§ 8.50 p.m.>
§ Lord Northfield
My Lords, I beg to move that the Bill be now read a second time.
I have repeatedly declared in this House an interest in the pharmaceutical industry as an adviser. I declared my interest in 1977 when we were discussing the Patents Bill, now the Patents Act. I declared it on the Animals (Scientific Procedures) Bill when we were discussing that. I declared it again on 22nd April when I raised the issue of licences of right and I raised it again just before Christmas when I discussed the parallel importing of medicines. My position as an adviser to this industry is well known.
The origin of this Bill is as follows. I raised the matter in April on the then Patents, Designs and Marks Bill. The noble Lord, Lord Lucas of Chilworth, speaking for the Government at col. 485 of the Official Report of 14th April, pledged to repeal the licences of right provisions. In col. 1137 of the Official Report on 22nd April he said that it should be dealt with, with,in the Bill that will deal with the intellectual property rights".That was a Bill we were all expecting this Session.
When the Intellectual Property Bill did not appear in the Queen's Speech and when the industry had been 447 so fervently hoping that it would be and that the matter would be dealt with, I approached the Leader of the House, the noble Viscount, Lord Whitelaw, as to what could be done to carry out the Government's pledge. The noble Viscount wrote to me on 25th November and said,the question of a short bill on licences of right was being considered".He went on to say:The latest position is that such a Bill can indeed be detached from the Intellectual Property Bill and the Government hope very much that it could go through this session as a Private Member's Bill".He went on to say that he hoped it might be taken up by a Commons Member in the ballot for Private Members' Bills. He then continued:If it is not taken up, we should be delighted if you would introduce a Bill in the Lords and would certainly be able to draft it for you".I am therefore greatly indebted to the noble Viscount. He has been good enough to see that the Bill was drafted and we have had great help from the Department of Trade and Industry and from the Patent Office officials. I repeat that this is effectively a Government Bill which has been, as the noble Viscount has said,detached from the Intellectual Property Bill".If we can get this matter right in this Chamber and send it through to another place, where there has been an Early Day Motion calling for it, there is no lack of sponsors for this Bill in another place. The industry has been slightly reluctant to take the course of a Private Member's Bill because it takes the firm view that this should have been a Government Bill. I must say that that is the case. However, when one receives advice from the number two member of the Government who is also the Leader of the House, it seems sensible to take his advice and to hope that if the Bill gets into difficulties when it gets to another place the Government will feel a moral obligation to see it through in the other place.
That is the origin of the Bill and I now come to the basic case for the Bill. The 1977 Act sought to extend patent life, as in the European Convention, from 16 to 20 years. In this Chamber I moved the deletion of compulsory licensing and that was carried and accepted in another place. A late amendment in another place, which was not actually debated here at any time, brought back compulsory licences of right for copyists to be able to produce these drugs in the last four years of patent life in the case of those patents that have more than five years to run—that is, those granted between 1967 and 1978.
The 1977 Act also removed the old provision that patentees could get unrestricted extension of patent life for up to 10 years on the grounds of inadequate remuneration. Licences of right, which had previously been voluntary, were now made compulsory by the 1977 Act, Therefore, the industry was hit in three ways: licences of right were brought in; they were made compulsory; and the possible extension for 10 years on the grounds of inadequate remuneration was removed.
The industry alerted the Government to dangers from medicinal patents. The danger arises because medicines are very easily copied once the chemical 448 formula is found. That makes them unlike most other patents covered by licences of right. Also, the industry was concerned because this four-year period in which copyists could operate at the end of patent life made a further difficulty in the effective life of patents which was already very greatly eroded in the pharmaceutical industry. The problem is well known to your Lordships. It is that because of the immense time taken for testing for safety between the granting of a patent and its marketing, the effective life of a new patent today is considerably eroded. A few years ago it was calculated that effective patent life was about 12 years. It is now probably about eight years because of the immense time needed for testing. If the effective life is eight years and if four of those years are subject to compulsory licensing, one can understand the alarm of the industry at the erosion of patent life.
The noble Lord, Lord Lucas, made this erosion of patent life the basic reason for accepting the case for repeal. Thorough studies have been made to show statistically how that life has indeed been greatly reduced. I would go as far as to say that patent protection for new medicines in this country is now weaker than it was 40 years ago.
The basic need for a remedy is that this situation is an immense deterrent to research and development in this country. It is made even more glaringly obvious when one recognises that there are no licences of right provisions in our main competitor countries—that is, the United States, Germany, France and Japan. Indeed, several industrial countries are actually strengthening patent protection for medicines by such things as the five-year extension that is happening in the United States and that is now being considered by the Parliament in Japan, and by an extension of protection to cover product as well as process. Therefore, one can go so far as to say that protection in this country is now moving to a point where it is less for medicine patents than it is in most other free world countries. This is an immense and growing deterrent to research and development in this country.
The final reason for the Bill is the legal costs of resisting these licences of right. Going through the courts concerning them is necessary because there are no guidelines in the 1977 Act about how the controller is to operate the provisions. Therefore, everything must be fought out with legal costs that are now considerable. There is finally the loss of revenue from copied drugs in the final years of their patent life. I gave your Lordships' House some figures in April and I will not repeat them now.
We really must get on with this provision now. The Government announced the repeal nearly a year ago now, and we are finding a situation where uncertainty is generated and where there will be a continuous rush for licences to try to get them before the chopper falls if we do not get on with this matter. As I said in April, one copyist has already filed 30 applications in recent times.
Who could be against the Bill? The first group of people who could be against the Bill and criticise it are the copyists themselves. Some of us have had propaganda from an organisation called PLUS. I have to say, and I say this very strongly, that PLUS does not represent, though it claims to do so, the generic producers of medicines. The producers of 90 per cent. 449 of generics in this country are in the Association of the British Pharmaceutical Industry and are fully behind this repeal. As I understand it, two very small companies are behind PLUS. They both have external links, to say the very least, and they have less than 10 per cent. of the generics trade. Indeed, I have to say quite bluntly that both are South African.
