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Lord Monro of Langholm: Will the noble Baroness make it clear that the affirmative resolution will apply to all of Part II relating to Scotland as well?

Baroness Hayman: I am not sure that I can make that crystal clear at this precise moment. We shall come to the provisions for Scotland shortly. As I understand it, the recommendation of the Select Committee and this amendment in particular deal only with Clause 30(6). Perhaps before we come to debate the Scottish provisions I can find out and respond to the noble Lord at that point.

Earl Howe: I am extremely grateful, as so often this evening, for the noble Baroness's constructive approach. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 30 agreed to.

[Amendment No. 178 not moved.]

Clause 31 [Controls: supplementary]:

[Amendments Nos. 179 to 182 not moved.]

Lord Desai moved Amendment No. 182A:

Page 23, line 32, at end insert--
("(4A) In carrying out his duties under subsection (4), the Secretary of State shall publish criteria setting out what factors should be taken into account in determining prices and profits which would be reasonable in all the circumstances.
(4B) Prior to publishing the criteria referred to in subsection (4A) above, the Secretary of State shall consult such organisations as he considers appropriate.").

The noble Lord said: I shall be brief as this matter has partly been discussed. The amendment proposes that the Secretary of State should publish the criteria as to how he decides whether prices and profits are reasonable. It seeks to clarify the situation.

There is another problem that should be mentioned. According to the annual report of the Department of Health, the PPRS is meant both to secure cost-effective medicines for the NHS and to promote the pharmaceutical industry. There may be problems of conflict between the two. I am not sure which hat my right honourable friend the Secretary of State for Health

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would wear in deciding one against the other. This is a probing amendment. I hope that my noble friend can give me a satisfactory answer at this late hour.

Baroness Hayman: I am grateful to my noble friend for the clarity and brevity with which he proposed the amendment. I believe he is right to point out that there will be judgments to be made in the objective of securing an agreement that is fair and reasonable both to the NHS as purchaser and to the industry as suppliers and manufacturers. I believe that it will be difficult but not impossible to do so. Previous schemes have managed to square that circle and I hope that the current negotiations will result in a scheme which both parties feel satisfies the need of the NHS for medicines at reasonable prices and of the industry for a reasonable profit base, not least for the reasons of supporting research and development to which reference has been made.

The amendment affects the Secretary of State's use of powers conferred under a statutory scheme. Such a scheme will be used where a voluntary scheme does not exist or where a company fails to abide by the terms of that agreement. Subsection (4) confines those powers to making any decisions by reference to the prices or profits which would be reasonable in all the circumstances. The amendment puts on the face of the Bill a requirement that the Secretary of State shall consult appropriately before deciding and publishing the criteria to be used in determining what prices or profits would be reasonable in all the circumstances.

In the event that the powers are exercised to provide for a statutory scheme of profit control, the statutory scheme would be entirely set out in regulations. Those regulations would have to be very detailed and formulaic and would contain the criteria to which the noble Lord, Lord Desai, referred. The Bill already provides for consultation with the industry body before the power is exercised and the Secretary of State is free to consult other bodies as he sees fit.

On the question of price control, the Secretary of State will again have to consult the industry body before exercising any power. He is also required to act reasonably, as required by general law and Section 31(4) of the Bill. To do so, a clear statement of the criteria which had been used in determining any price would be required. I hope that my noble friend will feel that the effects which the amendment seeks to put in place are already met, if not on the face of the Bill, in the regulations that would have to be made in the exercise of this power, and that on that basis he will feel able to withdraw the amendment.

Lord Desai: I am grateful to my noble friend for that very clear exposition. I need only add that among the organisations that the Secretary of State should consult should be some consumer organisations. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 183 and 184 not moved.]

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Earl Howe moved Amendment No. 185:

Page 24, line 3, at end insert--
(""the supply of any health service medicine" means the supply of a health service medicine to the health service,
"the manufacture of any health service medicine" means the manufacture of such health service medicine as may be supplied to the health service.").

