission reported, which might justify some modification of the order prices, my right honourable and learned friend would naturally be glad to consider it."—[OFFICIAL, REPORT, Commons: 4/7/73, col. 648.] Those words, I feel, are very welcome. At the same time, why should this company, because it is multi-national, no matter how small a percentage of their world sales are made in this country, stand at an advantage as compared with British companies? They must all be on the same footing. Neither the British companies nor Hoffmann La Roche need be ashamed of the amounts that they spend upon research. But it is not necessary that the figures of any of them should be publicised. To do that would be to give information to competitors. I should like to know whether there is going to be adequate secrecy in respect of figures which various companies give to the authorities.

The third point I want to make is as to the decision which now lies before the House. In my view, the only wise course open to Parliament at this juncture is to approve this Order. This may well lead to a compromise, but only in this way can we get on with the job of ensuring that these wonder drugs are widely available, and at the same time encourage research, including Roche's research programme, which I think I am right in saying in some respects concerns my native Scotland.

6.42 p.m.

LORD BOOTHBY

My Lords, my name is not on the list of speakers and I do not intend to make a speech, but I think I ought to let your Lordships know that before the war I was Chairman of Roche Products and I saw something of the magnificent research they carried out. The whole B.1 business, as the noble Lord Todd said, is owed entirely to Hoffmann La Roche and the vast expenditure they made on it. The whole vitamin complex really belongs to them. Since the war they have proceeded with what the noble Lord, Lord Ferrier, described as "these wonder drugs", and have had tremendous success, particularly with Librium and Valium, which are extensively used and have to a large extent taken the place of barbiturates, which are so dangerous and bad for health. I cannot help feeling that this House made a mistake in the vote they gave on that fatal Friday, and I think it is a sad thing that it should have come to this pass at the present time between Roche and Her Majesty's Government. I therefore think it is a pity that this Order should be rushed through in the way it is now being rushed through. I should rather have had a Select Committee consider the matter. I hope, with the noble Lord, Lord Ferrier, that some middle course may yet be found. I would only say that if it were to come to a Division (which I suppose it had better not), I should feel bound to go into the Lobby against the rushing through of this Order, because I think this Order may make it more difficult to reach the kind of solution that is desirable in the public interest.

LORD DOUGLAS OF BARLOCH

My Lords, I should like to bring to the notice of the House one point which has hardly been mentioned this afternoon, and that is that we are dealing here with a monopoly. This is the origin of the whole thing. It is a monopoly which has its products protected by patents, which prevent competition. Its products are sold under trade names, which I have no doubt also are protected and which will be of value when the patents expire. In these circumstances, a company is able to charge for its monopoly product whatever price it pleases, and the policy of intelligent companies, naturally, is to charge the price, which will give them the greatest profit. But that is not necessarily a fair price to the public. It has nothing to do with the question of research, because under these conditions the amount which is devoted to research is entirely arbitrary. It depends upon the decision of the company itself. It can devote the whole of its excess profits to research, if it pleases, or it can devote a portion of them to that purpose and invest the rest in something else. There is nothing to determine what amount of those profits it is necessary to devote to research. This is not a case of a competitive business, in which the amount devoted to research is limited automatically by the competition of the market, and you cannot charge more than is reasonable. It is, as I say, entirely arbitrary. The Monopolies Commission have gone into it, as a body equipped for that purpose, and come to a conclusion which is embodied in the Order before us. I think that the Order should be passed.

6.47 p.m.

LORD SHACKLETON

My Lords, I must say that I have never known a subject give rise to so much unpleasantness. What is an issue that is normally debated in a civilised way has given rise to a series of accusations and imputations that I have never seen equalled in these circumstances. Since I thought there might be some criticism—though no notice was given to me that there would be criticism of me—I thought I had better be here in order to explain once again (and I am grateful to the noble Lord, Lord Ferrier, for what he said) why I put the Amendment down and why we came to the conclusion we did. I do not know whether to ignore the letter from Mr. Marks that appeared in The Times, but I have never seen a letter of such an offensive nature criticising Members of your Lordships' House. I do not know of a similar example in the past. The noble and learned Lord who sits on the Woolsack, as noble Lords will know, has on occasion exchanged hard words with me, but I deeply resent the implication that there was any sort of plot—there is a reference to a Party political manoeuvre—that the noble and learned Lord, the Lord Chancellor, somehow or other, was secretly, by connivance or, indeed, encouragement of the Government, put in to vote to make sure that the squalid Party manoeuvre invented by the Labour Party succeeded. I have never heard such utter bilge and offensive untruth in all my life. It is an unfortunate thing.

