HL Deb 07 May 1981 vol 420 cc287-300

8.38 p.m.

Baroness Faithfull rose to move, That this House takes note of the report of the European Communities Committee on the proposed Council directive on the approximation of provisions laid down by law, regulation or administrative action relating to proprietary medicinal products (15th Report, H.L. 94).

The noble Baroness said: My Lords, I speak on behalf of the Education, Employment and Social Affairs Committee, Committee C, and I am most grateful to the noble Lord, Lord Vaizey, for supporting me this evening, because he always speaks on every subject with great wisdom and intelligence. I am grateful and my committee is grateful for his support. I should also like to take this opportunity to thank those who gave evidence to the committee, and I shall be referring to their evidence at a later stage. Finally, I should like to thank the noble Baroness, Lady Jeger, who is to speak for the Benches opposite and also Mr. Turnbull, the clerk to our committee, whose support helps and guides all members of the committee in their deliberations.

I will repeat the Motion because it is a very complicated one: That this House takes note of the report of the European Communities Committee on the proposed Council directive on the approximation of provisions laid down by law, regulation or administrative action relating to proprietary medicinal products". This Motion has been set down and pursued tonight in order to elicit from Her Majesty's Government their view concerning a complicated issue. This issue concerns, on the one hand, the proposed Council directive on the approximation of provisions laid down by law, regulation or administrative action relating to proprietary medicinal products"; and, on the other hand, the findings and conclusions of the House of Lords Select Committee on the European Communities 15th Report, which do not accord and indeed are at variance with the proposed directive.

The main point at issue concerns what is known as parallel importation of proprietary medicinal products. This takes place when a person who is not a manufacturer of the product buys, quite legitimately, a proprietary medicinal product in one member state at a comparatively low price and sells it in another member state, where he can obtain a higher price. He is, in effect, an independent entrepreneur. He has nothing to do with the manufacture of the product, and all that that involves in the realm of research, production and distribution.

The position as it stands at present is that the control of proprietary medicinal products is governed by two Council directives. The first, 65/65/EEC of 26th February 1965, has as its primary objective the safeguarding of public health without hindering the development of either the pharmaceutical industry or trade in medicinal products in the Community. The second directive, 75/319/EEC of 20th May 1975, aims to further progress towards free movement of proprietary medicinal products on the market in one or more member states. The directive establishes a Committee for Proprietary Medicinal Products responsible for giving opinions on whether particular products comply with the earlier directive.

In general, these two directives have worked well towards the aim of abolishing barriers to the freer movement of proprietary medicinal products. The proposed new directive has as its aim the establishment of a common system of registration for parallel importers of proprietary medicinal products. The Commission regard the implementation of the proposed directive as a matter of urgency in order to ensure consistent implementation of a judgment of the Courts of Justice of the European Communities of 20th May 1976. The case number was 104/75. This case concerned the importation to the Netherlands by the firm Centrafarm B.V. of valium manufactured by Hoffman La Roche in the United Kingdom, unpacked and sold under the name of Diazepam in the Netherlands.

Hoffman La Roche sought to deny Centrafarm B.V. the marketing by refusing to supply documents required by the Netherlands licensing authority as essential to the granting of a marketing authorisation. Under Article 36 of the Treaty of Rome the European Court ruled in favour of the parallel importer, on the grounds that as far as possible and practicable there should be free movement of goods within the EEC countries. Furthermore, the manufacturer should not, by withholding the necessary documents, be able to deny the parallel importer, the entrepreneur, a right to import and market the product. The proposed new directive is therefore in accordance with the latest ruling and favours the parallel importers to the detriment of the manufacturers.

My Lords, I should say at this point that I have taken legal advice and I am informed that there is no appeal against a ruling by the European Court unless somebody reapplies and brings forward another case. The European Court is not bound by precedent. Such action would be expensive, time-consuming and of great concern to a manufacturer.

