Official Report: Minutes of Evidence

The Chairperson (Ms P Bradley): I welcome Cathy Harrison, senior principal pharmaceutical officer; David Lennox, medicines policy branch; Margaret Glass, medicines policy branch; and Craig Allen, legislation, equality and human rights branch. Who is taking the lead?

Ms Cathy Harrison (Department of Health): That is me, Chair.

The Chairperson (Ms P Bradley): Go ahead.

Ms Harrison: Thank you for the opportunity to attend the Health Committee today. First, I will introduce my colleagues: David Lennox from medicines policy branch; Craig Allen from legislation, equality and human rights branch; and Margaret Glass from medicines policy branch. If you are content, I will make a few introductory remarks, and then we will be open to any questions from the Committee. I have quite a bit to go through. It is a number of pages; forgive me for reading. It is quite detailed.

The letter you received last week and the briefing paper that has been shared with you set out the background to the Health Service Medical Supplies (Costs) Bill, which was introduced in Parliament by the Department of Health in London on 15 September. The Bill amends provisions in the National Health Service Act 2006, and the proposed amendments broadly relate to controlling the cost of health service medicines and other medical supplies. As the pricing of medicines is a devolved matter, a legislative consent motion is required to allow the Department of Health to progress the Bill through Parliament. The Executive have agreed to the legislative consent motion (LCM) and have agreed that it can be tabled for consideration by the Assembly. The intention is to lay the LCM soon.

I will speak first about the existing legislative powers relating to the cost of medicines and medical supplies. The Secretary of State for Health currently has powers under the NHS Act to limit the prices of medicines or profits from the sale of medicines. The powers provide for a voluntary scheme made by the Secretary of State in association with the representative body for pharmaceutical companies, the Association of the British Pharmaceutical Industry (ABPI). The Department of Health negotiates a scheme on behalf of all the devolved Administrations. The current scheme, known as the pharmaceutical price regulation scheme (PPRS), is due to end on 31 December 2018. The purpose of the PPRS is to ensure that spending on branded medicines is constrained, and that is achieved by individual pharmaceutical companies making payments to the Department of Health based on their individual portfolios. Those payments are then apportioned to the devolved Administrations. Last financial year, for example, we received £37 million in receipts from the scheme.

There is also a statutory scheme within the NHS Act that sits alongside the voluntary PPRS scheme. That scheme places price limits on the sales of prescription-only branded medicines by companies that choose not to be members of the voluntary scheme. Under the current arrangements, the statutory scheme requires price cuts to be made to the list price for medicines at a flat discounted rate of 15%. The current differences between the voluntary and statutory schemes have resulted in reduced savings to the health service overall. In 2015, the Department of Health consulted on reforming the statutory scheme, with a preference for introducing a similar payment mechanism to PPRS. Northern Ireland was included in the scope of the UK-wide consultation. The consultation sought views on factors that should be taken into account and what further limits should be placed on the cost of branded medicines, as well as on potential approaches to controlling prices. Health service organisations, patients and other representative groups generally supported the preferred option of a payment mechanism to remove disparities between the PPRS and the statutory scheme. However, responses from the pharmaceutical industry disagreed and suggested that the schemes should remain distinct, although some companies agreed that there should be no commercial difference between the schemes. The industry responses also suggested that the Department of Health did not have sufficient legal authority to put in place a payment mechanism for the statutory scheme.

The Department of Health concluded that the planned changes to the statutory scheme should align the two schemes more closely and create a level playing field for companies, as well as optimising financial savings for the health service. In order to address the issue of legislative power, the Department of Health decided to amend the NHS Act to put it beyond doubt that pharmaceutical companies in the statutory scheme can be required to make payments to control the price of health service medicines. Those amendments have been incorporated into the Bill. The Bill also allows for financial penalties to be applied for non-compliance. In addition to medicines, the Bill extends the provisions to cover other medical supplies for the first time.

