Drug Costs

HL Deb 10 April 1984 vol 450 cc1122-41

8.43 p.m.

Lord Molloy rose to ask Her Majesty's Government whether steps will be taken to improve the relationship between the Department of Health and Social Security and the drug companies in relation to drug costs.

The noble Lord said: My Lords, I should first like to pay tribute—with which I am sure the entire House will agree—to all the scientists and researchers who have done so much for humanity, particularly since the last war, and starting possibly with penicillin. We all recognise what a wonderful thing that was. This trend has continued ever since to make its massive contribution to the easing of pain and, in some instances, to banishing disease from all mankind. But, regrettably, when the ogre of greed and cheating enters any form of profession, it leaves an odious mark on that particular element. All I want to do this evening is to outline that which I believe has to be eliminated in respect of the relationship between drug companies and Great Britain's National Health Service.

I will deal mainly with costs, advertising and, to some extent, the closed negotiations which go on between people representing the drug companies and the DHSS in a spirit which is totally alien to the whole concept of what I would call the British way and purpose. In 1982 the Public Accounts Committee published a report which was concerned primarily with the dispensing of drugs in the National Health Service. It was perfectly obvious then, and it still is perfectly obvious to anyone who has read that report, that all was not well in this sector of the National Health Service and in its relationship with the pharmaceutical societies. It was true when the committee submitted its report, and it is still true today, that the cost of drugs is linked to advertising, and this is linked to excess profits; and careless advertising is linked to real dangers to health and unnecessary deaths. This is a serious situation. We in this House cannot adopt the appalling attitude that we may only arrive at the frontiers of understanding when our own soul is stricken with grief; when someone close to us has died because an advertisement was not clearly read by a general practitioner, or by anyone else for that matter. No matter who is to blame, the result is that we have erred and someone has died.

I should like to take this opportunity to exonerate general practioners from many of the criticisms which have been levelled against them. It seems to me that, whatever goes wrong with the NHS, someone will find a way of putting the blame straight onto the ordinary GP. If anyone within the DHSS is totally innocent of the whole set-up in this particular respect, it is the general practitioner.

In November of last year the Secretary of State reported that he had reached agreement with the Association of British Pharmaceutical Industries that National Health Service medicines be reduced by 2.5 per cent. and prices frozen until 1st April 1984—just a fortnight ago. That was to save £25 million. I should like the Minister to tell the House tonight whether or not that saving has been achieved.

Drugs sales promotion alone costs no less than £150 million. It was officially regarded to stand at £130 million in 1981. Who are these pharmaceutical and drug companies tempting with their advertisements? Who can it be? This question has to be answered. We require an answer from the Minister—if not tonight, then at some later stage, when an opportunity is provided.

Another obnoxious practice, which was extant then and which is extant today, is a sweet little racket known as the export of drugs to Europe and their subsequent re-importation into the United Kingdom. None of the excuses which have been submitted holds any water whatsoever. It is because certain people are on the make; and when someone is desperately ill with a cancer or a cataract they think to themselves, "If we could only get another couple of hundred thousand people suffering from cancer, look at the pile of money we could make". That is the principle behind this appalling attitude.

Overcharging is causing great concern to many people in our country. The number of newspaper reports and specialist reports I have read—as well as reports in the newspapers of France, Germany and Italy—are indicative of the fact that overcharging exists on a very large scale, and we therefore have to take some cognisance of it.

In addition to the sending of British drugs to Europe and buying them back at a higher price, there is also the incredible variation in price for the same drug. What has come to be known in the trade as the "curious drug route", which I have just explained, costs the NHS roughly £50 million a year—and I believe that is a lot of money—simply for running British drugs around Europe and bringing them back at a higher cost. Certainly the DHSS has made efforts to curtail this evil practice. But—and I beg the House to listen to this—the DHSS has tried and has been told that the effort to end this distasteful practice breaks EC law. I am left with the conclusion that the current EC law is an ally of this form of racketeering. We must, therefore, take up this matter at a very high level because all this shows that there is much sense for what has been advocated on this side of the House by many Members on many occasions; that dropping the expensive drugs with brand names in favour of the cheaper but just as good generic medicines is a sane and sensible course.

As I have said, it is brutally unfair to tell GPs to keep their prescribing down. That is a hideous attitude to adopt in order to reduce prices. Long before any diktat is issued to the general practitioners in the NHS there is much more that can be done to reduce the massive cost of drugs to the DHSS. I believe that the DHSS and Parliament should apply pressure by forcing drug companies to reduce their promotion and distribution costs.

There is another element on which I want briefly to touch—the side effects of drugs. In some instances in doctors' journals the print has been so small that it can scarcely be read. Yet the law in this relation says that the print for these advertisements must be clear and legible. No one can argue with that. The argument comes over what I am about to say. I shall give one example, and there are many more. In one case the fine print warned that the drug in question could impair ability to drive or operate machinery; that it could cause aggressive outbursts and visual disturbance, and one or two other distressing side effects. However, when shown to two GPs and a radiologist they found it impossible to read that warning. They had to use magnifying glasses. A further test was made in the same hospital. Three young doctors and two consultants were also unable to read a single word without using magnifying glasses. I submit that this is a matter on which we should all be gravely concerned. The side effects are giving serious concern to people at the DHSS and to people within the NHS—the great professions; the doctors, nurses and consultants.

I believe that in so far as this sort of advertisement is already breaking the law there is no need to outlaw the practice but simply to implement the law. Any risk to life must aim to be minimal by the medical profession, and is aimed to be minimal, but the drug companies must have the same high standards. Therefore, that type of advert surely must be a candidate for law enforcement.

