HL Deb 08 December 1983 vol 445 cc1201-8

4.12 p.m.

The Parliamentary Under-Secretary of State, Department of Health and Social Security (Lord Glenarthur)

My Lords, with the leave of the House, I shall repeat a Statement being made in another place by my honourable friend the Minister for Health. The Statement is as follows:

"With permission, Mr. Speaker, I should like to make a Statement on the discussion that I and the Secretary of State have been having on behalf of all the United Kingdom Health Ministers with representatives of the pharmaceutical industry on the scope for savings in the NHS drugs bill and other matters of mutual concern.

"Prescription medicines cost the NHS in England about £1,250 million in 1982–83. Drugs account for about 40 per cent. of the total cost of the family practitioner service and about 10 per cent. of the cost of the NHS as a whole. The pharmaceutical industry's profits from NHS sales are governed by the non-statutory pharmaceutical price regulation scheme which was introduced in its present form in 1978. In the words of the published scheme, it is a key objective that safe and effective medicines should be available on reasonable terms to the NHS, but also that a strong, efficient and profitable pharmaceutical industry should exist in the United Kingdom. The industry's present target profit level was set by the Labour Government in 1978. Like our predecessors, we recognise that there is a major and successful industry providing 67,000 jobs and with a net balance of exports over imports of around £600 million a year.

"However, the present scheme has run unaltered for over five years. A review of the PPRS and its role in relation to the industry and the NHS was announced earlier this year. After extensive discussion with the industry's representatives and having taken account of the tenth report of the Public Accounts Committee published in April, we have decided both to reduce the level of profit from NHS business and the level of sales promotion allowed as an expense under the scheme.

"First, under the scheme, each pharmaceutical company participating in it is assigned a target rate of profit taking account of the circumstances of the individual company, the contribution which it makes or is likely to make to the economy, including foreign earnings, investment, employment or research. We have decided that these targets should be reduced by an average of four percentage points which will represent a saving to the NHS in the United Kingdom of about £40 million a year. We have also decided that the discretion which our department allows in certain cirucmstances when companies exceed their target profit rates should be tightened and related more closely to a company's particular circumstances. Companies will be told what their new targets are very shortly.

"Secondly, the industry will spend about £180 million this year on sales promotion. Some, but not all, of this amount is an allowable expense under the PPRS. Such promotion is funded largely from NHS sales, and we have concluded that the allowable level should be reduced. We propose, first, that companies should be asked to repay to the department a sum equivalent to any sales promotion expenditure which exceeds the level allowed under the scheme; and, second, that the industry limit should be reduced from the present level of 10 per cent. of turnover to 9 per cent. in 1985–86. We estimate that, when fully implemented, these measures should reduce actual expenditure on sales promotion by 25 per cent. but we will review this area again to see if further reduction can be made.

"All measures I have announced will take effect from 1st April next year. In a full year, they will produce savings on the NHS drug bill rising on present estimates from £65 million in 1984–85 to well over £100 million in later years. This compares with the industry's total profit from sales in the United Kingdom in 1983 of an estimated £200 million. The changes will mean that the price freeze on drugs, introduced in August as part of the £25 million savings agreed then, will continue, with few exceptions, through 1984–85 and beyond. Further-more. the price freeze will be at the level established by the 2½ per cent. cut of August.

"We have also discussed with the industry the problem of parallel importing of drugs. This occurs when an importer takes advantage of exchange rates and low regulated prices of particular drugs in other countries to import or rampart those drugs into this country in competition with the identical or near identical products already marketed here. At present, an exemption order under the Medicines Act is being used by parallel importers, in a way not envisaged when the order was made, to bring into Britain substantial quantities of medicines without a licence.

"Clearly, there are potential health hazards if a drug has not been properly manufactured or stored, or if labels are in a foreign language, or if there is difficulty in tracing a batch of drugs found to be faulty. We are not aware of any actual injury to patients but we propose to guard against that possibility. We are statutorily required to consult on these matters, and we will therefore shortly issue a consultative document on proposals which will ensure that medicines parallel imported for general dispensing must be licensed under the Medicines Act, either in the ordinary way, or. in the case of medicines, also licensed in the European Community, through a modified licence to cover such safety matters as storage, labelling and tracing.