I have in my hand the statutory declaration made by one of them in application for a licence of right. It is a public document. It is quite clear that this company, Generics UK, is part of a very involved network of South African pharmaceutical companies. The other company also has South African links. One of them—I am not sure which—is registered in Panama. So the whole generics industry is not lined up against my Bill. Indeed, the managing director of APS, one of the most reputable generic companies in the United Kingdom, Mr. Hemmingway, made it quite clear in the Pharmaceutical Journal of 29th November 1986 that the industry is fully behind this repeal.
A good deal of the propaganda of PLUS, put forward, as I say, by the two small companies which formed this organisation of which no one had ever heard before, is both wrong and distorted. I shall not deal with it in any detail today but I can say that the organisation desperately needs some new legal advisers apart from anything else because it cannot even understand the Bill as drafted. I shall come back to that point later on. So the first people who could be against the Bill are the copyists, and I have said some words about them.
Who else could be against the Bill? The trade unions could be against the Bill. Would there be a loss of jobs? The main company involved in PLUS employs 20 people, so we are not talking about great numbers. The generic producers generally will not really be affected. They mainly produce generics from drugs where the patent has expired. Most important so far as concerns the trade unions is the simple fact that the trade unions joined with the employers in a NEDO report which studied this situation. The report was published quite recently and recommended that the Government,should move speedily to abolish the 'licences of right' provision in the 1977 Patents Act in order to bring the level of protection afforded in the UK up to that enjoyed in other countries".That comes from the trade unions that are employed in this industry.
Is anybody else against the Bill? I take reputable scientists and people who are detached from the commercial and industrial world and I have found nobody who is actually against it. Indeed, I would refer noble Lords to a letter in The Times of 30th December from Professor Sir John Butterfield of the Cambridge University School of Clinical Medicine, a former chairman of the Medicines Commission, in which he hopes that somebody will pick up the gauntlet and get on with this repeal, which he believes is so obviously necessary.
Who else could be against the Bill? There are those who fasten on the problem of whether this measure will increase the costs of the National Health Service. I hope that the Minister will say a few words about that. I hope he will be able to say that the Department of Health and Social Security is fully behind the Bill 450 just as much as the DTI. I hope he will be able to say, as I understand is the position, that the cost to the National Health Service is minimal. The figures given by PLUS on costs are exaggerated, wrong, and deceitful to some extent. They disguise the fact that existing licences of right will stand. They disguise the fact that these matter only for four years at a time. PLUS uses figures in its propaganda about drugs that are already out of patent and it leaves totally out of consideration the fact that the profits made by drugs companies from the National Health Service are firmly controlled by the Government under the pharmaceutical price regulation scheme. Indeed, those profits are not excessive. They are at or below the level of the profits of average manufacturing industry, as was revealed in the recent negotiations about the new PPRS.
I do not know anybody else who could be against the Bill. We have to ask: do we mean it when we say, "Let us get a true 20-year patent protection under way in this country"? If we do, we need this Bill.
I should like finally to deal with the clauses of the Bill. Clause 1(1) is drafted so that the pharmaceutical patentee has to make a declaration to the Patent Office to get exemption from the licences of right provisions. Subsection (2) defines pharmaceutical use by reference to the Medicines Act. I am quite aware that this means that veterinary products will therefore come within the repeal. This is because the industry has proved to the Department of Industry that the erosion of patent life is the same or similar in the case of veterinary products as it is for human medicines.
Subsection (3) is procedural. Subsection (4) makes it quite clear that declarations made under subsection (1) will not affect applications already made to the controller by the operative date of 17th December. There is no retrospective legislation in this Bill. I know that the noble Viscount, Lord Craigavon, may have a point about some voluntary negotiations going on prior to 17th December. I shall listen sympathetically to what he says, and perhaps we can look at that point in Committee.
Subsection (5) has clearly been misunderstood by PLUS—the two generic companies involved in this trade. It is a purely transitional provision. It gives three months for declarations to be made in respect of any applications settled after 17th December—that is, the date of the publication of the Bill. It is a perfectly simple and non-discriminatory transitional provision which harms nobody. Subsection (6) deals with remedies for the patentee who has filed a declaration. Subsection (7) deals with certain fees.
Clause 2, new paragraph (1), gives statutory force (not as PLUS says, once again, the opposite) to guidance from a legal ruling in this Chamber about making applications from the beginning of the 16th year in order to allow a year for settlement of the licences of right before the four year licence begins—that is, for the 17th, 18th, 19th and 20th years. I repeat, PLUS needs some new legal advisers because they cannot even understand that point. Finally, the new paragraph (2) makes some transitional arrangements on that point.
451 I conclude by saying that this industry is hoping very much that we can now get this repeal under way before further damage is done. It is an industry with a good record. One-third of its products are exported. It has a balance of trade of £850 million per annum which helps the country's balance of payments. We are the world's third largest exporter of medicines. The industry employs 80,000 people. It invests £500 million a year in R & D. It does not make excessive profits, but in any case profits are controlled by the pharmaceutical price regulations scheme. Most importantly, our main industrial competitors in the world give better patent protection.
We hope to prove that the cost of this minor change to the National Health Service will be no more than minimal. I hope the House will go on record as supporting these companies which need encouragement rather than discouragement in their R & D investment. I hope that we shall not bow to the pressure of two South African companies who have had a rather lucrative piece of trade for a while out of the existing provision which the Government quite firmly have said is now due for repeal. It is part of the accepted case from the industry that the erosion of patent life of medicines has now gone much too far and must be stopped. I beg to move.
§ Moved, That the Bill be now read a second time.—(Lord Northfield).
§ 9.11 p.m.
§ Lord Lloyd of Kilgerran
My Lords, at this late hour, in the light of the full presentation made by the noble Lord, Lord Northfield, and in view of the arctic conditions promised for travellers tonight, I propose to confine my remarks to a few salient points in accordance with the well-known procedures for Second Readings in this House.