The Bill also addresses a specific issue relating to high-priced generic medicines that has arisen in recent years. At present, if a company in the PPRS scheme manufactures both branded and generic medicines, price controls cannot be applied to their generic products. There is some evidence that companies have been making unjustified price hikes to unbranded medicines when there is no competition in the market. That has caused significant pressures for the NHS, and we have experienced them in Northern Ireland as well. The amendments in the Bill will enable the Department of Health to take action to control the prices of these unbranded medicines for the first time.

Other provisions in the Bill relate to the power of the Department of Health to collect information from across the whole supply chain. By "supply chain", I mean manufacturers, suppliers, wholesalers, pharmacies and dispensing doctors. The Department of Health collects a range of information on purchases and sales from across the medicine supply chain under different arrangements and for a number of specific purposes. The Bill will include provisions that will bring together more clearly the information requirements for health service medicines and other medical supplies. This will enable more informed purchasing and reimbursement decisions to be made, and improve transparency overall across the health service around medicine spend and cost. The Bill also includes new powers to make regulations to require all parts of the supply chain of health service medicines and other supplies to keep and supply information on sales and purchases of medicines when requested by the Secretary of State, with penalties for non-compliance.

I will now turn to why there is a need for an LCM. The market for medicines generally operates across the UK, so it is important to maintain consistency in relation to pricing. In particular, we need to retain the ability to avail ourselves of any financial benefits that may flow from the control of prices on medicines. The regulation-making powers for the collection of information on health service medicines and related products will ensure that the Department of Health has the ability to access data on all products in all parts of the supply chain.

It would not be possible for us to progress separate legislation through the Assembly in a timescale to align with the Department of Health Bill. Therefore, it is appropriate for the Department of Health to progress legislation on what is a transferred matter. The Bill will ensure a consistent approach across the UK. It is also worth noting that the Department of Health will be unable to proceed with the Bill as introduced without an approved LCM, which could restrict the ability to control medicine prices and, ultimately, maximise financial benefit to the health service. As currently drafted, the Bill will also provide the Secretary of State with powers to require information from pharmacies and dispensing doctors, with penalties for non-compliance. It is proposed that the information will be used to complement that collected from other parts of the supply chain, such as manufacturers and suppliers, for the purposes of setting reimbursement prices for pharmaceutical services and improving efficiency and effectiveness in the supply chain.

The Bill could also be used as a vehicle to provide powers to allow information collected by the Department of Health to be used for devolved purposes. It is our intention to have access to that information. Subject to Executive and Assembly agreement, these provisions could be incorporated in the Bill through later Government amendments. As the provisions are outside the scope of the Bill as introduced, a second LCM would be required, and we would bring that to the Committee. Discussions are ongoing with the Department of Health around the detail of any further potential amendments, so it is not possible to give further detail on those at the moment.

I hope that is a helpful overview of the Bill. I and my colleagues are happy to take questions.

The Chairperson (Ms P Bradley): Thank you, Cathy, and, yes, that certainly was helpful. It was rather difficult to decipher some of the information, but you certainly made it a bit easier for us.

The consultation document does not list the consultees. I would be interested to know whether any of those consultees were from Northern Ireland, including the Department, and what sphere they were from.

Mr David Lennox (Department of Health): It was a UK-wide consultation. We did not formally respond to the consultation because we had, obviously, the opportunity to input into it. The draft consultation document was shared with the then Minister of Health, who agreed to the consultation proceeding. From memory, I think there were just over 50 responses to the consultation. I know that the Health and Social Care Board did respond, but I do not think there were any other responses from Northern Ireland. Some of the responses, particularly from organisations like ABPI, were UK-wide, so they are recorded as responding on behalf of the whole of the UK.

Mr Clarke: This is maybe more an observation or concern than a question. We talk about it being a transferred matter, which I accept. It is an absolute minefield. Health services here, I presume, have the use of research services. I would like to see the Committee get a research paper on the background of all of this medicine stuff, because it has been in the media in the past about how lucrative it is for some individuals. Cathy referred to the profits in her statement, and how some of that is being offset. It seems bizarre to me that pharmaceutical companies can charge huge prices and then give money back to the Department. I would like to see a paper on that. I accept that we have no power, given that it is not a devolved matter. However, I think that it is something we should be looking at. We are talking about the financial difficulties in Northern Ireland and, indeed, in the UK, so I think that this is an area that we should be looking at to try to drive down some of the cost. In Cathy's presentation, she talked about how pharmaceutical companies have branded drugs and they are the only ones. There are mechanisms in there, and I can understand the protection. However, I am still concerned that it is an unfettered market for those involved in it. I would like to see some research done on that for the Committee.