"There remains the question of generic substitution which we have also been considering in the context of the PPRS review, as announced earlier this year. The Greenfield Committee proposed that a pharmacist should substitute an equivalent generic preparation for proprietary medicine unless the prescribing doctor had specifically indicated that this should not be done. The Committee acknowledged that they had not taken account of the wider implications, for example, on the pharmaceutical industry, of their recommendation.

"Consultation on the Greenfield report earlier this year showed professional opinion to be divided on this recommendation, which was only one of 14.It became clear that many general practitioners were concerned that their patients would be supplied with formulations of drugs that their doctors had not prescribed. General practitioners and pharmacists foresaw problems of divided responsibilities for the treatment of patients. The various procedures considered all raised serious practical problems.

"We have therefore decided not to proceed with generic substitution. We do, however, intend to start a new campaign to encourage generic prescribing by doctors. As to the other recommendations of the Greenfield Committee, we have already announced our acceptance of these or referred them to the appropriate educational bodies.

"Finally, there are a number of other matters arising from the review of the PPRS which have still to be resolved in discussion with the industry. In particular, a study of transfer prices, which are the prices charged by a foreign-based company to its United Kingdom subsidiary, is being conducted by independent consultants, and our Department is undertaking a study of pharmaceutical wholesalers' profit margins.

"In framing these proposals, the Government have sought to achieve a balance between the interests of the NHS as customer and the interests of the industry. We recognise the research achievements of the industry and the contribution it makes to the United Kingdom economy and we want to see it continue to flourish. However, there is an urgent need to contain the drugs bill for the health service, and this we are also determined to achieve. I very much hope that the industry will accept this position as we wish to continue with the price regulation scheme on a non-statutory basis".

My Lords, that concludes the Statement.

Lord Wallace of Coslany

My Lords, first. I should like to thank the noble Lord, Lord Glenarthur, for repeating this Statement, which is long and complicated. I must congratulate the noble Lord on the way in which he has managed to cope with it, because no Member of this House could say that he could not understand what the noble Lord was saying—or, at least, the words that he was using. But the content, of course, is a different matter. Incidentally, I would point out that, through some technical hitch. I did not get the last section of the Statement. But, never mind; we can deal with that later.

The Statement is in many respects welcome, but I must say that it is a somewhat meagre response to excessive profit-taking by the industry in the past. There is in fact to be no refund of past excessive profits. I welcome the decision to cut sales promotion expenses. I think the Government will appreciate that in the future this will have to be very closely watched all the time.

The decision on generic drug substitution is welcome inasmuch as pharmacists will not face substitution on a doctor's prescription, which could have created serious problems and possible harm to patients. That situation was never "on". Generic prescribing by doctors instead of prescribing brand drugs could effect considerable savings. It is appreciated that one cannot legislate on this. The decision must rest with each doctor, who must have complete responsibility. Can we be assured that the Government's new campaign to encourage doctors will be pressed with the greatest vigour and determination?

Finally, in view of the estimated savings of £65 million in 1984–85 and well over £100 million in later years, will the Government consider the reduction of prescription charges—which have risen excessively under Conservative Administrations in spite of election promises—or, indeed, the avoidance of further cuts in the National Health Service?

Lord Winstanley

My Lords, on behalf of my noble friends on these Benches I should like to join with the noble Lord, Lord Wallace of Coslany, in thanking the noble Lord, Lord Glenarthur, for repeating this important Statement. The noble Lord may care to note that our initial response on these Benches would be a cautious welcome to what seems to us, at first hearing at least, to be a very cautious Statement. We take the view that the drug bill is too big and that it should be reduced substantially and speedily. We entirely agree with the noble Lord, Lord Wallace, that the Government are right in doing what they can to discourage excessive expenditure on sales promotion. The noble Lord may care to note that the Government have our entire support on that matter.

