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Delegated Legislation Committee Debates

Draft Medicines and Healthcare Products Regulatory Agency Trading Fund Order 2003

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Tenth Standing Committee on Delegated Legislation

Wednesday 19 March 2003

[Mr. Derek Conway in the Chair]

Draft Medicines and Healthcare Products
Regulatory Agency Trading Fund Order 2003

2.30 pm

The Parliamentary Under-Secretary of State for Health (Mr. David Lammy): I beg to move,

    That the Committee has considered the draft Medicines and Healthcare Products Regulatory Agency Trading Fund Order 2003.

I can confirm that the provisions are compatible with the European convention on human rights.

Today we are considering the draft order to allow the Medicines and Healthcare Products Regulatory Agency to operate as a trading fund. The MHRA will be created on 1 April 2003 from a merger of the existing Medicines Control Agency and Medical Devices Agency. We announced that merger last June and our aim is to create an agency that will be better equipped to deal with future developments in rapidly changing technology and in regulation.

First, I want to say a few words about the existing two agencies. They have much in common. Both exist to protect and promote public health by ensuring that the products that they regulate meet high standards of safety, quality, performance and effectiveness. As its name implies, the Medicines Control Agency is responsible for the safety of medicines that are marketed in the United Kingdom. To achieve that, among other things it licenses manufacturers of pharmaceuticals, ensures that pharmaceuticals meet the rules governing their sale, labelling and advertising, and runs a system to keep track of adverse reactions to medicines. As regards protecting the public, the essential role and purpose of the Medical Devices Agency is very similar to that of the MCA, but it deals with medical devices, which can range from simple products that can be bought over the counter to complex equipment such as magnetic resonance imaging scanners in hospitals. As well as their regulatory responsibilities, both the MCA and the MDA provide policy advice to Ministers about the products with which they deal and both operate at an international level.

I shall explain the scale of those agencies' operations. The Medicines Control Agency has around 600 staff and a budget of around £50 million. The Medical Devices Agency has around 160 staff and a budget of about £13 million. Both are executive agencies of the Department of Health, as the Medicines and Healthcare Products Regulatory Agency will be.

Why are we implementing the merger? First, as I have said, the essential role and purpose of the two agencies are very similar as regards the protection of public health. Secondly, there is increasing convergence between medicines and medical devices. Some products are already a combination of drugs and

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devices, such as drug-eluting coronary stents, which are devices to treat coronary heart disease. As technology develops, there is likely to be an increasing number of products that cross the border line between the work of the two agencies. Boundaries are becoming more blurred. The new agency will be well placed to respond to this changing world, and to new developments such as tissue engineering and pharmacogenomics.

It is important to record that the regulation of pharmaceuticals and medical equipment is already dealt with in a single agency—the Food and Drug Administration—in the United States. Most of Europe has either already brought these functions together or is in the process of doing so. I must emphasise that the creation of the MHRA will not affect the core functions carried out by the MCA and the MDA. The legislation that governs these functions, almost all of which stems from the European regulations and directives, will be unchanged. The regulatory systems, which are familiar to the pharmaceutical industry and the medical devices industry, will not be affected. “Business as usual” has been the watchword in both agencies, as the work on the merger has been taken forward.

The merger will not affect the jobs of most staff in both agencies. The key objective of the new agency, just like those of the current agencies, will be the protection of public health. That is not to say that this merger and the creation of the MHRA will not bring anything new. We want the MHRA to be outward facing and responsive to the interests and concerns of all its customers and stakeholders. First and foremost among these stakeholders are members of the public, patients, clients of social services departments and all users of medicines and medical equipment. Equally, the stakeholders of the new agency will include many professionals in health and social services, and manufacturers of pharmaceuticals and medical devices.

We are introducing new governance arrangements to help the MHRA to reflect these outside interests. They will include the new board of directors, involving a majority of non-executive directors drawn from outside. We have already appointed Professor Alasdair Breckenridge as chair designate.

I now want to consider the proposal that the MHRA should operate as a trading fund. That is a financing framework for some Government operations, covering operating costs and receipts, capital expenditure, borrowing and net cash flow. A trading fund gives an agency greater freedom to manage its financial affairs than if the parent Government Department meets its costs. It provides greater flexibility to plan ahead, and allows the organisation to establish and maintain reserves, to borrow to meet its financing needs and to build up deposits—for example, at the end of the year. A trading fund also encourages efficient and effective operations in agencies. That is because all income comes into the fund, and all costs are met from it. Any increased income or reductions in costs can therefore be used to benefit the agency.

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The MCA already operates as a trading fund, although the MDA does not. The draft trading fund order does not simply replicate the MCA's trading fund order. The new order includes functions concerning the regulation of medical devices. We have also made changes to reflect recent developments in work on the regulation of medicines and medical devices—and to allow for future developments. For example, assistance to other regulatory authorities falls under what are described as funded operations in the order. The MHRA is allowed to pay into the trading fund any money that it receives from, for instance, helping and advising countries that are about to join the European Community to prepare to become part of the medicines licensing regime. The list of funded operations also includes the accreditation and inspection of tissue banks. The new agency is allowed to pay money received for carrying out such duties into the trading fund.