I know the two noble Lords who spoke from the Cross-Benches are not party to this, and they have spoken reasonably, but it is unfortunate that Roche have contrived to behave with such outstanding bad manners in the whole matter. When we came to discuss this subject and I put down an Amendment, which was moved by my noble friend Lord Diamond, we made no criticism of Roche. We were concerned simply with the recommendation of the Special Orders Committee as to whether it was right to send this particular Order to a Select Committee. It is perfectly true that my noble friend Lord Peddie—and I believe the noble Lord, Lord Stamp, was with him at the time—mentioned to me on the Thursday (that is to say, the day after the Order was published) what a pity it was that the discussion could not take place on that Friday when they could both be there. There was not much notice on that occasion. And they were annoyed that it was postponed to another Friday.

I listened to this complaint seriously—I am sorry that my noble friend has not mentioned it during the debate—and in fact went to the Government and suggested that the discussion be postponed until a later date when all the people could be there. The Government Chief Whip, who has a lot of problems at this time of the year, said he did not see how he could postpone it. I do not know whether he could or could not, but Government Chief Whips of all Parties are apt to find it impossible ever to alter Business. Because my noble friend had made a number of criticisms, and in particular had suggested that it had all been fixed up so that my noble friend Lord Fletcher could speak, I thought I had better go into the matter.

At that point I was scarcely aware of the issue and I thought I must, like other noble Lords, study the papers. I did so, and on either Tuesday or Wednesday informed the Chairman of Committees that I thought almost certainly there was going to be opposition to the recommendation and that I personally, for reasons which I gave in the debate, would oppose the Special Order going to a Select Committee and would recommend to the House—not in a Party sense but as somebody who has a deep regard for the way in which the House conducts its Business, and I do not think many noble Lords would say that I am not concerned for the proprieties of your Lordships' House—that I thought it was inappropriate that this Order should in fact go to a Select Committee.

At that point, I was advised that if the House simply rejected the Order the whole weary business would start again and that technically the best way to deal with it was to put in an Amendment to remove that part of the Special Order Committee's Report which would have sent the Order to a Select Committee. This was a purely technical matter. It was already obvious by Tuesday or Wednesday—and if noble Lords were concerned enough they could have found this out, because it is not my responsibility on such a matter to go round informing people, and in any case I did not put in the Amendment until Thursday. I informed the House authorities, I informed the Government and I also informed the Chairman of Committees. Really, we cannot go round telling people what they ought to do and when they ought to be here.

I regret that my noble friend in some measure supported what I find the slightly offensive remarks (but I make no criticism of him because he is not here) of the noble Lord, Lord Reay. Incidentally, I think it is a pity that my noble friend made the remarks he did about the noble Lord, Lord Balogh. I do not know whether he gave him notice; he said he moderated his remarks because the noble Lord, Lord Balogh, was not here, but I did not find them all that moderate. Nevertheless, the House accepted that we could constitutionally and properly take the decision.

The Special Orders Committee reached their decision by a very small vote—four to three. I discussed this point with members of the Committee, and clearly some of them were in difficulty in coming to a decision. I would not say that they were wrong in coming to their decision. They came to it properly, within their Standing Orders—and, incidentally, Standing Order No. 216 is a little ambiguous. Nevertheless, they claimed that there had not been sufficient inquiry and that a further inquiry was necessary. This House is not bound by that Standing Order—I am sorry to have to give these constitutional arguments again—nor is it true that this House always accepts the recommendations of its Select Committees. It would be an intolerable constitutional principle if we were always to accept them. I must repeat it again, because I think that it ought to be on the Record, that we cannot, as a constitutional principle, accept that we are bound by these recommendations of our Select Committees.

For good and practical reasons, particularly on Private Bills, which I should be very sorry to see disappear, we normally do accept them and I think we are right to do so; but I have known several occasions where attempts have been made —for example, on the Brighton Marina Bill and others—to reject the findings and conclusions of a Committee. The same issue arose on another occasion. The only difference was that on this occasion the objections were successful. There have been other occasions, admittedly where evidence had not been heard, where Reports of Select Committees have been rejected; and the suggestion that somehow there was interference in what is a process of justice, an appeal and so on, and that it is a constitutional impropriety is absolute nonsense which is not supported. In this House we are our own judges of our own procedure. Parliament decides what its procedure should be, and not outsiders.

