HL Deb 19 March 1987 vol 485 cc1540-58

4.56 p.m.

Lord Northfield

My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee.— (Lord Northfield.)

House in Committee accordingly.

[The LORD AYLESTONE in the Chair.]

Clause 1 [Restriction of acts authorised by certain licences]:

The Deputy Chairman of Committees (Lord Aylestone)

In calling Amendment No. 3 in the name of the noble Lord, Lord Stallard, I should remind your Lordships that the debate on the amendment, which was moved on 4th February (col. 319 of Hansard), was adjourned pursuant to Standing Order No. 55. Unless therefore any noble Lord wishes to continue the debate, I shall have to put the Question.

Following is the amendment: Page 1, line 24, at end insert ("and within the prescribed time limits").

Lord Northfield

I should briefly like to say a few words because my voice is disappearing rapidly. I am grateful to the Chief Whip and to the officials for kindly arranging for the Committee's work to resume at an early hour today. After our experience at 11 o'clock the other night, this is appreciated. I apologise to your Lordships for the fact that, in my view, the proceedings on the last occasion degenerated to standards of dignity that were below what we proudly maintain in this Chamber. My views have been made clear in private.

If I may be permitted a lighthearted remark—and I mean it to be lighthearted—I hope that the noble Lord, Lord Mclntosh, is enjoying his visit to China. I guess that others will join me in hoping that his Chinese hosts will perhaps make him an honorary Chinese citizen and prevail upon him to stay for a long time with them.

I turn to the amendments which we were discussing. They concern the date on which the provisions of the Bill will begin to operate. I listened carefully to my noble friend Lord Stallard pressing that they should operate from the date of the passing of the Bill, rather than from the date of publication. I asked for time to consult on that point, and when the issue was pressed I forced a Division so that I could consult. As I explained to my noble friend, I have accepted his pressure with some reluctance.

However, it will be unfair on companies that have been waiting almost a year for the repeal of licences of right which was promised last May. The major trade unions that support the Bill will also be sorry, because the interval will no doubt see further licences of right granted to copyists and production perhaps later on transferred abroad to the detriment of jobs in the United Kingdom.

Nevertheless, in an attempt to secure agreement on the Bill, I have with good grace tabled amendments to carry out what my noble friend Lord Stallard wished to see, and he has kindly withdrawn his amendments which were technically defective. I am also grateful to the noble Viscount, Lord Craigavon, for withdrawing his amendments. I understand that he accepts that the amendments I have tabled cover the points that he kindly raised at the last sitting.

As the matter was fully debated on the last occasion, I hope that we may now proceed by accepting my noble friend's Amendment No. 3 and later on my Amendments Nos. 6A and 8A.

Viscount Craigavon

Will the noble Lord speak in detail to those later amendments or has he already made his main speech?

Lord Northfield

I have, yes.

5 p.m.

Lord Northfield moved Amendment No. 6A:

Page 1, line 25, leave out from beginning to end of line 13 on page 2 and insert— ("(4) A declaration may not be filed if—

  1. (a) there is an existing licence for any description of pharmaceutical use of the product, or
    2. 1542
  2. (b) an application is outstanding under section 46(3)(a) or (b) above for the settlement by the comptroller of the terms of a licence for any description of pharmaceutical use of the product.
and, in either case, the licence took or is to take effect at or after the end of the sixteenth year of the patent.").

The noble Lord said: I beg to move. I have just spoken to this amendment.

Viscount Craigavon

I make a few remarks on this amendment because I was involved with the issue of retrospection at the earlier stage of the Bill. Briefly, I am grateful to the noble Lord, Lord Northfield, and the ABPI for the amendments before us. It is important that normal practice as regards retrospection has now been accepted, and the time scale of the effect of this Bill is now clear on the face of it, and we should be grateful for that.

The noble Lord, Lord Lucas, may have seen from Hansard. that despite his enforced absence abroad at the previous stage he made quite a considerable contribution to the debate about retrospection thanks to my lengthy quotations from his earlier speeches on the subject. I should be grateful if the noble Lord could make clear the attitude of the Government to this Bill, and how he sees the prospects for it in the other place.

If the noble Lord, Lord Northfield, is going to speak again I should like to know how he expects this Bill to receive any time for debate in another place. If, as I believe, there is little practical chance of any progress there, the noble Lord, Lord Northfield, is in a slight danger of wasting the time of this House in pressing on with this Bill, even though one might agree with the principles of what he is, in my opinion rather forlornly, trying to achieve.

Lord Lucas of Chilworth

I remind myself that we are back in Committee, and I shall respond to any point that is put to me on any amendment as and when those amendments come up. I think I made the Government's position clear at an earlier stage in the Bill, and my noble friend Lord Beaverbrook made it abundantly clear when he looked after the first part of the Committee stage. We support the principle behind this Bill. I really do not think that I can answer for another place.

Lord Northfield

Neither can I. I should just like to remind the noble Viscount, Lord Craigavon, that when I put through the deer legislation I had to put it through three times before I got it through the other place. No time is wasted. You get the Bill in final shape. Regarding the point about how long it will take to go through, I hope it will be very soon.

