§ Mr. Hickmetasked the Secretary of State for Social Services (1) why the National Health Service pays for the sales promotion expenditure of companies within the pharmaceutical price regulation scheme at the rate of 9 per cent. of the value of the industry's sales to the National Health Service; and if he will make a statement;
(2) when the pharmaceutical price regulation scheme will be next reviewed; and if he will make a statement;
(3) whether expenditure on advertising expended by the Association of the British Pharmaceutical Industry in opposing his limited drugs list proposals will be an allowable expenses within the pharmaceutical price regulation scheme; and if he will make a statement;
(4) pursuant to his reply of 28 February, Official Report, column 273, why allowable sales promotion expenditure of companies within the pharmaceutical price regulation scheme is to be reduced to 9 per cent. of the industry's sales to the National Health Service; how the current figure of 10 per cent. was arrived at; when he next plans to review its level; and if he will make a statement;
(5) pursuant to his replies of 25 February, Official Report, column 71, and 28 February, Official Report, column 272, what steps his Department took in the latest year for which complete returns are available to satisfy itself that expenditure incurred by companies within the pharmaceutical price regulation scheme on representatives, advertising, literature and information items was reasonable; when the last comprehensive review of such expenditure took place; and if he will make a statement;
(6) pursuant to his reply of 28 February, Official Report, column 273, if he will explain the nature of the ad hoc formula which is used to control sales promotion expenditure within the pharmaceutical price regulation scheme; how the formula is applied; what are its components; and if he will make a statement;
(7) pursuant to his answer of 9 January, Offocial Report, column 497, what steps his Department takes to satisfy itself that gifts offered by drugs companies and received by general practitioners do not contravene the advice given by the Association of the British Pharmaceutical Industry; and if he will make a statement;
(8) how he satisfies himself that expenditure on representatives by companies within the pharmaceutical price regulation scheme is reasonable; what assumptions he makes for this purpose about the level and manner of the remuneration of representatives; what is the source of the information upon which he bases these assumptions; and if he will make a statement;
§ Mr. Kenneth Clarke[pursuant to his reply, 18 March 1985, c. 385–87]: Formal limitations on sales promotion
96Wexpenditure which may, under the pharmaceutical price regulation scheme, be accepted as a legitimate cost in the pricing of National Health Service medicines were first introduced in 1976–77. The limit was initially 12 per cent. of industry turnover, reduced by stages to 10 per cent. in 1979–80. As I announced on 8 December 1983, at columns 477–78, from 1 April 1985 the limit is being further reduced to 9 per cent. of turnover as one of a number of measures to achieve savings in the National Health Service drugs bill. The formula for applying the overall limit to individual companies will be a fixed sum of £550,000 plus 6 per cent. of turnover. Companies exceeding the limit will be asked to pay to our Department an amount equivalent to the excess.
This means that control is exercised by laying down a maximum level of permitted expenditure, with a financial penalty for exceeding it. Companies decide how best within the code of practice and other constraints to promote their products. We do not involve ourselves in such details as the remuneration of sales representatives.
Information expenses covering such items as issue of data sheets, samples and material for medical symposia are not classed as sales promotion and are therefore dealt with outside the formula described above. They are subject to a general test of reasonableness: where expenditure is judged to be unreasonably high a proportion may be disallowed. For details of information expenses in 1982 I refer my hon. Friend to my reply to him on 25 February, at column 71–72.
As regards gifts offered by pharmaceutical companies, I refer him to my reply to my hon. Friend the Member for Penrith and the Border (Mr. Maclean) on 9 January, at column 497.
The expenditure incurred by companies in supporting the campaign of the Association of the. British Pharmaceutical Industry against the introduction of a selected list of medicines for prescription under the National Health Service will certainly not be treated as an admissible expense under the pharmaceutical price regulations scheme.
Control of sales promotion costs and other aspects of the operation of the pharmaceutical price regulation scheme will be reviewed from time to time.