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Baroness Sharp of Guildford: My Lords, from these Benches, we cannot support the noble Earl, Lord Howe. We accept the response which the Minister gave us in relation to our reservations about the amendments that she tabled earlier. We recognise that if the voluntary scheme is to work satisfactorily, it needs the back-up of the statutory scheme which is incorporated in Clause 28. Therefore, on these Benches we support the Government in maintaining Clause 28.

Baroness Hayman: My Lords, I am grateful to the noble Earl for giving me the opportunity to say once again that we value one of Britain's most successful industries--the pharmaceutical industry--and wish to create a climate in which it flourishes. We recognise in particular the research and development strength and what we can offer the industry and what the industry can offer this country.

I believe that the industry itself recognises that having a sophisticated and discriminating home market is an advantage and not a disadvantage. I can underline too, as I said earlier this evening, that we have every intention of wholeheartedly renegotiating a voluntary price regulation scheme with the industry.

The noble Earl accused us of being schizophrenic in our attitude by having reserve statutory powers. I suggest to him that it is not schizophrenia but responsibility which is underlying our attitude here. We believe that it would be unwise totally to rely on a voluntary scheme.

Some pharmaceutical industries may not be willing to sign up to it or to comply fully with another voluntary agreement that is reached between the Government and the pharmaceutical industry. I am afraid that experience under the present scheme, as I mentioned earlier, provides evidence of that. I told your Lordships in Committee that one significant company has not submitted information required under the present scheme since 1990. In 1998 alone 24 companies increased prices without the agreement of the Secretary of State, outside the terms of the PPRS and at an annual cost to the NHS of £30 million.

Although the Government wish and believe that they will conclude another agreement with the industry, it is prudent for us to provide for a situation in which it is not possible, after the best endeavours of both sides, to

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reach an outcome which the Government and the industry are prepared to accept. The provisions in this clause are the minimum necessary to enable the Secretary of State to establish a statutory scheme.

There are a number of important safeguards written in if it proves necessary for the Secretary of State to use those powers. The noble Earl seemed to suggest that a statutory scheme would somehow undermine the industry and there would be no ability to make any form of profit whatever. We have made it clear that there will be the same considerations of reasonable profit and fairness to the NHS in a statutory scheme as we shall be aiming for in a voluntary scheme.

However, branded medicines are specialised products, the development of which incur considerable research and development expenditure. Those products have limited interchangeability in many circumstances and new medicines are subject to patent protection. That gives companies a period of market exclusivity. For that reason, the Government have concluded that it is necessary to continue to take steps in that area to ensure that prices are fair and reasonable, both to companies and to the NHS. We want to reach another agreement with the industry but, as I said earlier, it would be unfair on those companies which agree to abide by that new agreement while other companies are able to opt out of the scheme and be subject to no scheme at all.

As a last resort the Government must protect the interests of the NHS by having available reserved powers to implement a statutory scheme if it proved impossible to reach agreement with some or all of the pharmaceutical industry. For those reasons I urge the noble Earl to withdraw his amendment.

Earl Howe: My Lords, the Minister has made some reassuring comments. As I said earlier, the Government have done a lot to allay the initial fears expressed by the industry. For that we are extremely grateful.

My main point was that often markets and investment decisions turn on perceptions, sometimes quite irrational perceptions, but nevertheless that happens. If, in the future, a multi-national pharmaceutical company considers whether or not to invest in the UK, credibility is not stretched too much to imagine such a company looking at the reserved powers for a statutory scheme and asking whether the UK represented the most favourable place for that investment.

I hope that the Government are right in their judgment. If they are not right, the consequences will be very serious for us all. I still have nagging doubts about the criticisms that the Minister has voiced against the existing PPRS. If, as she maintains, the present PPRS is not working properly and we have an unacceptable minority of companies which are the cause of that, why not simply introduce a system of arbitration, combined with penalties for infringement? Why is it necessary to have reserved powers for a fully-fledged statutory scheme? I am still not convinced, but this is not a matter that I shall press. I believe that it is right to have voiced these concerns, but I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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Lord Desai moved Amendment No. 61:

After Clause 28, insert the following new clause--

Publication of details of voluntary or statutory scheme

(" . The Secretary of State shall publish a statement of any voluntary or statutory scheme he has agreed with the industry, which statement shall include--
(a) the criteria he will use for the purposes of making determinations under sections 26(1)(a) and (b), and 28(1)(a) and (b) above;
(b) the categories of information he determines to be commercially confidential and his reasons for their justification;
(c) details of the outcomes of his consultation with the industry and other bodies representing consumer and public interests in establishing the scheme;
(d) the mechanisms he will put in place for independent audit of the negotiation and operation of the schemes and the mechanisms for publishing the results of such an audit; and
(e) when he will next review the scheme.").