We came to this conclusion, admittedly by a rather larger majority than that of the Special Orders Committee—by about two to one. And let me say that the Government Front Bench notably took no part and abstained from voting. The noble and learned Lord the Lord Chancellor—I suspect that if any pressure had been brought on him it was for him to abstain too—felt sufficiently strongly about his rights as a Member of this House to vote for an Amendment which had been moved by me and about which there had been no collaboration between us, except that the noble and learned Lord told one or two people that he was going to vote for my Amendment.

I hope very much that the discussion can now go on to a more decent plane. There have been enough accusations, not just against this House but against Ministers, too, of a pretty unpleasant kind, which I resent, no matter who the Minister may be. I hope that the offer made by the noble Lord that again they are willing to have serious discussions—discussions which apparently it has not been possible to have before—will be accepted. At no time have I made a criticism of Roche before the Monopolies Commission, any more than my noble friend Lord Diamond did. We were careful to take the view that the subject which the Special Orders Committee thought could effectively be considered by a Select Committee was inappropriate. We now hear that it is likely to take two years in the High Court. I can only say, "The best of luck to them". But I think we have saved this House from involving itself. Had we been involved it could have been very embarrassing and might at the end, in our view anyway, not have yielded a satisfactory conclusion. There was no attack on research at any point. There has been a lack of clarity in the thinking on this subject, and I am glad to say that when we came to look at it a week ago clarity asserted itself and we decided that this was not a matter of a kind of appeal, a judicial process, which should go to the Select Committee. Therefore if there is a Division—and I hope there will not be —I will certainly support the Government.

7.0 p.m.

THE EARL OF LIMERICK

My Lords, I find this a somewhat difficult debate to wind up, not because I have the slightest doubt about the propriety of the Government's action in asking the House to accept this Order, but simply because it is a difficult subject. It can never be a simple matter to determine prices as between a supplier of 99 per cent. of certain products and a purchaser, in the form of the National Health Service, of some 90 per cent. of those products; hence the need for a negotiated solution; hence the mechanism of the voluntary price regulation system.

On several occasions the Government have expressed regret that Roche were not prepared to enter into meaningful negotiations to that end, hence the Monopolies Commission and the Government have repeatedly acknowledged the vital interest of adequate research. That should not be a point at issue. Equally, they have acknowledged the exceptional value of these drugs. That again is not in any way a point at issue. If there was doubt about the difficulty of the subject it would be dispelled by hearing noble Lords, as we have done this afternoon, of immense experience and eminence express worries and doubts about the subjects. But the fact is that the voluntary solution could not be found, and this was net for lack of trying on behalf of the Government Department concerned. The circumstances are known to the House. Thus it was necessary to look at some other form of adjudication. If ever there was a case for using a monopolies procedure, surely it must be when one producer controls 99 per cent. of the market. On the issue before us—and I shall be as brief as I can, though naturally I wish to refer to comments raised in the debate—when we left the subject the House decided not to refer the matter to a Select Committee. For this reason, I hope that no noble Lord will seek to divide the House, because whatever effect that might have, it is quite clear it would not have the effect of getting a Select Committee of this House to take another look at this subject.

If I may now turn to specific points made in the debate, the noble Lord, Lord Peddie, regretted that the only reference in the Order was to public interest and not specifically to research or other matters. But this is governed by the wording of the Monopolies and Mergers Act, and this wording is, of necessity, imported into the Order to explain—

LORD PEDDIE

My Lords, the noble Earl has misunderstood my point. I recognise the reference to public interest, but in describing the public interest in the Order it makes reference to price as being the sole factor in public interest. I tried to point out that there were other aspects of public interest.

THE EARL OF LIMERICK

My Lords, it is well understood that there are other matters. The wording of the Order, I suggest, stems from the wording of the Act.

Next I will refer to the way in which these procedures have been conducted. The Motion debated on June 22 was not a Government Motion but a Motion of the Chairman of Committees. It had been on the Order Paper since June 12 —that is, for 10 days. The Amendment was a matter for the Opposition, and the noble Lord the Leader of the Opposition has explained clearly his reason for bringing forward his Amendment. The issue then became a matter for the House which dealt with it in a manner which we all know.

The noble Lord, Lord Peddie, then raised a question of confidentiality of information supplied to the Monopolies Commission. Here it is not the case that the Commission always undertake in advance not to publish sensitive information, but they do not publish it unnecessarily. Nevertheless, they must be free to publish if it is necessary for an understanding of the Report; the Report has to be accepted from its reasoning in the body of it. In this case Roche refused to supply information unless their conditions were met. The noble Lord had some worry that the Order was concerned only with the price to the consumer. The prices suggested by the Commission make provision for research and development. This is a matter of degree not of kind; there is no argument that there should be such provision. In this case the figures fell out in the way made clear in the Report. The noble Lord was concerned about the quality of the Monopolies Commission, comparing it with the Special Orders Committee as if they were two football teams. Nobody is questioning the great experience of the Members of this House who took part in the proceedings of the Special Orders Committee.