The Chairperson (Ms P Bradley): On the back of that, will this actually tighten it up? We look at unbranded and branded medicines; I know that there are voluntary and statutory. I think that this is to tighten that up a little bit.

Ms Harrison: This will really improve transparency across the whole system and allow us to understand more about the cost of medicines.

Mr Clarke: I do not disagree with that, and I understand that this is a step in the right direction. However, what concerns me is that pharmaceutical companies can charge whatever they are charging and give the Department back a pot of money. Had they been charging the right price at the start, there would be no necessity to give the Department money back. That is where it is for me. The situation seems to be: "buy our medicines, spent £X millions of every year, and we will give you back a few million." It is nearly incentivising. To me, it looks as though it is difficult for other companies out there which maybe cannot break into the market because they cannot afford to give the cheque back to central Government. I would love to see a research paper done on the intricacies of all this scheme.

The Chairperson (Ms P Bradley): We can pick up on that. Do you want to comment on it?

Mr Lennox: Just to say that the PPRS, which Cathy referred to, is a very complex scheme and it extends to quite a number of pages. That scheme is led by the Department of Health. It engaged in negotiations with the industry on behalf of the devolved Administrations. You are right — I do not know whether the term is "incentivisation" — economists have worked on that. The purpose was to try to make sure that the growth in expenditure does not rocket, and to brand that some way. That was the mechanism they had. The current statutory scheme works differently, in that medicines are purchased at a reduced price, or below list price. It is a complex issue, and the PPRS is a complex scheme. We are happy to feed into any research paper about the process.

The Chairperson (Ms P Bradley): Actually, I do not think that it is a bad idea, because it is so difficult to understand how the supply of medicines and pharmaceutical items works. It probably would not be a bad idea for the Committee to get its head around that anyway. It is good that you are happy enough to work along with us on that.

Mr Carroll: Thank you for the presentation. I agree with Trevor's point. Obviously, it goes without saying that cheaper drugs would be a good thing for everybody. What about the detail? Have we any idea of the amount of drugs that could have prices reduced because of this, or how many people could be affected by it? I presume that, in the negotiations, there is a rep from the Department of Health. Do we know what companies are negotiated with? Have we a list of them, or have we an idea as to who they are? Is it your view that this is the best way to proceed to ensure that we get the lowest possible prices for drugs? Is it your opinion that this is the best way to proceed, or the only way to make that happen?

Mr Lennox: The negotiation will be with the ABPI, the Association of the British Pharmaceutical Industry. It represents the pharmaceutical companies. I do not know the exact number, but there are quite a few involved in that. The benefits of moving to a statutory scheme hinge on the agreed payment percentage in the mechanism — what percentage the industry agrees, as part of the negotiations, to pay back to the Department. That is something that the Department of Health will be working through, in the regulations. It made a quick guesstimate that a payment percentage that might be in accordance with the current PPRS might bring you back roughly £88 million in additional savings across the NHS in the UK. In very crude terms, that might be roughly £3 million locally. Again, those are not figures to stand over. That is part of the negotiation going on.

Mr Carroll: Do we have an idea of the amount of drugs that could be affected by this, or patients or people?

Ms Harrison: It will really affect the whole population. It covers a whole range of drugs, so it could affect practically anyone who is using prescribed medication at any point. You asked whether it was, in our view, a good thing for the public, and I definitely think that it is. It will bring increased transparency. It is an extremely complex area of pricing and how reimbursement and payments for medicines are made. Anything that brings transparency to that is a benefit.

Mrs Dobson: Thank you for your briefing. I totally agree with Trevor's point. This is very complex, as you described it yourself, David. I do welcome the fact that we need a research paper on it. You will be aware about the concern in the pharmaceutical industry that the moneys from the PPRS are not being used as intended. I am thinking about all of the issues around cancer drugs. What is the ABPI's view on this proposed legislative change?

