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Lord Campbell of Alloway: My Lords, before the noble Lord sits down, perhaps I may ask him a question. As there is not a special fund--
Lord Montague of Oxford: My Lords, I hope I did not express myself earlier in a manner which misled the House. There is a fund. I named the fund. I stated the amount of money that has been paid by the Government. I can now tell the House the number of small pharmacies that are being assisted at the present time in England and Wales. It is 280. If any more fall below this threshold, they will be able to get similar funds from their local health authority. I may not have made myself completely clear; in which case I apologise.
Lord Jacobs: My Lords, I remain unconcerned that my noble friend Lord McNally moved the amendment while I am opposing it. As your Lordships will see, this is not an open and shut case. Noble Lords may have believed it was when they heard the speeches at the Committee stage, but they have heard a more balanced view today. Indeed, if the arguments were so clear-cut, why have the supporters of the amendment made such enormous efforts to prevent this going before the Restrictive Practices Court, where things could be properly evaluated? Perhaps they are not confident that they will win their case there.
The strongest spokesman for consumers in this country is the Consumers' Association. Last year it carried out a major study and said that it unreservedly opposed the continuation of resale price maintenance on these goods. Its research showed, on a survey of 2,000 people, that 13 per cent. of them were unable to afford certain medicines. This minority of just one in eight of the population is large enough to warrant the concern of noble Lords. If the removal of the RPM on medicines allows some of this group to purchase the medicines they wish, the social benefits will be considerable.
It is claimed that 3,000 pharmacists are at risk if RPM is removed on over-the-counter drugs. Regrettably, so far the report adducing this information has not been published, although it has been requested by the Consumers' Association. Those pharmacists which it is claimed are at risk will be the smallest ones, naturally, and they will have a turnover of between £120,000 and £150,000 a year. Eighty per cent. of that will be for regular prescription drugs and about 5 per cent.-- there are differing figures ranging from 3 per cent. to 7 per cent., but the majority view is that it is about 5 per cent.--of that turnover will be on over-the-counter drugs.
If RPM is abolished, the Consumers' Association believes that there will be very little loss of business to supermarkets and other groups. It believes that customers will continue, as the noble Lord, Lord Desai,
has said, to use local pharmacists for their convenience when they serve a local community and offer a good service.I prefer to be more generous to the supporters of RPM by saying that perhaps as much as 50 per cent. of their turnover in what would be cut-price goods on over-the-counter drugs would go to the competition. The net loss of profit or margin for the 3,000 pharmacists in total would be about £7 million a year.
If RPM is not abolished, the Community Pharmacy Action Group believes that the cost to the consumer would be between 6p and 10p per week, which I am sure noble Lords will agree is a small sum-- unless noble Lords have already calculated that even 6p per week is £180 million a year--which the consumers will have to pay to enable the £7 million a year of additional money to accrue to the 3,000 pharmacists. I can well understand why the Consumers' Association is so strongly in favour of the end of RPM.
The Government could compensate small pharmacists for the loss of business by a smaller amount of the dispensing fee which they receive and make up the cost of that by reducing by a small amount the dispensing fee given to the larger chemist shops. It has been argued before that the pharmacists do not want to go before the Restrictive Practices Court and are seeking a delay of five years before this matter is reviewed. That would be in order to protect the 3,000 small pharmacists who are at risk. Their loss of margin over five years would be £35 million. The cost to the rest of the nation for maintaining that system over five years would be in excess of £900 million.
I do not argue that the case against RPM is absolutely certain to win the day before the Restrictive Practices Court, any more than it is possible to argue that the supporters of RPM will win their case. However, this matter has not been reviewed for more than 27 years. I believe that the process of re-examination of the merits and demerits for the continuation of RPM should take place before the courts. As an opponent of RPM, I am confident that our view will be upheld, but so indeed are those in favour of RPM. Therefore, let it be judged before the courts, where all the facts and evidence can be produced. I ask your Lordships to avoid the temptation of being persuaded by some very good emotional arguments which I heard both at Committee stage and today.