The House of Lords Select Committee took evidence from the Department of Health and Social Security, the Association of the British Pharmaceutical Society and the Department of Trade, all of whom have misgivings on the proposed directive. Evidence was also given by Mr. M. A. Alter, of Spectrum Marketing. The Pharmaceutical Society gave four reasons why they were concerned over the court ruling and the consequent directive supporting the case of parallel buying. First, parallel importing is jeopardising the manufacturers with loss of market. The case of a well-known heart drug was cited. ICI has been manufacturing a well-known heart drug throughout the world for 20 years. It is alleged that various businessmen who are not in the manufacturing industry have been buying this drug in small quantities in the United Kingdom, re-packaging it and then selling it at a profit in some of the EEC countries. ICI have said that they have lost 20 per cent. of their sales in Holland, for instance.

Secondly, there is the health aspect. The entrepreneur is breaking up the packages of medicines, repackaging them and then selling to dispensing chemists under the name of the manufacturer. This re-packaging is not done under supervision. The manufacturer, on the other hand, is of course controlled by legislation—the Medicines Act 1968. Thirdly, there is the question of product liability. The medicinal goods are bought by the entrepreneur, repackaged and sold under the name of the original manufacturer, who is responsible, for the product. The manufacturer's packing is carried out to a higher standard. There should surely be no subsequent repacking by the entrepreneur, whose work is not supervised as is the work of the manufacturer. Lastly, the manufacturer spends time and money on research. The businessmen, of course, do none.

We also received evidence from the Department of Health and Social Security. The department stated in their evidence that there would be policy implications. It was recognised that the directive would create freer trade, but there were health implications, they said. If entrepreneurs can buy, repackage and resell, there would have to be regulatory requirements, which would be cumbersome and expensive. We also took evidence from the Board of Trade representatives. There is the question of national trade marks, but this really comes under the patenting directive and I do not propose to pursue that matter this evening.

Finally, we took evidence from a Mr. Alter, of Spectrum Marketing—a businessman who offered to give evidence. He maintained that the Treaty of Rome, Article 36, was being contravened because the manufacturers in at least one country will not supply the necessary documents concerning a medicinal product. The entrepreneur therefore cannot obtain a marketing licence of the competent authority in the place of import. He contends that the problems in obtaining the necessary product licence act as a barrier to free trade. He considers that each member country should be prepared to accept the product licence of the original country, where the goods were manufactured. It should be said that there is the aspect of confidentiality. One Government might be willing to supply to another Government details of the make-up of a medicinal product, but would not be willing to supply it to a businessman outside the manufacturing of medicine industry.

It should be noted that the Economic and Social Committee in Brussels are against this directive. In October 1980, at a plenary session, the voting against the directive was 36 votes to 9, with 7 abstentions. We understand that a number of member states are not happy about this directive.

The House of Lords' committee was somewhat bewildered by the court ruling on which this directive is based. The opinion of the Advocate General quoted in the judgment the words "parallel import". I wonder whether he meant "parallel importer".

The position under the directive would have a serious implications for health and for the work of the pharmaceutical industry, which does research and manufactures the goods, and the DHSS which fixes the prices. Therefore, the House of Lords' committee considered that the Commission's proposed directive raises important questions of policy and principle and it was thought right to bring the matter to your Lordships' House. The committee are interested to know what is the view of Her Majesty's Government and what action can be taken concerning this directive which is unacceptable to the committee and to other member states of the EEC. I beg to move.

8.52 p.m.

Baroness Jeger

My Lords, I must first thank warmly the noble Baroness, Lady Faithfull, for the clarity and brevity of her presentation of this complicated report. On this side, we would wish to thank all Members of the committee for the work they have done on this matter. I must say that I read the report with great care and concentration, an exercise which I found so exhausting and demanding that my expression of appreciation to the committee is sincere indeed. Certainly, my heart went out to one exchange on page 14. My noble friend Lord Plant asked the question which I echo: Could you tell me in fairly simple language why the directive saw the light of day? Dr. Arnold of the British pharmaceutical industry replied: It is very difficult to fathom the minds of the officials in the Commission". With that I have great sympathy.

The terms of reference of this report and, therefore, of this debate are very narrow but there are undertones of wider, inescapable questions. The pharmaceutical industry is growing rapidly all over the world. Its products are the major element in the cost of our National Health Service and the cost of any health service anywhere. While we appreciate that there are countless people kept alive and in health by essential medication, we do not know how many are the worse for careless or superfluous medication—a form of internal pollution which should give us all cause to ponder in this pill-hungry world. I cannot escape these thoughts because the proposals for this directive on parallel importing seem to be concerned mainly with maximising commercial freedoms rather than safeguarding the health and wellbeing of our peoples. Concern for free competition seems to pre-empt most other considerations, enabling profitability to increase.

