§ 6.50 p.m.
§ Lord Hacking rose to ask Her Majesty's Government whether they support the European Commission's proposals to restore patent protection for new pharmaceutical innovation and, if so, what steps they are taking to secure agreement to the proposals.
§ The noble Lord said: My Lords, my Question is directed towards a draft Council regulation which was adopted by the Commission of the European Communities on 28th March but which has only recently taken the form of an English version. It is the proposed Council Regulation Concerning the Creation of a Supplementary Protection Certificate for Medicinal Products. It applies both to human and veterinary medicinal products and its objective is to extend the patent protection for those medicinal products.
§ It is proposed that the Council regulation will operate in this way: manufacturers of medicinal products who both have a patent still in force and a valid authorisation will be entitled to apply for an 638 extension of patent protection up to a maximum of 10 years. This will effectively create patent protection for medicinal products for a period of 16 years. The calculations for that are somewhat complicated in Article 6 of the draft Council regulation, but, assisted with a drawing board, it comes to a simple 16 years.
§ It is also proposed in Article 13 of the draft Council regulation that there will be transitional provisions which will apply when there is a valid patent but no authorisation —the situation being that the product is being developed but not to the point of it having been licensed to be used on the market—or if the product is covered both by a valid patent and by a valid authorisation the transitional provisions under Article 13 will be extended when the patent expires on or after 1st July 1992 and the authorisation has been obtained after 1st January 1984. Again, without getting out any pocket calculators, the effect of that is to enable patent protection for medicinal products, which would otherwise have their period of patent protection ended by that date, to be extended beyond 1st July 1992.
§ Despite the slightly complicated calculation in Article 6, the Council regulation is remarkably free of bureaucratic content. It is proposed that it will operate through existing patent offices in member states and will not be the producer of more bureaucracy.
§ In asking this Question in the House, I am seeking the best commitment that I can from Her Majesty's Government of their support for the proposal. It may therefore be helpful to noble Lords if I give some indication of the timetable as I understand it to be. As I have already told noble Lords, the Council regulation has been adopted by the Commission and it must now go through the process of being approved and adopted by the Council. The first period therefore is the consultation period with member states and with the relevant departments of state in every member state. I understand that it is planned that that consultation period will end roughly at the end of May. At that stage it is proposed that the Council will adopt the draft Council regulation in whatever form it may be by the end of that consultation period.
§ After that, the further processes must be gone through. The opinions of the Economic and Social Committee of the Community must be taken as the European Parliament is also entitled to be consulted. I therefore anticipate that the Council of Ministers will finally adopt the Council regulation, on the basis that it goes satisfactorily through all those processes, some time before the end of the year.
§ The timing of the Question is therefore of some importance in this member state of the European Community in ascertaining the position of Her Majesty's Government on the proposal and in encouraging the Government to be as supportive as they can, if they are not to be persuaded to be totally supportive, of the proposal. I say that with a caveat. There are one or two paragraphs in the Council regulation upon which I or others should like to make representations, but those are matters of detail and I need not at this stage take noble Lords or the Minister through those aspects.639
§ The value of patents has been perceived for many centuries. Indeed, patents have had their advocates of support in this country for over 400 years. There are references in the 15th and 16th centuries as to the value of patents. I think I am right in saying that the first time patents were introduced in a statutory form in the United Kingdom was in 1624. The value of patents can be illustrated in a different way because, when the Netherlands abolished its patent system in 1869, it found that there was a diminishing proportion of exports of manufactured goods and therefore reintroduced the patent system in 1912.
The value of the patent system in the United Kingdom was assessed in the Banks Report on the British patent system which was presented to Parliament in July 1970. As the basis of my Question is the value of patents, I can do no better than quote what the Banks Committee said in chapter 2 of its report. It broke down the value of patents into four parts. It says:
first, that it encourages research and invention; second, that it induces an inventor to disclose his discoveries instead of keeping them as a trade secret; third, that it offers a reward for the expense of developing inventions to the stage at which they are commercially practicable; and fourth, that it provides an inducement to invest capital in new lines of production which might not appear profitable if many competing producers embarked on them simultaneously".
Again, it is interesting to note the widespread support that the Banks Committee was able to attribute to the system of patent production. Paragraph 58 of the report refers to consultations with,
the Ministry of Technology, the Confederation of British Industry, the Trades Union Congress, industrial and professional associations and individual industrial firms, and an analysis of all the evidence shows it to be positively and overwhelmingly in favour of the maintenance of the patents system".
§ Unfortunately the patents system has not worked very well in recent years for the pharmaceutical industry. That is because the pharmaceutical industry has been faced with ever more complicated research and longer periods of development. It has also rightly been faced with increasingly stringent licensing procedures and—although they are now abolished—licences of right. As a result the pharmaceutical industry's period of effective patent protection for its products has averaged out at only 10 or 12 years. Indeed, in the explanatory memorandum to the EC regulation it is shown as low as eight years.
§ I can tell noble Lords that with certain drugs of considerable importance to patients—for example, a drug called Feldine, which is an non-steroidal, anti-inflammatory drug for the treatment of arthritic diseases; Diprivan, an anaesthetic drug of special value for day surgery; and Zoladex, a drug used for the treatment of prostate cancer—the period of effective protection was considerably less than the 8 or 12 years to which I drew your Lordships' attention. For Feldine it was four years; for Diprivan it was five years and for Zoladex it was only six years.
Arising from that there have been a number of debates in this House—for example, on licences of right—and the matter has also been subject to
consideration by your Lordships' Select Committee on Science and Technology. Its report. Priorities in Medical Research, was ordered to be printed on 1st March 1988. At paragraph 6.8 the committee said (I shall read the whole of the paragraph because it is of particular importance):
The Government should ensure that patent protection available to the pharmaceutical industry in the United Kingdom in practice affords levels of protection similar to that afforded by the patent laws in major competing countries, both in Europe and in the United States and Japan. The Committee are aware that the Government is taking steps in the Copyright, Designs and Patents Bill to deal with the anomaly in the United Kingdom's present licence of right provisions which constrain effective patent life".