The Public Accounts Committee was highly critical of the prices charged. The DHSS has been taken for an expensive ride and ordinary people are paying the bill. The question is: how can this have gone on for so long—for almost two and a half years? Has the parliamentary watchdog been drugged as well? There is also the monopoly danger which needs investigating. The price negotiating system within the DHSS is in need of scrutiny. Parliament must assist Ministers, on behalf of the people, to rectify these wrongs.

In conclusion, I believe that from this brief adumbration I have given, if action is taken millions of pounds will be saved. The NHS needs an injection of honesty regarding all aspects of drugs. Let the DHSS go to work to protect this great service—the NHS—the people, the professions and the patients. I hope that the DHSS will take action. It has nothing to lose but its good name.

8.55 p.m.

Lord Winstanley

My Lords, there seems to be a melancholy law in your Lordships' House that the business set down on the Order Paper for your Lordships' consideration, whatever it may happen to be, inevitably expands to fill whatever time is available. Bearing in mind some of the business which your Lordships transacted a little earlier, and which took a great deal of the time available, I would merely say that my enthusiasm for a Scottish Parliament has redoubled. Nevertheless, I am very glad that sufficient time has remained for us to give proper consideration to this very important Question tabled by the noble Lord, Lord Molloy. It is a matter about which we should all be concerned. It is also, of course, a matter in which we are all concerned. The cost of drugs is a cost that is borne by us all as citizens and, as citizens, from time to time we all require drugs. Therefore, anything to do with their safety and cost is a matter which ought to be of concern to us.

The noble Lord, Lord Molloy, quite properly dealt at some length with matters relating to the safety of drugs whereas his Unstarred Question relates much more specifically to costs. I would rather concentrate my remarks on the costs rather than safety. With regard to safety I would merely say that if a therapeutic substance has potent therapeutic effects there is not the slightest doubt that it will also carry with it certain risks and dangers. The remedies of the old days never did anyone any harm, but nor did they do much good because many of those old remedies were, frankly, inert and had no effect.

We now have generations of very powerful therapeutic substances which have revolutionised medicine and changed the whole outlook on life for many citizens suffering from diseases, because these are very powerful drugs. It is right to emphasise, as did the noble Lord, Lord Molloy, that powerful drugs inevitably carry with them certain risks and certain side effects. We must never ignore those and never in any way cease vigilance in that respect.

As I said, I would rather concentrate my remarks a little more on the matter of costs. I should like to begin by saying that I believe it is high time we dispelled this widespread myth that in Britain we spend an enormous amount of money on drugs. We do not. Compared with other developed countries we spend little. I do not have the latest figures available, but no doubt the Minister will have the figures and at the end of this brief debate will be able to give them to us. The last figures I saw for Europe, prepared by the World Health Organisation, in a table giving the cost of drugs prescribed therapeutically per head of population, showed that Britain came about nineteenth in the league and not at the top as is so often thought. I think it is very wrong that so many people should constantly be tempted to use the nation's drug bill as the whipping boy for all the deficiencies which may occur from time to time in the NHS, and for its costs.

Having said that we do not spend a lot on drugs in relation to other nations, I should add that drugs are very costly and modern drugs are sometimes even more costly than the older drugs. But savings obviously should be made wherever possible. It is my belief that many savings could be made without detriment to the NHS or to the many patients who depend upon it.

Savings of that kind could be made by effective co-operation among the pharmaceutical industry, the Government, who are of course the main customer of the industry in this country, and the third party to this necessary co-operation, the medical profession. I underline the word "co-operation" because I believe that those savings can be effected only by co-operation. I do not believe that they can be effected by management by the Government, still less by the Government nationalising large sections of the industry. I do not want to go down that route too far save to remind your Lordships of this. In the Soviet Union they have a wholly state-owned pharmaceutical industry. That is a state which has made immense strides in general surgery, general medicine and many other branches of medicine. It has made great progress, and there have been many discoveries; yet throughout the whole of its existence the wholly state-owned pharmaceutical industry of the Soviet Union has not yet produced a single new therapeutic substance of any proven value.

I think it is right to say that the advances have come from the private enterprise industry. We have to accept that there may be certain dangers there that have to be looked at; but the competitive private enterprise industry has done great service to this nation and made progress which should be recognised. I say that savings can be made by co-operation, but if we assume that the structure of the industry remains as it now is, and we still have the same kind of relationship with the Government and the medical profession, let me perhaps give one or two examples of the areas in which I think savings could safely be made without detriment to the National Health Service or to the patients.

First, there is the matter which has been discussed at length in your Lordships' House at Question Time and on other occasions—generic prescribing; namely, the prescribing of drugs by the pharmaceutical name rather than by the brand name. That is something on which we really must make progress, but the best way to make progress is by co-operation and by education. I mean by that education of general practitioners and of doctors generally. It is not that they always want to prescribe named drugs. Often they do not know the names of the others or they have grown so used to the named drugs that I am afraid that they do not always co-operate to the extent that they should.

We must accept that in the present situation it cannot be economic for us to require pharmacists to stock on their shelves perhaps 60, 70 or 80 different brand named antihistamine drugs of one kind or another which are largely similar and perhaps 40, 50 or even more different iron preparations of one kind or another. It cannot be economic that the pharmacist should continue to have to stock that wide variety of preparations merely because perhaps somewhat conservative-minded general practitioners persist in prescribing the drug that they have always prescribed in the past and refuse to look at the new possibilities which could be obtained by prescribing in the pharmaceutical names.

