Select Committee on Health Fourth Report

5  Arrangements for controlling the activity of the UK-based pharmaceutical industry

86. A number of processes are in place to control the research, marketing and promotional activities of the UK pharmaceutical industry. These include:

a)  International standards of good clinical practice (GCP) in research;

b)  Research Ethics Committees;

c)  Medicines licensing regulation;

d)  Post-marketing safety surveillance and drug evaluation; and

e)  Cost assessment.

International standards and 'good clinical practice' guidelines

87. For many years, the pharmaceutical industry has worked to international standards. Ethical guidance was agreed and internationally accepted under the "Declaration of Helsinki: Ethical Principles for Medical Research Involving Human Subjects", drafted and adopted by the World Medical Association in 1964 (and amended regularly thereafter). The Declaration covers fundamental principles of clinical research, such as the need for research to be carried out by scientifically qualified individuals and for the importance of the objective to be in proportion to the risk to the participant.

88. Increasingly, the European Medicines Agency (EMEA) works with its counterpart agencies in the US and Japan, through the "International Conference on Harmonisation on technical requirements for registration of pharmaceuticals for human use" (ICH). Standards developed by the ICH, when adopted by the US Food and Drug Administration (FDA), EU and Japanese authority, become internationally binding. The ICH agreed in 1996 to adopt the same standards of GCP in pharmaceutical clinical trials in the EU, the US and Japan. The adopted GCP standards include provision for audit, based on a checklist of approximately 2,000 items with detailed requirements for protecting the safety and well-being of patients or individuals involved in clinical trials, the need for informed patient consent and high data quality.

89. The European Clinical Trials Directive, which came into force in May 2004, established EU-wide standards of GCP for clinical trials under legislation. Under the Directive, the regulation, monitoring, and standards for early stage clinical trials were tightened. One of the main provisions of the Directive to ensure good practice was for Research Ethics Committees (RECs) to be governed by a national body. RECs should generally respond to applications within 60 days. The Directive required Member States to apply the principles of GCP to both commercial and non-commercial clinical trials with medicines.

90. In the UK, the GCP guidelines set out under ICH were incorporated under the Research Governance Framework for Health and Social Care, issued by the Department of Health in 2001. The Framework guides clinical research carried out within the NHS. Subsequently, the Medicines for Human Use (Clinical Trials) Regulations 2004 adopted the conditions and principles of GCP.

91. In 1985, the WHO issued a 'Revised Drug Strategy' recommending the adoption of national drug policies. The 39th World Health Assembly, held the following year, which adopted this strategy, also called on governments to implement a National Medicinal Drug Policy. The UK has not responded to this recommendation, but we were able to examine such a policy during our visit to Australia last year. The Australian National Medicines Policy has been in place since 1999. Its overall aim is to balance health outcomes with economic objectives. A key mechanism for achieving this is a dedicated committee involving all stakeholders, including patients, which makes recommendations to ensure the "Quality use of medicines".[60]

Research Ethics Committees

92. All R&D in the NHS involving patients has to obtain local REC approval for clinical trials. This may be a complicated and lengthy process, as PICTF pointed out. The establishment of a UK Ethics Committee Authority, provided for under the Medicines for Human Use (Clinical Trials) Regulations 2004, will maintain a single framework for the review of clinical trials and will monitor RECs.

93. NHS RECs are under the control of Health Authorities and work according to guidance from the Department of Health. Multi-centre RECs can give a single opinion on clinical trials that will be carried out in more than one area. The recently established Central Office for Research Ethics Committees (COREC) works on behalf of the Department of Health to co-ordinate the development of operational systems for local and multi-centre RECs in England. The establishment of COREC aimed to provide operational support and standardise systems, and to maintain an overview of the operation of the research ethics system in England.

94. Although COREC was praised by the Department of Health,[61] others have suggested that the large number of regulations that have resulted from the creation of COREC have neither simplified the procedures for researchers seeking ethics approval nor increased protection for the patients for whom the system was originally established.[62]

Licensing: the MHRA

95. Drug manufacturers are required to submit evidence of the utility of their products to the regulator under the Medicines Act 1968, which became operational in 1971. The Act set up a system of licensing based on evidence of drug safety, efficacy and quality; it applied to the manufacture, sale, supply and promotion of all medicines in the UK.

