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Baroness Sharp of Guildford: My Lords, I rise to support both amendments. As the noble Lord, Lord Desai, said, the pharmaceutical industry has done, does and will continue to do, extremely well out of the pharmaceutical price regulation scheme. The benefit has been a research-based industry which is the UK's most successful industry. We recognise that. It is nice to have a few very successful industries.
However, that industry's profits are extremely large. Like the noble Lord, Lord Desai, we argued in Committee that the scheme was a piece of industrial policy and that, as such, it should be within the orbit of the Department of Trade and Industry rather than of the Department of Health. As I said, it is a cosy arrangement, settled behind closed doors. Perhaps I may advise the noble Lord, Lord Lucas, that individual negotiations take place with individual companies behind closed doors when they reveal much about their costs which they regard as being very commercially confidential. They do not want that to be revealed to their competitors--and one recognises why. Nevertheless, that deal is done in the interests of consumers and it is important that consumers should know as much as they can about such deals. Transparency is an important issue. We on these Benches entirely endorse the two amendments.
Baroness Carnegy of Lour: My Lords, I may have misunderstood the discussion, but I am amazed at what the noble Baroness just said. If a big manufacturer is negotiating this deal with the NHS--because the Government are prepared to accept the "schizophrenia" which the noble Lord, Lord Desai, mentioned in order to achieve the best possible prices for the NHS--presumably the facts discussed when making the deal include the manufacturing costs of producing a particular product; and the world will know the selling price and "confidential information" passes to the world of commerce. The noble Lord knows that very well.
The schizophrenia point is valid. It is strange that we have to do this, but it is accepted as necessary. Some products will be sold across the counter for their real price. However, I do not think that one can possibly say that just because pharmaceutical companies make a lot of money they should have to reveal everything in such discussions. Of course, because they make a lot of money it is possible to contemplate such an arrangement. I see that, but perhaps I am misunderstanding the point. I simply do not think that you can say that because people make a lot of money they must give away their entire trade. We very much value those industries.
Lord Haskel: My Lords, perhaps I may remind my noble friend the Minister that this matter of commercial information involves a two-way road and that under corporate governance regulations, limited liability
Regarding the point made by my noble friend Lord Desai about financial assistance to the pharmaceutical industry, perhaps I may remind him that in the Budget the Chancellor announced £1.3 billion of assistance to technology-based companies, many of which are in the pharmaceutical industry, and that seven centres of excellence are to be established. That will be very much in the interests of the pharmaceutical companies. The Government are doing quite a lot to encourage this.
Lord Clement-Jones: My Lords, in that case, perhaps I may give some clarification on behalf of my noble friend Lady Sharp. We on these Benches fully support the amendment. Indeed, the noble Lord, Lord Haskel, has just given even further reasons for doing so.
Of course, one is not asking for the ultimate in terms of commercial information, such as the cost base, but City analysts have a fair idea of gross and net margins. Such information is not absolutely secret from competitors. I do not believe that the amendment suggests that a company should reveal anything unreasonably. The provisions seem eminently reasonable. It was no part of my noble friend's case to say that because companies make profits they should therefore have to reveal everything. That was certainly not her case.
Baroness Hayman: My Lords, we have had a useful short debate on this issue. I share the concerns expressed by the "unholy alliance" of the two Back Benches, if I can put it that way, that we should do all that we can to ensure that information is available, that there is transparency in the terms of the agreements between government and the industry, and that there should be adequate consultation on matters of public interest.
The details of the new voluntary scheme itself will be written into the document agreed by the Secretary of State and the industry body. Given the key need for greater transparency, the new agreement will have to be very much more specific than previous ones. It must be clear from its face how it is going to operate in a fair and transparent manner and apply equitably to the suppliers and manufacturers. We will continue the practice adopted with previous voluntary arrangements and publish the agreement. We intend to report regularly on the working of the agreement and to include in those
The idea is to publish as much information as we can, rather than as little as we are forced to. The statutory scheme, if it is needed, will be set out in regulations and those regulations--again, public documents--will have to be very detailed and formulaic and contain the criteria to which my noble friend's amendment points.