One matter is abundantly clear. The Bill applies to only a very few pharmaceutical patents; namely, those filed before the effective date of the Patents Act 1977. The effective date was in 1978, nearly 10 years ago. I was closely concerned with the many hundreds of amendments to the Patents Bill which were brought forward in 1977. The noble Lord, Lord Northfield, referred to certain relevant parts of that Act and I do not propose to repeat what he said.
I again declare my interest. In the whole of my adult life I have been concerned with intellectual property matters, and that continues—that is, patents, know-how, trademarks, copyrights and designs. I have been closely associated with such matters in connection with research and development in an international context in many fields. There is an increasing interest in these intellectual property matters related to more successful research and development in the United Kingdom. Even the Prime Minister acknowledged this in the introduction she signed to the 1983 Green Paper entitled Intellectual Property Rights and Innovation.
If I may, I should like to mention a somewhat topical matter to show that there is considerable confusion as to the scope of the Bill. I have been asked seriously what effect it would have on any new developments to cure AIDS. The answer is simply 452 none whatsoever as the Bill will apply only to old inventions conceived before 1978.
The next most significant matter in relation to the Bill concerns the profound change in the effective commercial life of patents filed before 1978. As the noble Lord, Lord Northfield, indicated, prior to 1978, about eight years, or half the life of a patent, was absorbed in the necessary quality testing. Since that date, because safety in regard to the use of these drugs is paramount, the testing of pharmaceutical products has become more and more strict and now it is estimated that 12 years may be taken up in safety operations before the product is allowed to go on to the market for human use. Therefore in the past 10 years there has been an effective increase of four years in the loss of the life of a patent. These losses were not contemplated at the time that the amendments to which the noble Lord, Lord Northfield, referred were made to the Bill.
The next important factor to be considered is that the Government have introduced stricter, more comprehensive and firm controls over the profits made by pharmaceutical companies. It is in the public interest that the cost of pharmaceutical products should not be excessive. Like the noble Lord, Lord Northfield, I hope that the Minister will be able to give the House some reassurance on these matters.
A further important matter to be remembered in connection with this Bill—and again it has been mentioned by the noble Lord, Lord Northfield—is that in relation to patents for pharmaceutical products, no other country in the EC has such draconian measures as licences of right. As a result, the system of licences of right as envisaged in 1977 is 10 years later, in 1987, having a profoundly discouraging effect upon investment confidence in the United Kingdom pharmaceutical industry and upon its research. This causes serious damage to research and development and to technical progress in the United Kingdom industry and could possibly lead to serious job losses. Again I emphasise that none of these factors was envisaged 10 years ago.
I accept that in the public interest it is essential to ensure that pharmaceutical products are as safe for human use as is reasonably possible and that their cost to the nation is kept under reasonable control. As the noble Lord, Lord Northfield, so frankly admitted, there may be some unfairness to certain United Kingdom companies arising from the operation of this Bill. One such example has been mentioned to me by the noble Viscount, Lord Craigavon. I understand that he will be drawing the attention of your Lordships to this point but I hope that he will not mind if I say now what I told him on the telephone; namely, that I feel sure that the point he wishes to raise is a matter that can be dealt with at Committee stage and will not affect his general approval of this Bill. In these circumstances I give general support to the Second Reading of the Bill.
I should like to add one personal comment. In view of the travelling arrangements that I have had to make because of the severe weather I apologise now to the House for the fact that I may be unable to stay until the end of this debate. I hope that I shall be able to stay but if I cannot I shall study carefully all the speeches made.
§ 9.18 p.m.
§ Viscount Craigavon
My Lords, I am grateful for the words of encouragement from the two previous speakers concerning what I have to say. I am happy to support this Bill, but I have one small concern about the effect of the cut-off date of 17th December 1986 which is mentioned in the Bill. My reason for speaking on this subject is that my concern was aroused on this point by a friend who is the managing director of one of the largest producers of generic drugs—and incidentally he fully supports the general principle of the Bill. This is not a case of special pleading but of wanting to be fair among generic companies, by which I mean companies whose main business is the production of generic drugs.
I do not want to go into too much detail at this Second Reading stage but I should like briefly to outline the problem. The effective cut-off date for changes made in this Bill is 17th December 1986, which is the day the Bill was published. I am maintaining that this could be unfair or unjust but that this injustice could be corrected without any loss to the general principle of the Bill. Generic companies are in healthy competition with each other. But by bringing down this cut-off in the Bill effectively at 17th December, some generic companies will have happened to have obtained a licence for a particular product, whereas other companies will not—for example, because they were still in the middle of negotiations at that date.
It is, in part, effective competition between all these generic companies that keeps prices down to the public and to the health service. But to be effective, that competition should be fair as between these generic companies. Now if by chance by the cut-off provision of this Bill, one or two significant products are not available under licence to some companies but are to others, then unintended and unfair anomalies will result.
I have particular knowledge of one large company, but other comparable companies will be similarly placed. This large company has been the subject of a recent management buy-out, and I am sure that the Government would approve of such considerable enterprise whereby financial projections were made last summer and significant finance raised on the basis of reasonable expectations that the existing fair competition would continue to prevail in their section of the pharmaceutical industry. Now, through no fault of theirs, the cut-off date of 17th December has been imposed by this Bill, which upsets such reasonable expectations.
If this is uncorrected, it could lead to considerable disadvantage in certain firms. What one is talking about here is a small number of significant drugs, which it was formerly reasonable to expect would be available under licence to all equally. It is accepted in this section of the industry that competing companies ought to be able to offer a similar and comprehensive range of drugs, otherwise the disadvantaged company, which is unable to offer a few key products, is like a supermarket which has some important items unavailable on its shelves: customers might reasonably prefer to shop at the firm which has the most complete 454 range. So the unfair loss that I am referring to is one which arises from the chance of the state of the licensing procedure and negotiations as at the cut-off date in the Bill of 17th December.