The pharmaceutical industry can do much in that regard. I welcome the appearance of new drugs. Very often a new drug appears and is immediately of immense benefit to patients and to the public as a whole. But I should be a little more enthusiastic if the pharmaceutical industry was equally ready to phase out old drugs when their usefulness has disappeared. An old drug may once have been very useful. It may have been the best antihistamine or the best iron preparation of its day. When it has become superseded by something which is better, I am afraid that the company may not immediately stop manufacturing it but may continue to try to persuade people to prescribe it. The number in that particular group of drugs grows and grows constantly, with serious economic effects for the pharmacists, the Government who have to pay for the drugs, the patients and the rest of us who have to support the whole thing. That is an area in which I am quite sure that great savings could be made without detriment to anybody.

I shall now say a word about the immense cost of research and development in the industry. It is immense. A new antibiotic drug may have been discovered, properly tested, approved as safe and effective, finally marketed and prescribed by doctors. We should realise that when we have to pay for that new antibiotic we are also paying for many other antibiotic drugs which have never seen the light of day but which have been pioneered by a company and brought to a certain stage in order to see whether they will be effective. Many are never marketed for a moment. Some means has to be found to pay for those false starts, if I may call them that. At the moment the only way is for the company to put the cost of those onto the cost of the drug which they finally market. I wonder whether there is some way round that problem.

Many new drugs are discovered by accident in the course of laboratory investigations of one kind or another. A pharmaceutical company may discover one new drug, perhaps by accident. That company may not necessarily be the best company or the most ideally placed to manufacture or market that drug. Were there some means whereby that drug, when once proved of value, could be marketed and manufactured by the company best equipped to do so, savings could be made. But some means has to be found of paying the company which has pioneered it for its work and industry. I have seen many examples of this. It is difficult to pick out one company.

I remember a long time ago being in the laboratories of ICI's pharmaceutical division at Alderley Park near Manchester, where a whole division at one time of expert pharmacologists and pharmaceutical experts were busy working out new structural formulae of different sulfonamide products. They would work out the formula and merely pass it to another expert who would look at it and say, "Yes, that is interesting but I am afraid that it would cause cyanosis"—in other words, it would make the patient go blue. He would look at another formula, and say, "Yes, that is very good. That might be useful but it would make everybody sick". Suddenly he would say, "That might be all right. Yes, we will make that one".

The company might make that product and later might possibly try it. Sometimes by such means one company may stumble on a product which it might be very much better for another company ultimately to manufacture and market, because it concentrates in that area. I hope that some thought will be given to some means to pay for all these hidden costs in the pioneering and development of new drugs, without necessarily making each individual company have to recoup its research and development costs by marketing one drug when it is not marketing all the others.

I wanted to be brief and I shall now try to conclude. If we can do something in a co-operative way to educate people and companies, I am sure that we can make progress. We also have to do something to educate the public as a whole. The Health Education Council could perhaps do a little more in trying to reduce the national dependence on drugs as remedies. I am afraid there is a tendency for patients, whoever they may be—whether it is noble Lords sitting here—to feel that whatever the illness may happen to be that they must somehow or other go away from the doctor with a prescription. But many, many ailments for which patients very properly seek advice will get better with the expenditure of nothing more costly than time.

If only the general practitioner had time to explain to the patient, "Look this does not matter; it is not important. You do not need any special tests; you do not need any special treatment and if you go away it will be better within two or three days". If general practitioners did that, we would save a great deal of money. But it takes a lot of time. It takes hardly any time at all to say, "Yes, it is so-and-so", and to give the patient a prescription for some useless drug—and it may be a costly drug. It takes much longer to spend the time to persuade the patient that they do not need any treatment.

Here I come to something really important. I have in mind the noble Lord the Minister giving his attention to allowing general practitioners more time. I know the General Medical Services Committee is asking for doctors' lists to be reduced, perhaps to an average of 1,700 rather than 2,500 patients, if we could have more general practitioners. That would not necessarily cost more money because if more general practitioners had more time to spend with patients, persuading patients that they do not always need a powerful or expensive drug for every minor ailment, then I think the noble Lord would find that reducing the number of patients on doctors' lists and having more general practitioners would not be anything like as costly as perhaps the noble Lord's advisers might tell him.

I have said more than enough. I am most grateful to the noble Lord, Lord Molloy, for drawing attention to this important subject and, like other noble Lords, I look forward to hearing Lord Glenarthur's response.

Lord Chelwood

My Lords, I apologise—

9.10 p.m.

Lord Rea

My Lords, I am quite sure the noble Lord opposite could intervene now if he wishes to speak for just two minutes; but I have something to tell your Lordships which will take about eight minutes. I think the understanding between the pharmaceutical industry and the DHSS is a delicately balanced one. The National Health Service pays for 95 per cent. of the drugs prescribed in Britain. Surely we ought to be able to say, "He who pays the piper calls the tune"; but does he in fact?

I am going to cover three topics, briefly. First, the difference between the hospital sector, which gives rise to 20 per cent. of the drugs bill, and the community sector which provides 80 per cent. of the drugs bill. Secondly, the patent laws and their influence on the development policy of the pharmaceutical industry. Thirdly, ways of encouraging doctors to prescribe better and more economically—departing a little I think from the wording of my noble friend, Lord Molloy, but I hope to show that they are relevant.

The department sets limits on the average profits and at least for the hospital sector drives as hard a bargain as it can for the supplies of drugs, which are often obtained in bulk or on a contract basis. This is a contributory reason for a much smaller proportion of the national drug bill which has related to hospital prescribing. I should like to know how much more cheaply the hospital sector get its supplies of equivalent drugs than the community sector, but I do not want to press the Minister for an answer to that tonight because I have not warned him of this. National Health Service doctors working in hospitals can only prescribe drugs which have already been puchased by the NHS at economical prices, while in the community sector—that is the general practice sector—GPs can prescribe very nearly any drug. However, a few are restricted, and some have recently been withdrawn, some are drugs which many GPs have used safely for many years and it has left the GPs rather annoyed—I am talking about phenylbutazone. The GPs can even specify which company's product they want, regardless of the cost of that product.