Lord Peston: My Lords, in addressing your Lordships briefly I declare two interests. I am an honorary member of the Royal Pharmaceutical Society of Great Britain and I am also chairman of the Office of Health Economics, which is financed by the pharmaceutical industry. It is for that reason that I have refrained from addressing your Lordships on this subject until now. I do not intend to deal with the substance of the matter even on this occasion, except to remark acerbically that it is customary in your Lordships' House for noble Lords to address the amendments before the Chamber and not to debate other subjects--which most noble Lords have been doing either for or against resale
price maintenance, which, unless I have lost all my ability to read, is not the subject of these amendments. They are about a related matter.I mention the matter largely to ask my noble friend a question which relates to double jeopardy. That is the only reason I rise to speak. Assuming that my noble friend Lord Stallard is right--and I believe he is--we are discussing here the question of triple jeopardy, because the bureaucrats in Brussels may well take an interest in the subject.
I believe that my credentials on competition are at least as good as those of any Member of your Lordships' House. Indeed, I believe that they are better than those of one or two noble Lords who have spoken today. But again that is me in my acerbic mood.
My noble friend the Minister has dealt with the Bill generally so admirably, but he has not answered the double jeopardy question. He has dealt with many other matters but he has not answered that. As I say, I do not wish remotely to get involved with the substance of the debate because I believe it would be improper for me to do so. But I hope on this occasion when my noble friend replies that he will explain to us why the Government view with equanimity the double jeopardy side of this subject. I have an open mind. I am willing to be persuaded that it is right that pharmacists should have to argue the case once under the old legislation, which they might win, but if they do, they have to argue the case a second time, let alone on a third occasion. I fervently hope that my noble friend wishes to carry his friends with him. But he has to answer once and for all the case for double jeopardy. I am looking forward to that.
Lord Fraser of Carmyllie: My Lords, I express to the Minister for the last time the view that it is not for him to respond to this debate. I very much regret that, having indicated on a previous occasion that it might at least have been a courtesy to the House to have one health Minister, or more, on the Bench alongside the noble Lord. As he well understands, what concerns me and many others in this House is that there are two sets of government policies which are in conflict. If the declared single objective of this Government was that over-the-counter medicines were to be as cheap as possible to the consumer, there would be no contradiction whatsoever.
But the fact is that the Secretary of State for Health has repeatedly said, and as recently as Monday evening, as the noble Lord, Lord Walton, and my noble friend Lady Miller remarked, and emphasised at great length, how keen he is to see the role of community pharmacies extended. He wanted to see them helping people to use self-medication where appropriate. He wanted to see a new and extended role for community pharmacists in primary care. That is not only a clearly set out policy--from this side of the House I say that it is an extremely good one. If the Government wish to follow that I can signal to them that they will get unswerving support, I believe, from all quarters of the House in the pursuit of such a worthwhile policy. It reduces the load on general practitioners.
In this debate we have over-concentrated on rural matters. I would like to see community pharmacies more extensively developing among some of the appalling housing schemes of our nation. That would be a much more important demonstration of the value of the extension of their role. That is what we are being told. In the White Paper for England, Wales and Scotland the Government have said that they wish to take competition out of the National Health Service. But by this change in the Competition Bill in a critical area of the policy they most wish to pursue they are saying that what will be paramount and the key issue, whether it affects community pharmacists or not, will be the price of such over-the-counter drugs. That is unacceptable. This is a health debate. As the noble Lord, Lord Peston, said, it may principally revolve around the issue of double jeopardy. However, the community pharmacists--and they are the people who have put up their own money and who run their own businesses--believe that if the limited protection now afforded to them is removed, their businesses will be put in real jeopardy.
It is unacceptable that the Secretary of State for Health should have gone to talk to the pharmacists on Monday night, praised them to the skies for all that they are doing and yet--although he is well aware that this is the one issue that is at the forefront of their minds--did not even refer to their worries during the course of a long speech. It would seem appropriate for a responsible government to say, "We understand your fears", and then either, "We do not accept them", or, "We are going to meet your concerns in another way by extension of the small pharmacy scheme or by some other device". None of those proposals has ever been offered to community pharmacists and I believe that their fears are well founded.
