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The noble Earl said that we were doing damage through this action to UK interests. We recognise the importance of the pharmaceutical industry to the UK, and are committed to working with it to help it

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maintain its competitive advantage by creating a stable and competitive economic environment favourable to a successful industry that also serves patients’ needs. The Government, NHS and pharmaceutical industry will continue to work together through the ministerial industrial strategy group and the long-term leadership strategy. The new PPRS includes several measures aimed at increasing uptake of innovative medicines, which will support research and development into new medicines. This will ensure that the industry has a fair return on its investments while ensuring that the NHS pays reasonable process.

The noble Earl also raised the issue of benefits to reduce profits in the pharmaceutical industry, mentioned in the Explanatory Memorandum. There is a difficult tight-rope to walk. Increased profits mean increased costs to the NHS. This PPRS will deliver a balanced package, creating better value for money for the taxpayer but also promoting uptake and innovation in the pharmaceutical industry for the benefit of patients and the industry itself.

The noble Baroness, Lady Barker, raised the issue of the supply problems in January. We have published joint Department of Health/industry best practice guides on medicine shortages that give guidance to companies on what to do in the event of a shortage, and recommend that companies communicate with the Department of Health as soon as possible about impending shortages that are likely to have an impact on patient care. The previous PPRS price cuts also took effect from January, and we expect to manage the process in a similar way so as to ensure that the transition is managed as smoothly as possible.

The noble Baroness also asked whether we should be doing more, in line with the OFT report, to ensure that the prices of medicines reflect their value. As I am sure that the noble Baroness is aware, the package announced in June did not include an announcement on value. However, negotiations on the new deal continue with a view to discussing how value can be better reflected in the new PPRS. She also asked whether we would be driving away UK industry. Noble Lords may be interested to know that successive attempts—the latest being a study commissioned jointly by UK Trade & Investment and the ABPI—have failed to determine a statistical link between price or sales and investment in a given country. The report concluded that supply-side factors such as flexible labour markets and tax rates are more important determinants in investment location decisions than market conditions. Market conditions tend to be relevant only where other factors are broadly equal.

I know that there have been concerns about the speed at which all this has taken place. I repeat that these regulations were made at a time when we could not be certain that there would be an interim voluntary 2008 PPRS in place when the 2005 scheme expired at the end of August, since we had not concluded the negotiations on the interim scheme. Nor could we be certain that all companies would sign up to the voluntary scheme once it was agreed. Our priority, therefore, was to introduce a statutory scheme that would broadly maintain the status quo. This needed to be workable within the context of a regulatory environment, which differs from the voluntary environment.

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It was only right that the Government took decisive action. Of course, at the same time, we recognise and fully acknowledge the important role that the pharmaceutical industry plays for the UK as a whole and value it for that. We continue to be committed to work with the industry to maintain a stable and competitive environment in the UK. The Health Service Branded Medicines (Control of Prices and Supply of Information) Regulations 2008 are an appropriate and sensible measure on the way to reaching our real goal of a sustainable, long-term voluntary agreement with an important partner in the NHS: the pharmaceutical industry. I hope that the noble Earl feels that I have gone some way to meeting his concerns, and will feel able to withdraw his Motion.

Earl Howe: My Lords, having listened to the Minister’s reply, I am particularly glad that I tabled this Motion. It has, as I had hoped, given her an opportunity to place a number of assurances on the record. However, I find it a little surprising that it has taken a debate to do that. I can tell her that, until she rose to her feet and said what she did, there was huge puzzlement in the pharmaceutical sector about the Government’s real intentions and plans. I am sure that it will be a source of some reassurance to the sector to hear that the Government intend to lay an amending regulation, which the sector has asked for; that there is no intention to introduce reference pricing as it is commonly understood; and that the matter of new active substances will be appropriately dealt with and defined.

The Minister will appreciate that the language used in the statutory instrument and the Explanatory Memorandum is important. How these things are expressed sends out a message. I hope that she and her colleagues will be cognisant of that.

I still retain considerable misgivings about the Government’s approach. There seems to be no apparent logic or sense in introducing an arbitrary price cut across the board. Many medicines have already been deemed cost effective by either the Scottish Medicines Consortium or NICE. I am not clear why the Government feel that they are justified in imposing a price cut upon those medicines. As we have said, the statutory instrument is a formal statement of government policy. It is now only a matter of time before the rest of the world takes a lead from what is happening in this country and the way we do things. Confidence around the globe is of great importance. As the CBI sectoral survey showed in March this year, the whole PPRS renegotiation, which has now gone on for many months, is doing considerable damage to the reputation of the UK as a pro-innovation country. I hope that in the weeks ahead that we have available, the Government will reassure not only the domestic industry but the international community of their long-term, benign intentions.

I think it is fair to say that up to now the industry has believed that this statutory instrument has been laid as a device by which the Government wish to strong-arm the industry into accepting the voluntary scheme; in other words, the position is so unpalatable that the industry will feel obliged to sign up to the voluntary scheme, even though at the moment it does not know fully what that scheme will consist of.

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I hope that those impressions can be dispelled. However, it would be helpful if the Minister could cover a point relating to the reporting requirements, which I do not think we have covered hitherto. Why have the reporting requirements for companies been made so much more onerous? Can she reassure me as regards reinstating quarterly reporting, which those companies with which I have talked have indicated has worked perfectly well? As she will know, the pharmaceutical sector in general has been assiduous and diligent in fulfilling its requirements in that regard. It is a mystery to me why the Government think that more frequent reporting is required.

Baroness Thornton: My Lords, the noble Earl and I had an exchange of views on this. I have two observations. First, this scheme is intended to run unamended for a mere four months, so three monthly reporting in a four-month scheme seems less than sensible. That is why there is monthly reporting. Secondly, as the negotiations progress, and given that the Government’s

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aim is to have something which is broadly similar to what has gone before, while I cannot say that quarterly reporting will be reinstated I can say that the matter is being negotiated.

Earl Howe: My Lords, that is very helpful. I am sure that the industry will be reassured that at least there is a good possibility that the previous modus operandi will be reinstated. I thank the Minister for the trouble she has taken in replying to the points raised in the debate. I thank the noble Baroness, Lady Barker, for her excellent contribution. It seems to me that greater clarity has been shed on a lot of these issues. It would surprise me if the industry was not still a little apprehensive about what lies ahead, but I hope that with good will on both sides we will see a result which is to the lasting benefit of patients in this country, the taxpayer and, indeed, the industry itself. I beg leave to withdraw the Motion.

Motion, by leave, withdrawn.

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