The doctor does not pay the bill and nor does the patient: it is picked up by the taxpayer. I think this is rather a travesty of the market economy. There is no incentive for the doctor to prescribe economically. To save money in a cash limited budget, hospitals only supply out-patients with 14 days' supply of drugs—or less sometimes. If the treatment has to be continued after that, supplies have to be obtained from the GP in the community sector at a higher price because that budget is not cash limited. Surely this is an example of robbing Peter to pay Paul. The drug companies benefit, but we, the taxpayers, lose.

The patent laws allow a new product to be under licence for 20 years. In the pharmaceutical industry half of this time may be taken (as the noble Lord, Lord Winstanley, has pointed out) in developing the drug and testing it, leaving perhaps only 10 years of protected status once it is launched on the market. I think it is generally agreed that a product should cost more than its manufacturing cost during that time to cover the research and development costs, or to "reward" (if you like) the developer for his inventiveness and initiative. But in other areas of the economy at the end of that time ordinary market forces are normally allowed to operate. This happens in the hospital sector, in buying drugs in the National Health Service, but in the community sector the privileged status of the patented product is prolonged through the use of the well-known brand names, which the noble Lord has mentioned, such as Librium and Valium; and there are plenty of others that are familiar.

Another problem with the patent regulations is that drug firms may develop and patent new, slightly different forms of a drug just when an old patent is about to run out and promote the new product intensively, attempting to get doctors to prescribe the new variant; and we are all gullible—we want to believe that something new is better, rather than the same thing dressed up in new clothes.

How can doctors be encouraged to prescribe intelligently and economically? Much is already being done by the department with its three excellent publications evaluating and costing both new and old drugs. These are sent free of charge to all doctors. But this is not enough to outweigh the heavy barrage of promotional activity from the industry, now running at some £120 million a year, I gather. Further educational activities are needed to countermand this, and one with promise will be allowed by the computerisation of the Prescription Pricing Authority's data. All GPs will be given details of their prescribing costs and, as a recent study at St. Mary's Hospital has shown, this information can be used to alter GPs' prescribing habits. This is a significant change. The data on what doctors have been prescribing is fed back to them, and it is discussed afterwards. They often realise that they can alter their prescribing habits to the benefit of both their patients and the nation's drug bill.

This will be a major undertaking, and in any case it is not certain how sustained will be the effect. Generic substitution, which we have discussed in this House and in another place many times, is a practical and simple method of reducing costs. It is now practised in hospitals where the National Health Service buys directly. So far, despite the Greenfield Report's recommendations, there is no sign of the Government bringing into action the recommendation regarding generic substitution, although I think that the arguments against it are weak. We are told, "The doctors and pharmacists don't like it", apparently. The General Medical Services Committee of the BMA narrowly voted against it, although its chairman is strongly in favour of generic substitution; he was in fact one of the members of the Greenfield working party. In discussions with many other doctors I have not met one who would object greatly and certainly not one who would go on strike if this measure were brought in. If the Government want to economise, here is a ready, quick way to save between £50 million to £100 million. We do not know the exact figures; we have not been given them.

But doctors, or members of any other profession, can be offered carrots to carry out Government policy. Doctors receive a fee for carrying out vaccinations and notifying diseases, in the public interest. Surely it is in the public interest that they prescribe effectively and economically. I would suggest that the department approaches the BMA to start discussions on a system of rewards for economy. I should like to throw out one possible suggestion: for every £1,000 of saving below a set norm, the GP could be offered perhaps an incentive of £100. The area is fraught with difficulties, but I think it is a promising field. If the pharmaceutical industry's profits are trimmed a little, it will not have so much for advertising. What a relief that would be to all the general practitioners in this country!

9.20 p.m.

Lord Chelwood

My Lords, I apologise doubly to the House, first for getting up before I should have done and, secondly, for the fact that I did not put my name down to speak. I hope that I may for a very few minutes make a contribution. I agree that this is a subject that needs an airing, and I am glad that the noble Lord, Lord Molloy, put down this Unstarred Question, although I am sure that he will not mind me saying that I thought that his speech lacked balance in certain respects.

I have some knowledge of the industry because in the 1960s I was a director of a well-known pharmaceutical company in this country. The pharmaceutical industry has, quite rightly, come under heavy pressure from governments of all complexions ever since the end of the war, in order to ensure that the customer—the patient—received value for money and that profits were not excessive. That is an entirely right and proper situation, and I have no criticism of it at all. I have no intention of whitewashing the industry, which has made its share of mistakes, I am a critic still of the occasional case of brash and costly promotion methods. They are very much the exception and very much not the rule. The ABPI has a strict code of advertising conduct, and I am sure that the more strictly it can enforce it the better pleased we shall all be on all sides of the House.

There are a great many good points about the industry which are apt to be overlooked and taken for granted. If we are hunting for some way in which, as the Unstarred Question asks, we can improve relationships with the Department of Health and Social Security, let us take careful account of the good points as well as the bad ones. Mention has been made by all three noble Lords who have spoken so far of research and development. All I wish to add is that it is not always realised that any pharmaceutical company that is worth its salt will spend up to 10 per cent.—and even more than 10 per cent.—of its annual sales on research and development. This is, indeed, their lifeblood, and without it they would lose out.