This is a matter on which we cannot be neutral. I understand that in answer to a question one of the Ministers responsible for health said that the Department of Health was neutral on this issue. It simply cannot be neutral on this issue because it is far too important for the future development of the National Health Service. I am aware that whatever may be the Government's view at present, over 100 of their Back-Benchers in the House of Commons have exactly the anxieties that have been expressed by the noble Lord, Lord Stallard, and others. In such circumstances, if those who are promoting the amendment are determined to put it to a Division, I shall advise my noble friends to support them in the Lobby.
4.30 p.m.
Lord Simon of Highbury: My Lords, I am clear that what I am trying to achieve this afternoon is an understanding of the implications of this Competition Bill to a particular sector. I am delighted to be asked to debate health policy during our proceedings on this Bill, but, again, I shall not rise to the challenge put to me because we are here to debate the Competition Bill. Although the noble and learned Lord, Lord Fraser, was very tempting in asking me to dispose of policy in another department, he will not find me willing to do so
on this occasion. I am sure that if my noble friend Lady Jay were not in America she would be sitting here on the Bench beside me supporting me fully because what I am about to say relates to government policy. We are aware of government policy in both sectors.As I have said before in previous debates (both in Committee and on Report)--I should like to make this clear to my noble friends Lord Stallard and Lord Hughes--the Government entirely accept the importance of community pharmacies. I fully understand that the CPAG wishes to press the arguments of community pharmacists and to outline their concerns about the future. However, as my noble friend Lord Borrie explained--I agree with this point--at the moment we do not know whether resale price maintenance in that sector is a good or a bad thing. The issue is whether the independent bodies set up to examine such matters under statutory provisions should be allowed to do so, or whether the resale price maintenance for over-the-counter (OTC) medicines should be removed from scrutiny, both under the Resale Prices Act and under the Chapter I prohibition in the Bill until the year 2004. That is the purpose and the likely effect of the amendments.
The Director-General of Fair Trading has now initiated formal proceedings. I advise my noble friends that the proceedings have been on the stocks since October 1996. They were formally announced in January, but for 15 months people were well aware that the case was being prepared. Now that the director-general is seeking the leave of the court for resale price maintenance in OTC medicines to be reassessed, the Government are satisfied that it would not be desirable for the legislature to intervene to set aside the formal process which has been initiated. As has been pointed out, after nearly three decades, it is reasonable for the matter to be reviewed by the competition authorities. We do not think it could be justified to remove resale price maintenance from competition scrutiny until perhaps 2004. My noble friends Lord Stallard and Lord Peston have suggested that it is unfair and wasteful, and could involve pharmacists in double jeopardy, if they had to argue their case under the Resale Prices Act at a time when we are about to introduce a new competition regime.
As I said on Report, I can see the case for saying that the resale price maintenance of OTC medicines should be considered only under the new regime, in which case it should also benefit only from the one-year transitional period we are providing for most existing agreements. I can see the case for saying, as we propose, that the present action should be allowed to continue to a conclusion, but that if the result of the proceedings is that OTC medicines are exempt because their case is as strong as those promoting the amendment contend, resale price maintenance in those goods should benefit from a generous five years' transitional exclusion from the Chapter I prohibition from the date those proceedings end. But I do not understand the case for saying that the present action seeking a review of the exemption should be stayed and that resale price maintenance for OTC medicines should benefit from a five-year exemption.
The existing exemption of resale price maintenance for OTC medicines has always been subject to possible review by the court, if there is prima facie evidence of a material change in the relevant circumstances since the court took its decision in 1970. As I have said, the amendments take the opportunity of the Bill effectively to remove the practice from being considered until 2004.
I am not here to suggest in any way that the CPAG is hiding anything in seeking to avoid scrutiny of resale price maintenance of OTC medicines. As I have said, we recognise the public interest in a plentiful and well distributed supply of pharmacists, and we would hope, as well as expect, that the court will consider carefully any evidence against ending the exemption for OTC medicines.
