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Baroness Hayman: It is late in the day to discuss the semantics of whether or not this is a hybrid scheme. Perhaps I may respond briefly to the noble Baroness. I should like to reiterate that the Government are committed to renegotiating the pharmaceuticals price regulation scheme. Negotiations are currently taking place with the industry with the objective of achieving agreement. I believe that those objectives are shared by both sides of the negotiations. We as a government want them to be a success. We recognise what has been achieved over the years under previous agreements and we consider that another voluntary scheme is the best way to proceed.

However, I have to repeat that we need to take account of recent experience in operating the current scheme. That is what has led the Government to conclude that it will not be possible to operate the new scheme fairly and effectively without some means of addressing those companies that sign up to the voluntary agreement but then do not abide fully by the agreed terms.

I have explained what some of those difficulties have been in the past and the reasons why that situation brings both the administration and the efficiency of the scheme into disrepute and delays the payment of excess profits where they are payable under the scheme. That is not fair to companies which comply with the scheme. Nor is it fair to the NHS.

We do not believe that what we put forward is a hybrid scheme. We want to reach an agreement which will be voluntary and any other provisions about a statutory need to provide information would not affect

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the companies which signed up and abided by it because they would be working within the terms of the agreement. We believe that that is the best way forward.

However, experience of recent years has shown that not all companies which sign up to a voluntary agreement are then prepared fully to comply with it. My understanding from discussions with the pharmaceutical industry is that it recognises the justification for the Bill including provisions for penalties to give teeth to the obligations which companies will undertake under the terms of the voluntary PPRS. I suggest to the noble Baroness that the two alternatives that she proposes, as I understand, by opposing the Question that the clause stand part of the Bill--either for a voluntary agreement, which is susceptible to the same problems that we have had in the past; or to a full scale statutory scheme--are not the best way forward. It is sensible to recognise the value of a voluntary scheme but equally it is necessary to have the statutory underpinning which ensures that that scheme is effective.

We do not believe that it would be sensible for the Government to have to decide between continuation of a probable non-compliance by some companies and a full statutory scheme. Both those outcomes are less satisfactory than a voluntary scheme with which companies comply fully. That is the aim of the clause. I urge the Committee to support that it remain part of the Bill.

Baroness Sharp of Guildford: I thank the Minister for that reply. We beg to differ on the issue, but, given the lateness of the hour, I shall not pursue the point.

Clause 26 agreed to.

Clause 27 [Power to control prices]:

[Amendments Nos. 161 and 162 not moved.]

Earl Howe moved Amendment No. 163:

Page 21, line 40, at end insert--
("(2) The powers conferred in this section shall not apply to a manufacturer or supplier to whom a voluntary scheme under section 26 applies.").

The noble Earl said: We come now to an important set of amendments. I shall speak to Amendments Nos. 163 and 167.

Clauses 27 and 28 of the Bill came as a considerable shock to the pharmaceutical industry. The provisions in these clauses empower the Secretary of State not only to limit any price which may be charged by any manufacturer or supplier of health service medicines but also to introduce a statutory scheme under which prices or profits of manufacturers or suppliers would be compulsorily curbed in respect of any health service medicines.

Only a few months ago, in July 1998, the Secretary of State was quoted in the Pharmaceutical Times as saying:

    "The PPRS delivers with no surprises and at the same time the UK is well below the international average on the cost of our drugs. I don't think we will be looking for any giant changes".
We have only to look at Clauses 27 and 28 to see how giant the changes are and how far the Government have altered course since July last year. What has brought

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about this dramatic change in the Government's position--so dramatic that they are effectively doing away with the voluntary nature of the PPRS by taking on powers to fix the prices of drugs as they choose?