Mr Lennox: I am not aware of the specific view of the ABPI, but, as Cathy said, the general responses of the pharmaceutical companies, which I am sure includes individual companies as well as ABPI on their behalf, is that they recognise that there needs to be some equality between the two schemes, but that they would probably prefer to maintain with the existing mechanism for the statutory scheme and not move to a new payment mechanism. I suppose that it is maybe not surprising that they would take that view, if this is going to bring back extra savings into the health service. I can understand why they might not prefer that option.

Mrs Dobson: So the ABPI has concerns about this?

Mr Lennox: I am not so sure about the ABPI specifically. I am assuming that it has. All that I am aware of are general concerns expressed by the pharmaceutical industry around that in the consultation.

Mrs Dobson: It would be useful for us to hear its take, given the fact that it is the embodiment of —

Ms Harrison: The negotiations are still ongoing.

Mrs Dobson: Can you update us as that progresses? I would rather find out more detail on its concerns.

The Chair touched on consultation. In this Building, nothing happens without consultation. Cathy, you referred to a Northern Ireland consultation, and I think that someone teased out that you had 50 responses and that it did not take in just the Department or something.

Mr Lennox: What I was saying was that it was a UK-wide consultation, but that we had the input and the Minister agreed to the consultation document before it was issued, so we did not then formally respond to the consultation. It was a UK-wide consultation.

Mrs Dobson: Given the impact on Northern Ireland, it would have been nice to have consulted with manufacturers, suppliers, wholesalers, pharmacies and, in particular, GP practices. I take it that you have not done so. I think that it would be important to get these groups' take on these changes, especially GP surgeries. I am sure that the last thing that they need is increased administration. I would like to find out what clear benefits are returning to the surgery. Have you any plans to consult with those groups?

Mr Lennox: We will do so through the regulations. In many ways, this is only a permissive power, and DH will be leading on those regulations. There will be another opportunity to consult around the detail of that. The ultimate benefit of this is the savings and efficiencies and money coming back into the service. It should not in any way impact on GPs and their prescribing behaviour.

Mrs Dobson: Do you not agree that it would be useful to get their take on it, given the fact that they will have increased administration and that they are already under severe pressure and are stretched. Do you think that they will be consulted?

Mr Lennox: Yes, there will be a public consultation on the regulations, and we can certainly make sure that those representative bodies are included in that consultation as we progress through the regulation-making stage.

Mrs Dobson: Finally, I feel that it would be useful to tease out the benefits to GP practices and the impact on larger medical items — wheelchairs etc — that are currently provided to patients. Do you have any take on that?

Mr Lennox: I am not sure if it will extend to those types of supplies. Do you know, Margaret, if it extends to them?

Ms Margaret Glass (Department of Health): No, we will need to check that. It has not come up.

Mr Lennox: We will need to double-check that and come back to you.

Mrs Dobson: Can you come back to us on that?

Mr Lennox: Yes.

Mr Butler: Thank you for your presentation. The Secretary of State has a number of roles in the Northern Ireland Act. It is detailed in the communication that the Secretary of State has the power to limit the maximum price of certain medicines. Can you tell me if that has ever been done? Are there any cases of that power being exercised? With the roll-out of this Bill, what will be the mechanism for application to ensure that maximum prices are not breached and that access is there for the general public?

Ms Harrison: The existing schemes that I described — the voluntary scheme and the statutory scheme — are how the powers are exercised at the moment. The changes that are proposed here are to strengthen the powers that the Secretary of State already has.

Mr Butler: OK. One sentence reads:

Can you explain to me, in layman's terms, what those are? It is complicated to get your head around that. What is the difference?

Mr Lennox: "Medicines" are primarily drugs. "Other medical supplies" are dental and ophthalmic-type supplies and surgical items.

Mr Butler: OK, but not wheelchairs?

Mr Lennox: We cannot know for sure.

Mr Butler: That is what I am trying to tease out, along with Jo-Anne. Is there an explicit list?

Ms Harrison: It may be more medical devices and that sort of thing.