The noble Earl said: I believe that there is a problem with the definition of "health service medicine" in Clause 31(6). I take it that the Bill intends to limit the exercise of the powers contained in Clauses 26 to 31 to medicines actually supplied to the NHS. As drafted, however, the definition of "health service medicine", which is,

    "a medicinal product ... used to any extent for the purposes of the health service",
leaves open the possibility that the controls would apply to such a medicine even when it was being supplied to someone other than the NHS. In other words, it would, as a product, be subject to the controls, no matter whom it was sold to. Amendment No. 185 attempts to put the issue beyond doubt by including two new definitions in Clause 31. I hope that the Government will be receptive to them. I beg to move.

Lord Clement-Jones: I wish to indicate the strong support of these Benches for the amendment. The clause as currently drafted is too wide. The amendment specifies the area that the clause is meant to cover, which I am sure is the Government's intention.

Baroness Hayman: Both noble Lords have expressed concern about the breadth of the current definitions within this part of the Bill. Clauses 26 to 31 are concerned with the single aim of ensuring that the prices paid by the NHS for its medicines are fair and reasonable. We are not concerned to control prices or profits on the sales of private medicines. However, at the margins, particularly when dealing with wholesalers, the precise destination of every drug in any particular consignment is very difficult to identify. That is the problem in limiting the scope of the price and profit control powers created under the Bill to medicines sold to the health service rather than to categories of medicine that are used to a significant extent by the service. But the problem to which I have alluded arises under the present voluntary arrangements that have operated satisfactorily.

I recognise that something may be required to deal with this marginal problem, but I suggest to the Committee that it may be best dealt with in regulations. Perhaps I can look at whether there is a way of doing that. There are problems in the suggested amendment which would have equal and opposite difficulties in the clause as it is phrased at the moment.

Earl Howe: I am grateful to the Minister for indicating that she will give further thought to the issue. I realise from her response that it is not as clear-cut as I had thought. Nevertheless, there is an ambiguity in the wording which perhaps can be removed by a little

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judicious rephrasing. We can perhaps look forward to returning to this matter at a later stage. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 31 agreed to.

On Question, Whether Clauses 32 to 35 shall stand part of the Bill?

Baroness Hayman: Perhaps I may take this opportunity before I sit down--if that is the appropriate way to put it--to respond to the noble Lord, Lord Monro of Langholm, on the question of the affirmative procedure and Part II of the Bill and the proposals that we make in Clause 36. This is a reserved matter and therefore will apply to Scotland. Clause 36 has no bearing on Part II of the Bill nor indeed on any of the Clauses 26 to 31. I hope that that deals with his point.

Clauses 32 to 35 agreed to.

Clause 36 [Repeal of law about fund-holding practices]:

[Amendment No.186 not moved.]

On Question, Whether Clause 36 shall stand part of the Bill?

Lord Monro of Langholm: Perhaps one should take this opportunity to debate Clause 36 which, after all, represents a major change in the health service in Scotland. It removes the capability of fundholders. I believe that some explanation from the Minister is required as to the reasons for the inclusion of this provision in the Bill over and above what is in the White Paper. It is unfortunate that Part II of the Bill is being considered at 12.45 in the morning. This makes very substantial changes to the health service in Scotland. This is hardly the time to discuss such important issues. While I appreciate that fewer general practitioners in Scotland than in England undertook fundholding, I believe that fundholding has been a success in terms of what they have been able to achieve: less interference in general practice; a reduction in bureaucracy; less impact on costs; easier prescribing under fundholding; and the ease of organisation of entry into hospital. Before we say goodbye to fundholding as provided for in Clause 36, the Minister should be able to put forward a good case for this major change.

I am grateful to the noble Lord, Lord Macdonald, for the trouble he has taken in writing to us this afternoon setting out in more easily understood English the more complicated changes to the Bill under the Scottish draftsmanship. That is appreciated. I am sure that all who read it in the future will wish that the Bill had been drafted in similar terms.

Having offered those words of thanks, perhaps when the noble Lord, Lord Macdonald, replies, he will argue a case for Clause 36.

12.45 a.m.

The Earl of Mar and Kellie: In discussion with my local health board I gained the impression that the few fundholding GPs had already accepted that the writing

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was on the wall. In view of the advanced state of preparations for implementing the Bill by 1st April, fundholding has virtually come to an end.

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