I was interested to see that, on page 24, the DHSS stated: The objective of the proposal is freer trade but there are implications for public health…which will need study in depth". I agree with the main findings of the report from which it seems that the committee came to the conclusion that some directive may be necessary although it may not necessarily be in this present form. Certainly, the time scales set out are totally unrealistic. The hestitations which were expressed on various pages to my mind are very serious. There are the dangers of repacking and, with loss of identification, of relabelling; there are problems about how shelf-life of products will be monitored, problems about the necessity sometimes of recalling batches which will have been sent out and in respect of which there may not be complete records of the destinations. So I find myself wondering whether the EEC did not have anything better to do.

I feel that in this country, if I may seem narrowly patriotic for a moment, we have a very fine pharmaceutical industry, with a very important basis of research, and that the controls which we have set up under our legislation, with the agreement of the industry and the medical profession, serves to protect our people. I trust that, while minds will not be closed on this matter, the Government will accede to the advice of the committee and will not accept in any precipitate way the recommendations of the directive which I share Lord Plant's difficulty in understanding.

8.57 p.m.

Lord Vaizey

My Lords, I am grateful to my noble friend Lady Faithfull for presenting the report of the committee and I regret that the noble Lord, Lord Wolfenden, the chairman is not present. I am a member of Sub-Committee C of the EEC Select Committee. I took part in the first part of the hearing but then was taken ill and did not hear the second part. I think that what is at issue is a perfectly simple case. The position is that valium is sold here at £x for 100 tablets, is then bought by a businessman and sold in Holland for £2x and so the businessman makes a profit of £x, and the question is whether or not this is legal. The European Court has ruled that it is legal. The reason why the entrepreneur does it is because the price level for the same product differs in different countries of the European Community—which prima facie is against the principles of the Community, which is based on considerations raised in Article 36 of the Treaty of Rome, that free competition shall prevail. Therefore, given chartering costs, the uniform price for identical products should prevail throughout the Community.

This particular case raises two issues of principle. One of them formed the main substance of the speech of the noble Baroness, Lady Jeger, the question of public health. I share with her the admiration she expressed for the United Kingdom pharmaceutical industry. The rate of conquest of disease and of discomfort in the past 30 to 40 years has been remarkable and, to a great degree, is the result of the work of the pharmaceutical industry. The record of safety of the industry is really quite outstanding. I am told by medical professors as a matter of fact that the level of safety in the pharmaceutical industry is such that if the same criteria were applied to surgical operations in hospitals no surgical operation, even setting a broken leg, would actually take place—so low is the risk of taking pharmaceutical products under suitable medical direction.

I think that while the industry exists in private ownership it would be foolish to believe that the industry can survive without making a profit; so I do not regard as axiomatic the fact that the pharmaceutical industry makes a profit is a sign that it is behaving badly. In that respect, I was somewhat astonished to read this morning in The Times a speech by the Prime Minister of India, Mrs. Ghandi, who accused the pharmaceutical industry of concentration on profit, fierce competition and recourse to hard sell advertising. She claimed that sometimes dangerous new drugs are tried out on populations of weaker countries although their use is prohibited within the countries of manufacture. I believe that the last part of that statement in so far as it applies to United Kingdom manufacturers happens to be completely false. Nevertheless, it is a widespread view that private business—or indeed public business—ought not to make a profit out of dealing in products which are to do with health.

Having therefore stated my basic position, which is one of being in support of what the pharmaceutical industry has done and of admiration for its record, I found its case came in two parts. Frankly, the first did not seem convincing; in fact I thought it was a sham. It rests upon the assumption that chemists in Holland—of all countries!—will split up batches of drugs, repackage them and then sell them to patients who come with prescriptions issued by Dutch doctors.

No single case was brought forward to substantiate the argument which the industry produced along these lines. Indeed, it is extremely difficult to believe that in Holland, a country which I imagine is almost pathologically clean, and which has a standard of public health care which is second to none throughout Europe, would allow this to happen. It also happens to be illegal in the United Kingdom. It could not conceivably be done in the United Kingdom by a pharmacist who hoped to be able to remain on the register of pharmacists and to be able to deal with doctors' prescriptions.