§ That has been dealt with in the 1988 Act.
The report continues:
The Government has not however tackled a further point on effective patent life: when periods for drug testing and registration are lengthened, this effectively reduces the period during which a product will be on the market with full patent protection (the period during which the company can recoup its investment). The Committee believe that it is important that the United Kingdom keeps in step internationally because otherwise companies will either take their research elsewhere, or else they will need to charge higher prices for new drugs to recoup their investment in a shorter time. Both of these eventualities would be bad for the United Kingdom. The Committee are aware that these matters may need European action. The Government should press our partners in Europe on the point if necessary".
Therefore the arrival of this report should be welcome news. It is also heartening to learn that the Government recognise the value of the pharmaceutical industry. I can do no better than quote from a recent speech of Mr. Kenneth Clarke, which he made on 16th February 1990. About the British pharmaceutical industry. He said:
The starting point for this Government's—and indeed any Government's—approach to prescribing has to be recognition of the tremendous contribution drug therapies have made to the treatment of NHS patients and the enhancement of their quality of life. It is a great tribute to the UK pharmaceutical industry that it should be a world leader in producing innovative products whose result is to help alleviate human suffering. On any realistic forecast of the future we can expect the demand for drugs to increase both in response to new treatments brought about by medical advance and the fact that life expectation will continue to rise".
§ However, I ask noble Lords to consider this Council regulation—as it must be considered—in terms of a European perspective. The Council regulation is directly applicable in all member states and in any event is directed toward the pharmaceutical companies throughout the world community. It is therefore particularly significant that 10 years ago the number of molecules—that is, the active ingredient of a new pharmaceutical product —of European origin to reach the research and development stage was 65 per cent. That figure has now dropped to only 40 per cent. That information has been obtained from paragraph 6 of the explanatory memorandum to the EC draft Council regulation. Therefore, the effect of this proposal will give the European pharmaceutical industry equivalent patent protection to that enjoyed in the USA and Japan.
§ I shall listen with care to the Minister's reply and all that he says but particularly to what he says on this point. I am particularly anxious that the Government do not place themselves in a position of conflict. On the one hand, the Government are 641 the supporter of British industry and the case for supporting the pharmaceutical industry, as I have described to your Lordships, must be a strong if not an overwhelming one. On the other hand—this is also recognised in the explanatory memorandum, so it is not unique to the United Kingdom—the Government also have another concern, which is the cost of the National Health Service. One can go on producing figures to show that pharmaceutical products do not cause increases in the overall cost of keeping the nation in good health.
§ I have already addressed your Lordships for 16 minutes and I do not want to develop my argument in great detail. However, I should like in particular to hear from the Minister that the Government are dealing with this matter and approach it from the position of the best interests of British industry. I want to be assured that in their approach to this matter they will not place themselves in a position of conflict as the monopolistic buyer of pharmaceutical products within the United Kingdom.
§ The benefit to the pharmaceutical industry and the society which it serves in having that additional patent protection is enormous. At this very time there is research being conducted —for which patents have already been obtained—into asthma, migraine, acute schizophrenia, multiple sclerosis, Parkinson's disease and Alzheimer's disease. All that research can only be accomplished if the pharmaceutical industry can invest with confidence in its own and our future. On that basis I ask this Question.
§ 7.10 p.m.
§ Lord Jenkin of Roding
My Lords, the House is deeply indebted to the noble Lord, Lord Hacking, for drawing attention to what I think by any standards is one of the most far-reaching and, from my point of view, most welcome proposals that we have had for some time from the Commission in the field of pharmaceuticals. Nearly a year ago I had the privilege of being invited to make the keynote address to the annual conference of the European Federation of Pharmaceutical Industry Associations, which is, as it were, the European Trade Association for the pharmaceutical industry—EFPIA. At that conference we were addressed by the commissioner responsible, Dr. Martin Bangemann. I found it quite interesting to see how much common ground existed between the commission and many of those who addressed the conference, including, I add with humility, myself. I drew the conference's attention to precisely the point that the noble Lord, Lord Hacking, has mentioned about the erosion of the effective patent period because of the conflict between two different regulatory procedures to which the industry is perhaps more subject than any other. I am sure that the noble Lord was right to make the point.
The patent legislation is now intended to give patent protection for 20 years. The great majority of industries enjoy a period of 20 years. But for the pharmaceutical industry the period has been progressively reduced from the moment that the clock begins to run because of the length of time after the filing of a patent that is taken up by the 642 necessary procedures, which are mainly aimed at efficacy and safety. The hurdles that a new drug has to overcome—and I agree with the noble Lord, Lord Hacking—quite rightly, before it may be prescribed and used by the medical profession for the benefit of patients, are now very substantial indeed and have been lengthening. We all cast our minds back to the dreadful thalidomide tragedy. There have since been a number of other instances where drugs originally thought to have a balance of advantage over disadvantage have turned out the other way.
I never miss an opportunity to make the point, and I do so again, that no really efficacious drug is ever without risks. It would not be effective if it were not fairly powerful. It is therefore a question of balancing the benefit with the risk. However, one needs to know the risk and that requires a great deal of clinical trial and other work. It is interesting that the commission states that the effective period for a pharmaceutical patent is now eight years. It is the conflict between the intention of giving 20 years and the amount of time that is actually given that has justifiably caused a good deal of anxiety in the industry and should have been causing the Government some anxiety.
Let me state one or two truths. I hope that noble Lords will forgive me if I make some points that I made to the conference in Paris 11 months ago. The pharmaceutical industry will remain competitive only to the extent that it is able to continue to finance research and development. That is what lies at the heart of the argument. If one does not see sufficient reward for the expenditures—and they are very substantial expenditures; for any one, single drug the expenditure can run into hundreds of millions of pounds before one eventually finds a product that can be put on the market—then one does not undertake the research. Alternatively—and it is a point upon which the European Commission has seized —one moves to do one's work and to exploit the results of it in countries where the patent climate is more favourable than it has been in recent years in Europe.
