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Earl Howe: My Lords, we warmly welcome the amendments. I thank the Minister for having responded so constructively to the concerns that I and other noble Lords voiced in Committee on these clauses. The noble Baroness has gone to great trouble which I am sure the whole House will appreciate.

The Minister has fulfilled in almost all respects-- I should like to have said in all respects--the undertaking given in Committee to meet those concerns. It will probably seem ungracious and churlish of me to have tabled Amendments Nos. 56A, 67A and 73A which seek to add to the wording of the adjacent government amendments. I make clear that these additions are intended to do no more than make the government amendments work in the way that I thought was intended. It is no part of my purpose to be confrontational.

I am grateful to the noble Baroness for her comments on the amendments. It may assist the House if I introduce them briefly. Amendment No. 56A is designed to make clear that the ability of the Secretary of State to take companies out of the voluntary scheme is limited to circumstances where they have breached the terms of the scheme. At present subsection (2B) of the amendment seems to give the Secretary of State virtual carte blanche to take a subjective view of the matter on which he may then base a decision. That does not seem right. Nevertheless, I am grateful for the noble Baroness's comments, upon which I shall reflect.

Amendment No. 67A concerns the right of appeal. I believe that the right of appeal should include an appeal against a decision of the Secretary of State to remove a company from the scope of the voluntary scheme. At present if one looks at the amendment together with one of my previous amendments, one sees that the Secretary of State has complete discretion to remove companies from the voluntary scheme without apparently having to determine that they had breached the scheme and without a right of appeal for the

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companies concerned. That is why I believe that my proposed addition to the government amendment is important. Again, I shall read carefully what the noble Baroness said on the matter.

Amendment No. 73A attempts to make clear that the statutory objectives set out for Clauses 26 to 31 should strike a fair balance between the requirement of the Secretary of State to secure safe and effective medicines on reasonable terms and the rights of manufacturers and suppliers to receive reasonable profits on the supply of medicines to the NHS, and their research and development costs. I did not think that the Government's new text did quite enough to recognise the interests of companies to make a fair return. One reason was that other statutes--for example, Section 3 of the Electricity Act--include language which recognises explicitly the objective of enabling companies to obtain a reasonable rate of return. I need to emphasise to the Minister that the wording of her amendment is extremely helpful. However, perhaps I may suggest that she considers the point again. I take note of what she said in relation to Clause 31(4).

Finally, I revert to the right of appeal. Will the Minister confirm that it is the Government's intention to introduce regulations at an early date after the enactment of the Bill? In other words, can she confirm that the permissive format of her amendment is no more than an adherence to the conventions of drafting?

Baroness Hayman: My Lords, before the noble Earl sits down, I can confirm that it is permissive, but we have every intention of setting up such an appeal scheme.

Earl Howe: My Lords, I am grateful to the Minister.

5.45 pm

Baroness Sharp of Guildford: My Lords, I thank the Minister for her full explanation of the amendments. On these Benches, we are pleased at the degree to which she has recognised the importance of research and development to the industry. Nevertheless, at present the amendments reflect substantially the amendments tabled at Committee stage by the noble Earl, Lord Howe. We understand why the amendments were tabled. In many respects they reflect the wishes of the pharmaceutical industry. Incorporating the amendments into their own, the Government have in many senses gone along with the wishes of the pharmaceutical industry about the regulation scheme. We agree that they provide greater clarity and meet many of the criticisms of the Delegated Powers and Deregulation Committee, for example about appeal mechanisms.

Nevertheless, from these Benches we maintain the view we expressed at Committee stage. We believe that a voluntary agreement should be what it states: a voluntary agreement. It should not be propped up by the Government. The industry should not have to look to the Government to enforce its own voluntary agreement when firms do not obey it. That the Government are now getting into bed with the industry to enforce its own agreement smacks too much of a cosy relationship--"I'll scratch your back if you'll scratch mine".