Further, as regards generic prescribing we think that perhaps at this stage the Government may be right to proceed by way of persuasion. But we take the view that time alone will show whether the Government's persuasion has been sufficiently persuasive. In the meantime, would the noble Lord agree that it cannot be right that a retail chemist should have to continue to keep in stock some 120 entirely differently named iron preparations, or perhaps getting on for 100 very similar but differently named anti-histamine preparations, merely in order to satisfy the conservative idiosyncrasies of elderly doctors who are resistant to change? Therefore, we would urge the Government to persuade as speedily and as forcefully as they can.

I should like to ask the noble Lord about one other matter. In their anxiety to save money on the drugs bill, will the Government note that there is a waste as regards drugs in other ways? For example, the prescription charges, as at present levied, tend to encourage poly-pharmacy—that is, the mixing up of different ingredients in one tablet or one bottle—which is expensive and wasteful? Secondly, the prescription charges tend to encourage mass prescribing or bulk prescribing by doctors, which can also be very wasteful. On these Benches we shall watch very carefully to see the results of the Government's attempts at persuasion.

Lord Glenarthur

My Lords, I am grateful for the general welcome which both noble Lords have given to the Statement. The noble Lord, Lord Wallace, asked about the refund of past excessive profits. The PPRS provides for excess profits to be recovered either by rebate or by price reductions. There have been refunds or excessive profits in the past, and, in fact, a cheque for over £1 million was received from one company only yesterday. So I hope that the noble Lord is satisfied on that account.

Both the noble Lord, Lord Winstanley, and the noble Lord, Lord Wallace, asked about generic prescribing and the need to educate rather than to coerce. I entirely agree with what they say. It is, in fact. largely a matter of re-education for newly-qualified doctors, because newly-qualified doctors leave their medical schools trained to prescribe drugs by their generic names. When they enter general practice, where prescribing by brand names is the more common practice, there is the invevitable tendency to adopt the habit of using the short and easily remembered brand names. We rightly have to convince general practitioners that generic prescribing is effective prescribing, and we must make it as easy as possible for them to do so.

The noble Lord, Lord Wallace, asked about reductions in prescription charges. The noble Lord will know that I am not going to he drawn along that particular track tonight. I am sure that if he has any particular points in mind, he will bring them to my attention and I will happily write to him about them.

The noble Lord, Lord Winstanley, raised a point about other waste within the retail chemist trade or in the pharmaceutical trade, and waste generally. These are matters that are being considered. What the noble Lord said is very valid indeed, and it is something which the Government will keep under review. The Government will note the comments that the noble Lord has made.

Lord Regatta

My Lords, can my noble friend assure us that as a result of these changes there is no likelihood of any diminution in the very important research which is at present being carried out by many of the pharmaceutical companies?

Lord Glenarthur

Yes, my Lords, I can tell my noble friend that of course the research aspect of the pharmaceutical industry is an important one, and that it will not be affected in the way in which my noble friend fears.

Lord Molloy

My Lords, the Statement which the noble Minister has made this afternoon must be welcome because it enables us now to examine in some detail some of the matters which were rumoured, and to test which are fiction and which are fact. For example, sometimes there have been grotesque figures and sometimes there have been realistic figures of the enormous profits being made in the pharmaceutical industry. The noble Lord has to bear in mind the recommendations that were made by the highest authority of which we can conceive in this democracy—a Royal Commission—and all the facts that they took on hoard just four years ago, when they made their report. That, too, should be examined.

Will the noble Lord please also bear in mind the situaton as regards ordinary people, and not merely the economics of the pharmaceutical industry? In just over four years the public have had to pay prescription charges increased from 20pto £1.40. Also, they are beginning to understand from the doctors themselves that very often—and this is an important point—doctors get samples of drugs which they are told they can administer, but often they do not have a clue what is in them. Therefore, we have seen an increase in what has been described as "the side effects" of drugs, and when the doctor is told of this he says, "Forget it: do not take any more". That was not much comfort in the thalidomide tragedy. That must never be forgotten in the interests both of the ordinary people and of those who are doing an excellent job in the drug and pharmaceutical industry. They make a massive contribution to good health and the maintenance of good health—

Noble Lords


Lord Molloy

But the noble Lord should be aware that we must take these matters into consideration as well as the economics of the situation—

The Earl of Swinton

My Lords. I must point out to the noble Lord that it is quite in order to ask questions of a Minister after he has made a Statement, but it is not in order to turn the matter into a general debate.

