§ Mr. Woodasked the Secretary of State for Social Services if the negotiations between his Department and representatives of the Association of the British Pharmaceutical Industry for a renewal of the pharmaceutical price regulation scheme are now complete; and if he will make a statement.
§ Mr. FowlerThe negotiations are complete, and the Association of the British Pharmaceutical Industry is now consulting its members on the outcome.
A renewal of the pharmaceutical price regulation scheme is proposed for a period of six years from 1 October 1986 with a provision for review after three years.
I have placed copies of the detailed proposals in the Library. They retain the essential characteristics of the scheme which was introduced in its present form in 1978 and which successive Governments have used to ensure that National Health Service pharmaceutical prices are reasonable and that the United Kingdom offers a fair return for pharmaceutical innovation and investment.
The detailed changes proposed include a more objective method, to be used from 1988–89, for keeping allowable rates of return on capital in line with changes in the average profitability of United Kingdom industry generally, and interim increases in the rates of return between renewal of the scheme and 1988–89 to reflect the rising trend in general industrial profitability. There would be a renewed and more explicit commitment on the industry's part to containment of the growth in pharmaceutical supply costs, and a more explicit basis for determining the research and development allowance in National Health Service prices which, in recognition of the costs and benefits of pharmaceutical innovation, the Government intend generally to maintain at not less than its present substantial level. There are also renewed and more explicit arrangements for consultation between the Government and the industry on trends in the costs of National Health Service medicines, and on any general developments in National Health Service pharmaceutical services. Sales promotion allowances met through National Health Service prices would remain constrained as at present to no more than 9 per cent. of the industry's 587W total National Health Service sales revenue, though in tightly defined cases of major pharmaceutical innovation companies would for a limited period be free to spend limited additional resources of their own on product familiarisation.
Pending the outcome of the association's consultation with its members, the present scheme remains in force.