The Commission has drawn attention to the fact that over the past 10 years the proportion of new drugs that have emerged from the European industry has fallen. I quote from the explanatory memorandum for the proposed regulation to which the noble Lord, Lord Hacking, referred. In Part One under the general headline "Aims", paragraph 6 states:Over about the last 10 years there has been a fall in the number of molecules of European origin that have reached the research and development stage (40 per cent. as against 65 per cent. 10 years ago) and a slow erosion of European market shares as compared with those of the USA and Japan".It continues:US and Japanese companies have, since 1984 and 1988 respectively, benefited from patent term restoration for pharmaceutical products on their national markets".Therefore the conference paid a good deal of attention to that. It was considerably heartened when it heard the commissioner, Mr Bangemann, in the course of his speech—and he referred to these arguments —state:The requirements of the proper functioning of the internal market, the improvement of our competiveness compared to our trading partners, and the promotion of research in the area of 643 health, are fundamental objectives which justify a proposal for a Community measure in this field.A legislative initiative could therefore be envisaged by the Commission for the end of this year".We have had to wait a little longer for it than that. However I repeat what I said. It is rare to read a Commission proposal and an explanatory memorandum with which I find myself more in agreement than this. It seems to make all the points with great clarity.
One point has been made by the consultants who have been appointed by the British drug industry to look at the proposals. Messrs. Touche Ross state in their brief report:The UK attracts a disproportionately large share of research investment in the EC because of its innovative track record".That is one of the most remarkable factors. Three of the very major drug discoveries that are the largest selling drugs in the world in recent years had their origin in British research laboratories. That is a matter in which the nation and the industry can take considerable pride. The report of Touche Ross continues:The benefits are considerable in terms of high added value, and export potential from related active manufacture and from royalties and profits to the UK-based company. It is therefore particularly vulnerable to reductions in R&D spend and well placed to obtain a share of extra R&D spend".The noble Lord, Lord Hacking, referred to the debates that we had on the copyright legislation when we were dealing with the four-year period with regard to the licence of right. There was a very widespread agreement in the Committee at that time that there was a considerable danger that if patents lost their attraction to any greater extent we would see a reduction in the amount of R&D that was done in this country, and its transfer abroad.
There seemed to be all the arguments for supporting this regulation, which, as the noble Lord has described with great clarity, will give a maximum additional 10 years with an overall maximum of 16 years for a patent where there is a considerable period between the filing of the patent and the beginning of the exploitation. Yet one reads that there is bound to be—indeed the Commission has acknowledged this—a very great deal of opposition to it. It clearly sees that this will not be a straightforward process in the Commission. What are the arguments against and what are the answers? There are two main arguments. One is directed to cost; and, secondly, and related to that, is the question of competition and the availability of the generic products rather than the branded products where the drug industry generally obtains its return.
The Commission has this to say. These are very important arguments. I quote from the explanatory memorandum, at paragraph 24:The argument concerning health and social security costs is no doubt the most important. Health expenditure is rising continuously throughout the world. At the same time, the shortfalls in the social security system are a subject of concern to those with political responsibilities. It is therefore legitimate to question the possible effects of this proposal for a Regulation on costs.The system established by the proposal does not apply to all patented medicinal products placed on the market, but only to 644 those which consist in new medicinal products. A large proportion of medicinal products sold on the market have only few innovative features, or none at all. These are not covered by the scope of the proposal. Each year, only about 50 new medicinal products are authorised worldwide. It is these that are covered by the proposal for a Directive. As for the transitional arrangement provided for in the proposal, the aim of this is to strike a fair balance between what industry needs and what can reasonably be accepted by society".The Commission then makes an important point, particularly in relation to this country where we have the pharmaceutical price regulation scheme. It states:Furthermore, the proposal for regulation does not affect the Member States' ability to control the prices of medicinal products on their markets".There is another point which it is perfectly fair to make and which was made by the Commission. If there is a long period in which to exploit your patent perhaps you can then afford to charge a lower price rather than attempting to recoup your expenditure over a shorter period by charging high prices.
I have been at both ends of the argument; at the Treasury and in the DHSS as it then was. I have never had any difficulty in accepting the argument that if we are to have a thriving and prosperous pharmaceutical industry—and that same argument applies to the Community as a whole—the industry must invest a great deal in research and development and in new products. Therefore, it must have the incentive to do that and the resources to pay for it. That will not be achieved by the continual erosion of the effective patent life; therefore, I believe that the proposal is justified on those grounds.
The other argument about generics is well answered in the explanatory memorandum. It is that if there is a shorter patent life the cheaper generic products will appear quicker on the market because there will be more competition. The Commission states:However, this will not mean any reduction in competition. The well known effect of the patents system is to promote competition through innovation. For this, a balance is struck between the encouragement of innovation and the making of innovations available to society by disclosing them. Generic products exist only if new medicinal products are developed and disclosed. Producers of generic products therefore have every interest in not seeing research being stifled".The argument used by those who facilely say that we should have more generic products on the market in order to reduce the costs of prescribing to the health service can be seen to be short term. It is interesting to note that in this country a higher proportion of generic products are prescribed and sold—approximately 15 per cent.—compared with half or less in our main competitor countries in Europe.
