HC Deb 22 October 1969 vol 788 cc272-4W
Dr. Summerskill

asked the Secretary of State for Social Services if he will now announce details of the revised pharmaceutical price regulation scheme.

Mr. Crossman

The revised Voluntary Price Regulation Scheme will replace the present scheme on 17th November. It is expected to run for a minimum of three years.

The scope for direct negotiation at the option of the Department has been extended to cover the price of all National Health Service Medicines, whereas under the present scheme the prices of new products have generally enjoyed a period of freedom from control and, in certain other cases, maximum prices have been determined solely by reference to objective price tests. In future, negotiations will in all cases be based primarily on consideration of the overall financial results in each company's home sales of National Health Service medicines. Under the new scheme, companies will supply the Department with Annual Financial Returns in an agreed standard form, giving relevant details of sales, costs and capital employed in the previous year. (In the first year, returns for the accounting years ending 1967 and 1968 will also be supplied as background information). Individual product costs will not be required but the returns will provide for a much more detailed analysis of overall costs than has generally been available to the Department in negotiations under the present scheme.

In the course of negotiation, companies may be called upon to satisfy the Department on a number of matters, including levels of sales promotion expenditure, transfer prices of materials supplied by affiliated companies and the amount of overseas costs and capital to be taken into account in considering the company's business in the United Kingdom.

In certain circumstances the Department may also apply one of two supplementary price tests: the first involves comparison with prices in similar overseas markets, while the second, for use where this is not applicable, entails comparison with prices of other closely comparable products in the home market.

The scheme includes an agreed timetable for the supply of financial information, and provides that price changes will be implemented from a point eight months from the end of the company's accounting year under review, regardless of the date of conclusion of negotiations.

The new scheme, like its predecessors, provides that prices should not be increased without the approval of the Department.

The Department and the Association will, in the second year of the scheme, review its operation and the information collected under it, with a view to seeking agreement on the criteria to be applied in the examination of sales promotion expenditure and the assessment of profitability. Subject to such guidance, these matters will be for direct negotiation with the individual companies.