The remedy to all this, and I shall not go into great detail at this Second Reading stage, is to amend the Bill to provide a cut-off point of a future date, such as one related to the passing of this Bill, which would have the effect of all generic companies having the same potential rights of licensing. This would only apply to products which would be endorsed as licence-of-right in the period up until that future date. Under this arrangement, there would be no scope or chance for artificially pulling a whole lot of products into licence before the door was closed. One is only talking about those products which in the effluxion of time, before the Bill passes, naturally reach their 17th year. The main principle of the Bill is thus maintained and supported, and would clearly remain intact.
So I hope that the noble Lord, Lord Northfield, and the Government would be able to support a minor amendment at the next stage to ensure fair competition in this one respect.
§ 9.23 p.m.
§ Lord McFadzean of Kelvinside
My Lords, I must disclose an interest. Until my retirement in the middle of 1986 I was a non-executive director of Beecham's which has a very large pharmaceutical business. I am also still a modest shareholder in the company.
The noble Lord, Lord Northfield, lucidly stated the arguments in favour of the Bill and I do not intend to repeat them. It is, however, interesting to note that the whole topic of the nature and extent of exclusive rights to inventions has a very long history indeed, reaching back to the 15th century. It is equally interesting to note that in England it was the Statute of Monopolies of 1623 that enshrined in law exclusivity for a period of 14 years.
The time span is very interesting. Until the present century inventions and indeed most industrial processes were of a relatively simple nature and the gap between the invention and the end product appearing in the market place was usually relatively short. Moreover, investment in research, such as it was, and in plant and work in progress tended to be of a very modest nature so that the 14-year period could be regarded as being adequate, if not generous.
Today all this has changed. Lead-in times in many industries, particularly those in advanced technology, and escalation of costs have reached a scale that inventors of another era could never have envisaged. These factors have been particularly marked in the pharmaceutical industry. Research and development costs on a single drug can be measured in tens of millions of pounds, and an average of 12 years can elapse between the filing of a patent and the date the product reaches the market. This period of exclusivity is clearly of vital importance in determining the level of research investment to be undertaken. Indeed, if the original 14-year period had been maintained, little if any advanced drug research would be taking place in Britain today.
455 The point at issue here and in the Bill was forcefully stated by that great philosophical radical, Jeremy Bentham, as follows:With respect to a great number of inventions … an exclusive privilege is absolutely necessary in order that what is sown may be reaped … He who has no hope that he shall reap will not take the trouble to sow".An inadequate period of exclusivity results in changes of attitudes and emphasis—waiting for others to invest in research and development rather than investing oneself because of doubts about recovering the costs involved.
The 1977 Act has been dealt with at some length, and I shall not repeat the arguments, apart from saying that the licence of right in the last four years largely vitiated the four-year extension in the Act.
Last week the Select Committee on Science and Technology under the chairmanship of the noble Lord, Lord Sherfield, issued a report on research and development. Among other things, the report states that neither government nor industry is spending enough on research and development to restore Britain's industrial position in world markets. One way of redressing this is to create a climate of confidence to encourage higher expenditure. The Bill seeks to do this in respect of an industry which has made and could continue to make a substantial contribution to the country's balance of payments.
§ 9.28 p.m.
The Earl of Halsbury
My Lords, it is quite like old times when the noble Lord, Lord Lloyd of Kilgerran, the noble Lord, Lord Northfield, and I rise to address your Lordships on patents. The last occasion was in regard to the 1977 Patents Act when I carried four forward-looking amendments against the Government, of which, needless to say, three were reversed in the other place. The same result took place in regard to the amendments of the noble Lord, Lord Northfield, on the subject of these licences of right.
I think it right to remind your Lordships of the law before the 1977 Patents Act. It was that anyone could apply to the comptroller-general of the Patent Office for a licence of right on terms to be settled by the comptroller-general such as to reward the inventor's initiative while allowing someone else to break his monopoly. In the case of pharmaceutical and medical patents, this was not left to the discretion of the comptroller-general. It was mandatory that he should grant such a licence of right. We removed that. It was a complete anomaly.
For some extraordinary reason in this country we are more subject to the burden of demonology in this field than almost anybody else. We are always trying to protect the sick against the wicked incursions of the pharmaceutical industry which makes money out of them. You might as well address your demonological criticisms to the medical profession. It does not make money out of sickness; it makes money out of restoring people to health. Surely that is a very worthwhile objective. The pharmaceutical industry is in no way different.
In order to illustrate some of the points made by the noble Lord, Lord Northfield, I should like to quote 456 some statistics—and I hope I am not sinning against modesty—from my Hooper Memorial Lecture to the Institute of Inventors and Patentees of 1971, where I presented my statistical investigations into a hundred seminal inventions with respect to what the time factor was.
Every invention is based on a prior scientific discovery of some kind or other. The average time lapse between the scientific discovery and the first inventive idea based on it was 31 years. Thereafter, from the first inventive idea to the first patent application there was a time lapse on average of 11 years. From then to the first market appraisal was a further six years and another four and a half years to establish success. The total working years at this stage were 21.
If the possessor of the inventive idea had had the idea when he was 21 he would now be a man of 42, with five and a half years to go for the life of his patent. Five and a half years for 21 years' work and 42 years' life on this planet! Had the thing gone as we would have wished, he would have had the extension by another four years to nine and a half years. But by the time he had finished exploiting that he would be a man of 51, having spent 30 years of his life on one idea. Those are all average figures.
If we look at the long end of the spectrum then from the inventive idea to the first patent application could be 30 years; from thence to the first market appraisal a further 17 years; a further 12 years to establish success, and at the end of that time, aged 21 to start with, he would have put in 59 years and be aged 80. All he would have at the end of the time would be a patent which expired 13 years ago. That is a measure of the long end of the scale.
Let me just take that figure of 12 years as the long end of the scale from the first marketing operation to the establishment of success. That is equal to the 12 years that the noble Lord, Lord Northfield, quoted as being the time to get permission to launch a new pharmaceutical product onto the market. It simply is not long enough. I hope that we shall rise above our temptations to indulge in demonology of an ideological character and support the noble Lord, Lord Northfield, in the Second Reading of his Bill.