On the grounds of cost and competition the proposal has everything to be said for it. I believe that the Department of Health will be sympathetic to the argument. Initially the battle will be with the Treasury and then with some of the interested parties who will be lobbying powerfully in Brussels to have the proposal amended. I hope that this evening my noble friend on the Front Bench will assure the House that the Government accept the principles and that they will do their best to prevent any erosion of the proposals. Furthermore, I hope he will say that they will listen sympathetically to those who 645 will argue that if a patent period is intended to be 20 years why is the proposal limited to a maximum of 16 years? They should also look at the effect of the transitional proposals. I know the Commission says that it has struck a fair balance but there is an argument to suggest that the new certificate for patents already in force should be made more widely available. That would be of advantage to the United Kingdom drug companies thereby encouraging them to carry out research.
I hope that at least the Government will say that they will not countenance any erosion of this modest but important proposal as the procedures are fulfilled and that by the end of 1991 the regulation will become effective. In this country the pharmaceutical industry has a huge balance of payments surplus and is extremely valuable to the economy. Therefore, I hope that it will have the encouragement of knowing that not only has the Community made a valuable change to its legislative background but that Her Majesty's Government have given the proposals their fullest support.
§ 7.25 p.m.
§ Lord Butterfield
My Lords, I apologise most sincerely to the noble Lord, Lord Hacking, for becoming caught up in a most extraordinary traffic jam between Bowring's Tower in the City and Parliament Square. In my view, there was something close to a London coronary thrombosis on the Embankment. However, I am now proud and pleased to be here.
I am also proud to speak in support of the Question tabled by the noble Lord. I am a user of pharmaceutical products. I am old and grey and when I look back on all that the world and the national pharmaceutical industry has done to help doctors and patients during the past 50 years that I have been involved in medicine I see that the scene has unrecognisably altered. I am also in a position to raise a voice in support of our industry because for six years I had the privilege and honour of being chairman of the Medicines Commission. It was set up under the Medicines Act and has an overall responsibility of keeping a watchful eye on the way in which the Act proceeds. It also heard appeals against the decisions of the medicines divisions and the various official committees.
I agree with everything said by the noble Lord, Lord Jenkin of Roding, about the industry. I support the way in which he displayed and mounted the arguments for this important development which will extend the patent life of our products. I have two reasons for encouraging the Government to proceed along these lines. The first was raised by the noble Lord, Lord Jenkin; it is the pharmaceutical price regulation committee. It was in existence when I was a member of the Medicines Commission. If ever there was an example to hold up of how a government—they representing the taxpayer, the National Health Service and to some extent the medical profession—and the industry worked together it was that committee.
I wish to pay tribute in particular to Mr. Long of the medicines division, who had a heavy 646 responsibility for the discussions. Perhaps in recent years noble Lords have noticed that in photographs of Test matches people are seen wagging their fingers at the umpire. However, as regards the pharmaceutical price regulation committee I never detected any complaints or noises about the decision of the umpire: it was final. We must be grateful that the committee has been so well launched and is so well founded. It gives all sides an important assurance as regards the funding of the pharmaceutical industry and the way in which it can recoup its costs of development. The committee is an important touchstone and ensures that we are achieving the kind of fair play for which we are world renowned.
Another point which I wish to make is about our pharmaceutical industry and the increasing costs which it faces. Those costs must be recouped during the sale of the product in general but particularly during the time that the patent is operating. The noble Lord, Lord Jenkin, reminded us of the industry's contribution to our balance of payments of £2 billion per year. That will not be the final positive figure but that is a fairly remarkable performance in my view.
Apart from the dreadful thalidomide tragedy, the industry, with its regulatory bodies in this country, the United States and elsewhere, has achieved a remarkable record for the safety of products as regards the patients. We must all agree that there are no completely safe medicines. There just cannot be. I am loathe to try to develop that point further in the presence of my noble friend Lord Hunter of Newington. He was a professor of therapeutics and I have only been a professor of physic, which actually means the application of natural philosophy to the body. Therefore, I am not in his class on pharmocological matters.
Following that terrible thalidomide tragedy, that safety record is a great triumph of the application of care to the testing, reporting and combing of the reports by the civil servants over the years. Recently with some other noble Lords I had the privilege of visiting the research laboratories of our leading pharmaceutical company, Glaxo. There they showed us a file of 87 volumes which had to be sent off when a new product was to be presented for scrutiny. Each of those 87 volumes had no fewer than 500 pages. It is a great triumph on the part of the civil servants that they are able to read it and check it as quickly as they can to make sure that no mistakes are made and that there are no awkward clues about unexpected toxic effects lying in that record. However, one must not be surprised if it takes them four or eight years, or that length of time, to sort it out. In my view it is in that sphere that the pharmaceutical industry is asking for help.
It seems to me that the arguments have been very well put and there is little more that I can say. However, it is very important that I convey to your Lordships that modern pharmaceutical research and development is very close to important British research ideas, developments and, indeed, Nobel Prizes. When I was a medical student most of our effective drugs either came from the refinement of plant products or from our belief that we were having 647 a direct influence on chemistry inside the cell. The new pharmaceutical products are much more concerned with working on the surface of the cells of the body.
I should like your Lordships to consider the cells of the body rather like the moon with craters. Those craters are special shapes on the surface of the cells which accept certain messages and signals. In my work we have been very interested in which part of the insulin molecule fits into its particular little slot on the surface of the cells.
All that has come out of two great British developments: first, that of the Braggs of Cambridge who won a physics Nobel Prize for work on what is called X-ray crystallography, working out the structure of molecules, including proteins. Secondly, there was the quite remarkable work of the doyen of molecular biology in Cambridge, Max Perutz, who worked out the exact sequence of the atoms in the red pigment of the blood.
I am leading your Lordships in this direction. Young laboratory workers can now take one of the craters from the moon, multiply it and then, with patience, they can crystallise repeatedly the same crater. They can then take pictures of the structure of the crater and more intriguingly, through the developments in computer technology—and let us not forget that this country has had a good deal to do with the development of computers at the University of Manchester—they can take the crater, rotate it and look at it. In that way they can actually look at the little hole in the crater into which the biological signal fits. Once they have got that far they can go into the laboratory and start to try and fashion new chemicals which will stick in that little hole and get in the way of whatever they are trying to interfere with.