[Amendment No. 7 had been withdrawn from the Marshalled List.]

Lord Stallard moved Amendment No. 8:

Page 2, line 21, at end insert— ("(8) A declaration filed under this paragraph shall have no effect, and any declaration already filed shall cease to have effect, in relation to a medicinal product which has been licensed for sale or supply in the United Kingdom under section 7 of the Medicines Act 1968 for a period often years or more.").

The noble Lord said: This amendment may take a few more minutes. The issues raised go right to the heart of my concerns about the Bill. My amendment proposes that patent protection should last the development period plus a further 10 years from the date when the drugs are first sold to cover research and marketing requirements, to be followed by the generic substitution after that 10th year.

Since our previous sitting I have been able to discuss the issues with representatives supporting the Bill and with representatives from the opposite camp. I have also sought clarification on the possible costs of the proposals to the National Health Service. I am bound to say that 1 am now more than ever convinced that this whole subject is not one that ought to be dealt with by way of a Private Member's Bill.

I said that during the previous sitting. I only have to repeat here that after giving it further consideration, and after further discussions with many people, because of the complexity of the issues raised, the amount of in-depth analysis and research necessary to present the case for or against the abolition of licences as of right, it is far beyond the resources of any private Member. I would have hoped that it would have been a government Bill.

The longer I study it, the more I think that there is a case that could be argued both ways. We could argue for either side in this particular case, either for or against the proposals. But there are many points of view that have not even been considered, and many people who have not been consulted. There is the whole administration of the National Health Service, many of whom would have an opinion about the abolition of these licences.

There are various government departments who would be involved, and I have not seen their views on this issue. There are the consumers; the GPs; the hospital consultants; the surgeons; the anaesthetists: the professional representatives; the trade unions representing the production side of the argument; the pharmaceutical industry itself; the drug companies, including the generic sector. These must surely all have an opportunity to express views, and not just one or two people.

In a Private Member's Bill like this we can give some views for or against; but the views can, of necessity, be limited, for the reasons 1 have just given, to selected calculations from parts of the interested and affected groupings. I find that unsatisfactory. It is certainly not sufficient. What is needed is a properly-researched measure presented by the Government, subject to widespread scrutiny, and allocated sufficient parliamentary time for detailed debate. Only then can we be sure that we are treating this subject with the gravity it deserves.

It has been mentioned that, given that this Bill has not yet passed all its stages in both Houses, it is just possible that it might be overtaken by the impending general election, and so the Bill could still emerge in another Parliament as a government Bill. That might be conjecture, but I hope that it might be near the truth. Therefore, we are dealing with a difficult situation, given all the circumstances.

However, we have to deal with the situation. We have this Bill, and I want to come back to my amendment. The Association of the British Pharmaceutical Industry claims that the Bill is necessary in order to ensure that drugs protected by patent have a sufficiently long period on the market to ensure that research and development costs are reasonably recovered. Again I find that a fair argument. I would not quarrel with that. There is nothing wrong with that. But it begs the question of how long is reasonable. What is a reasonable time?

In a recent proposed EC directive the Commission puts forward 10 years for the marketing of bio-technological medicines which are not protected by patent. This amendment proposed 10 years—the same time. The average length of time that it has taken the 15 best-selling products which have become available under the licence-of-right provisions of the Patents Act 1977 to enter the market has been under six years. This is according to a document that I dare say most noble Lords have received from an organisation called PLUS—the Pharmaceutical Licences Under Siege organisation.

They give examples and they say that the best-seller, ranitidine, better known under the brand name of Zantac, was on the market in under five years. According to numerous press reports—and I read a long report in the Guardian at the time—that is generating profits of £300 million a year. It will therefore enjoy a patented product life of over 11 years before it becomes available under licence of right.

The second in the table is atenolol, and that took under seven years to go on sale. Another one, amoxycillin, took fewer than four years, and salbutamol took fewer than three. There is a long list of similar examples which was circulated to Members of your Lordships' House.

Ten years, in the light of those circumstances and those statistics (and I have no others), would seem to be reasonable. The multinational drug companies must be properly rewarded for their research and development activities, and I have said that. But it is hard to imagine, particularly when you examine the performance of their shares on the stock markets all around the world and read the reports in the papers, to which I have just referred, that they need the extra profit—it has been called a windfall—that they would get from the Bill being put forward by my noble friend Lord Northfield.

On the other issue, my noble friend Lord Mcintosh sought at an earlier sitting on this Bill to find out how much extra the National Health Service would have to pay for its drugs if this Bill was passed. The noble Lord, Lord Lucas, was quoted as saying that the cost of abolishing licences of right would be insignificant. The association representing the pharmaceutical industry said that no exact figure can be calculated in relation to events a decade ahead. It even said in a handout that it was quite possible, at least in some cases, that the National Health Service would save through licence of right abolition.