Mr Lennox: It is very general in the legislation, I have to say, but we will need to double-check what that means.

Mr Butler: OK. Thank you.

Mr Sheehan: Thanks for your presentation. I am just wondering whether this will have any negative impact on section 75 groups or lead to any further health inequalities.

Ms Harrison: No, because access to medicines affects everyone. If anything, these amendments will allow us to ensure that medicines are more affordable across the whole of the health service, and that will benefit everyone.

Mr Durkan: Thanks for the presentation and for answering all the questions thus far. This seems too good to be true. It is a win-win: it is about maximising benefit to the health service and, therefore, benefit to the patients. That leads me to question why that route has not been gone down before, given that there have been various schemes in place since 1957. I know that we will be giving an increased negotiating role to London, and I tend to proceed with caution when we do that, particularly when we are dealing with a Tory Government that you do not really associate with maximising financial benefit to the health service. In the consultation, other than some of the companies or perhaps their representative body, has anyone come back with any concerns or questions?

Mr Lennox: There were just general concerns. If I may, I will step back slightly: you are right. The system has worked. The key issue at the moment is that the PPRS is a voluntary scheme through the agreement that has been negotiated, and the pharmaceutical companies have engaged in that. However, because it is voluntary, they can decide to leave the scheme. If they leave, they fall within the statutory scheme. If there is a disparity between the returns from the PPRS and the statutory scheme, there is probably an incentive for pharmaceutical companies to leave the PPRS and transfer to the statutory scheme. So what DH has been leading on is to try to militate against that arising by strengthening its scope to reinforce the statutory scheme and put in place a stronger payment mechanism.

Going back to the general comment on feedback on the consultation, you can understand why, if this is going to bring bigger receipts into the health service from the pharmaceutical companies, they might be concerned about any change to the current arrangements, even though they recognise the counter-argument that there is a need to equalise the market. I am not sure if it is addressing your question, but those are understandable concerns that the companies might have. It has worked quite well. Outside of the schemes, there are arrangements in place where the Department of Health in London and the Health and Social Care Board here collect information on drug prices and so on. That is provided voluntarily, so that they can work out profit margins. Things are working well, which is important. The pharmaceutical companies actually challenged the Department in the consultation on whether they had the proper legislative authority to introduce the statutory scheme. That then led to this Bill, and they thought it was better to put that beyond doubt.

Ms Harrison: In respect of your question about the need for this, information and data sources are now associated with medicines. There is better, more detailed and higher-quality information available, but the Government have found that they cannot always access it. One of the amendments in the Bill will allow to us to really increase the transparency and have all of the facts that we need to make decisions around medicines. The challenges continue. We have a continuing financial constraint in the affordability of medicines, so it is right that we continue to reflect on what additional changes will be needed to legislation to support us.

Mr Durkan: "Transparency" is another word or phrase that I would not necessarily associate with Tory Governments, who, I think, generally try to maximise financial benefit to big companies. I am just curious if there is a catch in there somewhere. David, you said that this could bring in another £80-odd million across the UK and that would equate to roughly £3 million here; is that what you said?

Mr Lennox: Yes.

Mr Durkan: OK. Was it in 2015 that the health service here got £37 million out of this? I know that it is not an exact science, but is the £37 million typical, or is there much fluctuation from year to year, generally, due to different prices, patents or what have you or changes in the pharmaceutical landscape?

Mr Lennox: No. There has been some fluctuation in the PPRS, and there was some renegotiation and amendment of the agreement last year as a result of expenditure in the cancer drugs fund. For example, our best estimate at this stage — it is an estimate — is probably in the region of £27 million for this financial year. Again, the payment percentage is set around the December time, because they work on a calendar year. That is a challenge to the system because, obviously, that creates an additional pressure. Welcome as it is, if it drops to £27 million this year, that is just the nature of how the scheme works.

The Chairperson (Ms P Bradley): I thank you all for coming in to brief us today; it is an extremely complex subject. I think that all members would agree that anything that makes things more transparent and tightens regulations and, of course, where more money is given back to us to spend in the Department is truly welcome. Thank you very much. It was not too long and laborious for you.