96. The Act designated the Secretary of State for Health in England (and equivalents in Scotland, Wales and Northern Ireland) the Licensing Authority for human medicines in the UK. Executive responsibility for drug control passed from the Department of Health's Medicines Division to a new executive agency, the Medicines Control Agency (MCA), in 1989. The Act included stringent requirements for secrecy.[63] In 2003, the MCA was re-established as the MHRA and became responsible for the regulation of medical devices, as well as ensuring the safe and effective licensing of human and veterinary medicines, operating under a framework of UK and EU legislation.

97. The MHRA is assisted by the Committee on the Safety of Medicines (CSM), which advises on the efficacy and safety of medicines in order to ensure that appropriate public health standards are met and maintained. The CSM may review licence applications and produces an independent assessment. Depending on whether or not it finds the medicine to be of acceptable quality, safety and efficacy and to give overall benefit to patients, the CSM, working through the MHRA, will either recommend that a licence be granted, accept the application subject to modifications or reject the application with reasons. Ultimately, however, it is for the Licensing Authority (Ministers of Health) to grant the licence. The Medicines Commission provides advice to the Licensing Authority on policy issues relating to drug regulation and is the appellate body for medicines where a decision has been made not to grant or to withdraw a licence. Following public consultation in 2004, the MHRA is now reviewing the role and structure of these advisory bodies. It has proposed, in place of the Medicines Commission and the CSM, the setting up of an overarching Commission on Human Medicines.

98. The medicines operation of the MHRA has three main divisions, which concentrate on pre-licensing, post-licensing and inspection and enforcement issues. It has a budget of some £65 million and employs around 750 staff.[64] The MHRA is unusual in being one of few European agencies where the operation of the medicines regulatory system is funded entirely by fees derived from services to industry (drug regulatory agencies in other countries are more often only partly funded by licence fees). The MHRA's activities are 60% funded through licensing fees paid by those seeking marketing approvals and 40% through an annual service fee, also paid by the industry. Most of the income generated from the service fee is allocated to post-marketing surveillance and inspection, as opposed to pre-marketing scrutiny of drug licence applications.

99. In return for the licensing and service fees paid by the industry, companies expect an efficient and rapid service. The need for a swift response to marketing applications is heightened by the presence of alternative European regulatory agencies to whom industry may turn.[65]

100. The speed at which the UK regulatory authority has historically processed licence applications has been one of the fastest in the world, which means that its services are much in demand from EU applications. Recently, the regulatory agency has accelerated its reviews of their data for new products. In 2003, time from application to the granting of a licence of a new chemical entity, if no further information was needed, was approximately 70 working days, whereas a response may now usually be expected in approximately 30 working days. Licensing times can take rather longer for generic products.[66]

101. The MHRA relies on company data, presented as a series of detailed assessment reports, in its decision whether or not to licence a drug. Raw data is very rarely analysed.[67]

102. Recently, there have been significant changes in drug control, largely because of the increased influence of European legislation. However, safety, quality and efficacy, and the overall balance of benefit to risk, remain the sole criteria for drug approval. Manufacturers are not required to undertake comparative drug testing, nor to demonstrate medical need for products, and regulators may not take price or value into consideration.


103. The Post-Licensing Division of the MHRA is in charge of continuing surveillance of safety, whereby reports of adverse drug reactions (ADRs) are monitored and recorded after a licence has been issued and the medicine is on the market. Drug companies are required to report all suspected ADRs, and doctors and other health professionals are encouraged to do so, by sending in Yellow Card reports.

104. The Yellow Card ADR reporting system provides the mainstay of the pharmacovigilance system, with particular attention focused on newer drugs, identified by an inverted black triangle. Adverse reactions are reported voluntarily by doctors, nurses, dentists, coroners, radiographers, optometrists, health visitors, midwives and pharmacists to the CSM using a yellow card. The MHRA/CSM acknowledge considerable under-reporting of suspected ADRs. The purpose of the Yellow Card/Black Triangle system is not to estimate the incidence of ADRs, but to provide signals of possible problems in need of further investigation.[68] The Scheme did not, however, provide an effective signal of problems with Vioxx, with an essentially steady number of reports of heart attacks from 1999 to 2004 (with figures of six reports in 1999; nine in 2000; seven in 2001; five in 2002; seven in 2003; and four in 2004 up until the drug's withdrawal in September). These figures remained constant despite a year-on-year increase in prescriptions for the drug, with figures rising from 162,600 in 1999 to 2,128,600 in 2003.[69] Electronic yellow cards may now be used, a process which is encouraged by the MHRA. The black triangle symbol is removed after a period of time (usually two years) and then reporting is only of serious or previously unrecognised unwanted effects.