Recently it conceded that the sum might be in the region of £5 million to £10 million. That might not be much in the context of the tremendous profits I have just mentioned, but it is certainly quite significant if we recall the state of the National Health Service and the views that we hold about it. I know that Members on all sides of your Lordships' Committee have expressed grave concern about the financial state of the health service, with the cost-trimming exercises that have been imposed causing great hardship to hospital administrations all over the country and certainly in London. Essential maintenance is being postponed and hospitals, wherever one goes, are beginning to look tatty and almost run down. Waiting lists for some operations are becoming nearly unmanageable and there is a great deal of concern about that all over the country.

We have debated these matters both here and in another place. The Government, to their credit, are currently reviewing their attitude and their expenditure in connection with some of these areas and are making more money available. Again to their credit, they have also expressed doubts about the cost of the National Health Service drugs bill.

In a document published last April, Primary Health Care—an Agenda for Discussion, the Government recommended that doctors should prescribe generic equivalents of branded products when these were available. I understand that special government leaflets were sent to all GPs, encouraging them to prescribe generic drugs. We also had the limited list scheme, which was aimed at cutting the costs of National Health Service drugs by ensuring that the cheaper generic medicines were dispensed wherever possible.

My noble friend will argue that the PPRS would stop multinational drug companies making excessive profits, and there is merit in his argument. But if the DHSS can recoup its losses by means of this PPRS, why do we need this Bill? That is the question I ask. The independent Henley Centre for Forecasting—we discussed this very briefly at the previous sitting—has produced a report setting out a case which calculates that the cost of abolition to the National Health Service could be at best £50 million a year by the early 1990s, with the possibility of the figure rising to as much as £ 190 million. Given the state of the National Health Service—and we all know about it—and given the commitment of my party and myself to the National Health Service, it is natural to expect us to be concerned about figures of the size of £190 million.

I hope therefore that the noble Lord who is sponsoring the Bill will be able to reply to some of the points that I have made and that the Minister may be able to supply estimated and updated costs for the National Health Service of the abolition proposals. Ideally, I hope both noble Lords will be able to accept my amendment. I beg to move.

5.15 p.m.

Lord Williams of Elvel

I apologise to the Committee for entering into the debate at a rather late stage. The debate has been interesting and indeed somewhat complex. I rise merely to support one of the points made by my noble friend Lord Stallard in moving his amendment: that is, the question of the cost of the National Health Service. I have read through the reports of the debates and, as my noble friend pointed out, a wide variety of forecasts have been made. That is not unreasonable, because clearly we are dealing with a period ahead in time and it is rather difficult to make exact estimates.

Nevertheless, the noble Lord, Lord Lucas, has made the Government's position on the Bill absolutely clear. They do support the principle of the Bill. In the light of that, I think it would be sensible and also important for the Government to give us their view and their estimate of what the cost to the National Health Service would be if the Bill were enacted—not of course in the state in which it was first introduced but in the state we have it at the moment, as amended by Amendments Nos.1 and 3 put foward by my noble friend Lord Stallard.

I also ask the Government to give us something we can grasp hold of, if I may put it in that way—not a word such as "insubstantial", "insignificant", "unreasonable" or whatever it may be. I should like them to give us something we can actually get to grips with, like a figure. I would, if I may, request any such figure to be calculated before compensating action is taken through the pharmaceutical price regulation scheme. In other words, I fully understand that there is a compensating mechanism that the Government can introduce if the cost to the NHS in gross terms is, let us say, too high. Nevertheless I think that one has to start with a base figure of what the Government feel might be the cost before any compensating action is taken.

I put this question to the Government because, as my noble friend Lord Stallard pointed out, this is a slightly odd Bill to come to us as a Private Member's Bill. One would have expected it to come as a Government Bill; and since the Government have given their support to the Bill I believe they have a duty to give the Opposition the sort of figure that I am asking for.

Lord Somers

I approve of the purpose behind this amendment but there is just one point I wish to make. Surely 10 years is rather excessive. The noble Lord mentioned some other alternative times in his speech. I should have thought that any product on the market without complaint for a period of three years can be considered quite safe; but of course that is merely my opinion and I leave the matter to your Lordships.

Lord Hacking

I wish to be wholly supportive of the new harmony which is now to be found between the noble Lords, Lord Stallard and Lord Northfield, and I rise, first, to support the amendment of the noble Lord, Lord Stallard.

Lord Stallard

The noble Lord is not suggesting that it was ever otherwise, surely!

Lord Hacking

I shall block from my memory the discussions that were held in your Lordships' Chamber during an earlier stage of this Bill. While I am on my feet, perhaps I may give an immediate response to the noble Lord who has just spoken. He may not have been here during the ealier debates on this Bill, and particularly during its Second Reading when the position was explained. In a sentence, the drug has to be patented before the manufacturer has had time to do research and to carry out a number of extensive tests. For that reason, there is a period of 12, and sometimes 15, years between the date of the patent and the date when the manufacturer can market the product. That is why a fairly extensive time—though I am not going into the actual number of years—is needed.

