Health Service Medical Supplies (Costs) Bill — House of Lords, 2017-02-07
Topic: Health
James O’Shaughnessy (Conservative, Centre-right): My Lords, I am grateful to the noble Lord, Lord Hunt, for his amendments. I shall speak to government Amendments 9, 11, 25 and 26 relating to information notices and appeals, and will refer to Amendments 8, 10 and 12 tabled by the noble Lord We had a good discussion in Committee about the information powers. My noble friend Lord Lansley proposed information notices with a right of appeal; the noble Lord, Lord Warner, proposed to place certain restrictions around the Government’s ability to collect information on profits; and the noble Lord, Lord Hunt, proposed that those restrictions be in the form of "triggers". As I hope noble Lords will know from the individual meetings that I have had the chance to have with them, I have been listening carefully to what has been said and I am conscious of the importance of proportionality in the Bill. In particular, I have reflected on the suggestion from the noble Lord, Lord Hunt, that we may be able to combine these different ideas into a workable solution that would deliver the sort of safeguards that I believe noble Lords are seeking. The government amendments that I have tabled would do precisely that There was broad agreement in Committee that the Government should be able to collect the information required to reimburse community pharmacies and to operate our cost-control schemes for medicines as effectively as possible. That includes straightforward information about sales income actually received or the amount actually paid in relation to health service products at each point in the supply chain. We already collect much of this information now under a mix of voluntary and statutory arrangements, including scheme M, scheme W and the community pharmacy margin survey We have discussed previously that our current arrangements need to be strengthened. The changes proposed by the Bill would allow us to expand routine collections to inform reimbursement prices. They would enable us to use data from more companies, make the reimbursement of community pharmacies fairer and more robust and set reimbursement prices for more products. Setting reimbursement prices leads to more competition—whose merits we have discussed—as pharmacies are incentivised to source the products as cheaply as possible, allowing them to retain a margin. That in turn helps us to keep the drugs bill down However, I have heard the concerns raised by noble Lords in relation to the collection of information on the profits associated with particular products. The noble Lord, Lord Warner, spoke about his concern that it would be burdensome for the pharmaceutical industry to apportion certain operating, development or manufacturing costs to individual products. The government amendments that I have tabled would address that concern. Amendments 11, 25 and 26 would introduce the requirement in regulations for the Secretary of State to issue an information notice for the collection of information on the costs incurred by a producer in connection with the manufacturing, distribution or supply of UK health service products. The exception to that requirement would be information on the amounts actually paid for purchasing health service products from an organisation in the supply chain. As I set out earlier, our current routine collections already cover the acquisition costs of the products themselves, as distinct from the overheads incurred by an organisation in supplying them Amendment 9 makes clear that in order to collect information in relation to certain types of profit made by suppliers, the Government would by necessity need to collect information on certain costs. I know that the collection of information on profit has been of concern to some Peers. Taken together, these amendments therefore make clear that the Government would be required to issue an information notice before they could collect particular types of profit-related information I have sympathy for the amendments from the noble Lord, Lord Hunt, that would restrict the term "profit" to aggregate UK profit. However, this approach may mean that we would be unable to collect information on the purchase costs and sales revenues that we currently collect and use to inform the reimbursement of community pharmacies and ensure that our reimbursement arrangements deliver value for money. I hope he would be willing to support the Government’s approach, which addresses the concerns raised by the pharmaceutical industry without undermining our ability to reimburse community pharmacies effectively. It might be worth adding at this point that I have had the opportunity to meet a couple of representative groups and explain the approach that we were taking in order to provide proportionality, and that approach was welcomed by those groups I should point out that in drafting Amendment 11 the Government have omitted to reflect that under the voluntary scheme, on a routine basis, we already obtain information from companies on profits and costs, including the costs of manufacture, R&D and distribution. This is company-level information, not product-level information. I will therefore bring forward a small amendment to Amendment 11 at Third Reading to reflect this, which would enable the Government to obtain that information on a routine basis under a future statutory scheme. I believe this would also be in line with the intention behind Amendment 8 from the noble Lord, Lord Hunt, which distinguishes between company-level or aggregated information on the one hand and information on individual products on the other I turn to the circumstances in which the Government may wish to collect information on costs via an information notice. In Committee we spoke about triggers, and the noble Lord, Lord Hunt, has tabled amendments along those lines. I have thought about this carefully but have concluded that we cannot set particular conditions for when we issue information notices. First, we cannot predict all the circumstances where this or a future Government may need to investigate further the value for money of a particular product or supply chain. Secondly, we may want to issue an information notice when we have an information gap and cannot properly assess whether a product or the supply chain is delivering good value for money. It would be a Catch-22 situation if we were to have triggers for an information notice in legislation that would allow us to issue an information notice only when we already had the evidence. I trust noble Lords will understand the Government’s concerns about triggers for an information notice However, in Committee I said I would provide examples of when the Government may wish to collect information about costs. These include where companies in the statutory scheme ask for a price increase for a particular product and we want to assess whether that is justified; where we have concerns about the high price of an unbranded generic medicine and want to assess whether the prices are warranted; or where the Government have no visibility over costs in the supply chain and want to assure ourselves that the market is working effectively. These are only some examples but I hope they illustrate where the Government may benefit from more information than that which is collected routinely to run our community pharmacy reimbursement system and to operate our cost-control schemes for medicines. The information notice would of course clearly set out what information would need to be provided, the form and manner in which the information would need to be supplied, the period of time that that information would need to cover and the date by which that information would need to be supplied. It would inform those issued with an information notice of their right of appeal The government amendments would introduce a right of appeal for those served with an information notice, an important point made by my noble friend Lord Lansley in Committee. UK producers could appeal an information notice if they believed the request was beyond the powers in the NHS Act 2006. That is in addition to the existing appeal mechanism against any enforcement decision made by the Government when a company refuses to submit information I thank noble Lords, especially my noble friend Lord Lansley and the noble Lords Lord Warner and Lord Hunt, for helping to shape these amendments. I hope that through the government amendments I have reflected the concerns raised in Committee, and that the House will agree them. I also hope I have addressed the amendments tabled by the noble Lord, Lord Hunt, and I ask him to withdraw his amendment and instead support the Government’s amendments.