Lord Glenarthur

My Lords. I am bound to say that I am not quite clear where the questions lay in what the noble Lord has just said. However, he attempted to draw me on the question of prescription charges. I think he ought to bear in mind—and I am sure that other noble Lords will as well—that 75 per cent. of all prescriptions are, in fact, exempted from charges anyway, whatever might have happened to the rise in prescription charges over the years.

The noble Lord must bear in mind that there is a balance to be struck here, which I think was brought out in the Statement: that we have to retain and develop a very soundly-based pharmaceutical industry as well as trying to contain the level of charges to the NHS. I am sure that when the noble Lord, Lord Molloy, reads the Statement again, he will understand the points more fully.

Lord Kilmarnock

My Lords, I should like to ask the noble Lord two specific questions. First, on the proposal that, companies should be asked to repay to the department a sum equivalent to any sales promotion expenditure which exceeds the level allowed under the scheme", can the noble Lord give us an assurance that this money will, in fact, go back into the National Health Service budget?—because, as he well knows, his department also has a great number of other responsibilities into which, on the face of it. it might be siphoned off.

Secondly, I agree with the noble Lord, Lord Wallace, that we cannot legislate on generic prescribing, and I also agree with my noble ally, Lord Winstanley, that it is better to do this by persuasion. However, although generic prescribing was only one of 14 recommendations in the Greenfield Report, it was, in fact, the most important one, and a very simple scheme was advanced in Section 24. I simply want to ask the noble Lord whether he would consider encouraging the introduction of that as a pilot scheme in the area of one or perhaps more family practitioner committees which were prepared to try it out.

Lord Glenarthur

My Lords, on the second point which the noble Lord, Lord Kilmarnock, has raised, that is something that I should like to look at rather than respond to immediately. On his first question about repayments for sales promotions, yes, the new proposal is that expenditure over limit would be repaid to the department instead of merely being treated as notional profit for assessing price increases and rebates for excessive profits.

Lord Lloyd of Kilgerran

My Lords, I should like to make two short observations. First, to echo the words of my noble friend Lord Winstanley, the implementation of many of the matters referred to in the Statement will require a cautious approach. My second observation is to declare an interest, in that I had the privilege of being a member of the inquiry into the pharmaceutical industry. chaired so ably by my noble friend Lord Sainsbury, whom I see in his place at the end of this Bench. Therefore, having listened to the noble Lord, Lord Wallace of Coslany, on behalf of the Labour Party. may I presume to say that if his party, when it was in Government, had taken more notice—

The Earl of Swinton

My Lords, we are running into great trouble here, As I said earlier to the noble Lord. Lord Molloy, it is quite in order to ask the Minister questions on the Statement that he has made. It is not in order to go into a great debate and start criticising what other noble Lords have said.

Lord Glenarthur

My Lords, in that case, I do not think that I ought to be drawn on what the noble Lord has said.

Lord Auckland

My Lords, in giving a general and very warm welcome to this Statement, I should like to put two brief questions to my noble friend. First, can my noble friend the Minister say what consultations there have been, or will be, with the ABPI and the other pharmaceutical bodies on the implications of this scheme? Secondly, can he give any estimate as to how many pharmaceutical products are currently imported into this country as opposed to our own home-produced products? Is he aware that, if we can use more home-produced and home-tested products, this Statement would be additionally valuable?

Lord Glenarthur

My Lords. I must start by saying that I do not have in front of me the figures in relation to the second part of my noble friend's question, but I shall certainly find out and write to him. As regards consultations with the ABPI, these will continue.