105. The Yellow Card Scheme was first formally reviewed, and a report published, in May 2004.[70] One of the recommendations was that patients be able to report their own adverse drug reactions. A pilot scheme is currently underway to assess this process.

106. If drug safety problems are suspected, typically some warning will be added to the SPC but, occasionally, medicines may be taken off the market altogether. Twenty-four prescription drugs were withdrawn due to safety concerns in the UK between 1971 and 1992 inclusive (1.1 per year) and 19 were withdrawn between 1993 and 2004 (1.6 per year). No public inquiry has taken place into the withdrawal of any of these drugs, to determine mistakes that may have been made in the original licensing process and subsequent monitoring.


107. In order to increase rates of research into areas of serious disease that affect relatively few people (and therefore might be expected to have low market value) the US Orphan Drugs Act was passed in 1983 in the US and its principles were adopted in the European Orphan Drugs Act in 2000. Incentives to develop orphan drugs include intellectual property protection and 11-year market exclusivity.

108. A number of criticisms have been levelled against the current system for encouraging the development of orphan drugs. The lack of competition drives up orphan drug prices and this may have important economic implications for PCTs and other healthcare providers. An example of this is nitric oxide, which was available for years and, unlicensed, cost very little (it cost approximately £2,000 to supply a neo-natal unit with nitric oxide for one year[71]). Two clinical trials proved the benefit of inhaled nitric oxide and it was approved and received a patent in the US and EU on this basis.[72] Since licensing, nitric oxide now costs many times more (it was estimated that supply of nitric oxide for the same neo-natal unit would now cost over £63,000 per year).

109. Some drugs marketed as Orphan Drugs may have required little research input. The quality of clinical trials of Orphan Drugs has been questioned. In addition, innovation in a particular area may be reduced once a single product is available, due to market exclusivity.

The National Institute for Clinical Excellence

110. The uptake of novel drugs, an issue of great importance to the industry, is partially determined by NICE. The Institute issues guidance about the use of both old and new medicines and procedures. Guidance is of four main forms:

a)  Technology appraisals: recommendations on the use of new and existing medicines and other treatments (devices, surgical and other procedures, diagnostic techniques and health promotion methods);

b)  Clinical guidelines: recommendations on the appropriate treatment and care of patients with specific diseases and conditions, such as diabetes and schizophrenia;

c)  Cancer service guidance: recommendations on arrangements for the organisation and delivery of services for people with cancer; and

d)  Interventional procedures: guidance about whether interventional procedures used for diagnosis and treatment are safe enough and work well enough for routine use. An interventional procedure is one used for diagnosis or treatment that involves making a cut or hole in the body, entry into a body cavity or using electromagnetic radiation (including X-rays or lasers) and ultrasound.

111. NICE currently publishes around 25 technology appraisals, 12 clinical guidelines and 60 pieces of interventional procedures guidance each year. Of the 25 technology appraisals, not all are for new drugs; they can also be reviews of non-drug treatments, re-reviews or reviews of medicines licensed several years ago. This means that a minority of new drugs approved by the MHRA are subsequently subject to NICE scrutiny. The Department of Health asks the Institute to look at particular drugs and devices only where the availability of the drug or device varies across England and Wales or where there is confusion or uncertainty over its value.