I was not expecting at the Committee stage to declare this interest, but I feel bound to do so. My wife is a consultant anaesthetist at a big National Health Service hospital which is very close to your Lordships' House. She, like her colleagues, is fully aware of the funding problems of the National Health Service and of the need to be cost-conscious. Indeed, one concern of many doctors in national health hospitals is the desire of consultants and physicians to go for the latest and rather expensive drug in the course of treatment when older and well-established drugs which cost far less would meet, and do meet, the needs of most illnesses that the physicians and doctors treat. It is only in more specialised cases that there is a need for the more advanced drug.

In the more specialised cases there is that need, and that is why I believe it is not right, having heard so much discussion about the test of cost to the National Health Service, that this should be the exclusive test. At the end of the day, the National Health Service and our hospitals are seeking to assist patients and make them better. If a new albeit very expensive drug is available and it is the only drug which will ease that patient's difficulties, that factor should be taken into account. I draw your Lordships' attention to that point when considering the issue of costs.

Things do not all work in the direction of more expense to the National Health Service caused by new drugs coming on to the market. I mentioned at Second Reading a drug called Diprivan. That drug is an anaesthetic which has special value in day surgery. It enables the anaesthetist to treat patients in day surgery, as opposed to surgery that keeps them in hospital overnight. Therefore, that drug has a potential for saving costs in the National Health Service. Those are the observations that I have to make on the issue of cost to the National Health Service.

The other observation which 1 should like to make is whether the vehicle chosen for dealing with the problem of licence of right—a Private Member's Bill as opposed to a Government Bill—is the right vehicle. Time is of the essence. This Bill concerns only drugs that were patented between 1967 and 1978. The vehicle of the Private Member's Bill has now been chosen. In my respectful submission, the Bill should now be sent—your Lordships having given it full consideration—to another place in the hope that it will receive there maximum support from the Government as well as the full consideration which the noble Lord, Lord Stallard, seeks for it, so that it may pass quickly into law.

Lord Lucas of Chilworth

I say to the noble Lord, Lord Stallard, that I fully understand his concern. However, I must indicate that I cannot accept his amendment. I recognise that some pharmaceuticals receive marketing approval long before others, and the noble Lord indicated a number of these. However, the Government's decision to remove pharmaceutical patents from the scope of the licences of right provisions of the Patents Act 1977 was based on the average increase in time taken to obtain marketing approval since 1977. We must take account of the need to encourage research and development in this important field. The Government have always recognised that profits from medicines entering the market earlier than the average play an important role in financing this.

I do not want to re-enter the discussion we had only a few nights ago on the value of the pharmaceutical industry to the nation as a whole, to the sick as well as to the economy. But the noble Lord, Lord Williams, has specifically raised the question of costs, and I am grateful to him for telling me that he would do so, because it enabled me to prepare for it.

Shortly before the beginning of the Committee stage on 4th February, an estimate was published—I think that the noble Lord was referring to the same one that I shall refer to—which I believe has come to be generally recognised as considerably exaggerated and quite unreliable. That may serve—and I say this in parenthesis—to underline the hazards of rushing into print with figures that are not sustainable.

When I and my noble friend Lord Beaverbrook were asked what was the Government's view on these matters, we informed the Committee of your Lordships' House that the Department of Health and Social Security had examined the position and was satisfied that any additional cost to the service would not be significant. One or two noble Lords invited us to offer a figure for the estimated cost. I shall do this, but I must emphasise the precarious nature of any forecasting in this area and the relationship between savings on licensees' medicines and the operation of the Pharmaceutical Price Regulation Scheme, the PPRS, to which a number of noble Lords have referred. I think the noble Lord, Lord Williams, recognised that there was some little difficulty in looking forward to what is not a totally predictable future, particularly in this area.

I emphasise here that the purpose of the PPRS is to set a ceiling on the amount of profit which any pharmaceutical company may earn from the supply of branded medicines for use by the NHS. It is important that we keep this in the forefront of our minds. It applies to each company individually. The circumstances of particular companies are constantly changing. For those affected by a licence of right, there could be implications for the assessment of the company's position under the Pharmaceutical Price Regulation Scheme.

A "saving" to the NHS, which reappeared as an allowable profit flowing from increased prices of other products within PPRS rules, would not be a real saving but a transaction which moved cash away from the original innovative company to those who had played no part in the underpinning research and development work. I recognise the difficulty faced by your Lordships, both in the House and in Committee, in addressing this question of costs and I have considered how I can give a clearer and more specific indication than we have previously given.

The Department of Health and Social Security has examined very closely all the factual information to date on the effect of licences of right. This is, I admit, somewhat limited because these arrangements have only recently begun to have an effect. The analysis indicated that in 1985 and 1986 there were estimated cost savings to the National Health Service of less than £1 million in the first year and about £1 1/2 million in the second year, when a total of four products were affected. It might help if we were to consider the sum of around £1 million in the perspective of the total NHS drugs bill of £1,800 million. It is a sum that is within the normal area of tolerance. Even so, these sums represent the maximum estimate of possible additional cost to the NHS if licences of right had not existed.

