Memorandum from the Department for Environment,
Food and Rural Affairs
2002 (S.I. 2002/2569)
1. The Committee has expressed a desire to examine
further the statement made by the National Office of Animal Health
Limited (NOAH), which was summarised in paragraph 9 (a) of the
Regulatory Impact Assessment accompanying the above Regulations,
that they "reserved the right to comment on the Consultation
2. The Veterinary Medicines Directorate (VMD) is
responsible for, amongst other things, authorising the marketing
of veterinary medicines and their manufacture and distribution
on behalf of the Secretary of State and the Agriculture and Health
Ministers for Northern Ireland who jointly form the Licensing
Authority. The VMD charges fees for applications and inspections
relating to the authorisation of veterinary medicines under the
Medicines Act 1968 and the Marketing Authorisations for Veterinary
Medicinal Products Regulations 1994. The fees are set out in Regulations.
Fee levels are regularly reviewed.
3. NOAH were consulted, along with approximately
700 other interested parties, including all holders of marketing
authorisations for veterinary medicines in the UK, on 3 July 2002
on proposals for an overall fee increase of 2.5% to cover inflation.
The 12-week consultation period ended on 25 September 2002.
4. NOAH are a trade organisation. They represent
some of the companies that research, develop, manufacture and
market animal medicines in the UK. In 2001 (the latest information
available) according to NOAH's website NOAH's members represented
around 95% of sales in the £359 million animal medicines
market (at ex manufacturers prices). A copy of NOAH's response
(dated 7 August 2002) to the consultation letter of 3 July is
attached at Annex A.
In it NOAH state that they have "no objection to the proposed
increase of 2.5% on all fees". The letter goes on to
say "However, we do have some more detailed comments about
the way in which such consultations are carried out, and will
be writing separately on this subject."
5. The VMD received no further correspondence from
NOAH on this matter. NOAH subsequently confirmed, in a telephone
conversation with the VMD, that they would not be writing further.
They explained that the concerns expressed in their letter of
7 August did not relate to the way in which the VMD had carried
out the consultation exercise. Their concerns related to their
continued unease at changes in the percentage rate of the Graded
Annual Fee (GAF), a part of the annual fee, without accompanying
explanation. This is a long-standing concern of NOAH and one that
was last raised by them in their response to the proposed fee
increase for 2001/2002. A copy of NOAH's letter is attached at
Annex B. At paragraph
2 of that letter NOAH comment "you will recall that in
previous years we have expressed concern at a percentage increase
being applied to the percentage rate of GAF, which is based on
industry turnover which is itself subject to rises and, latterly
falls. We reiterate our suggestion that it should be clearly stated
in fee proposals what the gross income from GAF is that is being
targeted, an estimate of industry turnover, and thus an argued
case for the GAF percentage needed".
6. These views, along with those received from other
consultees, were reported to Ministers. The outcome of the consultation
process was reported back to consultees in the VMD's letter of
19 December 2001 - a copy is attached as Annex C.
In it VMD gave a detailed explanation of the issue raised by NOAH.
The justification for the increase in the GAF was that the annual
fee forms part of an overall package designed to produce sufficient
income for the VMD to meet full cost recovery. If the GAF was
not increased other fees would need to be increased by more than
inflation to compensate.
7. The VMD are in the process of examining the feasibility
of radically changing the fee structure to make it more transparent
and enable the veterinary pharmaceutical companies to see exactly
what they are paying for. NOAH are aware of this work and support
26 November 2002
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