112. The pharmaceutical industry has some say in the selection of topics for appraisal. Drug companies provide information to the National Horizon Scanning Centre on the development of new pharmaceutical products and their licensing position and have one seat on the Advisory Committee on Topic Selection (ACTS), which assesses proposals for work topics for NICE against published criteria. The Joint Planning Group, which considers ACTS' proposals and advises Ministers, who take final decisions on NICE's work programme, does not include the pharmaceutical industry in its membership. NICE's approach to engaging with the pharmaceutical industry in the development of its technology appraisals and clinical guidelines is as follows:

a)  NICE drafts a written consultation on the scope for a technology appraisal or a clinical guideline.

b)   NICE invites relevant members of the pharmaceutical industry, alongside the other stakeholders, to a meeting at the start of the development of a piece of guidance to discuss the scope, the approach to assembling the evidence base, and the key issues that will be addressed during the development of the guidance.

c)   NICE consults on the evidence to be used by the advisory body and all stakeholders are given the opportunity to supplement the evidence base. Ultimately, the evidence that is taken account of is a matter for the advisory body, which sets out the rationale for the use or otherwise of the evidence submitted by all stakeholders.

d)   The advisory body prepares a written consultation on the draft recommendations, on two occasions during the development of a clinical guideline (where there is no appeal stage), and on one occasion during the development of technology appraisal guidance (where there is an appeal stage). Comments received from the pharmaceutical industry on draft documents, in common with responses from other stakeholders, are posted on the Institute's website.

e)   In the technology appraisal programme the relevant pharmaceutical company, alongside other stakeholders, has the opportunity to submit an appeal on the grounds that the Institute has exceeded its powers or has failed to follow its process, or that the guidance is perverse.

The Pharmaceutical Price Regulation Scheme

113. The Pharmaceutical Price Regulation Scheme (PPRS) is a mechanism for determining the profit made by drug companies through the sales of their medicines to the NHS.[73] Details of the Scheme, which has been running since 1956 (when it was known as the Voluntary Price Regulation Scheme) are negotiated periodically by the Department of Health and the ABPI. The present Scheme came into force on 1 January 2005 and, unless either side withdraws beforehand, will continue until at least 2010. The overall objectives of the PPRS are to:

  • Secure the provision of safe and effective medicines for the NHS at reasonable prices;
  • Promote a strong and profitable industry capable of such sustained research and development expenditure as should lead to the future availability of new and improved medicines; and
  • Encourage the efficient and competitive development and supply of medicines to pharmaceutical markets in this and other countries.

114. The PPRS, which applies only to companies supplying licensed brand name products to the NHS, indirectly controls drug prices. Although it nominally applies to all such drug suppliers, only those companies with sales each year to the NHS of more than £25 million become involved in detailed negotiations. Sales by the 44 companies currently involved at this level account for 94% of the total amount the NHS spends on purchasing brand name products.

115. Through the Scheme, each year individual companies are set a level of return on capital (ROC; the amount of money they can earn through sales to the NHS). Once this profit target has been agreed, it is for the company to adjust the prices of its portfolio to reach that target. Companies are required to reimburse the NHS when their returns are above target, and may increase their prices when returns are below target.

116. Target ROCs are set in advance, so the profit actually achieved may differ from that predicted. To take this into account, margins of tolerance (MOTs) are built into the PPRS such that reimbursement is not required until returns are over 140% of the ROC target, and price rises not permitted until returns are less than 40% of the ROC target. Increasing the prices of established drugs is not encouraged, so companies generally aim to reach their ROC targets by charging high prices for their drugs at the time of launch or by broadening their sales base.

117. In order to set the ROC target, each year the company submits details of its business in an annual financial return (AFR). One section of the AFR seeks information on the company's fixed assets (which includes the historic cost of the company's UK sites, land, buildings, plant and machinery). The profit the company is allowed is then calculated as 21% of the fixed asset figure, which, with the MOT, may rise to 29.4% of the fixed assets.

118. Also included in the determination of the final ROC are allowances for the company's spend on R&D, marketing and the provision of information. For R&D, the allowance is equivalent to up to 28% of the company's sales to the NHS, and in this figure provision is made for each new drug introduced. For drug promotion, the figure is 4% of sales, and to this is added further allowances depending on the number of drugs available. For providing information, the allowance is again equivalent to 4% of sales to the NHS.

119. By determining company profit margins allowed against the sale of medicines to the NHS, and by incorporating into these margins allowances for R&D, innovation, drug promotion and the provision of information, the PPRS provides a key mechanism by which the Department can act as the UK-based industry's sponsor.

120. The price of generic medicines is not controlled by the PPRS but, since August 2000, the main generics used in the community have been subject to a statutory maximum price scheme. This cap on prices was introduced following 'turbulence' and alleged price-fixing in the generics market that led to substantial prices increases in 1999/2000.

