Previous Section Back to Table of Contents Lords Hansard Home Page

Lord Desai: My Lords, I am grateful to my noble friend the Minister as well as to all noble Lords who took part in this debate. One way to measure the usefulness of an amendment is to measure the proportion of the mover's time as compared with that of everybody else, including the Minister. In that respect the multiplier has been very high. I am especially grateful to my noble friend for a careful, detailed and thorough answer. It has put many of my concerns at rest and it is therefore with pleasure that I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 29 [Statutory schemes: supplementary]:

Baroness Sharp of Guildford moved Amendment No. 62:

Page 22, line 33, after ("body") insert ("and the National Institute for Clinical Excellence").

The noble Baroness said: My Lords, the brief point that I wish to make with this amendment is that NICE (the national institute of clinical excellence) is being set up under this Bill in order to develop a wide expertise about the relative efficacy of different therapies. In implementing a statutory scheme, which is what this part of Clause 29 is about, it is important to include NICE within the consultations as well as the industry itself. The amendment seeks to ensure that such consultation is written on the face of the Bill. I beg to move.

Lord Walton of Detchant: My Lords, I fully understand why this amendment was tabled, but I find it difficult to support it, if only for one important reason.

NICE is a body which is to be established to be pro-active and not reactive. In other words, its responsibilities will include examining different forms of medicine and treatment to be available to the National Health Service; to look at the validity of that treatment and its cost-effectiveness. As I understand from public statements made by Sir Michael Rawlins, its chairman, it will be examining whether it is appropriate, within the NHS, for a specific treatment to be made available and whether it will be cost-effective for a specific group of patients.

To impose upon NICE the responsibility of reacting to consultations with the pharmaceutical industry in relation to issues set out in the Bill, would be an inappropriate measure. Solely for that reason I find it difficult to support the amendment.

Baroness Hayman: My Lords, I agree with the noble Lord, Lord Walton of Detchant. We all accept that

18 Mar 1999 : Column 879

consultation is a good idea, but if we write on the face of the Bill that a body is to be statutorily consulted, we must make sure that it is appropriate that that body should be so consulted.

In this case we are talking about the imposition of a statutory scheme which will be necessary if there is a failure to arrive at an overall voluntary agreement with the pharmaceutical industry, or if an individual company or companies fail to abide by the terms of such agreement. It is hoped that we will not get into that situation, but were that to happen, the form of such agreement would mirror those previous agreements which existed between the Government and the pharmaceutical industry over the years. That is to say, it would aim to ensure that the prices paid by the NHS for its medicines were fair and reasonable, having regard to the overall profits made by a supplier from its trade with the NHS. Of course, we would be looking at issues about appropriate recognition of research and development. Alternatively, if that supplier exceptionally refused to supply information necessary to make a determination, consideration would then be given to the reasonableness of the prices paid for individual medicines.

However, the real focus of Clause 29 is the measures that would be needed in practical terms to introduce such a statutory scheme; for example, what information might be needed before a scheme was in place? In matters such as these it is reasonable to be required on the face of the Bill to consult the industry body; but, as I said in reply to the amendment of my noble friend Lord Desai, the Secretary of State is free to consult whoever he wishes. But, for the reasons explained by the noble Lord, Lord Walton of Detchant, I am not sure that NICE is the right body. The clause is concerned with procedural matters which I believe are outside that body's immediate remit. I therefore urge the noble Baroness to withdraw the amendment.

Baroness Sharp of Guildford: My Lords, I thank the Minister for her reply. I take on board the fact that, as she said, the Secretary of State is free to consult whosoever he wishes in relation to setting up a statutory scheme. Therefore, if it were appropriate to consult NICE on such an occasion, he would do so. In the light of that assurance, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hayman moved Amendments Nos. 63 and 64:

Page 22, line 35, after ("scheme") insert ("or of a limit under section 27").
Page 22, line 38, leave out from ("person") to second ("to") in line 39 and insert ("to whom such a scheme or limit may apply").

On Question, amendments agreed to.

Clause 30 [Enforcement]:

Earl Howe moved Amendment No. 65

Page 23, line 2, leave out ("£100,000") and insert ("£50,000").

The noble Earl said: My Lords, I shall be brief with this amendment. First of all, I should be grateful to know what considerations led the Government to propose levels of financial penalty in this part of the Bill

18 Mar 1999 : Column 880

that appear, at least to me, extremely steep. For example, what bench-marks did they use, and why? Further, what principles will govern the imposition of particular levels of penalty within the maxima laid down?