Do we take sufficient account of, and do we ever try to assess, the enormous saving to the taxpayer from the use of life-saving drugs—indeed, not only life-saving drugs, but drugs which have brought crippling illnesses and diseases under control? The saving to the taxpayer must be enormous, and I have never heard of anyone who has made any real attempt to assess it. As the noble Lord, Lord Winstanley, has said, there has been a revolution in medicine to which the pharmaceutical industry has made a major contribution. Who knows where the next breakthrough will come, and what its value will be? Perhaps it will come in connection with one of the cancers, arthritis or something else. The value of a breakthrough in such fields will be absolutely enormous: it will be incalculable.

Another matter which is rarely mentioned is the contribution that is made to this country's balance of trade. The industry's export record is quite remarkable. One cannot export unless one is competitive. The industry is competitive and, as far as the balance of payments is concerned, the industry has made a very big contribution indeed to this country's prosperity. Going still further down the same route, let us consider the foreign capital that we have attracted from the United States, from Switzerland and from Germany, which are perhaps the other three leading countries in relation to the pharmaceutical industry. Hundreds of millions of pounds have been poured into this country because it is a suitable base from which to operate, to manufacture drugs, to carry out research, and to export those drugs. That, again, is a matter which is not often mentioned but which ought to be mentioned much more.

Let us consider employment. Let us look at the employment that has been brought to this country—good and well-paid employment—by the pharmaceutical industry as a result of the attraction of foreign capital and the skill of some of our own British drug companies. These are all points which need emphasising. In my view the pharmaceutical industry really is an example of private enterprise at its best. I am indeed glad—and I hope it really is the case—that the threat of nationalisation, which crops up, roughly speaking in every two Labour manifestos out of three, appears to have been dropped. We were reminded what state control means, in terms of never finding a new drug, by the noble Lord, Lord Winstanley.

The pharmaceutical industry has been a political football for too long, and it is just about time that we stopped kicking it around. By all means keep up the pressure on prices to ensure that profits are not excessive, but do not press too hard or we will run the risk of damaging a highly successful industry of great value to the nation.

9.25 p.m.

Lord Ennals

My Lords, I am sure that the House is most grateful to my noble friend Lord Molloy for raising this matter, and I think that each of the contributions in the debate has come from people with a very great knowledge. It has been an extremely valuable debate. Of course, I agree that the drug industry is open to criticism and in a moment or so I shall make my criticisms of the industry. However, I want to take up the point put forward by the noble Lord, Lord Chelwood, because I believe that the value of the contribution of British-made medicines to the balance of payments—which last year was over £1,000 million—is enormous. This is one of the most success-ful industries in this country.

Although Britain consumes only 3 per cent. of the world's medicines by value, over 6 per cent. of pharmaceutical production, and more than 10 per cent. of pharmaceutical research takes place in Britain. As the noble Lord, Lord Winstanley, said—and it has been repeated by the noble Lord, Lord Chelwood—the value of the research which is carried out by the British pharmaceutical industry is very high indeed. Of course, there are always vocal lobbies which call for the withdrawal of drugs whenever there is a side effect. We must recognise that no drug is totally safe. If we thought that there ever was, no drug would ever go on the market and we would not have the great achieve-ment that we have. No drug is risk-free.

The pharmaceutical industry makes a very great contribution to the National Health Service and there is no reason whatever why the industry should not continue to make a major and growing contribution to health in Britain and the world as well as, as a major export industry, strengthening our economy. When I was Secretary of State for Social Services I was greatly involved in seeking to encourage inward investment to ensure that we had a strong industry in this country, which was the basis not only for good research here but for exports abroad.

As has been said by my noble friend Lord Rea, the fact that the pharmaceutical industry in Britain is so dependent upon the National Health Service imposes upon it a very heavy and very special responsibility. Sometimes I think that the industry is its own worst enemy.

Having paid my tribute, let me say that it has its weaknesses and that it ought to put its own house in order. It often incurs public criticism, either by insensitive actions or because it delays the withdrawal of drugs from the market—a point that was made by the noble Lord, Lord Winstanley.

My noble friend Lord Rea referred to the painkillers which are largely based on butozone. I must declare an interest here as I have often had to take butozone. However, from the Committee on the Safety of Medicines we have had evidence that 1,500 deaths have probably been associated with this brand of products over a number of years. If I had been in the pharmaceutical industry, I should have taken that drug off the market rather than simply wait for the Minister to intervene, and inevitably, therefore, create among the public a good deal of criticism.

Sometimes, in terms of advertising, they have also failed to observe the agreement which was drawn up at the time when I was able to negotiate the pharmaceutical price regulation scheme. Recently it was reported in the press: Persantin is given to thousands of patients in danger of suffering strokes and heart attacks. Advertisements show post-mortem specimens from patients who have had heart attacks and strokes with the slogan: 'When thrombosis threatens … Persantin 100 Anti-Thrombotic offers a real opportunity for prevention' ". I have to declare another interest. I have had thrombosis and I constantly take medication for this condition. The article goes on: Under the Medicines Act, advertisements must adhere to the indications in the officially approved data sheet. The data sheet does not mention myocardial infarction, ischaemic heart disease, or strokes. The bulletin, sent to doctors under the auspices of the Department of Health, says: 'The association (between the pictures in the advertisement and the slogan) clearly suggests that the drug can prevent these conditions. 'After many years of investigation there is no evidence that the drug, given alone, can do so.' ". This is one clear example where the pharmaceutical industry ought to be putting its own house in order.

The committee, which was presided over by the noble Lord, Lord Sainsbury—and I had hoped that he might take part in this debate because he made a great contribution—published its report shortly before I became Secretary of State. We were looking then at the voluntary price regulation scheme which was designed to ensure that there was not excessive profit made by the pharmaceutical industry. The Sainsbury committee had concluded that the VPRS did not lead to effective price competition.