Drug and Therapeutics Committees

121. Local NHS measures may also be in place to control the activities of the pharmaceutical industry. Drug and Therapeutics Committees (also known as Use of Medicines Committees), which operate in local hospital Trusts, address prescribing and medicines use across the Trust, including affiliated primary care trusts (PCTs). Their guidance may be stricter than that of NICE. [See boxed text in Part 6 for an example of a Drug and Therapeutics Committee.]

122. There are also Area Prescribing Committees, which operate across health authorities and aim to ensure appropriate medicines use across the primary and secondary care boundary. In addition, there are prescribing advisers, usually pharmacists, who are employed by Strategic Health Authorities and PCTs, and work to encourage rational and cost-effective prescribing in primary care. According to the Department of Health, over 1,200 prescribing advisers are now in place in England and Wales.[74] This works out at an average of fewer than four per PCT.

Professional bodies

123. The core guidance booklet published by the General Medical Council (GMC), Good Medical Practice, warns doctors against "involvement in any relationships with pharmaceutical or other companies which could raise, or be seen to raise, a conflict of interests".[75] The GMC states that this is intended to cover matters such as accepting any kind of substantial hospitality or gifts from pharmaceutical companies. According to Good Medical Practice, doctors must be honest about any financial or commercial interests they have in pharmaceutical companies and ensure that those interests do not affect their independent judgement in providing and arranging patient care. No mention is made of guidelines for medically qualified doctors working within the industry but the GMC is reported to be working with Faculty of Pharmaceutical Medicine to set standards for doctors working for pharmaceutical companies.[76] The World Medical Association also issued guidelines in October 2004 on the relationship between doctors and commercial enterprises, with particular reference to the disclosure of interests in the context of research, conference attendance, gifts and affiliations.[77]

124. Other professional bodies, such as the Royal College of Nursing (RCN), Royal College of General Practitioners (RCGP) and National Pharmaceutical Association (NPA), may have individual policies in place regarding funding received from the pharmaceutical industry. For example, the RCGP, which received 3% of its annual income from the industry in the 2003-2004 financial year, stated:

The College has strict guidelines on accepting money from any sponsor, in order to ensure that the sponsor has no direct influence on the educational content of an event or conference.[78]

125. Although the GMC pointed out that, "complaints about doctors asking for or accepting inappropriate fees or hospitality" from pharmaceutical companies are unusual, we have not heard of any standard policies in place among professional organisations governing the interaction between industry and their members. There is no centrally held register of personal or financial interests in the pharmaceutical industry. The RCN, which receives approximately 30% of its annual sponsorship income from the pharmaceutical industry[79], stated that individual contact between nurses and drug company representatives does not involve the College:

Nurses can get offered the opportunity to negotiate payment of expenses for further training directly with company representatives without reference, support or the knowledge of the RCN. In these situations the RCN is not in any way involved, and does not attempt to regulate.[80]

The industry's codes of practice

126. The industry has its own arrangements for regulating the sales and marketing activities of its companies. This is largely achieved through the Code of Practice of the ABPI.[81] The Medicines Act and related EU legislation requires Ministers to exercise oversight of these activities. All aspects of the promotion of medicines, including advertisements, representatives' activities, meetings, the provision of education and hospitality and the provision of medical information by the industry are subject to self-regulation through the Code. The ABPI states that the industry "works well within self-regulation".[82]

127. The Code, first established in 1958 and since revised several times, was drawn up in consultation with the BMA, the Royal Pharmaceutical Society of Great Britain (RPSGB) and the medicines regulator. Compliance with the Code is a requirement for membership of the ABPI. A review of the Code, which began public consultation on December 17th 2004, is currently underway and is expected to conclude in November 2005.

128. The Proprietary Association of Great Britain (PAGB, the trade association representing the manufacturers of OTC medicines) covers promotion of OTC medicines. A condition of membership of the PAGB is the pre-vetting of all material directed to consumers.[83]

129. The Prescription Medicines Code of Practice Authority (PMCPA) was established by the ABPI to administer the Code for the pharmaceutical industry at arm's length from the ABPI itself. The Code covers the promotion of prescription-only medicines to health professionals and other staff, and communication with the general public.[84] There is no requirement for pre-vetting promotional material under the ABPI Code. The PMCPA is responsible for providing advice, guidance and training on the Code of Practice and it also handles complaints regarding advertising materials.

