Health Service Medical Supplies (costs) Bill

Dr James Davies (Vale of Clwyd):

My principal reason for supporting the Bill relates to the vast increase in the costs of certain off-patent drugs, as we have heard today, and its impact. I first had contact with constituents in June about a loophole in existing regulations resulting in some old generics being hiked up in price by up to 12,000% over the course of eight years. This followed the investigation in The Times in which 50 drugs were identified as costing the NHS about £262 million a year. To put that into perspective, it is equivalent to 7,000 junior doctors. I believe that there have not been similar price increases in mainland Europe, interestingly, which tends to suggest that we have some failures in our regulations. We also discussed this matter in the Health Committee and we saw evidence of correspondence that had highlighted it for at least one year.

We should not refer just to costs, of course. There are also big impacts on patients when their drugs are withdrawn. That issue hit home when I met a constituent, Eira Roche, at one of my constituency surgeries in the summer. She has given me permission to talk about her story. She was diagnosed with hypothyroidism—an underactive thyroid—in 2006. She had the typical symptoms of weight gain, thinning hair and brittle nails. She was tired all the time, she had pain all over and she had a low mood. She was prescribed T4—thyroxine—which is the usual treatment in such circumstances. She was also given a cocktail of other drugs, because the T4 simply did not work. She was on quite strong medication for an extended period.

Eira saw her endocrinologist at Glan Clwyd hospital in my constituency in 2014, and he started her on a drug called T3—liothyronine—which she describes as an absolute revelation. In fact, she said that she was so much better than for years: her brain fog lifted and her energy levels soared. When she tried to reduce the dose of the drug, she found that her symptoms began to return and she had to have some time off work. She is now a teaching assistant and caretaker at Ysgol Bodfari.

The drug Eira is taking, liothyronine, was acquired from GlaxoSmithKline in 1992 by Mercury Pharma, which is now part of AMCo. To put the costs into perspective, a packet of the drug cost £34.65 in 2011, but this year the cost is £258.20, which is a 645% increase. Shockingly enough, that increase is relatively insignificant compared with some other examples, but it is still quite significant. I understand that drugs costing £3.4 million a year in 2010 now cost the NHS over £20 million a year.

My local health board, Betsi Cadwaladr University Health Board, is understandably concerned, as are other parts of the NHS in the UK, and it has looked at withdrawing the drug. That makes Eira feel very anxious. She is worried about the impact on her colleagues if she is unable to work, and about the impact on her pupils with special educational needs and other needs. She also has two children of her own. The Department of Health has asked the Competition and Markets Authority to investigate this issue. That may or may not result in a good outcome, but it is not a sustainable way forward: it will not close the loophole or stop the same thing happening again. That is one reason why we need this Bill.

The generics market is generally competitive, with fair prices for all. I believe it accounts for £4 billion of the £15.2 billion spent by the NHS on drugs per annum. However, the £4 billion figure represents a 20% rise during the past five years. There is a statutory system, which can in theory control the prices of both branded and generic drugs, but there is the loophole I have mentioned.

The loophole involves old generics that are usually available via one manufacturer or supplier that also happens to market branded drugs and is a member of the voluntary pharmaceutical price regulation scheme in relation to them. Their membership of the PPRS means that, under existing legislation, they cannot currently be subject to the statutory scheme, even for their generic drugs. There are concerns that this loophole has been actively exploited by some. Indeed, it has been a deliberate business model to purchase off-patent medicines for which there are no competitor manufacturers—in other words, where there is no competition. Hon. Members might ask why other drug companies have not sought to manufacture such drugs if they are sold in such large quantities. Introducing new competition is not always feasible, however, because of the time it takes to obtain a rival licence from the Medicines and Healthcare Products Regulatory Agency, and because the size of the market is often small once such medications are produced and the manufacturing process is often difficult.

I support a change in the primary legislation—the National Health Service Act 2006—to allow the Government to consult on and bring forward the enforcement of statutory controls on all generic drugs to require companies, if necessary, to reduce the price of the drugs or to impose other controls. This amounts to an extension of the existing deterrent powers that Secretary of State has not yet used to direct the prices of drugs that already fall under the statutory scheme. Assuming the Bill receives Royal Assent early in 2017, we would need investigations and discussions with the companies concerned where issues have been raised. It is important to be fair not only to the taxpayer, but to such companies. If not, there remains the ultimate risk that such products are taken off market.

Where does that leave my constituent, Eira? I am sure she is hoping that the Bill will go through. She will be looking to the CMA to come forward with some good news. She may be tempted to purchase the liothyronine from abroad or online. Interim prescriptions to allow patients like her to continue to receive her prescription need to be considered. If the Government feel that the drugs can be acquired at a much better rate—from abroad, for instance—such people would very much appreciate assistance in doing so. For everyone, the routine and systematic monitoring of drug costs will clearly be important.

I will briefly mention the two other principal elements of the Bill. The first is the proposed change to the statutory scheme. In autumn 2015, the Secretary of State issued a statutory consultation on strengthening the statutory scheme. The Bill proposes to bring the statutory scheme in line with the voluntary 2014 PPRS for all manufacturers or suppliers that are not PPRS members. There are 166 companies currently represented in the PPRA, and £8 billion is currently spent through that mechanism. Interestingly, £647 million is brought back to the taxpayer each year when the agreed cap is exceeded. There are just 17 companies in the statutory scheme, through which £l billion is spent. There is evidence of companies switching from the voluntary to the statutory scheme for financial reasons, meaning that there is a £88 million annual loss to the taxpayer. It should be borne in mind that these companies are mostly small and non-UK domiciled ones.

Changes to the statutory scheme will require companies to make payments back to the Department of Health based on their level of sales to the NHS—this can be in addition to other mechanisms—whereas the existing statutory scheme operates via a cut to the published list price, which is currently set at 15%. The existing statutory scheme therefore brings in less money, but also results in inequity to companies, risks to supply and uncertainty of financial outcomes for complex reasons that, fortunately for hon. Members, I will not go into. The Bill also proposes new penalties for non-compliance and for the recovery of payments owed through the courts. Ultimately, the Bill creates a more level playing field between companies in the two schemes. It merely extends what is in place for the vast majority of companies, so it is not in any way unreasonable. I do not believe there should be major concerns with regard to the impact on research and investment.

The other element of the Bill involves information powers. The Bill brings together the information requirements for NHS medicines and other supplies in one place in the 2006 Act. It will enable the Government to make regulations to obtain information on the sales and purchases of medicines and other medical supplies from all parts of the supply chain—from the manufacturer to distribution to the pharmacy—for defined purposes. This will improve the data that inform reimbursement arrangements for community pharmacies and GP practices. We hope that it will help to ensure value for money for the NHS.

These are positive proposals, but it is important that they are not overbearing on the companies concerned. In particular, I want to make the case for medical technology and devices businesses, which have not been subject to such data collection in the past. The Secretary of State has given us some reassurances about that today, but we need to recognise that a large proportion of them—99%, I think—are small or medium-sized enterprises, so we need to work with the industry to develop appropriate regulations. We need to avoid onerous and certainly routine data collection beyond what is already required by Her Majesty’s Revenue and Customs.

In summary, I support the principles of the Bill—in fact, the Association of the British Pharmaceutical Industry largely supports the Bill as well—but the detail will be subject to consultation during 2017. I look forward to scrutinising the progress of the Bill over the coming months.