§ 29. Mr. Pavittasked the Secretary of State for Social Services if he will estimate by how much profits made by pharmaceutical companies in the last year exceeded 17 per cent.
§ Mr. Kenneth ClarkeThe annual financial returns submitted by the larger companies show that for 1981, the most recent year for which full figures are available, the actual return on capital was 19.6 per cent. After adjusting for such factors as sales promotion expenditure above the admissible limit, the Department's own assessment of profit will be somewhat higher.
§ Mr. Pavittasked the Secretary of State for Social Services whether he proposes to take steps to recover the whole amount of excess profits of pharmaceutical companies as revealed in the Tenth Report of the Committee of Public Accounts in Session 1982–83.
§ Mr. Kenneth ClarkeWe normally regard a company's profit as excessive when it is more than 10 percentage points higher than the company's target rate of return for the year. The Government will take steps to recover profits above that level in every case, and in some circumstances will also recover profits below that level.
The band of profits between the target return and 10 percentage points above that return is known as the "grey area". The size of that grey area is under review as part of the Government's wider review of the PPRS.