I am trying to make two points to your Lordships: first, that that is a really exciting modern development. It stems from fundamental British research and the British pharmaceutical industry is well to the forefront in that application of molecular biology. It is a way in which new products can be designed without resorting to a very large animal testing programme.
I should read into the record that none of us can see any alternative to giving new drugs to living creatures. I suppose it may be argued that those of us who are over a certain age —and I expect that I have already reached it—should volunteer to be the subjects for the drug development programmes. However, we have not yet reached that stage in our Good Samaritan acts. Until that is seen to be one way in which one can help the race, it seems to me that we must inevitably recognise that we must have animal testing.
These modern techniques and the crater on the moon image which I have given to your Lordships are providing marvellous new ways of short-circuiting much of the old experimental work. However, your Lordships will not be surprised if I say that it is very expensive. At Glaxo £400 million per year is being spent on their research and development programme. For that they expect to 648 have a brand new drug on average once a year and two or three important developments which will be better than a competitor's drug in any particular field of activity.
Inevitably, that will be the big poker game of the pharmaceutical world. That poker game is being played like mad in America. When the molecular biology plant had been operating for a few years in Cambridge we discovered that of the first 350 men who came to be trained in it, over 300 came from the United States. We all know where they have gone now. They have returned to America and are helping the pharmaceutical industry there.
There can be no doubt that the resources available in the research laboratories in Japan are prodigious. Even British pharmaceutical chemists who visit the laboratories in Japan are dazzled by the array of apparatus. We must be very grateful that in some mysterious way—perhaps since Sir Francis Bacon's time —we have produced these people who can think laterally and come up with new ideas. The pharmaceutical industry is a very important part of that and it is for that reason that I hope Her Majesty's Government will give serious consideration to this proposal. It is a way of ensuring that they have blood in their circulation and can stand up to international competition.
Along with our colleagues in West Germany, where there has been this great chemical industry, in France the Pasteur Institute has produced much work on antibodies; and we have our own molecular biology industry. I hope that those three old European cultures and countries are given the encouragement embraced by this proposal. We could then give the rest of the world a good run for their money. I hope we give the encouragement where it is due.
§ 7.41 p.m.
§ Lord Auckland
My Lords, I join with others in thanking the noble Lord, Lord Hacking, for introducing this very important Question in his usual very persuasive manner. I am one of the few Members of your Lordships' House taking part in this debate who is not a doctor or a scientist, has no interest to declare in the pharmaceutical industry and has not been a Minister—shadow or of substance. However, my family for many generations had a great interest in the medical industry.
This is a very complicated subject. Patent law is complicated enough by itself for those who are experts, let alone those who are not. However, some very important questions arise. We shall be full members of the European Community within two years. Quite clearly the whole question of patent law is very important in any case.
There are two very important aspects to this Question. The first relates to those who are working in the British pharmaceutical industry, particularly in research and development; the second relates to drug safety. As my noble friend Lord Jenkin of Roding and others rightly pointed out, there is no such thing as a completely safe drug. If the proposals inherent in the Question of the noble Lord, Lord Hacking, are adopted, it will be an enormous 649 incentive to drug safety. It will prevent, I shall not call them "private companies" but companies which have not had to go through the long process of research and drug safety, jumping the queue. That is why the Question is so important.
The British pharmaceutical industry has a fine record in its very careful drug testing. Like the noble Lords, Lord Hacking and Lord Butterfield, I too visited the Glaxo laboratories. I have a relative who actually works for that fine company. Mention has been made of such diseases as migraine, Alzheimer's disease and asthma; all are diseases for which, if it were not for medical research and the thorough testing by British pharmaceutical companies, there would be no cure. There is at least a partial cure for asthma. One must hope with regard to other conditions such as Alzheimer's disease that with the present research there will eventually be a cure. There are now remissions for many of those conditions. If it were not for the innovations of the pharmaceutical industry they could not take place.
It is vitally important that patent law is reasonably embarked upon. I cannot see that the request inherent in the Question is other than thoroughly reasoned. It would not only encourage more people to enter medical research because they would know that their products were thoroughly tested, but it would enhance the safety of drugs. Drug safety is an emotive matter. Leaving aside thalidomide, as has already been mentioned there have been one or two other very tragic occurrences. They are tragic to the families concerned, but if one looks at the record of the pharmaceutical industry as a whole there are very few such accidents—if I may use that word.
There is then the matter of allergies. One hopes that the pharmaceutical industry will eventually be able to combat the whole question of allergies, particularly in the field of cancer. If one is given a drug and another has to be prescribed, there may be side effects. That is an esoteric subject at this time on a Wednesday evening, but it is one of great importance. I also believe that an extension of patent protection can do much to enhance that research.
With those few remarks, I urge my noble friend the Minister to give very careful consideration to the views of the noble Lord, Lord Hacking, and other noble Lords with their lifetimes of experience in this very important industry.
§ 7.47 p.m.
§ Lord Hunter of Newington
My Lords, perhaps I may also add my thanks to the noble Lord, Lord Hacking, for giving us this opportunity. I will be brief because there seems to be unanimity in the House and I do not disagree with that.
For the past two days, with the help of the officials of our European committee, I have been trying to obtain the English version of this regulation. We have not yet been able to obtain it and I am therefore at somewhat of a disadvantage. However, I have the paper from the European Federation of Pharmaceutical Industries Association. That tells me, as the noble Lord, Lord Hacking, and others mentioned, that what is proposed in the first instance is that there should be a regulation. The argument 650 used by the European federation with regard to that regulation is that it is directly applicable and so avoids differences in the ways that EC member states implement it.