130. Complaints submitted under the ABPI Code come from three main sources: health professionals (30% in 2003); companies (46%) and those nominally made by the Director of the PMCPA (17%). In total, 131 complaints were received in 2003. Of the 122 cases actually considered (some related to matters not subject to the Code with no prima facie case and others were withdrawn), 97 (80%) were found in breach of the Code and 20% were not. Allegations may be appealed; 31% of appeals succeeded in 2003.[85] Details are published in the PMCPA's quarterly reviews and are expected to be made available on the Internet.

131. In each case in which a breach is ruled to have occurred, the chief executive of the company concerned must give an undertaking that the practice in question will cease forthwith, and ensure "all possible steps have been taken to avoid a similar breach in the future". This means materials have to be recalled immediately and destroyed. The major sanction is "the publication of comprehensive reports on all completed cases in the Code of Practice Review", which may be picked up by the medical and pharmaceutical press and occasionally the national press.[86]

132. Additional sanctions of the Appeal Board include a requirement to recover items distributed in connection with the promotion of a medicine and for the company to undergo an audit of its procedures in relation to the Code of Practice (two such audits occurred in 2003). In addition, the ABPI Board of Management may make a public reprimand, demand an audit, publish a corrective statement or suspend or expel the offender from the ABPI. However:

The ABPI Board has never required a company to publish a corrective statement nor has a company been expelled from membership of the ABPI. Companies have been suspended from membership of the ABPI, but this sanction has not been used since 1993.[87]

133. Gifts and hospitality are also covered by the ABPI Code of Practice:

All meetings, including sponsorship of scientific meetings and payment of travelling and accommodation expenses in connection with such meetings, are covered. Hospitality must only be provided in association with scientific meetings, promotional meetings, scientific congresses and other such meetings. It must be secondary to the purpose of the meeting and the level must be appropriate… Hospitality can only be provided for persons who qualify as proper delegates in their own right.[88]

134. Promotional reminder gifts (pens, pads etc) carrying a product name are permitted, up to the value of £6 and providing they are relevant to professional practice. The ABPI's Code of Practice states that hospitality may be offered only at a level that the recipient would be expected to pay him or herself.[89]

60   Quality use of medicines requires that drugs be used: judiciously, with non-medicinal approaches considered alongside pharmacological intervention; appropriately, taking into account condition, drug type, dosage, length of treatment and cost; safely, to ensure drugs are not over- or under-used; and efficaciously, to achieve changes in actual health outcomes. To achieve quality use of medicines, "people must be provided with the most appropriate treatment, and have the knowledge and skills to use medicines to their best effect". (Australian Government, Dept of Health and Ageing, National Medicines Policy 2000) Back

61   PI 01 Back

62   PI 104  Back

63   Section 118 in particular was a bar to disclosure. It was repealed in January 2005, the date of implementation of the Freedom of Information Act. Back

64   HC Deb, 10 Nov 2004: Column 259WH Back

65   Several PICTF indicators signal the importance of drug licensing business for the UK - e.g. "In the mutual recognition procedure, the number of times the MCA is chosen as the Reference Member State (RMS)"; and "In the centralised procedure, the number of times the MCA is nominated by industry as the rapporteur" Back

66   Q729 Back

67   PI 77 Back

68   Q802, 854 Back

69   HC Deb, 21 Feb 2005, Col 183W Back

70   See Department of Health announcement 17 January 2005: Back

71   Subhedar NV et al, The Lancet 2002; 359:1781 Back

72   Nitric oxide was patented as an orphan drug in 1999 Back

73   See  Back

74   PI 01 Back

75   The third edition of Good Medical Practice was published in May 2001 and is available at:  Back

76   PI 120 Back

77   Further details can be found at  Back

78   PI 19 Back

79   PI 42a Back

80   PI 42 Back

81   The ABPI Code of Practice is administered through the Prescription Medicines Code of Practice Authority. Back

82   PI 35 Back

83   PI 94 Back

84   PI 14 Back

85   PI 14 Back

86   PI 57 Back

87   PI 57 Back

88   PI 57 Back

89   PI 14 Back

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