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Earl Howe: I am most grateful to the noble Baroness for her response. In the interests of brevity, I shall leave it at that. I beg leave to withdraw the amendment.

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Amendment, by leave, withdrawn.

[Amendments Nos. 157 to 159 not moved.]

Earl Howe moved Amendment No. 160:

Page 21, line 32, at end insert--
("(5) Any dispute between the Secretary of State and a manufacturer or supplier to whom a voluntary scheme applies--
(a) in connection with or arising out of the scheme, or
(b) as to any addition or modification which should be made to the scheme pursuant to subsection (2)(b),
may be referred to arbitration or to the determination of an independent person or body in accordance with the procedures established in the scheme.").

The noble Earl said: This amendment, which I shall take with Amendment No. 176, needs only a brief comment but is extremely important.

As the Bill is drafted, there is no mechanism available to deal with disputes between a company and the Department of Health, either in relation to the requirements of the voluntary scheme or as regards the payment provisions under Clauses 27 and 28, or as regards the penalty provisions under Clause 30. I do not believe that that is equitable. Nor do I believe that it is in the interests of either the industry or the department.

The Minister mentioned at Second Reading, and again just now, that there were companies that were in breach of the existing PPRS, one for a number of years. We cannot go into detail about individual cases, but how much better it would be if there were a neutral arbitrator or tribunal available to resolve disputes of this nature. It would make both the company and the Department of Health much less inclined to be obdurate for long periods and would open up the prospect of disputes being settled more speedily. I hope that the Minister will be receptive to these proposals, as I believe she has hinted she will be. They are made in a genuine desire to see the PPRS working as we all wish it to do. I beg to move.

Baroness Sharp of Guildford: I support the noble Earl in his Amendments Nos. 160 and 176, and wish to speak to Amendment No. 174. This amendment, like the other two, might be described as a tidying up proposal. It applies to Clauses 28 and 29 relating to the setting up of a statutory price regulation scheme. Just as Amendment No. 160 calls for an arbitration scheme to be put into effect in the event of a dispute between parties to the voluntary scheme, so it is appropriate that there should also be an arbitration mechanism for any statutory scheme. Given the extensive powers that the Secretary of State will take upon himself under the establishment of any statutory scheme, equity demands ways of balancing interests. We must recognise that, however good the scheme, conflicts of interest and dispute will arise. It is necessary to write into the Bill clear dispute mechanisms as a requirement. From these Benches we support the amendments proposed by the noble Earl, Lord Howe, and I commend Amendment No. 174.

Baroness Cumberlege: I, too, support these amendments. The problem with the Government's proposals as they stand is that they give the

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pharmaceutical industry the feeling that it is not wanted. It is a global industry which can site its enterprises anywhere in the world. It will go where it feels wanted and respected. Indeed, in some places the pharmaceutical industry is even given sweeteners because it is recognised that the industry is a prize which is worth winning.

The Government have rightly placed an enormous emphasis on education. Those who are the brightest are employed by the pharmaceutical industry, a quarter of its employees being graduates. If we educate people in this country to a high standard but then offer them no jobs, we shall be educating people for emigration, which I think would be a very great pity. Anything we can do to make the industry feel wanted--and arbitration will clearly be a part of that, because it is a fair proposal--should be supported by the Committee.

Lord Walton of Detchant: I rise briefly to support these amendments. The ABPI has said clearly that it would have much preferred to see an effective boundary defined between the voluntary and statutory schemes on the face of the Bill, but it accepts that such a boundary could be introduced into regulations made under Clause 28. We seek the assurance of the Minister not only that the appeal mechanism and arbitration will be introduced but also that that boundary will be clearly defined in regulations.

Baroness Hayman: I hope I can be helpful to the Committee, both in what I say and the brevity with which I say it.

As far as the boundary between the voluntary and statutory schemes is concerned, there are amendments which deal with that matter, but I hope I can offer a way of making it clear that the statutory provisions will not take effect for those who agree to, and abide by, the voluntary scheme. Perhaps we can come to that point in a moment.