I wanted to have a much broader agreement with the Association of the British Pharmaceutical Industry which would cut back on the cost of promotional activities which could be included in the profit balance, which would reduce the profit margin and secure a self-regulating scheme to vet advertisements, and to ensure that all the necessary facts were included, including the contents of the formulations and any known counter-indications in ways that could be quite clearly read by doctors themselves.

We achieved such an agreement. We called it the PPRS—the Pharmaceutical Price Regulation Scheme—and it was not voluntary because I threatened legislation if a voluntary agreement was not reached, but we did have a major agreement which should have been the basis. I know that the PPRS is now being reviewed, and it is partly being reviewed because the bargain which was struck then has not been effectively sustained and adhered to, in some cases by the industry itself and in some cases by the Government. I mentioned some ways in which the industry itself has not done so.

Let me turn to the Government. May I give two examples of the way in which the Government have failed properly to implement the bargain. It was revealed by the Public Accounts Committee in their report in 1979–80—that was the first year after the change of Government in Britain—that the industry showed a profit of £252 million in relation to drugs that they supplied to the National Health Service. If one expressed that as a return on capital employed the returns of the larger companies averaged 22 per cent. in 1979, and 23.3 per cent. in 1980. Thus, in these two years alone the profits achieved by these large companies above their estimated targets totalled £33.2 million, of which the DHSS recovered only £1.7 million. This is very unsatisfactory indeed.

It was conceived that the task of the DHSS—and the facilities were made available—was to claw back excessive profits, and I fear that they gave way to the pressure of profit and deprived the NHS of much needed resources. In accordance with the Labour Government PPRS I think this clawback was an absurdly small clawback. Profit margins themselves have increased to about 5 per cent. above the return for United Kingdom industry generally. I believe that the DHSS have failed effectively to implement the agreement to reduce from 14 per cent. to 10 per cent. the chargeable promotion costs. No wonder the DHSS are now reviewing the PPRS which they have themselves allowed to be ineffectively implemented.

I hope that when the Minister replies he will say something about the review of the PPRS and when we may expect to be able to see it. I am deeply concerned that the industry and the Government maybe have too cosy a relationship, and that this excessively cosy relationship means that the profits—and I am talking about profits over and above research, because research is a vital element in the industry's expenditure—have been at an excessive level at the expense of the National Health Service. I am not just talking about generic substitution—we will have further debates on that, because there are disagree-ments across the House about the extent to which the generic substitution may undermine clinical freedom.

As I have said, the Government have a cosy relationship with the industry; I want them to have an effective and useful relationship with the industry, but I do not want to see excessive profit, inevitably paid for by the taxpayer in terms of excessive costs to the National Health Service.

The Government, suddenly faced with the fact that they had to make cuts in 1983 and 1984, decided to clamp down on the pharmaceutical industry's profits not as part of a carefully worked out scheme such a we had worked out in 1977; it was done hurriedly. As far as I know it was done without consultation with the industry. The industry was told that, without any warning, it had to make the cuts that have already been referred to.

The Government seem unable to resolve this conflict of interests; on the one hand, maximum profit for an important private sector industry and, on the other hand, the need to restrain drug costs in the interests of the National Health Service. I hope that when the Minister replies he will give us some indication of the progress that has been made in cutting down the extent to which the NHS is financing, to an excessive extent, an already highly profitable pharmaceutical industry.

9.36 p.m.

Lord Glenarthur

My Lords, I am sure that we are all grateful to the noble Lord, Lord Molloy, for asking this Question this evening, even if he did so in his characteristically strident tone so late in the night after a lengthy debate on Scottish affairs. It will at least give me the opportunity to set the record straight on the fact that there are those who say that the relationship between the Government and the pharmaceutical industry is not good. I think it is better than the noble Lord believes it to be, despite the changes in the pharmaceutical price regulation scheme which were announced on 8th December last and which, as he knows, will reduce the profitability of that industry. Having said that, of course no industry likes to have its profitability forcibly reduced. And so the noble Lord is probably right if his Question means that the relationship between my department and the industry is not quite as good as it was, although that will please the noble Lord, Lord Ennals, who has said our relationship was probably too cosy.

I suppose that my department has something of a split approach in trying to adopt a balancing act in its dealings with the pharmaceutical industry. To query the department's honesty—I do not think that was the word, but it was something akin to it to which the noble Lord, Lord Molloy, referred—was not particu-larly fair. The NHS is the industry's main customer for its sales of prescription medicines in the United Kingdom. It is the sponsor of the industry, and it wants to see the industry continue to prosper. With other United Kingdom health departments it is also responsible for the regulation of its products. We have tried to achieve a balance between the interests of the NHS as customer and the interests of the industry. That is not particularly easy.

In 1982–83 drug costs for the National Health Service amounted to about £1,250 million. The noble Lord, Lord Winstanley, may think that this is just a little: so be it if he does. The fact is that it represents about 10 per cent. of the National Health Service budget. I am afraid I am not able to give him the position of the United Kingdom in the league of the Western world, but it is a fact that 10 per cent. of a budget of the size we are talking about is a lot of money. That is the basic cost of drugs, excluding fees and on-costs for chemists and dispensing doctors, or any credits for prescription charges.