I apologise to the Committee for being repetitive. However, I have to stress that part or all of these sums may not be a true saving because of the operation of the PPRS. What would happen in the future if the law stands unchanged must be uncertain to a degree. It depends on the number of drugs for which licences could be sought, the number of licences granted, the associated royalties payable, and so on. It is affected by market penetration and prices of licencees' products. The department's examination—and I am speaking of the DHSS—of future possibilities does not suggest any major change from the 1986 position in the years immediately ahead.

Nevertheless, the Government recognise that there is concern among innovative companies holding patents which could be subject to licences of right under present legislation. The Government appreciate that they have invested substantial amounts over a long period in developing their patented drugs, and they are conscious that in the longer term these firms' continued research and development work is essential to improved patient care. We wish to encourage that work by allowing a fair return on investment over the balance of the full 20-year patent life remaining once patented drugs are marketed.

The advantages to the country of the research-based industry have been spelt out on many occasions. But it is useful to note that this is one industry which has consistently provided a healthy balance of payments. In simple terms, what is before us is a choice of supporting an industry, which under both Labour and Conservative Administrations has produced new drugs to provide a saving in hospital beds and the need for operations and other kinds of care.

I believe that the disadvantage suggested by the figure mentioned and by some of the arguments put foward is far outweighed by some of the advantages that I have sought to illustrate. I hope that the noble Lord, Lord Williams, and others who have raised the matter of costs will feel reassured and will not feel that either I or my noble friend have sought to evade the question which is posed so directly to the House this afternoon.

5.30 p.m.

Lord Northfield

Before I comment on the amendment of my noble friend—and I must be brief because my voice is nearly gone—perhaps I may refer to what I said at Second Reading about one of the copyist companies, Generics UK. Solicitors for the company have asked me to point out that the company is not South African. The matter does not rest there; disquiet about the company has surfaced in another place. Answers given there indicate that Generics UK is 60 per cent, owned by a company named Interpharm which is registered in Panama. I leave the matter there; I have put the copyists' case, as I have been asked to do.

I have listened with great care to the moderate and persuasive case put by my noble friend for his amendment. He has now heard the Minister. I shall only put one or two further considerations to him. I think that he will agree that the case for repeal is strongly supported by four leading trade unions operating in the pharmaceutical industry. They were on the NEDO working party, which had nine trade unionists on a committee of about 25. They also published reports on R&D aspects. The unions concerned were the Transport and General Workers' Union, the Association of Scientific, Technical and Managerial Staffs, the Union of Shop Distributive and Allied Workers, and the General, Municipal, Boilermakers and Allied Trades Union. They were all strongly in favour of repeal. My noble friend will say that we cannot always follow the wishes of the trade unions. But of course their painstaking work, which took two years and produced a massive technical report, will count with him when he considers what to do about the amendment.

I shall make two final points. The amendment, as drafted, would be particularly unjust. I am sure that my noble friend will accept the evidence, so clearly given, that some patent lives are disastrously eroded. Some medicines, as I have explained, are subject to licences of right soon after they arc allowed on the market. When this happens, such companies should, I suggest, be allowed a longer run of life within the law and without being cut off at 10 years from the protection that my repeal Bill affords. It would be very unjust if companies which have very short runs on some newly patented drugs find that the others which could compensate them to some extent will be cut off at 10 years.

Finally, if my noble friend wants to be fair (as I am sure he does) perhaps he can tell me why his amendment does not provide for all patents to have at least 10 years before licences of right are allowed. As drafted, it deprives the ones with longer life but does nothing to help those with a very short patent life before copying is allowed.

The remedy in the long run, and I hope in the short run, will be to extend patent life as had been done in America, for example, so that the time taken in testing does not count against the total which is allowed. In the meantime, in the interests of research, I hope that my noble friend will feel that it is proper to agree to the repeal and not to limit protection to 10 years. Perhaps I may quote to him from the research and development report of NEDO which had trade union support: it has been reported that, because financial projections showed that there would be insufficient time to obtain satisfactory return on R&D investment, some promising lines of research have been abandoned". The danger we face is that more and more promising lines of research will be abandoned if we continue to see the erosion of patent life and if we do not take one step to restoring it by getting rid of the right of copyists to copy drugs in the four years which are under consideration in this Bill. It is therefore in the interests of R&D that this Bill is being promoted. I hope that on consideration of all these matters, my noble friend will feel able to withdraw his amendment.

Lord Stallard

I have listened to the debate with great interest. I hope all noble Lords will accept that no one on this side of the Chamber, and certainly not myself, would want to interfere or hold up research and development in important fields. That has not been one of our objectives. As I have said before, we accept the need for R&D and the time and effort which is spent in it. Nor do I decry for one second the efforts of the trade union movement and the contributions which its representatives have made on numerous committees in looking after the interests of consumers and of their members in relation to all these matters.

I am not entirely convinced as regards the loss to the NHS. There are confusing and differing sets of figures. I am sure that the Minister will accept that the figures he gave in his intervention are something I wish to reread and compare with other statistics and discuss with members of the National Health Service. However, I do not want to hold up anything in the meantime. While I may decide to return to this at Report stage, in view of what has been said, and in view of the Minister's intervention in relation to the DHSS, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 1, as amended, agreed to.