§ 9.32 p.m.
§ Lord Hacking
My Lords, it is a fairly obvious statement to present to your Lordships that "we live in changing times". Nonetheless I make that statement at the beginning of my few comments in support of this Bill because the basic cause of the erosion of the patent period, or reduction of the period of patent protection, lies in the longer development period that is now needed by pharmaceutical companies between the original filing of the patent and the time that they can market their product.
Therefore, I think it is important, in considering the Bill, to identify the cause of this longer development period. Several noble Lords have extracted one or other of these causes, but it seems to me, having listened to your Lordships, that there are three identifiable causes.
First, there is the cause arising out of the more stringent tests on the efficacy, efficiency and safety of 457 the drug imposed by the licensing authorities before that drug is given a licence. Secondly, there are the heavier responsibilities placed by society, through Parliament and through the courts, on the safety of drugs which in turn require the pharmaceutical company to carry out more tests.
Thirdly—to put it very simply—the bad bugs are now more difficult to attack and more resistant to the good bugs which have been used so successfully in my lifetime to exterminate diseases such as tuberculosis, polio and dyptheria and a host of diseases whose origin lies in bacterial infection.
The result of these three factors is that it takes a pharmaceutical company longer and costs the company much more money to develop new drugs. But all the factors stand to our advantage. It is to our advantage that licensing authorities require pharmaceutical companies to test their drugs more carefully so that they are safer and more efficient. It is to our advantage that society generally imposes upon pharmaceutical companies a requirement on the greater safety of their drugs. It is to our advantage that pharmaceutical companies have the resources to develop new drugs to attack a disease that affects our society and affects it in new and troubling ways.
The noble Lord, Lord Lloyd of Kilgerran, and the noble Lord, Lord Northfield, reminded us that this Bill is directed to drugs that have been patented in the period 1967 to 1978. However, I would submit to your Lordships that it affects a number of important drugs, and I will quote three of them to your Lordships. There is a drug called Feldene, which is a non-steroidal anti-inflammatory drug for the treatment of patients with arthritic diseases. It is an extremely important drug and yet its manufacturer had only four years to market the drug between the time it was able to be put on to the market for the 458 benefit of the sufferers of arthritis and the time when the patent expired.
Another drug, which has only very recently been marketed, is called Diprivan. It is an anaesthetic of special value in day surgery. Incidentally, the drug offers considerable savings to the National Health Service because it enables more surgery to be done on a daytime basis rather than on a basis of having to keep the patient in hospital overnight. That drug was marketed only last year, but the patent is due to expire in 1991—a period of five years.
Another drug called Zoladex has not yet been marketed. It is to be used for the treatment of prostate cancer. Its manufacturer, a very well established British company, hopes that the drug will be marketed some time this year. Yet the patent is due to run out in 1993—a period of only six years. I cite those examples because I believe they are important, even though there may be fewer drugs generally on the market which are affected by this measure.
There is another important consideration relating to the Bill. It draws attention to the general problem that this extension in the period of development means that a patent period, whether it be 16 years, 20 years or 25 years, provides less protection for those pharmaceutical companies developing the drugs that I have argued are for our good and for our benefit.
Therefore, I hope that the Government will be able to give the strongest support to this Bill. Without Government support and without the Government making parliamentary time available, this Bill will fail. Equally, if the Government are able to give support to the Bill in your Lordships' House and in another place, it has a reasonable prospect of getting on to the statute book. If so, for the reasons advanced by other noble Lords as well as by myself, our society will be better for it.
§ 9.39 p.m.
§ Lord McIntosh of Haringey
My Lords, I preface my remarks, as I must in speaking from this Dispatch Box, by saying that as this is a Private Member's Bill (although one from my noble friend) I speak in a personal capacity. I shall, of course, be referring on one or two occasions to Labour Party policy.
It was obvious to me before this debate opened that this was a matter of very great importance, where tens or hundreds of millions of pounds were at stake, in terms of the revenues of the drug manufacturers and possibly in terms of the cost to the National Health Service. Therefore I took the matter with considerable seriousness. I took steps to acquaint myself with the views of the Association of British Pharmaceutical Industry. I also received, as did my noble friend, representations from the organisation called PLUS. Those representations are in such profound conflict on matters of fact as well as matters of opinion that it is extremely difficult for a layman such as myself to sort out the virtues of one from another. What makes it worse is that the opinions are expressed in such extreme terms.
My noble friend used the word "deceitful" about the publication of the organisation called PLUS. That word has been used to me outside the privilege of this Chamber. When it was used, I demanded that the deceitfulness should be shown because that is an extremely strong word and it must be thoroughly backed up if it is to be made to stick.
Noble Lords have used the word "draconian" with regard to this measure. If someone is to use such a word I need to know exactly what is involved and what credence I can give to the opinions being expressed.
I would have said this before the debate started, but I am concerned that there must be noble Lords here who have matters of interest to declare. My noble friend and the noble Lord, Lord Lloyd, have made general declarations of interest. The noble Lord, Lord McFadzean, made a specific declaration of interest in Beechams. I understand that noble Lords who have spoken have or have had specific interests in Merck, Sharp and Dohme and in the Distillers Company.
I wish that those interests had been declared more specifically and that if any noble Lord has an interest, not as a shareholder, director or adviser, but as a legal adviser, he had made that interest clear and said what, in his understanding, is the Bill's effect on the companies or organisations with which he is associated.
The Earl of Halsbury
My Lords, the noble Lord mentioned the Distillers Company. I was a director. I joined the board in the immediate aftermath of the thalidomide tragedy, so I have no interest to declare.
§ Lord McIntosh of Haringey
My Lords, I am grateful to the noble Earl for that. I have not mentioned his name.
I have been trying to piece together what it is that lies behind the passions aroused by the Bill. I have been trying to understand the nature of the Patents Act, 1977 and the debate that then took place. As I understand it, and I will gladly be corrected if I am 460 wrong, when introducing that Bill the Government were prepared to see it go through applicable only to future patents with the 16-year limit continuing to apply to existing patents.