Establishing a trading fund that covers new activities such as those does not in itself mean that new categories of fees will be charged to the industry or the national health service. Any proposals to create new classes of fees for the licensing of medicines and related inspections must be the subject of a separate exercise. Part of the income of a trading fund may come from a Government Department, as will be the case for the MHRA. The operations of the present Medical Devices Agency are largely funded by the Department of Health, and we envisage that departmental funds will be paid into the MHRA trading fund to cover operations of the new agency that are concerned with medical devices. That will be done under a service-level agreement, in which the detail of the service to be provided and the amounts to be paid for it will be set out clearly.

The order is compatible with the European convention on human rights. As is required under the primary legislation, we carried out a consultation exercise on the proposal to set up a trading fund for the MHRA, and a report on its outcome has been laid before Parliament. We carefully considered all the representations made during the consultation. Almost all were supportive of the proposal or did not object to it. Therefore, the Government decided that the order should be laid before Parliament, and I ask the Committee to approve it.

2.42 pm

Chris Grayling (Epsom and Ewell): It is a pleasure to serve under your chairmanship, Mr. Conway. The measure is not controversial, but I have several questions, specifically on the potential implications for the pharmaceutical industry of the changes. The Minister referred to fees, but I wish to probe further on that and several other matters for clarification.

The Minister mentioned the concerns that were raised during the public consultation exercise that implementation of the new agency might result in an increase in the fees charged to notified bodies, particularly for medical devices work. He also said that an additional consultation exercise would be needed before significant changes to fee structures could take place. Can he clarify exactly how such changes would occur? Are there any plans in the

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pipeline for such a consultation, or does he think that the current pricing arrangements are set fair and will be in place for the foreseeable future?

I ask those questions against the background of the fee situation that the Medicines Control Agency has experienced during the past couple of years. The agency has been fully funded by fees that are chargeable to the pharmaceutical industry for work on the regulation of medicines. There is a two-tier fee structure comprising capital fees, which are charged for specific applications and inspections, and annual periodic fees, which cover renewals and other elements.

Two years ago the Government, with the agency, decided to increase fees by 5 per cent. across the board. According to the Government, the increase, which was significantly above the rate of inflation, was intended to bring fee levels in line with long-term trends. Given that the Government have taken steps towards raising fees significantly above the level of inflation in the immediate past, can the industry be reassured that there is no agenda to continue to increase the amounts raised from the industry through additional charging levied on devices, and that the new agency will not seek to levy higher charges on the industry? I should be grateful if the Minister would address that.

Will the Minister look at the additional functions that will be included, defined in the order as “funded operations”? There is a whole new dimension to the range of services for which charges can be levied under the order. To give a sample, they include functions under the Medical Devices Regulations 2002 and the EEC medical devices directives, the provision of advice and information about regulation of medicines and health care products, the provision of education and training services, the production and sale of reports and other services on the assessment of devices and the components of devices, the function of the United Kingdom authorities under any mutual recognition agreements, the accreditation and inspection of tissue banks and the provision of electronic and database information services.

If my reading of the order is correct, all those functions will become chargeable under new arrangements as a result of the measure. Can the Minister comment on that? When one reads a list of new areas of charging, there is anxiety that that is an attempt to find new ways of levying money from the industry. The Minister will be aware that the industry has come under greater pressure in recent years and that there are uncertainties over the future of medical research in this country. I would hate to see any step taken—albeit a small one, as I suspect that this would be—that might weaken the future of medical research in this country.

I have some questions on the specific financial arrangements for the measure, particularly on the building up of the new fund. Will any borrowing that the new agency may build up show up in the public sector borrowing requirement? How do the two categories of finance work? The Minister will be aware that some finance can be kept in reserve and that some must be subject to a revaluation. How does that work? Is there an ultimate point at which the

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Treasury will be able to take back some of the funds raised from the industry through the agency? At what point will the agency cease to be able to retain the funding that it has levied, or will it be able simply to keep all the money that it raises?

My next question is on budgeting for the future. The Minister has made it clear in written answers that the difference on funding for medical devices is that whereas up to now the MCA has levied almost all its funding from the industry and the trading fund has in effect been a self-contained operation, the MDA has secured its funding from the Department. I understand that the Government now intend to pay all the money that would previously have gone to the devices agency into the new trading fund. We are now more than midway through March and fast approaching the start of the new financial year, but my understanding is that the level of departmental funding for medical devices services in 2003–04 and subsequent years has yet to be finalised. If we are setting up a new agency and trying to plan operations for the next 12 months, not having a clear sense of funding levels this late in the financial year could cause operational problems. Can the Minister address that?

The final issue that I would like the Minister to address concerns the new European clinical trials directive, the proposal on the table at the moment. It will entail quite a significant change to the way in which clinical trials are conducted across Europe. How will the new agency and the new trading fund be affected by the changes that are currently envisaged by Brussels? Will we need to revisit this measure in due course as a result of those proposals? If so, can the Minister explain how that will happen?

2.49 pm


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