The Government's justification for these new powers is that certain companies are not complying with the voluntary scheme. If that is really their perception, I believe that we need further and better particulars. We are told that one major company has refused to submit financial returns since 1990. If that is true, it is clearly unsatisfactory. However, there are at present 45 companies in the scheme and one problem case out of 45 hardly seems to justify the kind of power we see here. Indeed, on 26th November, the Secretary of State told another place that the reserve powers,

    "should have no significant impact on the vast majority which always have complied and are complying at present".--[Official Report, Commons, 26/11/98; col. 332.]
But these powers could apply to the compliant majority. They are not limited reserve powers; they are sweeping powers. They would enable the Secretary of State to impose direct price and profit controls on individual companies, or on the industry as a whole. The Government in the Bill makes much of the spirit of partnership, but I have to ask where the spirit of partnership is in Clauses 27 and 28.

The clear understanding within the industry was that the new statutory powers were intended as reserve powers to back up the PPRS and that Clauses 27 and 28 would be held in reserve in the full expectation that their use would be unnecessary once the new voluntary PPRS had been agreed upon. Indeed, the Minister herself on Second Reading said:

    "We consider that a voluntary scheme which is clear and fair is the best way of working".--[Official Report, 9/2/99; col. 113.]
She has repeated those sentiments tonight. How do the Government believe that a voluntary scheme can be successfully negotiated if the companies attempting to sign up to it are simultaneously threatened by the use of compulsion? That threat undermines the entire voluntary basis of the PPRS. What the Bill does is to place companies in double jeopardy and that is totally inequitable and counter productive.

If the Secretary of State and the industry reach agreement on a voluntary scheme under Clause 26, the companies which have agreed to take part in the scheme should be expressly exempted from compulsory controls of any kind. By that, I do not mean that there should be no sanction against those who break the terms of the PPRS. I see nothing offensive in principle about the provisions in Clause 30 for penalties on non-compliant companies. But what is completely unacceptable is the enactment of new compulsory powers of price and profit control which could operate indiscriminately against saints and rogues alike. And that is the purpose of the amendments. I beg to move.

Lord Walton of Detchant: I have already raised the issue of the boundary and it may well be that the Minister will say that this issue is to be dealt with under regulations. But looking at the wording of Amendment No. 167, to which the noble Earl referred, is it not possible that the Government could come back with an amendment

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at Report stage indicating precisely on the face of the Bill that the statutory scheme will not apply to a manufacturer or supplier who is complying with all the provisions of the voluntary scheme? Would that not be a means of meeting the great concern of the industry on this matter?

Baroness Hayman: Yes, I believe that it would and that that is what we ought to do. With the leave of the Committee, I should like to see whether we can draft a provision which I agree with the noble Lord will be better dealt with on the face of the Bill rather than by regulation.

We have here three sequential clauses. We have Clause 26 dealing with the voluntary agreement; Clause 27 concerned with the control of prices; and Clause 28 intended to operate where there is no voluntary agreement or in relation to those companies or suppliers that fail to abide by the terms of the agreement.

The noble Earl, Lord Howe, was quite right to point out that the Government's intention has always been that the statutory provisions should have no significant impact on those companies which agree to and comply with the voluntary agreement. Amendment No. 163 underlines the Government's intention that the control of prices should not apply to manufacturers and suppliers who are abiding by voluntary schemes, as described in Clause 26. Amendment No. 167 makes clear that Clause 28 is to operate only in the case where there is no voluntary agreement or where companies or suppliers fail to abide by the terms of that agreement.

It is not our intention that any manufacturer or supplier abiding by the terms of the voluntary agreement to which Clause 26 refers should be subject to the powers conferred in Clause 28.

I believe that the boundaries to which the noble Lord, Lord Walton of Detchant, referred are not very clear on the face of the Bill, although I believe that we have been clear as to our intentions. Therefore, with the leave of the Committee, I wish to take away both amendments with a view to looking at how we may subsume their spirit and bring forward amendments at a later stage.

11.45 p.m.

Earl Howe: Once again, I am extremely grateful to the Minister for the constructive way in which she has responded to these amendments. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 27 agreed to.

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