Clause 2 [When application may be made for settlement of terms of licence]:

Lord Northfield moved Amendment No. 8A:

Page 2.line 28. leave out from ("paragraph") to end of line 31 and insert ("applies to applications made after the commencement of the Patents (Amendment) Act 1987 and to any application made before the commencement of that Act in respect of a patent which has not at the commencement of that Act passed the end of its fifteenth year").

The noble Lord said: I spoke to this at the beginning of our proceedings this afternoon. I beg to move.

Clause 2, as amended, agreed to.

Lord Kilmarnock moved Amendment No. 9:

After Clause 2. insert the following new clause:

("Non-proprietary Medicines

After section 25 of the Patents Act 1977 (term of patent), insert— Non-proprietary Medicines 25 A. (I) Where on the expiry of a patent, or by virtue proprietary of a licence under patent, a non-proprietary medicinal Medicines. Product is lawfully available on the market in the United Kingdom, a chemist providing pharmaceutical services pursuant to the National Health Service Act 1977 and any Regulations of Orders made the reunder, shall supply that non-proprietary medicinal product in response to an order on a prescription form for the equivalent proprietary medicinal product unless specifically instructed to supply that proprietary medicinal product by the registered medical practitioner making the order on the prescription form. (2) In subsection (1) above "proprietary medicinal product" shall have the same meaning as in subsection (7) of section 7 of the Medicines Act 1968, and "non-proprietary medicinal product" shall mean any medicinal product, as defined in that subsection, which is not a proprietary medicinal product." ").

The noble Lord said: I am afraid that I must also trespass on the Committee's time for a few minutes to introduce an idea which has not previously been touched on. I must also apologise for coming in at this stage but I was ready to speak to this amendment on the first day of Committee which, for the reasons that we all know, collapsed.

In moving this amendment I want to make it quite plain that I have absolutely no interest to declare but the public interest. I advise nobody, I am retained by nobody and I have no holding in any pharmaceutical company, generic or otherwise. I have even managed to hold at arm's length all lobbyists, which has been quite an undertaking in relation to this Bill. I repeat that the public interest is the one that I have to declare.

There is clearly a fine balance to be struck between assuring to the holders of patents a proper return for their costs in developing their branded products and the effect of such a proper return on the drugs bill to the National Health Service. It was on this balance that much of the debate both at Second Reading and on the first day of Committee turned, and indeed on Amendment No. 8 introduced by the noble Lord, Lord Stallard.

On the question of patents protection, I broadly accept the case that the industry has put to the Government and which the Government have chosen to offload, for reasons best known to themselves, on to the able and not unwilling shoulders of the noble Lord, Lord Northfield. It is clear from the NEDO publications on pharmaceuticals and research and development, and from other sources, that the lead time required for bringing innovative drugs on to the market has increased and is now probably in the region of 12 or 13 years. I am prepared to accept that. I have been asked more than once to state the Alliance position on patent life in debates organised by the ABPI and I have always given the assurance that the Alliance recognises the need for enough leeway in patent life to encourage the development of new drugs required equally for the NHS and for our export performance.

However, when it comes to licences of right, which the Bill seeks to repeal, I am a little more torn, as it has to be borne in mind that some of the drugs which would receive a four-year reprieve under the Bill fall into the profitable category which has already been referred to by the noble Lord, Lord Stallard. This includes drugs such as Zantac, which costs the National Health Service some £40 million annually, Ventolin, costing £37 million, ICI's heart drug, Tenormin, costing £38 million, and Beecham's antibiotic, amoxycillin costing £37 million.

It has been suggested that the lead time on the development of these drugs, although it is generally accepted that lead time has increased in recent years, was somewhat shorter. The noble Lord, Lord Stallard, mentioned a period of six years before marketing. My information is that the period is somewhat longer. Even so we are talking about large sums continuing to be realised on drugs that could be said to have received already a fair return. This is where I put on my hat as a health spokesman, which means that I cannot be indifferent to National Health Service costs and that I have to take them seriously.

There were heated exchanges on this subject on the first day of Committee, not least between the noble Lord, Lord Northfield, and his own Front Bench and other members of his party. I do not want to follow him into that ideological conflict with his noble friends, of which I have not lost the memory. I want rather to concentrate on his repeated assertion that nothing under the Bill could possibly affect National Health Service costs because these are contained within the envelope of the pharmaceutical price regulations scheme which limits the profits that the industry can make out of its National Health Service business.

This is the broad intention in general terms, but it is not quite so conclusive and cut and dried as it might seem. The drug bill of the health service rose by 7.3 per cent, in 1985 even though the number of prescriptions fell by 12 million. The scheme as renegotiated in 1986 continues to provide a grey area within which it may be allowed in certain circumstances to retain additional profits earned on National Health Service medicines. Allowable promotional expenses vary with sales, and new products may be priced at the discretion of the company.