I am sure that the pharmacists will be able to make a powerful case. But it is only fair to point out that the Director-General of Fair Trading has unquestionably studied this issue long and hard over a number of years and has reached a serious conclusion, to which many noble Lords have referred. There are factors which have changed considerably and the director-general has tried to lay out some of those factors publicly. I sense that the noble Lord, Lord McNally, implicitly criticised the director-general for making known his views which were reported in the press. I am assured that the director's intention was merely to put on record the issues which led him to refer the case and to set out the due process and merits of the case which would be properly examined.
The director-general notes that in 1970 the court was particularly concerned about the availability of ethical medicines should resale price maintenance be prohibited. He observes that resale price maintenance of such medicines appears to have been abandoned in the 1970s without there being the effects which the court feared. He questions whether the prohibition of resale price maintenance of the remaining medicines covered by the exemption would threaten the future of pharmacies. He points out, as noble Lords have pointed out today, that their mainstay is NHS dispensing, since over 70 per cent. of their turnover is accounted for by prescriptions. When the court made its order in 1970 pharmacy numbers were declining and branded OTC medicines made up between 10 per cent. and 13 per cent. of their sales. Since 1987 the number of pharmacies has been stable and these products account for about 7 per cent. of their sales. This is a real dilemma which the House has recognised. I believe that the director-general implies that pharmacies do not rely on branded over-the-counter-sales as they once did. As my noble friends Lord Montague and Lord Desai have pointed out, the director-general has noted that since the 1970 Essential Small Pharmacy Scheme has been instituted. That scheme protects small rural pharmacies from going out of business. Surely, a targeted scheme such as that to protect local pharmacies is a much more sensible policy for the Government and consumers than to make customers pay more for their goods. The Essential Small Pharmacy Scheme may well command greater support in the future.
As for the disadvantages of resale price maintenance in the sector, the director-general has pointed out the dramatic increase in prices since 1970. A basket of medicines used by most families has risen by 17 per cent. in real terms since then, and continues to rise. Between 1990 and 1996 the price rose 20 per cent. above inflation. Small pack sizes, which are most popular with low income families and the elderly, have risen by almost 60 per cent. above inflation since 1977.
I do not outline the economic facts that the director-general has put to the public because I necessarily draw conclusions from them. That is not my job but the job of the court. I do so just to point out--here I agree with many noble Lords--that there are important points to consider. The amendments that have been tabled would prevent proper consideration of those matters by the court. To what avail is that likely to be? Like my noble friend Lord Peston, I come to the triple-jeopardy question that I cannot answer, having attempted to answer the double-jeopardy question. The triple jeopardy question is: what would the European Commission do if we did not make this examination and the case was not heard by our own authorities? I must warn the House that the consequences of accepting these amendments are unpredictable in that sense and may not necessarily be to the advantage of the sponsors of the amendments. I believe that it would be better to leave the matter to be dealt with on its merits by the court. We seek to press to a conclusion these very difficult matters over which I sense the House is also divided. If the proceedings result in an exemption, then under the Bill resale price maintenance for over-the-counter medicines will enjoy the benefits of a five-year transitional exclusion from the Chapter I prohibition from the end of the proceedings.
In conclusion, I must advise your Lordships against accepting the amendments. I believe that it would be undesirable for this House to set aside proceedings before a court of law brought by a statutorily appointed officer exercising functions confirmed on him by the Act, particularly as the proceedings concern the very pertinent question of whether resale price maintenance for medicines is in the public interest. There should be and will be other ways to assure the distribution network, but they cannot be part of this particular Bill. I ask the noble Lord to reflect very carefully before pressing this amendment.
4.45 p.m.
Lord Stallard: My Lords, before my noble friend sits down, can he explain why for the past 30 years successive directors-general have believed it to be in the public interest to retain RPM but suddenly the present director-general decides in the same month as this Bill commences that he must institute proceedings? Is it merely a coincidence, or am I being over-suspicious?
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