Joint Committee On Statutory Instruments Third Report


Memorandum from the Department for Environment, Food and Rural Affairs


1. The Committee has expressed a desire to examine further the statement made by the National Office of Animal Health Limited (NOAH), which was summarised in paragraph 9 (a) of the Regulatory Impact Assessment accompanying the above Regulations, that they "reserved the right to comment on the Consultation process."

2. The Veterinary Medicines Directorate (VMD) is responsible for, amongst other things, authorising the marketing of veterinary medicines and their manufacture and distribution on behalf of the Secretary of State and the Agriculture and Health Ministers for Northern Ireland who jointly form the Licensing Authority. The VMD charges fees for applications and inspections relating to the authorisation of veterinary medicines under the Medicines Act 1968 and the Marketing Authorisations for Veterinary Medicinal Products Regulations 1994. The fees are set out in Regulations. Fee levels are regularly reviewed.

3. NOAH were consulted, along with approximately 700 other interested parties, including all holders of marketing authorisations for veterinary medicines in the UK, on 3 July 2002 on proposals for an overall fee increase of 2.5% to cover inflation. The 12-week consultation period ended on 25 September 2002.

4. NOAH are a trade organisation. They represent some of the companies that research, develop, manufacture and market animal medicines in the UK. In 2001 (the latest information available) according to NOAH's website NOAH's members represented around 95% of sales in the £359 million animal medicines market (at ex manufacturers prices). A copy of NOAH's response (dated 7 August 2002) to the consultation letter of 3 July is attached at Annex A[1]. In it NOAH state that they have "no objection to the proposed increase of 2.5% on all fees". The letter goes on to say "However, we do have some more detailed comments about the way in which such consultations are carried out, and will be writing separately on this subject."

5. The VMD received no further correspondence from NOAH on this matter. NOAH subsequently confirmed, in a telephone conversation with the VMD, that they would not be writing further. They explained that the concerns expressed in their letter of 7 August did not relate to the way in which the VMD had carried out the consultation exercise. Their concerns related to their continued unease at changes in the percentage rate of the Graded Annual Fee (GAF), a part of the annual fee, without accompanying explanation. This is a long-standing concern of NOAH and one that was last raised by them in their response to the proposed fee increase for 2001/2002. A copy of NOAH's letter is attached at Annex B[2]. At paragraph 2 of that letter NOAH comment "you will recall that in previous years we have expressed concern at a percentage increase being applied to the percentage rate of GAF, which is based on industry turnover which is itself subject to rises and, latterly falls. We reiterate our suggestion that it should be clearly stated in fee proposals what the gross income from GAF is that is being targeted, an estimate of industry turnover, and thus an argued case for the GAF percentage needed".

6. These views, along with those received from other consultees, were reported to Ministers. The outcome of the consultation process was reported back to consultees in the VMD's letter of 19 December 2001 - a copy is attached as Annex C[3]. In it VMD gave a detailed explanation of the issue raised by NOAH. The justification for the increase in the GAF was that the annual fee forms part of an overall package designed to produce sufficient income for the VMD to meet full cost recovery. If the GAF was not increased other fees would need to be increased by more than inflation to compensate.

7. The VMD are in the process of examining the feasibility of radically changing the fee structure to make it more transparent and enable the veterinary pharmaceutical companies to see exactly what they are paying for. NOAH are aware of this work and support the project.

26 November 2002

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