As a result of this last provision, some health authorities simply cannot afford some of the new drugs coming on to the market. One example is Cyclosporin, the post-kidney transplant drug, which is priced so high that it is only marginally cheaper than haemodialysis. The PPRS is a complex scheme, with a number of variables. I think I am right in saying that even the ABPI has recognised that the Bill could lead to a rise in NHS costs of £5 million to £10 million.

The noble Lord, Lord Lucas of Chilworth, said on 13th January (at col. 464 of the Official Report) that it would not have any significant overall effect, but that depends on one's definition of "significant". An increase of £10 million or even £5 million could have a great impact on kidney dialysis or on cervical cancer screening for younger women, a field in which a sum of that order would make a vast difference.

Lord Williams of Elvel

I am sorry to intervene. On the last amendment we went over the question of National Health Service costs and the Minister gave us a full reply. Is the noble Lord disputing the figures we have, which I think are more up to date than the ones he has been reading out?

Lord Kilmarnock

I was about to come to the intervention of the noble Lord, Lord Lucas, in which he mentioned the sum of £1 million. I think he said that that would have been the difference, if licences of right had not operated, over four products. If I am right, and if I did not mishear him, that appears to me to affect a fairly limited part of the spectrum. I respectfully say to both the noble Lords, Lord Lucas and Lord Williams, that we are still not entirely in the clear on the ultimate cost to the National Health Service.

Lord Lucas of Chilworth

I am grateful to the noble Lord for giving way. Perhaps I should repeat what I said, because there is no picking particular figures. These were the actual figures. I said that that analysis indicated that in 1985 and 1986 there were estimated cost savings to the National Health Service of less than £1 million in the first year and £1.5 million in the second year, when a total of four products were affected.

Lord Kilmarnock

That is exactly what I thought I heard the noble Lord say and what I believe I reproduced in my own words. I am certainly grateful to him for repeating it but it still does not seem to cover the whole of the field that is relevant in this matter.

Even supposing that the low-cost case is waterproof—and I do not accept that it is—we are still left with the undoubted fact that higher profits on drugs freed from licence of right must mean leaner times for generic companies. The noble Lord, Lord Northfield, referred (at col. 314 of the Official Report for 4th February) to, '"this reallocation of profits between the generic producers and the original producers, which is what this Bill is about". Those were his words and I see him nodding. That, of course, is correct. All drug sales to the National Health Service above £1–5 million, including generic sales, fall within the PPRS. Therefore it is the generics which will be squeezed by this Bill.

In my opinion that is not desirable from the National Health Service point of view. This does not mean that I accept the assessment of the Henley Centre for Forecasting of the effects of the Bill, which was promoted by the PLUS campaign. The noble Lord, Lord Lucas, said that these figures were not sustainable and I am inclined to agree that they are open to serious questioning. The noble Lord shakes his head. He said they are not sustainable and I am agreeing with him.

Lord Lucas of Chilworth

I did not say that.

Lord Kilmarnock

If I may be allowed to continue, both sides have overstated their claims and that is why I want to be closely associated with neither. Common sense and the future development of cost-effective prescribing requires that there should be a healthy generics industry. I have accepted somewhat reluctantly that licences of right should go, but it is extremely important that the generic companies should not also go to the wall. There should be some incentives for the maintenance and improvement of generic production in this country.

I come to the substance of this amendment, which is basically a quid pro quo for the abolition of licences of right. The inventors and the innovators should have their protection. There might even be a case for longer than 20 years with regard to block-busting drugs which have a long time lead to production. Whatever the statutory patent life, as soon as it is over there should be distinct encouragement of generic substitution if and when these substances are available, licensed and tested and they satisfy the requirements of quality control.

The proposal in this amendment is based upon the recommendation in paragraph 24 of the Greenfield Report on effective prescribing, published in February 1983, which says: We consider that many doctors would be quite content for their patients to receive an alternative version of the drug prescribed, but that they tend to prescribe the proprietary brand with which they are most familiar. We therefore suggest the introduction of a simple scheme which would require doctors to indicate a positive preference for the proprietary version by initialling a box provided for that purpose on the FP10. In the absence of the doctor's initials, and assuming an alternative 'generic' version exists, the pharmacist would be expected to dispense the approved name preparation and would be paid according to the basic price indicated in the Drug Tariff. This could bring about a significant change in the pattern of prescribing which would result in savings to the NHS.". It is interesting to note that the present medical director of the ABPI, Dr. Wells, was a member of the Greenfield Committee which made this recommendation, so it would not appear to be entirely friendless within the mainstream of the industry. I cannot clearly put a figure on the savings which would accrue from this proposal; some claims running into hundreds of millions have been made but they are almost certainly exaggerated. Ultimately it depends on doctors, since they have the overriding power to insist on the brand-named products for their patients if they so wish. At the same time there is little or no doubt that generic substitution would gradually extend the use of generic drugs to family practitioner prescriptions and would act as a long-term stimulus to the generic sector of the industry.

It is important, as I have already indicated, and in the public interest that this sector should not wither away. If there are worries about the quality of certain foreign imports, these should be dealt with by a strengthening of the medical inspectorate.