As regards these three amendments, which would set up an appeals procedure both for the voluntary scheme and for decisions made under the statutory scheme as defined in Clause 28 and regulations made under Clause 30 for enforcement, Members of the Committee correctly pointed out the need, to which the Select Committee on Delegated Powers and Deregulation also pointed, to set up an independent tribunal to ensure a process that is as speedy and open as commercial confidentiality allows. It has been suggested that I hinted that we might possibly want to do that. I say clearly that we intend to do it. I should be grateful for a little time to enable us to try to draft something which comprehensively covers the three areas which it is necessary to cover.

Perhaps I may say to the noble Baroness, Lady Cumberlege, that we have tried to meet the concerns of the ABPI on this and other issues. I should not like anyone to think that the Government's proposal to take what I believe is justified and justifiable action to ensure that there is compliance which gives equity, fairness and a reasonable price to the National Health Service in any way undermines our confidence in, and respect for, the contribution of the pharmaceutical industry in this

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country, which has been enormous. It is a world leader. It is an industry for which the department has a sponsorship role, which it is pleased to take on. It is an industry which has a considerable knowledge and research base, which is important to our economy, and nothing in these clauses should be taken as undermining our support for it.

Strictly speaking, companies under the voluntary scheme will be subject to statutory provisions-- the process requirements under Clause 26--but not the statutory scheme under Clause 28. That was the distinction that I sought to make in replying to the noble Lord, Lord Walton. By definition, in putting a voluntary scheme on the face of the Bill one makes them in some way subject to statute. But I believe that the noble Lord understood what I said--at least I hope that he did.

Earl Howe: I thank the Minister for her constructive and helpful reply, which I am sure will be welcome news to the pharmaceutical industry. We look forward to seeing the amendments to be tabled by the Government at a later stage. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

11.30 p.m.

On Question, Whether Clause 26 shall stand part of the Bill?

Baroness Sharp of Guildford: We on these Benches believe that a voluntary scheme should be what it says it is: voluntary. In this regard it should not need statutory reinforcement. If the voluntary scheme does not work the Secretary of State may introduce a statutory scheme as set out in Clauses 27 to 29. But we are opposed to a hybrid scheme that confers on the Secretary of State wide powers to enforce the terms of a voluntary scheme. We believe that the voluntary price regulation scheme, which in one form or another has worked in this country since the late 1950s, has had very substantial benefits for Britain. In particular, it has helped to encourage the development of a research-intensive, innovative pharmaceutical industry as instanced by the fact that, as the noble Lord, Lord Walton, said earlier, seven of the top selling 25 drugs in the world were developed in British R&D laboratories.

Thanks to a price and regulation regime that has favoured innovative and research-intensive activities over "me too" drug production, the industry in this country is a leading contributor to the global market-place. Three leading companies--Glaxo- Wellcome, SmithKline Beecham and Zeneca (shortly to become Zeneca Astra)--are British-based, while other international companies such as Upjohn-Pharmacia have chosen to locate their headquarters here. Many leading manufacturers, including Merck-Sharp & Dohme, currently regarded as the world's leading research company in pharmaceuticals, locate substantial R&D facilities in the UK. These facilities feed upon one another. In total we have a considerable "clustering" of research activities attracted to the UK by the quality of

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the research base and the general environment in which the industry operates. But in its turn it provides jobs for high-quality graduates and research moneys that help to maintain the excellence of the science base in this area. It is a prime example of what all political parties claim they wish to see achieved in this country: a high productivity, high value-added industry.

As the Minister made clear, especially of late there have been a number of breaches of the voluntary agreement. In our view, it is up to the industry to make sure it delivers on its side of the agreement and up to the Government also to honour their promises, which notably in 1993 they failed to do. The industry should not have to rely on the Government to pull renegades into line. If the scheme does not work there should be a fully-fledged statutory scheme in its place. While we back the voluntary scheme we are unhappy about the degree to which it depends upon secret decisions made behind closed doors. We have therefore proposed-- I shall speak to this later in the debate--that the Secretary of State should issue regular reports on his negotiations with the industry that describe in much greater detail than at present the outcome of the negotiations.

But I return to where I began. We do not think that the Government should legislate to enforce a voluntary agreement, and accordingly we do not believe that Clause 26 should stand part of the Bill.

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