Frankly, I think that we can assume that our European allies are as perfectly competent to look after their public health as the United Kingdom undoubtedly is. The practices which have been cited in the report do not take place in the United Kingdom, and they certainly do not take place in the Netherlands—which was the case which was cited—and I doubt whether they actually take place anywhere. Certainly no cases were brought before the committee.

The second issue—not that of public health care—which is one of competition, is of far more significance. Article 36 of the Treaty of Rome requires industries in Europe to be competitive. It applies particularly to the United Kingdom pharmaceutical industry which is one of the two most successful pharmaceutical industries in the world—the other one being the United States. The United Kingdom pharmaceutical industry is a major contributor to the United Kingdom gross national product; it is a major exporter.

The way that the industry operates is by what is known technically as a discretionary monopoly, that is to say, it charges what the traffic will bear. It happens to charge low prices in the United Kingdom because the National Health Service imposes low prices; but in the case of some of our European allies—Holland and Germany are good examples where the system is not our National Health Service system but is an insurance-based system—the prices prevailing are higher. Therefore United Kingdom manufacturers make a bigger profit in those countries than they make in the United Kingdom. By this process of discretionary pricing, discretionary monopoly, the total flow of profits to the firm concerned has increased.

I must emphasise that there is nothing unusual about that. It is something, for example, that the railways do. As many noble Lords will know, the railways offer cheap prices to old-age pensioners. If an old-age pensioner presents his pension book he can get a pass to travel cheaply on British Rail. The same is true of students. The reason is that British Rail tries to discriminate in its marketing policy between businessmen and so on who can pay the full cost and other more vulnerable groups in a community who, if they were charged the full price, would be unable to travel, and therefore it recoups the cost of running the trains by charging cheaper prices to those vulnerable groups. That is in principle exactly the same as what the pharmaceutical industry is doing.

The question which arises, and is raised by this directive, is of great significance. Is that principle of charging which is common and is practised by theatres who offer discounts to students, and so on, and is something carried on by a whole range of industries, against the competitive principles of the Community? Personally, I see nothing wrong in the principle of discretionary pricing. The patent law offers a pharmaceutical company a monopoly in the product which it is selling; otherwise the product would not be marketed, because it would not be invented unless there was a guaranteed market of 15 or 20 years in order to recoup the money spent on the product.

Therefore, in principle I see nothing wrong with this. If our industry is to be sacrificed on the European altar of competition on the grounds that this practice is in principle against European law, it is going to be an extremely severe blow against one of the industries which I claim is a major industry—an important industry—of which we in the United Kingdom have every right to be proud. Unfortunately, when the industry gave evidence they foolishly rested their case upon the alleged misdemeanours of pharmacists in Holland. I must say that of all the people I know, the Dutch are the least likely to be fiddling about with doctors' prescriptions inside their pharmacies. I should think that they are a nation of meticulous care about that. The industry did not rest their case upon this central point of whether or not discretionary pricing was in principle against the competitive law of the Treaty of Rome.

I must mention in passing that one of the undoubted consequences of adopting the directive would be to raise the price of drugs in the United Kingdom. What would be required of pharmaceutical firms would be to average the prices that they now charge throughout Europe. If they were not allowed to sell their products cheaply here and expensively in Holland but had to charge the same price, the laws of arithmetic tell us that what will happen is that prices charged in the United Kingdom will go up. Therefore, the net effect on the National Health Service will be to increase costs.

Baroness Jeger

My Lords, will the noble Lord not accept that these price differentials are often to do with currencies and exchange rates? They also have to do with the differing price controls which take effect in different countries. For instance, the price levels between this country and Western Germany are very different and must contribute to the difference in prices as well as to the competitive marketing element.

Lord Vaizey

My Lords, I accept that might be true in the short term but not in the long run, because it is necessarily the case that if you can make a bigger profit because the Dm has depreciated and you can sell your product there at a higher price, then you necessarily would sell your product in such a way. But we have very substantial areas of non-competition within the Community. There was an article in the Sunday Times recently which showed that if you went to Belgium to buy your Volkswagen and brought it back to use in the United Kingdom you could save yourself something between £700 and £1,000. So even in something like motor manufacture, in which the Community is concerned with preserving competition, there is not at the moment a uniform price level.