With expenditure at that considerable level, we must do all we can to contain costs, and one of the ways of doing it is to reduce prices, or at least to contain any increases in prices. That is what we have tried to do. Last year, we reached agreement—and I stress it was an agreement—with the parmaceutical industry that from 1st August 1983 prices of prescription medicines should be reduced on average by 2½ per cent., and at the same time prices were frozen until 31st March this year. The noble Lord, Lord Molloy, asked if the £25 million had been saved. Final returns from every company have not been received, but we have no reason to believe that it will not be achieved.

In December, we announced that from 1st April this year the target profit rate for the industry would be reduced from a 25 per cent. to a 21 per cent. return on historic capital, as well as further limiting the tolerance allowed in certain circumstances when companies exceed their target rate. This is something to which the noble Lord, Lord Ennals, referred and made specific references. In addition, we changed the rules governing the amount of sales promotion expenditure we will allow in calculating drug prices. The existing limit will be retained at the present level for 1984–85, but companies exceeding the limit will have to repay to the department a sum equivalent to the amount of the excess. This is already encouraging companies to reduce their expenditure on sales promotion so as to avoid repayment.

From 1st April 1985 we intend to reduce the sales promotion expenditure limit to 9 per cent. of sales, and we will review the whole question again. All these changes are estimated to save £65 million in 1984–85 and over £100 million thereafter. We still have other things to do. A report by independent accountants on methods of dealing with transfer prices in the PPRS is being studied. Transfer prices are charged by multinational companies to their United Kingdom subsidiaries for raw materials and finished and semi-finished goods. We are also considering whether the margin that the pharmaceutical companies allow their wholesalers should be reduced from the present average of 12½ per cent. This might cover to some extent one of the points raised by the noble Lord, Lord Rea.

There is also some tidying-up to do with the details of the published scheme, which has remained unchanged since 1978. We shall be discussing this with the Association of the British Pharmaceutical Industry in the coming months. All the changes affect the industry in its dealings with the DHSS on prices. Some are bound to be unwelcome to the industry, but I believe that they accept that they cannot be exempt from measures taken to make savings in the National Health Service expenditure in order to make the service more efficient and provide better value for money for those whom it serves. Sponsorship is not forgotten. The industry as a whole provides jobs for over 67,000 people, many in high technology. It exported goods worth well over £1,000 million in 1983. This was a fact referred to by my noble friend Lord Chelwood and by the noble Lord, Lord Ennals.

The net surplus of exports over imports exceeded £600 million in this particular field. The United Kingdom industry is firmly within the top half dozen pharmaceutical exporting countries in the world and one of the major foreign currency earners in this country. This is an impressive record and one I am pleased to acknowledge. The industry spends millions of pounds on research and development—a point raised by Lord Rea—and the industry also spends much more on investment, so that it is good for "UK Limited" and for the individuals who benefit from its products. There have been many notable discoveries of new drugs in the United Kingdom since the end of the war. Recent world-wide successes have been Tagamet and Zentac, for which ulcer sufferers throughut the world have cause to be grateful.

That is one of the reasons why we have confirmed our support for the aims of the PPRS so that safe and effective medicines should be available on reasonable terms to the National Health Service but also that a strong, efficient and profitable pharmaceutical industry should exist in the United Kingdom. That is not a recipe for the cheapest drug prices possible but provides the balance to benefit everybody: the National Health Service, because it pays reasonable prices; the patient because the gets the best and most up-to-date products; the worker has a job in the industry, the industry itself gets a fair return on its investment and the nation at large benefits from all four.

I turn now to the question of advertising—an area in which the noble Lord appears to believe we do not exercise adequate control. In the United Kingdom advertising controls are provided by a mixture of statutory measures and means of various voluntary codes of practice. These arrangements have been found to work satisfactorily despite the fears of the noble Lord; and despite the competition involving promotional material for similar types of products, the Department has found that manufacturers generally display a good standard of ethics—

Lord Molloy

My Lords, they were not my fears that I was speaking of, but the fears of doctors, sisters, nurses and consultants. They were the fears that they have expressed to me which I thought were wise to express to the House.

Lord Glenarthur

Exactly, my Lords, and it was in that vein that I was replying to the noble Lord who was expressing the fears of all the people he had referred to.

These arrangements have been working satisfactorily, and despite the competition involving promotional material for similar types of products, the department has found that manufacturers generally display a good standard of ethics in their campaigns, and furthermore a welcome degree of responsibility. The main statutory powers are contained in the Medicines Act 1968, under which it is an offence to issue false or misleading advertisements or to make false or misleading oral representations. Advertising claims have to be consistent with the product licence and the Act empowers Ministers to make regulations for controlling the content of advertisements.

An advertisement can be sent or delivered to a doctor only if it is accompanied by an approved data sheet, or if a data sheet has been sent to him during the previous 15 months. The form and content of data sheets are laid down in regulations so that practitioners are provided with a uniform document containing the essential information about uses, dosage, adminis-tration, contra-indication, warnings, and so on.

The regulations embody the basic statutory controls. They provide a valuable framework within which much of the day-to-day supervision of pharmaceutical advertising is implemented by the industry itself in conjunction with the codes of advertising practice which have been drawn up. These are managed by the trade associations which represent the industry.

Where advertising to the professions is concerned—that is for prescription-only drugs—the Association of the British Pharmaceutical Industry operates a code of practice to which their members must subscribe. Most of the major pharmaceutical companies are members and companies not in membership are, nevertheless, invited to observe the requirements of the code. The code emphasises the importance of providing the medical profession with accurate, fair and objective information. To complement these arrangements, the DHSS investigates all complaints about advertisements and monitors advertisements for new products. If an advertisement is unacceptable, the company is contacted straight away to put matters right. Invariably companies comply with requests to change their advertising material. If the noble Lord, Lord Molloy, or any other noble Lord who has taken part has a particular product to complain about, I shall be happy to have it looked into, as I would be for any claims—and claims have been made—that deaths have occurred from misleading advertisements. If that is the case, the noble Lord can take it up with me.

