My Lords, I am pleased to have the opportunity to contribute in Committee. I join in welcoming our noble friend the Minister to his new responsibilities on the Bill. I also draw attention to my interests as recorded in the register. I think only one of them might be regarded as specifically relevant to the Bill, although it is a company which would not benefit directly from it.
As the noble Lord, Lord Warner, said, Amendment 1 raises quite a number of issues, which we will have the opportunity to return to on further amendments. If I may be so bold, the structure of Amendment 1 would insert a clause which is really designed to express hope and intention, rather than to provide a statutory provision having any effect. Some of the other amendments would have the necessary statutory effect to back up some of the intentions encapsulated in Amendment 1, but it does no harm to realise what we are trying to do.
On the amendment’s first limb of supporting,
“a flourishing life sciences sector”,
it is a very apposite day as that is one of the clear intentions of the consultation on an industrial strategy. Listening to the reports this morning, it was clear that in so far as there is a focus on sectors where this country has a comparative advantage—I think we were discussing comparative advantage in the Chamber only last week—pharmaceuticals and life sciences is clearly one of those areas.
A number of noble Lords talked about the strength of our research base in this country and, as the noble Lord, Lord Warner, said, the proportion of new discoveries that have emanated from our research base is striking. It is considerably in excess of our relative importance as a market. We are only about 3% of the global market in pharmaceuticals but we have more than 10% of the new chemical entities—and as my noble friend Lady Redfern said, we often represent up to
25% of the international reference pricing. That is one of the reasons why there is a noted sensitivity on the part of the industry about its strength in the UK.
Where the life sciences sector is concerned, from my experience around Cambridge—in my former constituency and where I live—we probably have the strongest cluster of life sciences in Europe. As was raised by the noble Baroness, Lady Walmsley, when you talk to the industry at the moment its principal concern is simply its capacity to recruit and retain some of the very best researchers and staff. It is often specifically about retaining them and is all to do with the current situation relating to our future relationship with the European Union.
The sector recruits staff from all over the world, way beyond the European Union, but is only too aware of the reaction there has been among its staff—something like 15% of whom are on average from elsewhere in the European Union—to the prospect of our leaving the EU. It is one of those classic situations: if Britain had never been in the European Union, staff attracted from elsewhere within it would have come here understanding under what circumstances they came. Having had the expectation of being EU citizens enjoying access to all the British circumstances, they find the prospect that those might be taken away from them very difficult. It is very important for us to be clear about not only accrued rights but the circumstances in which people come here.
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For the industry, however, the Bill is about pricing schemes. My recollection is that, some years ago, the industry and the Office of Fair Trading did a study of the former PPRS before 2014, and quite rightly said that it did not stimulate innovation—it did not have that effect. It was one of our intentions, certainly when I was chair of the ministerial industry strategy group, to try to bring the promotion of innovation into the scope of the PPRS. That happened in 2014, in the sense that the industry did a deal to say that it would deliver to the Government through the rebate scheme the ability to control the overall drugs budget.
In return for that, two things that were very important to the industry were offered. The first was the continued ability and freedom to price its products at introduction to the market, because of the reference pricing effect that that would have. Secondly, that the Government, drawing particularly on the December 2011 report Innovation, Health and Wealth, would work to deliver increased access to new medicines.
From my point of view, I was always very aware of, as other noble Lords have said, the lack of access for patients in this country—in England in particular at the time—to certain medicines. Mike Richards, in his study in 2009, identified that there was a particular problem in this country relating to access to new cancer drugs. That is the reason we instituted, in 2010, the Cancer Drugs Fund, which was intended not to be sustained beyond the end of 2013. It lived within its budget until the end of 2013. The subsequent arguments that the fund bust its budget are, of course, misleading, in the sense that it was never intended to have a budget beyond the end of 2013 and was intended to be encompassed within the new structure of the PPRS.
The structure of the PPRS was designed to reflect the intention that patients should have access to the medicines that are in their best interests and that the resulting cost should be determined, essentially, between the industry and government.
In 2014, the new PPRS should have enabled that to happen, because the industry could price and the NHS could pay—but, if the overall effect was to increase the budget, it would be sorted out by the structure of the rebate, bringing that money back into the NHS. In practice, that is not how it has happened. While freedom of pricing has been sustained, access has not. It has not led, as it should have done, to a different approach with NICE and the NHS. If anything, NICE and the NHS are proceeding further in the direction that we did not want them to go—speaking as a former coalition Government Minister. We did not want them to go down the path of constantly assessing medicines, applying a threshold and recommending that the NHS should not use medicines. What we should be doing is not trying to find new ways through the budget impact of restricting access to medicines, but finding more effective ways to ensure that we pay the industry only what the new medicines are worth.
In discussing later amendments—in particular, from my point of view, Amendment 10—we will come back to the question of value. It seems to me that value-based pricing was not reflected in the structure of the PPRS this time round, but that it will be possible for us to do so in further revision of the PPRS in future. To that extent, the issues under Amendment 1 are very well raised. I do not personally support the structure by which it would be incorporated into the legislation, but I think it was very helpful to get that overall picture at this first stage.