I share the view of the noble Baroness on the Front Bench opposite that this kind of practice is widespread and I myself see nothing necessarily wrong in it. Furthermore, I see no great evidence to suggest that the industry is conspiring against the public interest by making monopoly profits. I certainly agree with the noble Baroness on the Front Bench opposite that the differential behaviour of national health authorities in different countries has profoundly affected the price level. The National Health Service in this country has managed to maintain a very reasonable price for drugs, but under the much laxer system which prevails in the Federal Republic of Germany and in the Netherlands prices to the patient are substantially higher. I think that in this industry, which has a first-class record and where we lead the world in safety and research, it must be a matter of very great care before the United Kingdom Government assents to this, in my view, rather foolish directive.

Baroness Faithfull

My Lords, before the noble Lord sits down, may I ask him whether he would clarify one point for me? Is he putting together the entrepreneur and the parallel importers with the pharmaceutical industry?

Lord Vaizey

My Lords, the word "entrepreneur" was used in our committee as a rather dirty word—something like "pimp". I, perhaps rather naively, assumed that, particularly on this side of the House, the word "entrepreneur" was surely looked on as rather a good word. A man who is in business for a profit would be assumed, as a matter of axiomatic belief in the Tory Party I should have thought, to be doing a good thing; and I see no great damage being done to the Dutch consumer if a British businessman buys goods cheap here, makes a hit of a profit and sells them cheaper in Holland than the Dutch consumer can buy them from a Dutch firm. I see nothing wrong with that and therefore I would not subscribe to the rather nasty way in which the businessman is referred to in some of the evidence which was presented by the pharmaceutical industry to the committee.

9.11 p.m.

Lord Cullen of Ashbourne

My Lords, I am sure that all your Lordships are grateful to my noble friend Lady Faithfull for introducing this subject today and for giving the House the opportunity to debate this report, which concerns the important matter of parallel importation of proprietary medicinal products. My noble friend and the other noble Lords who produced the report are to be congratulated for submitting such a clear account of the position, together with their views.

I had got a lot to say in order to explain exactly what parallel importing is, but it has been very well described by my noble friends Lady Faithfull and Lord Vaizey. In short, parallel trade is the purchase by an entrepreneur of a branded prescription medicine in a low-price country and its sale in a high-price country. I agree with my noble friend Lord Vaizey that there is nothing very serious about being called an entrepreneur.

A marketing authorisation in that other—high price—country will be held by the manufacturer or his authorised agent. The problem for the would-be parallel importer is to satisfy the member state into which the product is to be imported that his product is identical to, or at any rate virtually the same as, a product which is already licensed in the importing country. The parallel importer, however, does not possess and does not have access to the information—much of it of a commercially confidential character— which would enable him to satisfy the member state as to the nature of the product he wishes to import. The manufacturer, for his part, is unlikely to accommodate the parallel importer by providing him with this information or, as the case may be, by agreeing to a change in the original marketing authorisation so as to extend the marketing authorisation to cover a product manufactured in a location different from that specified in the authorisation. And I think your Lordships would agree that this is a perfectly understandable attitude for the manufacturer to adopt towards what is, after all, a prospective and undercutting competitor in the market.

In 1976, in what is known as the Centrafarm case, the Court of Justice of the European Communities considered that it should be possible for a parallel importer to play a role in stimulating competition. The court ruled, first, that national rules or practices which result in imports being channelled in such a way that only certain traders can effect these imports amounted to a quantitative restriction on free movement within Article 30 of the Treaty of Rome. The court also ruled that in such a situation, which enables a manufacturer, simply by refusing to supply necessary information, to enjoy a monopoly, this could not he justified in terms of Article 36 of the treaty—that is to say, on grounds of protection of health and life of human beings—unless it could clearly be proved that any other rules or practices would obviously be beyond the means which can reasonably be expected of an administration operating in the normal way.