One of the great attractions of this amendment is that it does not signal "All change" overnight, but it introduces a gradual evolutionary process from which the NHS would benefit and by which the mainstream of the industry would not be seriously threatened, as Dr. Wells must have recognised during his membership of the Greenfield Committee. I repeat that we on these Benches want the industry to have proper and reasonable patent protection. We must be strictly cost-conscious as regards the National Health Service, and this has always seemed to me to be a major concern of governments as well.

When Mr. Fowler, the Secretary of State, introduced the limited list early in 1985 he said: I hope that we shall achieve further savings through better prescribing and more competition in the generic manufacturing of the drugs on the limited list".— [Official Report, Commons, 21/2/85; col.1231.] That will not happen if there are no generic companies in business to provide those equivalents. Likewise, the encouragement of doctors by the DHSS to prescribe generically through the distribution of cost-comparison charts, which they are actually doing, will be so much wasted effort as will be the steps being taken by the Royal College of General Practioners in the same direction.

On all these grounds the Government will be doing no more than underpinning their own policy by supporting this amendment. By failing to support it they will be letting the Bill on to the Statute Book in a dangerously unbalanced form. Perhaps the noble Lord, Lord Northfield, will also feel that his Bill will go forward with more widespread support by all sections of the community in the more balanced version that I am suggesting. Ultimately it is a question of the public interest, the interests of the consumer and the National Health Service, and it is on that interest that I rest the case for this amendment. I beg to move.

Lord Lucas of Chilworth

It might be helpful if at this stage I put the Government's view. I have looked at the amendment itself and its effect. We do not support the concept of compulsory generic substitution or the imposition of an additional burden on doctors in their methods of prescribing. The amendment which has been proposed and described to us by the noble Lord, Lord Kilmarnock, would require changes in the contracts and conditions of service of both doctors and pharmacists and it would undermine the research-based pharmaceutical industry in the United Kingdom which the Administration of the noble Lord opposite and my own party have consistently encouraged.

It would in fact mean that a pharmacist on receiving a prescription with a branded medicine prescribed could fill it with a generic equivalent. The result would be a growth in the generic trade and a shrinkage in branded medicine business. I ask rhetorically, where would this leave United Kingdom inventors over the next few years?

The Government believe that the right balance must be struck. There is a place for generic drugs and that has always been acknowledged, but it is not a place under a system of compulsion. Our concern is for economical and effective prescribing. We have encouraged, and we will continue to encourage, generic prescribing, but only where the doctor considers it suitable for the patient. We cannot entertain an element of compulsion in the way doctors prescribe for their patients, and that would be the effect of this amendment. I suggest to the Committee that it would not be in our best interests to accept it.

Lord Northfield

I am grateful to the noble Lord, Lord Kilmarnock, for raising this issue. He should not be concerned that this Bill will somehow kill off the generic trade; there is a respectable generic trade and its practitioners are members of the association of the industry, the ABPI. I am sorry that the noble Lord thinks that this Bill would in some way kill them off. The companies that are members of the ABPI fully support this Bill.

As the noble Lord, Lord Lucas, said, this could not be brought in without considerable consultation, and it is, as I think he did not say, outside the Long Title and the purpose of the Bill. Therefore, I hope that he will feel able to withdraw his amendment.

6 p.m.

Lord Kilmarnock

May I briefly respond, first, to the noble Lord, Lord Lucas? He has misunderstood the purpose of the amendment. It does not compel doctors to adopt a generic equivalent. It allows them to specify the branded name and to continue with the branded name after 20 years if they so wish. It is mandatory on the pharmacist if the doctor has not so specified, but it is not mandatory on the doctor. Therefore, I do not see this as an additional burden on doctors.

It is also very much in line with the guidelines which have been issued by the Royal College of General Practitioners, which is a respected body, to its 14,000 or 15,000 members (I cannot remember the exact figure) that they should proceed as far as possible on a voluntary basis along those lines. Frankly, therefore, I think the argument that it would be an intolerable burden on doctors is not sustainable.

The noble Lord, Lord Lucas, spoke about a shrinkage in brand names but I remind him that the proposals in the amendment are designed to come into effect only after the patent has run its full life of 20 years. Indeed, I have suggested that there may be cases where it might be right that the patent life should be longer than 20 years. Therefore, to suggest a sudden disappearance of brand names from the shelves is rather an alarmist view of the results of this amendment.

I am grateful to the noble Lord, Lord Northfield, for having listened to my explanation of the amendment. I am sorry that he does not like it. I was not suggesting that his Bill would kill off the generic industry altogether. However, I suggest as a quid pro quo for what he proposes that we should give some encouragement towards long-term development, as I believe that is in the interests of the country as a whole and of the National Health Service.

I shall not press the amendment this evening. Like the noble Lord, Lord Stallard, on his earlier amendment, I shall want to read carefully what has been said and decide whether to come back at the next stage of the Bill. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Remaining clause agreed to.

House resumed: Bill reported with amendments.

House adjourned at four minutes past six o'clock.