My second concern bears directly upon the latter, although it relates more to subsection (3). I hope that the Minister is in a position to answer a few questions in that respect. The ability of the Secretary of State to impose a surcharge of 50 per cent. of whatever penalty arises from subsection (2) is a seemingly draconian provision. It is certainly not a provision which, if it were inserted into a private contract, would be likely to be upheld by the courts. Can the Minister say what the model is for that provision and what precedent there is for it?

The only parallel of sorts that I have been able to find is in VAT legislation, but that is surely a poor model for legislation that has nothing to do with taxation; indeed, this is legislation which seeks to regulate the pricing of pharmaceuticals. The penalties are not a tax. Can the Minister say what will govern the imposition of a 50 per cent. surcharge? Moreover, does not the Minister think that such a power is inherently incompatible with the spirit of a voluntary scheme?

I realise that I am guilty of straying outside the strict confines of the amendment on the Marshalled List, and I apologise for that fact. However, this question is intimately bound up with the absolute level of penalties laid down in the Bill, and I believe that we should look at the whole question in the round. I am uneasy about the amounts which might be charged to a pharmaceutical company under Clause 30. Therefore, I beg to move.

6.45 p.m.

Baroness Hayman: My Lords, the noble Earl asks what considerations were taken into account when setting the level of these penalties. The considerations were to ensure that they were effective and that they were of a sufficient amount that those who might contravene any provision of regulations or directions under Clauses 26 to 29 would wish to avoid incurring them. However, I recognise that they must not be out of proportion to what is needed. It was finding the balance in respect of those considerations which led us to the amounts set out in the clause.

The NHS spends billions of pounds each year on medicines. Several companies have sales in excess of £100 million. Many companies derive annual profits of tens of millions of pounds. Over 500 medicines have sales to the NHS of £1 million individually. I would ask noble Lords to bear those figures in mind when looking at these penalties. I should also like noble Lords to recognise that amounts stipulated in subsection (2), at which this amendment is directed, are the maximum amounts of those penalties.

It is not the intention to use the maximum amount in all, or possibly in any, cases, but there remains the need to have an effective deterrent against the non-compliance which we have seen with earlier schemes. Clearly the amount of the penalty will be

18 Mar 1999 : Column 881

affected by the amount of excess profit or prices made or charged by a non-compliant supplier or manufacturer. That, in turn, will be influenced to a great extent by the level of sales. The detail of how the level of penalties for a given case will be determined will be contained in regulations. Amendment No. 68 to Clause 30 also means that the Secretary of State must consult with the industry body before making such regulations. I remind noble Lords that we have also introduced an amendment which means that these maximum penalties cannot be increased other than by the affirmative resolution procedure.

I have to say that the proposition that the survival of a supplier or manufacturer with sales of, say, in excess of £50 million to the NHS each year is going to be jeopardised by penalties in the range up to those specified is not one that I believe to be realistic. I believe that we have reached an appropriate point.

Perhaps I may now deal with the penalties uplift issue raised by the noble Earl. Clause 30(3) provides that where a supplier or manufacturer increases the price of a product under the statutory element of a voluntary scheme or under a statutory scheme, the amount required to be repaid may be increased by an amount not exceeding 50 per cent. This means that a company which contravened regulations made under these provisions would be liable to repay the amount overcharged to the NHS as a result of the unapproved increase and the penalty of up to 50 per cent. of that amount, plus an interest charge to be specified in regulations.

As I said, the purpose of penalties is to deter companies increasing prices outside the terms of a voluntary agreement or a statutory scheme. What is required is a scale of penalties which is sufficiently flexible to accommodate various types and sizes of transgression. Persistent offenders, or particularly large price increases implemented without the agreement of the Secretary of State, would face higher penalties.

It seems obvious to me that a penalty of £10,000 per day or a single penalty of £100,000, as provided for in Clause 30(2), would be an inadequate deterrent against unapproved price increases which might cost the NHS millions of pounds before the excess could be recovered. In all the circumstances, we believe that these arrangements are proportionate.

In terms of the voluntary scheme, these penalties can only be used where a company disregards the terms of that scheme, which would be contrary to the provisions and the spirit of it. In such circumstances, it is reasonable for there to be adequate powers to deal with companies that flout the terms of a voluntary agreement. I hope that my response explains the thinking behind the clause to the noble Earl.

Next Section Back to Table of Contents Lords Hansard Home Page