The court added that an exception on the basis that almost identical products were, in fact, different medicinal preparations would be acceptable only if it could be shown that there was therapeutic justification for the variants between the products as marketed in one member state compared with another. The European Community Commission is of the opinion that the principles enunciated in that judgment should operate consistently in all member states. It has become apparent, however, during the five years which have elapsed since the judgment, that member states diverge on the interpretation of the judgment. The European Community Commission has, therefore, proposed a Council directive in order to ensure consistent application of the judgment throughout the Community,

The proposed directive would establish a common system of registration for parallel importers of proprietary medicinal products, and would enable those registered to obtain information necessary for them to trade between member states. There would also be controls to prevent manufacturers from circumventing these proposals by changing the name or composition of the product. The Commission considers that the proposed directive would assist the free movement of proprietary medicinal products within the Community.

But there are a number of objections to the proposals in the draft directive, which, incidentally, appears to be a source of disquiet in virtually all member states. Parallel imports will not improve the range or quality of the medicinal products available, because the products would already be available in the country into which they are imported. Consequently, the proposed directive will contribute nothing to protecting the health of the Community. The proposal will not assist in maintaining a thriving pharmaceutical industry. I so agree with my noble friend Lord Vaizey about the wonderful job which the pharmaceutical companies have done in this country. Were they to be starved of the profit from which they get their research, it would be extremely damaging.

A company bears the immense expense of the research, the application, the licensing and the marketing and promotion of the product; a parallel importer would have none of these expenses yet he would be able to cream off the price differential. He would also be able to offer the product to the retailer at a lower price, although it is by no means to be assumed that the product would become available to the consumer at a significantly lower price than the product which is already in the country concerned. The consumer may, therefore, benefit little or not at all through lower prices.

The proposal in the directive, that information which is confidential to the holder of the original marketing authorisation should be made available to the parallel importer, is unacceptable, and we would wish to see any proposed registration scheme based on the proposition that only regulatory authorities of the member states involved would be entitled to exchange the control information required to assess and monitor the products which enter a member state by way of parallel importation.

The proposed directive would appear to require all applicants for marketing authorisations to submit details of all authorisations and variations in other member states, and require all further changes to be notified, too. It seems quite unreasonable to require that such information should be exchanged for all products between all member states against a possibility that a question of parallel importation could conceivably arise. Such a requirement would place an unreasonable burden on regulatory authorities, possibly to the extent that they were unable to discharge efficiently their more important functions.

The proposed directive would also appear to impose unreasonable requirements upon the original holder of the marketing authorisation, such as the imposition of controls to prevent manufacturers from circumventing the proposals by changing the composition or name of the product. As far as differences in composition are concerned, the proposed directive would not allow variations from the composition authorised in another member state, without therapeutic justification. However, there are often valid commercial reasons for variations in what is basically the same medicinal product. It might be, for example, that a particular flavour or colour could be commercially more successful in one member state and less successful in another because of, for instance, differences in patient preference.

So far as differences in trade names are concerned, a trader would not be granted a licence to market a product where he could not provide a legitimate reason for the use of different names for this purpose in different member states. Problems would arise when licences came up for renewal and traders were faced with having to abandon established names whose goodwill had been built up at not inconsiderable expense. This would be further exacerbated where, as is often the case, such names are registered as trade marks, since a legal bar on their use is, under present trade mark law, a ground for invalidation of registration.

The idea of requiring justification for the use of different trade marks for the sale of the same goods in different member states finds expression in a more general form in the Commission's recently proposed directive for the approximation of national trade mark laws. The sanction here, however, is direct invalidation of the registration although, unlike the proprietary medicinal products directive, continued use in an unregistered capacity would attract no sanctions. There is, nevertheless, clearly a similarity of ideas between the two directives, and in fact proprietary medicinal products will be affected by both. In the absence of any demonstrated reason to the contrary, we are unable to accept that it would be at all desirable to consider the trade mark aspects of medicinal products in isolation from any other products and accordingly we would endorse the Select Committee's recommendation that this is a matter which is best considered within the framework of discussions on the trade mark directive.

A directive would not prejudice the introduction of new products by curtailing research and development or otherwise damaging the pharmaceutical industry. One of the main costs incurred by the major pharmaceutical companies is the cost of research. Research and development of new medicines and the cost of licensing are financed out of current sales of existing medicines. Parallel trade in existing products of a research-based group results in a reduction of the overall revenue available to that group. If it caused a significant reduction, the extent to which research could be financed would be reduced and the ability to produce new medicines would equally be reduced. The United Kingdom industry is particularly strong in research-based companies and has in recent years produced new medicines which are significant export earners. In 1980 the United Kingdom had a favourable balance of trade in prescription medicines in excess of £500 million. That is why there is concern about the possible effects of parallel trading.