It was pressure from Members of this House which secured that the Act should take effect retrospectively for patents which had been applied for before the passage of the Act. That concession, achieved by Members of this House, was then subject to a compromise in another place which said that that retrospection should apply but that there should be a mandatory licence of right.
If I understood it correctly—and I have not yet been corrected on it—I fail to understand why anyone should think that the 1977 Act was so much of an intrusion into the rights of the pharmaceutical companies. Similarly, I have been bombarded with statistics on the comparative rights available to pharmaceutical companies in different parts of the world. I discovered that many countries have patent periods of fewer than 20 years; that no country has a patent period of more than 20 years, which is our period with the exception of the licence of right; and that many countries, unlike us, have a patent which applies to process only rather than to product. I am driven to the conclusion that, with the possible exception of the licence of right, which is a dying provision half way through its active life, we have as draconian a patent protection as any other country.
I am told on the one hand that the pharmaceutical industry in this country has an outstanding record in export, research and development. I believe it. I applaud it. It is clearly valuable not only to the country but to the companies themselves and to their employees. However, if that is the case that achievement has been gained under circumstances in which the patent protection was either only 16 years before 1977 or 16 years with the licence-of-right protection which has existed since 1977. If the situation were as bad as noble Lords have suggested, why is it that the achievements of the pharmaceutical industry have been so tremendous? Yet my noble friend used words such as "an immense deterrent to research and development". The noble Lord, Lord Lloyd of Kilgerran, referred to "serious damage". I have yet to be convinced that such serious damage or such immense deterrence has occurred or has been shown by the commercial history of the pharmaceutical companies.
Finally—and this is where I come to what I believe is the concern of my party as a political issue—that is the question of the cost to the National Health Service. One side of the argument has told me that the cost to the National Health Service might be of the order of £200 million by the early 1990s. I have no way of estimating whether that is true. All I can say is that the Association of British Pharmaceutical Industry has in rebuttal simply denied those figures and has not given me any others. My noble friend Lord Northfield, for example, did not give me any indication of the difference in price to the National Health Service of generic as compared with branded drugs. Nobody has referred to the fact that this country has far stronger protections for branded drugs—I will just finish my sentence if I may before giving way—than, for 461 example, the United States because there is no possibility of pharmacists substituting generic drugs for branded drugs in fulfilling a prescription.
§ Lord Lloyd of Kilgerran
My Lords, I am grateful to the noble Lord for giving way. I merely wanted to ask him whether he is prepared to disclose who gave him that figure of a £200 million increase in costs? There have been figures bandied about even in the papers by well-known persons which are quite wrong. I wonder whether he could disclose—I do not want to press him about this matter—who gave him the figure of £200 million?
§ Lord McIntosh of Haringey
My Lords, I thought that I referred to "one side of the argument". By that I clearly meant PLUS, the organisation to which my noble friend referred. The figure has also been given in a letter to The Times by the noble Lord's honourable friend, Mr Archy Kirkwood. It may well be the case that it is untrue, but I have no evidence to show that the figure is untrue. It seems to me that the onus is upon those who are proposing the Bill to show that the cost to the National Health Service will not be, as my noble friend says, significant.
§ Lord Lloyd of Kilgerran
My Lords, I did not realise that the noble Lord was referring to the word PLUS. However, I am grateful to him for referring to the letter which I presume is that written by my honourable friend in another place. That Member from the other place today assured me that the contents of that letter were in many respects wholly inaccurate and he apologised to me this morning for not having cleared that matter up before. I am very grateful therefore that the noble Lord has given me the opportunity of being able to explain how the Member of the other place—who belongs to the same party as myself—found himself in difficulties having introduced figures which he now confesses were not quite right.
§ Lord McIntosh of Haringey
My Lords, the last thing I wanted to do was to interfere in the internal communications of the Liberal Party. However, if that is the case no doubt Mr Kirkwood will make suitable corrections at an appropriate time. That is not a matter for me. I have to accept what I see in public prints.
As I said at the beginning, I am a layman in these matters. I ask questions only as a result of what appears to me to be conflicting evidence. However, the matter which I say is, apart from my own possible misconceptions, a matter of great political import is the cost to the National Health Service. Unless it can be much more clearly shown than it has been so far that there is no such significant cost to the National Health Service in the passage of this Bill, the Labour Party will oppose it.
If it is pushed through against our opposition then I must warn noble Lords who wish to push it through that the whole question, which has been raised on many occasions, of compulsory generic prescribing, or generic substitution, at the pharmacist level will be raised again and will become a matter of political 462 significance. It is that above all which is the interest of my party, and it is for that reason that I am worried about the potential impact of the Bill now being put forward for Second Reading.
§ 9.51 p.m.
§ The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth)
My Lords, I am grateful to noble Lords for having had the opportunity to hear their views. With one exception, about which I hope I shall be able to help the noble Lord, Lord McIntosh, I see that your Lordships' House is in general agreement with the purport of the Bill introduced by the noble Lord, Lord Northfield, which we welcome. As the noble Lord said, we announced in April that the Government were proposing to introduce legislation having a similar effect.
I appreciate that it is late, but it is necessary on perhaps one or two points for me to be a little repetitive, for which I apologise in advance. We attach great importance to the maintenance of a strong research-based pharmaceutical industry in this country. The United Kingdom pharmaceutical industry has a creditable track record in the development of new medicines to combat a wide range of medical conditions.
I do not quarrel with the figures given by the noble Lord, Lord Northfield, towards the end of his speech. However, the discovery and development of new medicines is becoming increasingly complex and expensive. Gone are the days when there were numerous targets for fruitful innovation in pharmaceuticals. Illnesses, such as cardiovascular diseases, cancer, and most recently, acquired immune deficiency syndrome, for which cures are still sought, all involve complicated, time-consuming and expensive drug research.
At the time the present Patents Act was passed in 1977 the Government considered that patents which had been granted under the now superseded Patents Act 1949 should have their term extended by four years. This would bring them up to the 20 years enjoyed by patents granted under the 1977 Act.