It is on that point that I wish to ask a number of questions. The European committee has wide experience of the differences between our lifestyle in this country and abroad and are spending a great deal of time studying the Single European Act. One is reminded of the position in 1963 when the Committee on the Safety of Medicines was appointed. That was the predecessor of the committee of the noble Lord, Lord Butterfield. The person chosen to chair that committee was Sir Derrick Dunlop. He was chosen for his charm and ability. I feel almost as though his spirit was abroad in this House tonight because it was his work with the pharmaceutical industry which led to their co-operation, even though they knew—and it happened—that what was to be demanded of them from the chairman of the clinical trials committee and others like myself would affect the patent life of drugs. Since then I have been pressing and had long discussions on many occasions with Mr. Long as to what can be done.
The case is substantial. It has been made forcefully and eloquently. However, I am uncertain—I ask the Minister for advice—about the effect in regard to a number of aspects. One is the recognition in our pricing of medicines committee of the research base of the companies concerned. I remember discussing this on many occasions. The result of that is a strong United Kingdom industry which contributes significantly to exports, as has been said. I am sure that that procedure is supported by the Department of Trade and Industry and the Department of Health. If we are to have a regulation imposed upon us which avoids differences on how member states do things, we want an assurance from the Government that we shall not upset a system that is so important to our industry.
I should also like to say that the way the limited list was handled by the present Secretary of State in a previous incarnation, and by the Government, was excellent. We have not prejudiced the situation of the pharmaceutical industry in this country, which is in sharp contrast to a number of other countries that I do not need to name.
There are two other factors. One is the text of the Commission's regulation and the other is the Government's recent decision to introduce a special office headed by a chief of research and development who obviously would have an interest in the pharmaceutical industry. We want to ensure that what is allowed to continue and flourish is the best of the British system. Therefore, we are seeking assurances that the Commission's proposals do not fundamentally upset this system. When replying to this Question I ask the Minister to tell the House whether the Government expect, as I believe we would expect, the new director of research and development to be a next generation Sir Derrick Dunlop with the charm to obtain the productive co-operation of the pharmaceutical industry in this important matter.
§ 7.52 p.m.
§ Lord Peston
My Lords, in replying to the short debate for the Opposition I should declare an interest; namely, I am a member of the council of the Royal Pharmaceutical Society of Great Britain, which, as noble Lords will know, is the statutory body concerned with the profession of pharmacy in this country. In saying I declare an interest, I do not mean that I have a pecuniary interest but simply that I find the twin subjects of the profession of pharmacy and the pharmaceutical industry extremely interesting. They are fascinating activities, especially to an economist.
I extend the normal courtesies to the noble Lord, Lord Hacking, in thanking him for tabling this Unstarred Question but, as he knows, I believe that he has been somewhat premature in doing so. I have listened to his argument that timing is of some importance but, speaking for myself, I was only able to obtain yesterday the document that I think we are talking about by courtesy of a colleague. During that period I was fully involved until the early hours with the new health legislation and I have only had an opportunity to look at the document during the course of today.
I have to say that I have not been able to think it through or to obtain any advice. Indeed, I also have some difficulty since the document does not appear to be dated or have any authenticity about it and therefore I have no way of knowing the status of the document. I am not even certain that the document I have is the same document that others have. I hope it is. Therefore, though I understand that the noble Lord, Lord Hacking, feels he should raise this matter now, I have to say that because of my position I certainly cannot give him a view which can be defined as that of the official Opposition.
Indeed, I would be surprised if the noble Viscount, Lord Ullswater, who is replying for the Government, can give a definitive reply. Obviously he is slightly better supported with expert advice than I am but these matters must be examined with great care. I go further. I would be unhappy if the noble Viscount felt that he were able to answer the Question in terms. I would consider him to be rushing into this matter too rapidly.
Having said that, it may assist noble Lords if I outline some general principles and state my views on the subject generally. May I also say that, although I intend to support strongly the pharmaceutical industry, I am not an uncritical admirer of that industry. The industry spends an enormous amount of money on public relations and seems to have about the worst image of any industry in this country. How it managed to achieve that is slightly beyond me, but one possible explanation is that some of us find certain aspects of its marketing methods a little difficult to accept.
However, the central principle that I put forward is that we need, have had and can have in this country, a successful pharmaceutical industry. Such an industry must be research based. The industry must be profitable. Indeed, in terms of the industry itself, what success means is profitability. I hasten to add that in considering the profitability of the 652 industry I, for one, believe that it is right to look at the overall position. I do not accept those who point to the fact that companies make enormous profits on individual pharmaceutical products. What those people should do is look at all the other products on which no profits are made at all and where, in fact, companies make considerable losses. I do not believe that it is a criticism of the industry to say that when companies have had success they are doing very well out of it. In an area like this, which is so full of risk and uncertainty, that is exactly what one would expect to happen. That is also a not unacceptable state of affairs if the industry is earning those profits by meeting consumer demand and, more generally, consumer needs. Therefore, I start from the position that I do not regard profit as bad in this industry.
I also add—a point made by other noble Lords—that I am fully aware of the international mobility of this industry. As my initial position referred to the United Kingdom I underline what I want to see. I am not, so to speak, a world altruist in this field. I am pleased if drugs are discovered elsewhere but I want to see a successful industry in this country.
A research-based industry does not depend solely on patent protection. Curiously enough, when we were finishing our deliberations on the student loans Bill recently I believe it was the noble Lord, Lord Adrian, who pointed out how important postgraduate research was to this country and how important was the stock of postgraduate students for this industry if it is to survive and advance. Nonetheless, one must accept that in this field innovation centrally depends on patent protection. Certainly, I accept as a general principle that this industry deserves decent treatment in the way that patent laws are applied to it. If, as the noble Lord, Lord Hacking, stated clearly, for technical reasons the law as it stands gives too limited a protection; if the period of effective protection it receives is simply shorter than the legislators originally intended for industry in general; if because of the particular nature of this industry it does not receive sufficient patent protection, then I entirely agree that something must be done. Therefore, there is no difference between us in that regard.