The proposed directive seeks to remove a possible barrier to trade in the form of licensing regulations. Although the United Kingdom is unlikely to be the target for parallel importing on any scale, it is the Government's view, as it was the view of the Committee, that to replace what may be an inequity with regulations which much more inequitably place burdens on the companies who are the losers in parallel trading is unacceptable. If there were truly a common market in medicines, the problem would not exist or would be far less difficult. As it stands, the draft directive is in part faulty and in part unnecessary and it does not deal at all with the underlying matter of pricing differences or the reasons for them. Since the Commission itself is engaged in commissioning research to study differences in the prices of medicines in the member states, the Government agree with the conclusion of the committee that any further action should await the result of the Commission's investigation on price structures.

At this point I should like to give grateful recognition to the close collaboration with representatives of the principal bodies representing the pharmaceutical industry: the Association of the British Pharmaceutical Industry and the Proprietary Association of Great Britain, which the Government have enjoyed in considering these proposals, as indeed we do in all matters affecting the control of medicinal products in this country. It will not have escaped your Lordships' notice that representatives of the ABPI were examined at length by your Lordships' Select Committee. The industry and the Government are at one in their objections to the directive as drafted, but I think it is fair to say that, while the industry would prefer no directive at all, believing that the judgments of the European Court provide ample guidance to enable member states to adapt their national legislation, the Government's view, notwithstanding all the objections to the present draft, is to concede the substance of the European Commission's argument that a directive of some kind is necessary in order to secure the consistent interpretation and implementation of the court's judgment by all member states.

The proposed directive appears to have been drafted solely from the point of view of facilitating the free movement of goods, as the noble Baroness, Lady Jeger, pointed out. The court's judgment could not relate to the economic circumstances which obtain at the present time. It tended instead to look forward to the time when the objects of the Treaty of Rome will be achieved, that is, free movement within the Community.

While the Government fully endorse that objective, we also need to consider the problems of the present. Since the inception of the Medicines Act 1968, successive Governments in this country have been concerned to maintain standards of safety, quality and efficacy in medicinal products and to ensure the integrity of storage, handling, and documentation arrangements. We are committed to ensuring that these standards are maintained in the future. Any directive should not prejudice the controls already established for the protection of the public by permitting, for example, the importation of a product where the identity of the product had not been firmly established or where it was not possible to identify particular batches so that suspected quality defects could quickly be identified, quarantined and recalled, or to ensure compliance with the terms of the existing licence.

The Government's view therefore is that, although a directive is necessary, further consideration of it should be delayed until the Commission has dealt with both the initiatives on price structures and harmonisation of manufacturing standards. This view will be put forward in European Community discussions on the subject in the hope that it will find a measure of acceptance among other member states and the Commission. However, if the general Community view is to proceed with a directive, then we would not wish to withhold our co-operation. Our objectives—and here again we are entirely at one with the industry—would then be to see the proposed directive modified to provide that regulatory authorities rather than the parallel importer are entitled to obtain confidential information relating to medicinal products in order to operate a system of registration. We should seek to secure adequate control of the parallel importer and of the products he imports in much the same way as any other licensed manufacturer or wholesaler of medicinal products, without creating cumbersome and expensive administrative machinery and without imposing unreasonable requirements upon the original licence holder. Above all—and your Lordships may rest fully assured on this point—the Government will do their utmost to ensure that the standards of safety, quality and efficacy of medicinal products which this country presently enjoys are maintained.

Baroness Faithfull

My Lords, as there is a most important Unstarred Question following this debate, I will certainly not detain your Lordships' House. I should like to thank the noble Lord, Lord Vaizey, and the noble Baroness, Lady Jeger, for taking part in this debate and also to thank the noble Lord, Lord Cullen of Ashbourne, for the very satisfactory reply he has given. I should like to make various comments on it, but in view of the lateness of the hour and the other business which is to come before the House I will not make any further comments other than to thank the noble Lord for all that he has told us this evening.

On Question, Motion agreed to.