Perhaps I may turn to the vexed question of what is commercially confidential. There is obviously tension between information that should freely be available and any legitimate right to privacy. The noble Lord, Lord Clement-Jones, and my noble friend Lord Haskel rightly said that companies already have to publish much information in terms of their corporate governance responsibilities. That is not the level of information with which we are dealing. However, the effective operation of the scheme depends on companies providing information to a level of detail that is not in their published accounts and where such publication could harm their commercial interests. We are talking about a great deal of detail being given. Such areas could include sales and profits forecasts, and information on profits on individual segments of the market to a level not required to be published in any statutory accounts but which could be of great value to competitors.
The exact definition of what generally constitutes "commercially sensitive information" is very difficult to render precisely. I accept the spirit of some of the comments made about it being used in the past as a blanket term and an excuse for not being as transparent as we could be. In that connection, a minimum definition needs to take account of information which, were it to be disclosed, would at least be likely to result in damage to suppliers and manufacturers. Looking at it from the other end of the spectrum, it is easier to say what is not commercially sensitive and previous reports to Parliament achieved a great deal in describing the operation of the PPRS.
The amendment of the noble Lord, Lord Lucas, would require the Secretary of State to publish details of payments recovered under the statutory scheme arising from excess profits or prices and the publication of otherwise confidential directions made under Clause 31. It is our intention to publish all that can be published without breaching a tight definition of commercial confidentiality. It is important that decisions made under the voluntary arrangements or the statutory scheme are correct, correctly arrived at and can be seen to be so. But we do not want this to be an area of dispute with companies and the Secretary of State coming to different decisions in relation to confidentiality. We want to maintain a climate of confidentiality when it comes to individual suppliers and manufacturers, which is necessary if the operation of both the voluntary and the statutory schemes is to command the confidence of all interested parties.
An additional problem is that, should a supplier or manufacturer perceive a danger of disclosure of commercially sensitive information, he would be less likely to provide the information freely and frankly and therefore push us more into the statutory scheme.
The noble Lord, Lord Lucas, asked for an example of the circumstances where a company might not be a clear "sinner" but might have excess profits recovered from it. Excess profits do not necessarily mean that there has been a transgression of the statutory or voluntary scheme, or that prices have been increased without reference to the Government, or that information has not been disclosed. The profit derived from sales to the NHS can increase beyond what was expected because of unexpected changes in volume. In those circumstances it is right that excess profits should be paid back, but it could be commercially damaging if that was disclosed in terms of the individual company to which it applies.
I have some sympathy with the noble Lord's view in circumstances where companies increase prices charged to the NHS without the agreement of the Secretary of State. While it would be unwise to have such a requirement placed on the face of the Bill, it is certainly something at which we should look carefully in terms of future reports to Parliament on the operation of the schemes.
Directions are provided for so that the Secretary of State may communicate with a specific supplier or manufacturer other than by regulation, thereby respecting commercial confidentiality. In that regard the amendment would defeat the necessary mechanism and jeopardise the successful operation of the scheme.
I turn now to consultation. Clause 30, as amended, requires the Secretary of State to consult with the industry body before making regulations. The industry body is alone specified in Clause 30. That is common sense, given that it is the body which stands to be most affected by the implementation and operation of either a voluntary or statutory scheme. But that does not mean that others--consumers in particular--are not affected by those schemes. Nor does it mean that the views of other interested parties will not be sought by the Secretary of State. He is free to consult more widely than with the industry and I am certain that he will consult interested parties appropriately.
I am not convinced that there is a need to put requirements to publish details of the outcome of such consultations on the face of the Bill though, as I said at Committee stage, we have made it absolutely clear in most responses that the Government intend to consult the representatives of patients. The outcome of consultations in those cases will be the schemes themselves. Their form and content will be a clear indication of what the Secretary of State decided after consulting with interested parties. It always remains open for his decisions to be questioned here or in another place. I am not sure that there is value in his being required to describe those decisions separately.
Equally, on the question of an independent audit, I am not sure that we need new mechanisms specifically directed towards the operation of those schemes. The National Audit Office is a highly competent and respected body which has the required expertise and experience to deal effectively with the audit of the schemes. I trust that my noble friend will accept that that body, in undertaking an audit and publishing its
I hope that I have convinced your Lordships that, in urging noble Lords to withdraw the amendments, we are absolutely clear that we wish to move towards more transparency, giving more information in these areas, and that we will not be using the limited circumstances of commercial confidentiality as some sort of blanket exemption to shroud the operation of these schemes in any kind of unwarranted mystery.
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