Incidentally, perhaps I may add a point which shows why debates of this nature are worthwhile but why one must think further. It had not occurred to me—a point made by the noble Lord, Lord Auckland —that if the industry is assisted in this way it might also improve the safety aspect. That seemed to be a persuasive point and certainly a point on which I wish to reflect further; but that would add to the case as I see it.
More than one noble Lord—certainly the noble Lord, Lord Jenkin of Roding, and also the noble Lord, Lord Hacking himself—pointed out that there is sometimes an apparent tension between the needs of the industry, on the one hand, and those of the National Health Service, on the other. The tension is there. I refer to what the noble Lord, Lord Jenkin of Roding, said in that what we seek to do is to achieve a fair balance. I regard that as possible. I am not saying that in every single year the Secretary of State gets the balance right. The industry complains 653 that in the use of the pharmaceutical price regulation scheme the industry is being squeezed excessively. On other occasions it appears that the industry is not being squeezed enough.
The odd factor about the pharmaceutical price regulation scheme is that it is not a price regulation scheme per se. It is a profit control scheme, which is a fact people often forget. I believe that the Government have it within their power to get the balance right. I add very strongly here my own view at the moment. It is argued that by helping the industry we may be neglecting the needs of the NHS and the taxpayer. However, I do not accept that view as over whelming. I believe that we can both help the industry and protect the taxpayer who finances the National Health Service. We can get that matter right.
As an economist I am not saying that everything is perfect as regards pharmaceutical prices. What we have seen happening in the past few years with so-called parallel imports suggests to me that something has gone seriously wrong on pricing generally in Europe. The noble Lord, Lord Auckland, mentioned 1992 and all that. I shall be intrigued in trying to work out whether the differential prices that we see in Europe can persist beyond 1992.
Those are my broad remarks. I hope that they will be interpreted as supportive of what the regulation is. That is certainly my intention. Equally, I hope that I am regarded as a critical supporter of the industry. I place on record, as other noble Lords have done, my convinced view that the drug advances we have achieved have been enormously important in terms of improving the health of the nation. The drug advances that we wish to see will be equally important. I do not wish to detract from that.
It is rare for me to say this speaking from the Dispatch Box, but broadly speaking I agree with virtually everything that noble Lords have said. More generally, I am sure that either through your Lordships' Select Committee on Europe or in some other way we shall return to this subject. In reiterating my remark that I am not yet ready to say anything finally on the subject, I also hope that it is a matter that we can return to very soon in order to hear something more definitive from the Government. I am not saying that I am not interested in what we are about to hear from the Minister. I also hope that we shall have something more helpful to say from these Benches.
§ 8.3 p.m.
§ Viscount Ullswater
My Lords, I am grateful to the noble Lord, Lord Hacking, for raising this important matter of the proper duration of patent protection to be afforded to new pharmaceutical innovations. I have listened with interest to the learned and very germane views that have been put forward on it today.
As has been outlined, new pharmaceutical products may only be marketed once they have passed safety tests and been given statutory approval. That means that for a new drug a substantial proportion of the patent life—which in the UK and 654 most other EC countries is 20 years starting from the patent filing date—has often elapsed before sales of that drug can begin.
As the noble Lord, Lord Hacking, has explained, the European Commission is bringing forward proposals for a Council regulation concerning the creation of a supplementary protection certificate for medicinal products. The grant of such a certificate would extend the period of protection of a new medicinal product beyond that conferred by the relevant patent by a period equal to the patent life lost in obtaining marketing approval, minus four years, subject to a maximum extension of 10 years. The Commission believes this formula will provide new patented drugs with a period of monopoly which is consistent with that in other sectors of technology. Transitional provisions for certain drugs that have already been patented in the recent past are also envisaged.
While the certificate would have the effect of extending the period of protection afforded by an initial patent, it is presented as a notionally separate piece of industrial property from the patent. By doing so, the Commission hopes to avoid a clash with the European Patent Convention, which specifies a patent term of 20 years, and to which 10 European Community states, including the UK, as well as four non-Community states, belong.
I should point out that although the European Commission floated last year some informal preliminary proposals, its formal proposals, including an explanation of the aims behind them, have only very recently become available. Indeed, I understand that even now these proposals have not yet been officially forwarded by the Commission to the Council of Ministers. I hope that that will help the noble Lord, Lord Hunter.
The Government have not yet had an adequate opportunity to examine these formal proposals and are not in a position now to take a view on them. The noble Lord, Lord Peston, has pointed out that the Government should not be rushed in these matters. I agree with him. We are assessing them and will naturally take due account of the significant arguments for and against them, including those which have been articulated in the debate this evening.
Several arguments in support of the measure have been advanced by, among others, the European Commission itself. Foremost among these is the observation that the portion of the 20-year patent term on a new drug which elapses before marketing authorisation is granted is now on average some 12 years. As the noble Lord, Lord Jenkin of Roding, told us, that erosion of the effective patent life is continuing to increase because the necessary safety tests are becoming more time-consuming.
It is widely asserted that the patent life left —some eight years on average—is insufficient to allow the industry's heavy investment in research and development to be recouped and profits to be maintained at a level which creates the incentive for further innovation. It is argued that the owners of pharmaceutical patents should therefore be compensated, at least partially, for the loss of patent 655 life which they must bear in performing safety tests, which I am sure all would accept are essential but which are nonetheless imposed as a statutory obligation. Although this burden does not bear uniquely on the pharmaceutical industry, since it also applies to, among others, the pesticide and food additive sectors, it is one which does not affect most fields of technology.
Perhaps I may say in this context that the Government fully recognise the important role played by the United Kingdom pharmaceutical industry. It makes an enormous contribution to the prevention and treatment of disease and illness throughout the world. It also makes a major contribution to the health of the UK economy, as can be measured, for example, in terms of its exports of some £2 billion and a balance of payments surplus in excess of £900 million last year.