The noble Lord said: My Lords, perhaps I should begin by declaring a non-pecuniary interest. Unlike the noble Lord, Lord Lyell, I am not in the habit of getting dinner, but I have spoken to the National Consumer Council, which has expressed reservations about the scheme. Noble Lords will remember that I pursued this point in Committee. It was well past midnight on that halcyon evening and we marched into the lobbies at 1.30 a.m. in the morning. I was brief at that time and thought that I would not try the patience of noble Lords too much.

However, I have returned to this issue because it is an important one. There are questions about the voluntary arrangement for PPRS or even the statutory ones. There is a missing actor and that is the consumer. I am grateful to the noble Baroness, Lady Sharp, for having welcomed my amendment before I had moved it; I hope that I shall have her support.

The first problem is that the Secretary of State is obliged not only to secure reasonable prices for the medicine board of the National Health Service but to promote the pharmaceutical industry. In Committee I argued that that is schizophrenic. If there is schizophrenia, that is it. I do not understand why the DTI does not undertake the task of promoting the pharmaceutical industry. What does it have to do with the Secretary of State?

The scheme that we have is a kind of bilateral monopoly. It is a very cosy arrangement. One large buyer can influence a few large sellers. The fact that there is a large stable buyer no doubt has immensely benefited the pharmaceutical industry. That fact is seldom mentioned when people talk about how efficient the pharmaceutical industry is. I do not deny that it is efficient. The advantage that a large stable demand from the National Health Service has on the pharmaceutical industry is not to be underestimated.

My amendment asks for a certain amount of transparency in these arrangements. First, if the Secretary of State is to determine prices or profits, paragraph (a) of Amendment No. 61 says that the criteria he will use for these purposes ought to be made explicit.

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Secondly, given the schizophrenic role of the Secretary of State, we must be quite clear what information will be suppressed because it is commercially confidential and the justifications for that. Whose interests are we protecting?

Thirdly, it is a matter of concern that in all the consultations industry bodies are mentioned but consumers are seldom mentioned. Basically, consumer bodies and public interest bodies ought to be consulted on this matter. While I entirely trust the Minister and my right honourable friend the Secretary of State for Health to look after national interests, it will still be good to have consumer interests specifically represented when the scheme is discussed.

Lastly, it mentions an independent audit of the way in which the scheme is set up. It is a fairly modest amendment, but it proposes to introduce a culture of transparency and accountability in the voluntary or statutory scheme and it introduces, in a major way, the interests of consumers. I beg to move.

6.15 p.m.

Lord Lucas: My Lords, perhaps I may speak to Amendment No. 74 which is grouped with Amendment No. 61. I am delighted to see the noble Lord, Lord Desai, and myself as Back-Benchers grouped together, producing a cross-party Back-Bench amendment. I hope the Minister will be suitably impressed. After our discussion in Committee, she was kind enough to write to me a long and helpful letter on the amendments that I tabled at that stage, avowing a commitment to freedom of information. I am delighted to note that the noble Baroness shares that commitment, striking again, as we did in Committee, the rock of commercial incompetence.

My reply to that is Amendment No. 74, which says that details should be published, except that which is "commercially in confidence". I hope the noble Baroness will think that that provides a reasonable answer to all the problems that she has raised. In case she does not, it would be helpful if the Minister or her officials in a letter could give examples of what sort of confidential information would generally come to light in such cases. If a company is fined or given directions as to price or market behaviour, I do not believe the fact that directions have been given to that company would be considered as "commercially in confidence". How can the fact that the Government have given directions to a company be "commercially in confidence"? Perhaps one can go beyond that and say that it could be in respect of a particular preparation. Again, how can that fact be commercially in confidence? One can work a long way down the circumstances that we have envisaged being covered by this scheme, before discovering anything that is "commercially in confidence" of which a competitor could take advantage.

It is commonplace for those who have sinned and have been found out and punished to have their names published, unless they are minors or people who should be protected. I do not believe that pharmaceutical companies come into that category. In the interests of

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freedom of information, in the interests of openness and good government, I believe that the Government should publish as much information as they can. I hope that the noble Baroness will agree that my amendment will give them that option.

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