However, these extra four years could not have been anticipated when the patents were originally applied for. It was Parliament's decision therefore that these patents should be endorsed "licences of right" during the extended period. This means, in effect, that during the extra four years anyone may have a licence to use the invention. If he and the patentee are unable to agree the terms of the licence, such as the royalties, then they are settled by the Comptroller-General of the Patent Office under powers given to him in the 1977 Act.
Parliament considered that licences of right would provide a fair balance between the needs of research-based industries and the expectations of others wanting to work inventions once they have come off patent.
Perhaps I may say to the noble Lord, Lord McIntosh of Haringey, whose contribution was made in his usual 463 forthright manner (with which I am sure your Lordships do not quarrel) that his understanding of the history of the four-year term is correct. The licence of right provisions, though themselves not debated at length, were part of a compromise which was reached after discussions in the Government's Standing Advisory Committee on Patents. I believe that when that compromise was adopted by Parliament during the passage of that Bill, those concerned were in no doubt at all as to its effect. By about last spring the pharmaceutical industry satisfied us that there had been a significant erosion of the period during which pharmaceuticals could be marketed with the benefit of patent protection.
The noble Lords, Lord Lloyd of Kilgerran, Lord Northfield, and others have discussed the patent term, which noble Lords will appreciate runs from the date of application for a patent. Normally, and for security, the application is filed before the product is tested and therefore before it is allowed to be marketed. I was interested in the statistical review of the noble Earl, Lord Halsbury, which had that element of humour in it which we have come to expect from his contributions, but it was not, if I may say so, without its element of truth, as he pointed out. The time taken by testing is therefore lost from the patent term. Noble Lords who quoted these figures are right that in 1977 this time loss amounted to something like eight and a half years. It has now increased to about 11½ years. It was that which decided the Government that the situation should be redressed by exempting patents for pharmaceuticals from the licences of right.
The Bill relates only to patents granted under the previous Act. The last of these were applied for in 1978 and the provisions of the Bill will consequently be spent when these patents run out; that is, in 1998. The licence of right provisions apply to patents in all fields of invention, but it has been in the pharmaceutical sector only that convincing evidence has been furnished to show that conditions have changed significantly since 1977.
A consequence of this Bill is that patentees will have a full monopoly during the last four years of their patents. They will not be subject to competition during this time, but I should point out that all patent monopolies are subject to compulsory licences should the patentees abuse their rights; for example, by not supplying the market adequately or charging prices which are too high. The last four years of the term will not be an exception to this rule.
As a practical result of the Bill the generic sector of the pharmaceutical industry will not be able to assume that new licences of right will be available. Indeed it can be assumed that the owners of patents which are still in force after 16 years will wish to maintain their exclusivity for the full 20 years. Generic manufacturers will therefore have to wait until pharmaceuticals come off patent before they can produce their own versions of them.
I listened carefully to what the noble Viscount, Lord Craigavon, said on the subject of the cut-off date which is now in the Bill. As other noble Lords have said, this date is something which can be dealt with in 464 Committee. I shall consider carefully what the noble Viscount has said about the effect of the date. It is not for me to answer for the noble Lord, Lord Northfield, but I have little doubt that he will give consideration to that. Perhaps we can engage in discussions to see that there is a complete understanding of what arrangements can properly be made.
The noble Lord, Lord McFadzean of Kelvinside, drew our attention to the recently published report of the Science and Technology Committee on the subject of research and development. While the department is studying carefully this report, I do not think it would be out of place for me tonight to thank the committee for its work, nor do I think it would be out of place to agree with the noble Lord, Lord McFadzean, in what I am sure he will admit was the narrow reference he made to that report.
The noble Lord, Lord Northfield, invited me to comment on the cost to the National Health Service, as did the noble Lord, Lord Lloyd of Kilgerran. The point has been made fairly forcibly, if I may say so, by the noble Lord, Lord McIntosh of Haringey, since he suggests that this is perhaps the only political point that seems to emerge from the Bill. Perhaps I may comment by saying that the Pharmaceutical Price Review Scheme has operated over nearly 30 years now with the agreement of both major parties when each has been in government. The scheme has sought to promote not only a manufacturing base for drugs in the United Kingdom but also to establish research centres in this country. It sets the annual profit ceilings for individual pharmaceutical companies for their total sales to the National Health Service.
The Department of Health and Social Security examined all aspects of company costs—profits, capital and so on. It is against this background that it considers that the abolition of licences of right would not have any significant overall effect on National Health Service costs.
It is seen as essentially a matter of maintaining the level of income for companies which have undertaken basic research and development, rather than requiring them to share it with companies which have not borne that cost. Perhaps when noble Lords come to read what I have said they will note carefully my opening remarks in relation to the increasing costs that are now involved in the complex matters of discovery, of invention and of innovation.
§ Lord McIntosh of Haringey
My Lords, before the noble Lord leaves that point, will he give way to a genuine inquiry for truth? If it is the case that there are no significant additional costs to the National Health Service, what then is the pressure for this Bill? Presumably what he is saying is that the PPRS already keeps the pharmaceutical companies' costs to the National Health Service down to reflect research and development. Presumably also therefore the PPRS reflects the additional burden on the pharmaceutical companies, which has been so eloquently expressed, from the increased development time for pharmaceutical products. Is it not the case that brand products cost more than generic products? How can somebody gain with nobody losing? I do not understand it.
§ Lord Lucas of Chilworth
My Lords, it is reasonably simple. While the price review system controls the profitability of that element of profit that is made out of sales to the National Health Service, it means that, should the costs rise by virtue of the increase in research and development which I have described, then that would have to be taken into account. Therefore, the rate at which the National Health Service would have to pay would have to go up. However, if the companies are able to retain more profit of their own invention by virtue of maintaining the profits from a further four years, which is now the 20-year term set by the 1977 Act, then that amount of money can be turned back of their own volition into research and development. That means that the cost to the NHS would be held or would be, as I have described it, not significantly increased. I do not believe that the noble Lord's fears, or indeed the fears of other noble Lords, with regard to the cost to the National Health Service are well founded.