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On these Benches, we would prefer to see a more distant relationship--a voluntary scheme run by the industry, not having to be enforced by the Government. Alternatively, if the voluntary scheme does not work, we are prepared to condone a statutory scheme which is incorporated in Clauses 27 and 28. As it is, the statutory scheme will remain a fallback provision which is unlikely to be used provided that the voluntary scheme, with government backing, is effective. In effect, we are now being offered this voluntary scheme--a voluntary provision that provides for the Government to help enforce it.

Given that we have that cosy relationship, it becomes more vital that the Bill incorporates the transparency provisions of the new clause proposed by the noble Lord, Lord Desai, which we shall debate shortly. We recognise the benefits that the PPRS has brought to the British pharmaceutical industry over the past 30 years. We are sorry that it does not remain what it has been: a voluntary agreement voluntarily enforced; and that the Government have succumbed to being a partner in enforcing it. We remain unhappy at the degree to which it muddies the water between state and industry and encourages a degree of corporatism which we on these Benches cannot condone. I therefore register our unhappiness with some of the amendments as they stand but accept that the Government have made a considerable number of moves in the direction that we ask. I thank them.

Lord Lyell: My Lords, I hope that I shall not tread on the toes of the noble Lord, Lord Clement-Jones. I declare an interest in that I had a delicious free dinner last night from one pharmaceutical company. It is the only financial, tangible interest that I have received from the pharmaceutical industry over 22 years. Noble Lords will be aware of perorations from me in praise of the good work that can be done by the industry.

Concerns were expressed to me at Second Reading and an earlier stage of the Bill. The noble Baroness seems to have covered virtually every point. However, perhaps today or later she can clarify this point. The Minister referred to prices and profits, although in separate compartments. Am I right to think that those are part of a weird amalgam, a formula that has developed over the years? I believe that it used to be called the voluntary price scheme. It then became the pharmaceutical price scheme. It is an arcane formula that evolved on an industry-wide basis and from time to time on individual large companies with a specific product that is greatly in demand. Will the factors of both price and profit be part of the discussion between the Government and the industry? I hope that the Minister's amendments will not muddy the waters, be more prescriptive, or add something unforeseen.

The noble Baroness pointed out that reasonableness is behind the amendments. That is a factor which has appeared in all the discussions between the industry as a whole, individual companies and the department. The amendments appear to meet all the issues which were brought to my attention by various sections of the

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industry. After the large dinner last night, I would not wish to appear greedy, glutinous or curmudgeonly towards the scheme.

I am grateful for what the Minister has done and I hope that the amendments will enable the scheme to continue beyond its 30 years. It should be discussed beyond your Lordships' House, and I say that advisedly, because we are not experts in the complicated formula. Discussions should take place in a discreet and reasonable way and I and the industry are grateful for what the noble Baroness has done.

Lord Walton of Detchant: My Lords, I, too, welcome the amendments which have been tabled by the noble Baroness. When the Bill was first published, the ABPI, and even pharmaceutical companies which were not members, expressed several important concerns. The first was that the voluntary scheme which had served the country and the NHS well should continue and should be on a voluntary basis and that those companies adhering fully to that voluntary scheme would not be subject to statutory control. That point has been properly met.

The second concern was that companies outside the voluntary scheme, for whatever reason, some of which had without any consultation increased the prices of medicines being supplied to the NHS which were, in the view of the Government and others, and to some extent in the view of the ABPI, beyond a reasonable amount, should be subject to a statutory scheme. That intention was clearly accepted by the ABPI.

The third and most important point, bearing in mind the enormous contribution made by the pharmaceutical industry to our balance of payments and recognising the fact that some of the most effective medicines available in the NHS have resulted from research and development carried out in the UK, was that research and development costs should be taken into account in relation to agreements under the voluntary scheme.

Those were the three principal concerns of the industry. In my view, the noble Baroness's amendments have met virtually all those anxieties and I congratulate her upon them.

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