LORD PEDDIE

My Lords, I am sorry to interrupt, but I was not suggesting that the noble Lord opposite was doing so. I was making reference to a comment made from this side of the House at the time of the last debate on the subject of the composition of the Special Orders Committee.

THE EARL OF LIMERICK

My Lords, of course I accept that correction. But it would be right, as the subject has been raised, for me to make two points. The first is that the Monopolies Commission is the body appointed by Parliament to examine matters of this type, monopoly issues. Secondly, I should like to refer to the composition of the Commission who were looking at this particular issue: Sir Ashton Roskill, Q.C., the chairman; Sir Roger Falk, a management consultant; Professor Hart, Professor of Jurisprudence at Oxford; Mr. Richardson, a Fellow of St. Johns College, a specialist in economics; Mr. Williams, former Deputy Chairman of I.C.I., a specialist in research matters; and Professor Barna, Professor of Economics at Sussex University. It would be right to put on Record that this was a very experienced group, one which could be expected to come to a reasonable conclusion on such an issue. In addition, they had the full support of an expert staff on the Commission, and the investigation went on by correspondence and inquiry for 17 months. It was by no means a rush job. The public interest hearings, to which the noble Lord referred, were the final stage. He rightly pointed out that they took one day and one hour. But the Commission were ready to sit as long as Roche wanted on that issue.

The noble Lords, Lord Stamp and Lord Todd, raised fundamental matters of great importance, matters which I hope they will agree with me are such that we should wish to look at and study. I do not think they can be said to bear directly on the question of the acceptance of this Order this evening. I will refer to one or two of them, but I hope that noble Lords will understand if I do not follow them very far in these extremely interesting and specialised matters.

The first point to which I refer, which was alluded to by both noble Lords, is the "R and D" expenditure. Of course the Monopolies Commission and the Government fully recognise the need for high levels of research and development spending in the pharmaceutical industry. Naturally, the conclusion is also accepted that this must be reflected to the right extent in current prices. The Monopolies Commission established in their inquiries that Roche priced these products at what the market would bear; and in the absence of competitive restraint this meant, in their opinion, that the prices were excessive. They did not accept, and the Government do not accept, that there is no limit to prices that can be charged so long as part of the proceeds are spent on research. I well understand the difficulties of these issues and that they are matters of degree and judgment. The noble Lord, Lord Todd, also raised the question of discussions before the reference to the Monopolies Commission which were with the D.H.S.S. under the B.P.R.S. Roche broke off relations in 1971 specifically on the ground that the D.H.S.S. would not undertake to procure the repeal of Section 41 of the Patents Act.

I would next deal with a point which has raised much concern around the House. It refers to what I said in my opening remarks about the Government's willingness to discuss with Roche any new evidence. I would repeat what I said because my words were chosen with care. I said that if Roche were to come forward with any new evidence of a material change in the relevant circumstances since the Commission reported which might justify some future modification of the Order prices, then my right honourable and learned friend would naturally be glad to consider it; and I added that clearly the prices the Order sets may not be appropriate for all time. I would wish to stick to those words which I used in the opening. The noble Lord, Lord Platt, raised the point that the Roche company does extemely good work. With this of course we agree; it enjoys a very high reputation, and for this we pay tribute to it.

I think the House would not wish me to weary it by continuing to take individual points. There is only one I think I should refer to a point raised by my noble friend Lord Ferrier. I entirely agree on the question of patents that it is an aspect of the matter which should be very carefully considered in the light of the Banks Committee Report. But this does not alter the main issue at stake in this case. We always come back to the Report of the Monopolies Commission. The noble Lord, Lord Douglas of Barloch, was absolutely right to remind us at the end that we were dealing with a monopoly, and therefore it is the procedure of the Monopolies Commission that was used. That machinery has led to the laying of this Order. I do not think it is right to say, as the noble Lord, Lord Boothby, said, that we are rushing it through. This Order was laid before the House I refer to the No. 1 Order which was substantially in the same terms, the only difference being in minute detail —on April 12. It has been before the House for that length of time. My Lords, in these circumstances I feel confident in commending the Order for acceptance by your Lordships' House.

On Question, Motion agreed to.