Select Committee on Trade and Industry Minutes of Evidence


Examination of witnesses (Questions 480 - 498)

TUESDAY 11 MAY 1998

MR J BARKER and MR T BROWN

  480. Yes, the ultimate consumer.
  (Mr Barker) The patient, because as you of course know, the consumer is a strange animal in the pharmaceutical world. As far as the patient is concerned, the prime benefit comes back through the clawback through the price containment that parallel import products have on the price of product.

  481. Is that right? We get the impression that the profit goes to the parallel importer and maybe the pharmacist but neither the NHS nor the NHS's patients, the general public, actually benefit from this process.
  (Mr Barker) In my opinion this is one of these misconceptions which seems to be very popular. There is unquestionably a financial benefit to the Treasury through the clawback. That is estimated to be around about two per cent, so there is a financial benefit there which can be quantified and is quantified. What is more difficult to quantify is the fact that the parallel imported product does on occasions mean that the domestic manufacturer is unable to apply for a price increase. It can on occasions encourage him to discount, as he often will do, the domestic product in the United Kingdom. That does happen.

  482. We have not been able to get any evidence of that. Can you provide some evidence of that? We have seen that assertion from you and it is something we have heard before, but getting hard evidence sounds more difficult. Could you supply us with some clear evidence of where parallel importing has resulted in price decreases?
  (Mr Barker) I would prefer to do that in writing.

  483. We are very happy to have that.
  (Mr Barker) It would be on a confidential basis. I can supply evidence which firstly shows products where prices have actually been reduced and secondly I can supply evidence of where we have been offered products at a lower price to encourage us to market or to supply the domestic version as opposed to the imported version.

  484. The other thing that many of the drug manufacturers claim is that their research projects are going to suffer if these parallel imports go on because they will not be able to fund the very expensive research in which they are engaged. You say that there is evidence to show that the reverse is actually the case. Can you elaborate on that?
  (Mr Barker) I do not think, with respect, I said the reverse is the case. What I in fact suggested was that there is no evidence to support the contention by the manufacturers that their R&D budget has been or is likely to be affected in any significant sense at all by the parallel trade. As you well know, if you look at the published financial figures of the pharmaceutical companies, they are all increasing their profits year on year. They claim—they claim—to be increasing their R&D expenditure, so quite how they then argue that their R&D budget is at risk, I do not follow.

  485. They have not all increased their profits.
  (Mr Barker) The majority.

  486. There are one or two who have got into quite spectacular difficulty.
  (Mr Barker) They are the exception, not the rule, with the greatest respect.

  487. You do not think that this sort of claim that they need some sort of guarantee of return on their investment is one which stands up to any detailed scrutiny.
  (Mr Barker) I am not aware that too many sectors generally have any such guarantees. I am not quite sure that I understand why the pharmaceutical sector needs to be singled out for that kind of guarantee.

  488. They do have certain problems, do they not? You have said yourself that the testing which goes on and the licensing arrangements are fairly severe.
  (Mr Barker) Accepted.

  489. I am not holding a candle for them. I am trying to tease out from you evidence that will support the statements you are making to us.
  (Mr Barker) Was that a question? I am sorry.

  490. Yes, it was. I am sorry if it was not clear.
  (Mr Barker) Could you repeat the question?

  491. I am concerned that you suggest that it would not affect their ability to conduct research in any way if parallel importing were to go on in an unrestricted manner, whereas they would say that they need at least the reliability of a market in which to operate. You are suggesting that really that does not stand up. Why does it not stand up?
  (Mr Barker) What I am suggesting is that I have yet to receive any evidence at all that their R&D budget has been affected and significantly affected by the parallel trade. Nobody has ever produced that evidence.

  492. Presumably it could be.
  (Mr Barker) If they would like to produce that evidence, then we would be happy to consider it, but at this time the statement has often been made. It was made in the Bannerman round table conferences for three consecutive years and never once was any evidence produced.
  (Mr Brown) Is not the point that the burden of proof lies firmly with them rather than with us? If they made the statement, they need to establish that it is the case.

Chairman

  493. Is it the truth that the major source of parallel imports are generic drugs rather than R&D based ones? Would that be true?
  (Mr Barker) No. I am not quite sure where that information has come from. The majority of the parallel trade is concerned with branded products rather than generic products. I cannot speak for the importation of generic products through the parallel trade route. It is true that some products are brought into this country as brands, but are then put into the supply chain as generics, yes. But I am not aware myself of any significant volume of generic products coming into the parallel trade route.

Mr Berry

  494. Earlier you commented on the counterfeit pharmaceuticals issue. Am I right in understanding that you are saying that those who argue that parallel importing has led to an increase in counterfeit pharmaceuticals in the UK are exaggerating the problem? Is that how I understood you? May I put it more neutrally? Do you think that parallel importing has led to an increase in the number of counterfeit pharmaceuticals in the UK market?
  (Mr Barker) As far as I am concerned, I am only personally aware of two examples of a counterfeit product. The MCA as the regulatory authority are on public record as stating that counterfeit in pharmaceuticals is not an issue for the United Kingdom.

  495. Could I ask you to comment on the global situation because the ABPI have expressed concern that counterfeiting globally is increasing. Do you share that view?
  (Mr Barker) I cannot answer the question because I do not have the knowledge to answer it. The only observation I would make to that of course is that the pharmaceutical industry itself and the manufacturing side of it has, I would suggest, a very decided responsibility in this area. If they cannot control their own raw material actives, and so on ... I know that in the extreme case of course you will even have products with no active ingredient in at all, but it is primarily their responsibility rather than anybody else's.

Mr Hoyle

  496. What conditions make the UK a major source for parallel exports? Is it just that prices are lower than in countries like Denmark or Germany?
  (Mr Barker) Yes.

  497. It is as simple as that.
  (Mr Barker) Yes.

  498. No other conditions which would affect it.
  (Mr Barker) The only other factor—and it is a factor of course—is that in this country, as we are all painfully aware, our ability to speak any language other than English is not high, whereas of course if you go to Germany, Denmark, Holland and so on, English is very widely spoken and understood, with the consequence that all the problems associated with a foreign language are not so acute in countries like Denmark, Holland, Germany.

  Chairman: Thank you very much, that is very helpful. I think you indicated it might be appropriate to reply to us in writing on a couple of points and we should be happy to receive that. Thank you very much for your time and your trouble this morning.


 
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