I have mentioned all noble Lords who have taken part in this debate apart from the noble Lord, Lord Hacking, whose examples were extremely interesting. I was glad that at the end of his remarks he was able to give his general support to the Bill.
In conclusion, I should like to stress that the Government see the Bill as most desirable in order to help the confidence of investment in further research and development. I commend the Bill to your Lordships.
§ Lord Northfield
My Lords, this has been an interesting debate. As in all debates in your Lordships' House, one always learns something. I did not know the delightful quotation which the noble Lord, Lord McFadzean, had extracted from Jeremy Bentham about an adequate period of exclusivity. I shall beg leave to use it myself on future occasions. I am very grateful to the noble Lord for his support. I did not know the delightful calculations of the noble Earl, Lord Halsbury, about the number of years one has to live, hopefully, in order to profit from any invention. I shall study that with great interest.
I was not aware in detail of the kind of examples that the noble Lord, Lord Hacking, mentioned with regard to the way the erosion of patent life is now going on in those drugs with which he dealt. One learns a great deal all the time and I am grateful to noble Lords for their support. I am especially grateful to the noble Lord, Lord Lloyd, as he has been a stalwart on this matter for many years. I have asked for and received his most generous support in helping me with this Bill. I hope that that will be so when we move it in the future to the other place.
I have many thanks to express this evening. I am grateful, too, to the noble Lord, Lord Lucas, for expressing the Government's clear support for the Bill and for dealing with some of the issues that have been raised. I come to the speech of my noble friend Lord McIntosh. He has obviously fallen for a great deal of the propaganda by PLUS. He did not think that it was deceitful. Perhaps I may give him some examples. The first page of one of its documents says: 466Many independent UK drug companies—the generic sector—are not convinced that additional protection is essential for continued development of drugs".That is deceitful. It implies that the generic sector is being spoken for in this document and that it is against this repeal. That is deceitful. The producers of 90 per cent. of generics—the document calls it the generic sector—are in the ABPI and want the repeal of this provision. This document has no right to claim that it speaks for the generic sector.
§ Lord McIntosh of Haringey
My Lords, I am grateful to my noble friend for giving way. I do not doubt what he says. Indeed, I did not say that I questioned the statements on either side. My attitude was one of complete puzzlement at the conflict of evidence which was presented to me. What proportion of the remaining generic companies are subsidiaries or financial associates of the branded drug companies in the Association of the British Pharmaceutical Industry? Clearly, any association they may have will affect their attitude towards this Bill.
§ Lord Northfield
My Lords, I do not know the figure but I can say to the noble Lord once again that representatives of the producers of 90 per cent. of generics are in favour of this Bill. It is wrong for this organisation to say that the generic sector is not convinced about the Bill. That is what it claims to do.
I give another example. It says that the transition provisions of the Bill drive a coach and horses through the commitment given by the Government about applications made before the Bill. That is just not true. There is no retrospective legislation involved in the Bill.
My noble friend challenged me to produce examples of deceit. I give a third example. It says that in order to whip up propaganda against the Bill and make us feel embarrassed that,Lord Northfield in the final clause of his Bill, seeks to change the law as declared by the House of Lords in the recent Gist-Brocades case, whereby the House of Lords held unanimously that the Comptroller has jurisdiction to entertain licence of right applications before the commencement of the seventeenth year of a patent.On the contrary, my Bill actually carries out what the legal ruling of your Lordships' House recommended. It does not change the law in the other direction.
This is a document which is full of half truths and deceit, and I shall not go on further. I am sorry that my noble friend has fallen for the propaganda of these two very small South African companies. I hope he will reconsider his position before we make further progress.
The other point that he raised concerns the cost to the National Health Service. I shall be happy to deal with that further during the Committee stage, if the noble Lord wishes me to do so. However, the position has been fairly stated that the Department of Health and Social Security has examined this problem and is fully behind the Bill, believing the cost to the National Health Service will be minimal.
I shall now deal with the point made by the noble Viscount, Lord Craigavon, and then have one final comment to make. I do not think the noble Viscount expects me to give him an answer this evening, but I 467 would say that the option he put forward of altering the starting date or cut-off date, whatever one likes to call it, is not a good one. It could mean many months of delay. A better way might be found in discussions with him on the issue he raised; namely, those people who applied for licences where they had already been granted to someone else and whether we can find some way to cover that point rather than altering the date. I am sure it will be helpful to have discussions with him after Second Reading.
My final comment is this. I repeat—
§ Lord Lloyd of Kilgerran
My Lords, I apologise to the noble Lord for interrupting him in his peroration and at the end of his speech but there has been so much confusion about the effect of this Bill that it would be helpful to have on record that the Bill makes no amendment to Section 48 of the Patents Act, 1977, connected with compulsory licences and applications for compulsory licences that can be made to the Comptroller-General. The Minister mentioned that applications in relation to compulsory licences were in the Bill. They still remain and there is no attempt to amend that.
My final reason for intervening is that during my speech I apologised and explained that I would not be here for the end of the debate. However, I also wish to have on record that I am still here at the end of the debate.
§ Lord Northfield
My Lords, I will not keep the noble Lord for more than another minute or so.
Finally, may I say that this Bill comes to the heart of the matter, as I tried to say in my opening speech. Do we intend to carry out the obligation which we undertook to give an effective 20-year patent life? Either we mean it or we do not. Now that the effective patent life is not only not 20 years but is continuously reducing and is probably not even 12 years or even 8 years, is it not proper that we should face up to one mistake made in an earlier year where we have allowed a further erosion of patent life deliberately to take place? Either we mean that we want to be on the right side of this matter in giving proper protection for patent life or we do not. This Bill is part of an attempt to remedy something which is reducing the effective patent life.
§ On Question, Bill read a second time, and committed to a Committee of the Whole House.
§ House adjourned at fifteen minutes past ten o'clock.