Lord Molloy

My Lords, what I submitted was that there have been a number of instances where the medical profession know full well that people have suffered the side effects of drugs. I am simply appealing that in the name of all decency and of civilised behaviour we do not want another episode like Thalidomide. Ask any mother who has had a Thalidomide child, and she would be on my side.

Lord Glenarthur

My Lords, in that I am entirely on the side of the noble Lord, Lord Molloy, as well. The last thing anyone wants to see is that sort of threat repeated; but at the moment we have a satisfactory system. No doubt it is impossible for any of us to say that any system is perfect, and when it can be improved it will be; but the fact is that we are content at present that the system is working.

I can say to the noble Lord that I saw recently an article in the Sunday Times about the small print to which he referred being used to supply information for some drug advertisements directed to practitioners. Again in this connection I must tell him that all drug companies supplying general practitioners must supply each of them with a data sheet and a standard format, designed to give the essential particulars about a product. It would be quite wrong to conclude that practitioners are having to prescribe medicines without proper access to prescribing information.

We have found that the combination of legal requirements, official monitoring and self-regulatory voluntary codes of practice work well. The codes reflect the statutory requirements to which I have referred, but they are able to impose conditions in much greater detail and with much greater flexibility than could possibly be done if we relied on legal measures only. The Government are satisfied that we have an effective working relationship with the pharmaceutical industry in advertising, and I do not think I need dwell further on that.

However, I should like to touch on some other points raised during this debate. We have debated generic prescribing and generic substitution on more than one occasion in the past few weeks. On the question: why not generic substitution? I can only say what I have said before: when we consulted, we found there was no general support for it. The recommen-dation could not be implemented without the agreement of the medical profession. They objected to the element of compulsion involved because of the special relationship that doctors have with their patients. I am sure that the noble Lord will be well aware of that—probably more so than I. Having said that, we will do all that we can to encourage generic prescribing. That, again, is something I have touched on in the past. The whole question of generic substitution is a matter which, while not accepted from the Greenfield Report, will crop up over the years, and so it is impossible to say that generic substitution will never occur; but there are no plans to introduce it at the moment.

The noble Lord, Lord Molloy, asked about re-importation and about drugs exported from the United Kingdom and re-imported at a lower price. This can happen but it is only a small part of the trade known as parallel importing. The reason is usually, if the product was originally exported at the United Kingdom price, over the years price freezes in the importing country have kept the cost down. In the United Kingdom prices have been legitimately allowed to rise. I do not think I need dwell any further on other aspects of parallel importing because those will be facts of which the noble Lord is well aware.

The noble Lord, Lord Rea, asked about patents for drugs very similar to those already on the market. Such drugs must be sufficiently dissimilar; otherwise the Patent Office would not have granted a patent. That is a fact of life. They arise because more than one company is engaged in similar lines of research but only one can win the race. The rest do not want to waste research expenditure and therefore market similar products.

The noble Lord also asked about hospital prescribing. I can say that the hospital drugs bill amounts to about 20 per cent. of the NHS's total expenditure on Pharmaceuticals. The establishment of multi-disciplinary drug and therapeutic committees has done much in recent years to bring about the formulation of broad professional policies regarding selection, procurement and distribution of drugs. Such committees can make a significant contribution to the effectiveness of prescribing practices in the local situation. Our long-standing guidance to health authorities is that the quantity of drugs prescribed to an out-patient should not exceed what is needed for a period until either the hospital doctor or the GP can see the patient again. The noble Lord mentioned 14 days: that figure may be correct, but the principle is the same.

He also asked about information technology. I have seen myself that increasingly hospital authorities are turning to information technology to control their drug stocks, which helps to avoid wastage due to duplication, discarding date-expired materials, and so on. It also is a most useful means of informing doctors of the costs of their prescribing and of their prescribing policies. Here I am referring to repeat prescriptions.

I am pleased that the Government have been asking and will continue to ask health service managers to draw together the lessons learned from their experiences to manage the drug budget and to increase the efficiency of drug procurement and usage. So far as the purchase of drugs by hospitals is concerned, health authorities and some hospitals contract for drugs that they require. Prices are often less than agreed with companies through the PPRS, but then again many generic drugs are purchased.

If I may mention one point made by the noble Lord, Lord Winstanley, when he talked about general practitioner prescribing, the Government are exploring ways of educating doctors to become cost-effective prescribers, while exercising their very proper freedom to treat their patients in the best possible way. I agree with him that education is the best way forward and better than coercion. Doctors' prescribing is already monitored, and this is an important point to get across. An average cost per patient is calculated each month for each doctor and a summary is sent to him, together with the average cost per patient in the doctors' family practitioner committee area. DHSS regional medical officers visit doctors whose costs are substantially above the average, and visits are also made where individual items of exceptionally large quantity at high cost are prescribed.

This country, as we have heard, has one of the most advanced and successful pharmaceutical industries in the world, and that is something in which we all ought to take pride. I certainly join with others who have spoken in stressing that. So far as National Health Service consumption is concerned, that industry cannot be immune from our need to get the very most out of each pound spent on individuals within the National Health Service. Doctors must prescribe effectively and be mindful of cost; they should prescribe generically where possible; they should look critically at repeat prescriptions; they should think about cost, and we should all think about waste. The Government, in collaboration with the pharmaceutical industry, have their part to play in controlling public expenditure in a service as demanding as the National Health Service. Between the two a balance must be struck. I hope I have shown that, within the constraints that face us all, that balance is being maintained.