The Government appreciate, moreover, that the success of this industry is founded on the basis of a substantial investment in research and development in this country. To enable that investment to be recouped, it is essential that effective patent protection is available for the products obtained given that they are expensive to innovate but easy for others to copy. That is also necessary for the encouragement of further innovation, particularly as new drugs become harder to invent, albeit that they will carry the expectation of greater returns.
It was indeed recognition of such considerations which led the Government to include in the Copyright, Designs and Patents Act 1988 provisions which extended from 16 to 20 years the maximum unhampered life of older pharmaceutical patents granted under the Patents Act 1949. Notwithstanding these arguments, however, the Government, in coming to a decision on the European Commission's proposals, need also to give due consideration to countervailing factors. The justification for the proposed certificate demands careful scrutiny to ensure that it is in fact necessary—that is, that continuing erosion of patent life in the United Kingdom is actually placing essential research and development at risk—and that the increased revenues which would be generated by effectively extending patent term for new drugs is indeed required to fund further innovation.
Furthermore, the Government need to examine the Commission's assertion that a longer period of drug protection is necessary in maintaining the prominence and excellence of pharmaceutical research in the Community. It has been suggested by contrast that other factors, such as the availability of highly skilled research personnel and relatively inexpensive facilities, are the keys to attracting and retaining research laboratories. Strong patent protection is arguably more important in respect of countries where products are to be manufactured or sold rather than in those where they are researched. This of course raises the related question of whether extending the monopoly conferred by a patent within the European Community market benefits non-EC patent owners more than it does EC businesses which own patents.
The broader effects of the Commission's proposals beyond those on the research-based pharmaceutical 656 industry also require examination. The generic drug manufacturing industry in the United Kingdom is relatively small but should not be overlooked. The ability of that industry eventually to produce legitimately generic versions of drugs represents a keen incentive to efficiency through competition, which can provide advantages for industry and the consumer. Generic drug producers are dependent on a flow of drugs coming out of patent, which in turn requires research-based industry to be able to reap sufficient reward to be encouraged to undertake the initial innovation. However, a balance needs to be struck, since extending patent term will defer the onset of the competitive situation and may be expected to have a direct effect on drug availability and probably drug prices. I must tell the noble Lord, Lord Hacking, that in this context the Government will need to consider the implications of the proposals for the National Health Service as the principal consumer of pharmaceuticals in the United Kingdom.
The noble Lord, Lord Butterfield, has drawn our attention to the good work of the price regulation scheme and the fair balance that it has achieved. The pharmaceutical price regulation scheme is a profit control mechanism, not a price control mechanism, as the noble Lord, Lord Peston, pointed out. It provides support for research and development in the costs that it allows. It has encouraged the establishment of research and development centres and the setting up of manufacture here. Overall, pharmaceutical price regulation has balanced the needs of the patient with the needs of industry to research and discover new products. The operation of pharmaceutical price regulation mechanisms in the United Kingdom and elsewhere within the European Community will also clearly have a bearing on the proposals' possible effect on drug prices, but it is nevertheless important that the Government should give full and separate consideration to the price implications of extending the duration of drug monopoly protection.
It has been observed that measures have already been taken by the governments of the United States and Japan to provide a degree of extension of patent term for pharmaceutical products. However, it should be borne in mind that these are limited extensions, available only in particular circumstances. In the United States, for example, there is a 14-year ceiling on the patented marketing period allowed and the patentee has to be able to demonstrate diligence in order to obtain an extension. Whether or not the United States and Japanese decisions to provide for extensions represent precedents which the European Community should follow, it is notable that the European Commission's proposals are even more generous than the provisions in those countries.
I turn to one or two of the points raised in debate. My noble friend Lord Jenkin of Roding stressed the erosion of patent life. The Government accept that there has been this erosion but I point out that sales of a drug do not cease at the end of the patent cover. The pharmaceutical price regulation scheme currently allows companies to launch a new product at a price chosen by the company. Doubtless, any 657 increase in patent life would need to be taken into account when setting the price in those altered circumstances.
My noble friend Lord Auckland suggested that medicines, whether branded or general, must satisfy the quality, safety and efficacy conditions before obtaining a licence and a place in the market. Drug safety is important. The increasing number of clinical tests undertaken has inevitably reduced the market life. I can assure my noble friend that this will be one of the considerations in any review.
I think I answered the question about the proposals not being submitted to the Council. A formal test has not therefore been received. As soon as one has been it will be deposited in the Library.
The pharmaceutical price regulation scheme is a voluntary agreement and its existence is recognised by the Government as providing a means of containing profits and therefore prices. Its length of life will need to be considered in the light of the movement towards 1992.
I should say to the noble Lord, Lord Hacking, that I am doubtful whether the consultative period will be over by the end of May and that the adoption will be by the Council by the end of the year.
The European Commission's proposals clearly raise a number of complex issues which the Government will wish to weigh carefully before reaching a conclusion. The views of interested circles have been, and continue to be, canvassed. The Government will take due account of those views, 658 and of course of those expressed today, in judging the merits of the Commission's proposals in regard both to their general principles and to their finer details and will take a view on them at the appropriate time.
§ Lord Hacking
My Lords, before the noble Viscount sits down I should be grateful if he could assist the House on the timetable. He told the House that he was unable to give a definitive reply at this stage and he mentioned some doubt about whether the timetable that I put forward could be adhered to. Does he accept that there is a limited timetable for consultation with member states? Will he also be kind enough to accept that the argument that the pharmaceutical industry should have an extension to its patent protection period is hardly new? In those circumstances can he tell the House when the Government will be ready to give their response; and when they are ready, whether they will make their response public?
§ Viscount Ullswater
My Lords, I think the answer to that request is no. I have outlined the position in which the Government find themselves. The consultation period is taking place at present. I am afraid that I cannot go further in informing the noble Lord or the House as to when that period will be completed or what the next step will be.
§ House adjourned at twenty minutes past eight o'clock.