My Lords, I thank the noble Baroness, Lady Finlay, for the work that she has put into investigating this issue, for her amendment and, indeed, the intent behind it, which is to save the NHS money and provide a better bang for our buck. That is something that everyone would support.
I say first that it is the Government’s priority to make sure that we get the best possible results for all NHS patients with the resources we have. That is what the Bill, in its entirety, aims to do. This amendment seeks to save the NHS money on specials by requiring CCGs, hospital trusts and community pharmacies to seek no less than three quotes for non-tariff items, at least one of which should be from an NHS manufacturer and, where possible, to select the cheapest quote. It also requires NHS England to take into account prices of NHS manufacturers when setting reimbursement prices. A special is a medicine manufactured or imported to meet the specific needs of a specific patient. By nature they are bespoke, and therefore they do not have the same economies of scale during manufacture and distribution as licensed medicines. Due to the
bespoke nature of specials, the costs associated with manufacturing and distribution will never be as low as the often relatively cheap components that make up the special. I say that by way of background for those who are perhaps not as familiar with the subject as the noble Baroness is.
I turn now to the idea of setting tariff reimbursement prices and including data from NHS manufacturers. In England, reimbursement prices for the most commonly prescribed specials are listed in the drug tariff. Those prices are based on sales and volume data, which the department currently obtains from specials manufacturers under a voluntary arrangement. The new provisions in the Bill would make reimbursement data more widely available and more accurate—which would clearly be a benefit in making sure we get value for money with specials. By setting a reimbursement price, we encourage pharmacy contractors to source products as cheaply as possibly because it allows them to earn a margin, which in turn creates competition in the market and, as a result, lowers reimbursement prices. Since these reimbursement arrangements were introduced in 2011, we have observed that, in England, the average cost for specials listed in the drug tariff decreased by 39% between 2011 and 2016.
In setting that out, I do not disagree with the idea that there are instances of wild variation. Indeed, I ask the noble Baronesses, Lady Finlay and Lady Wheeler, for any examples and evidence that they have. I would be keen to see them, to better understand instances where it has happened.
Basing reimbursement prices on selling prices from more manufacturers than we do now, which the Bill would allow us to do, would make our reimbursement system more robust. For specials, we currently rely on information from those manufacturers that have signed up to our voluntary arrangement. There have been talks with NHS manufacturers to provide information on a voluntary basis. However, we have not been successful so far in securing data from NHS manufacturers that we are able to use. The Bill would enable us to get information from all manufacturers, including NHS manufacturers, for the purpose of reimbursing community pharmacies—that being, of course, one of the main aims of the Bill. Once we receive data from NHS manufacturers, we will be able to assess whether it is appropriate to include it in calculating reimbursement prices. We are actively looking to see whether we can include data as part of our reimbursement price setting, and the Bill will help us to get it. Consequently, we do not need the amendment.
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On seeking three quotes, including one from an NHS manufacturer, I am aware that the three-quote system was used in Scotland, but I understand that our Scottish colleagues have now simplified this and restricted it to one quote—unless the special is sourced from an NHS manufacturer or the price was authorised in the past 12 months and does not vary by more than 20%, in which case no quote is needed.
The letter I wrote to the noble Baroness, Lady Finlay, goes into a little more detail about price comparisons between the English and Scottish systems. For those
noble Lords who have not seen it, a high-level comparison of reimbursement prices showed that out of 42 products which are in both the English and Scottish drug tariffs, 31 specials—74%—have a cheaper reimbursement price in England than in Scotland. The pricing arrangements are different and complex. Although we should always be looking at international examples as a way to improve what we do here, we feel relatively confident that we are learning the right lessons and that the English system is operating for specials on the drug tariff.
In England, specials that are not listed in the drug tariff are reimbursed at the manufacturer’s invoice price, less any discounts and rebates. Introducing a requirement on pharmacies to seek three quotes for every special not listed in the drug tariff, including one from an NHS manufacturer, would put a considerable burden on pharmacies and bring considerable administration costs with it. I am concerned that the amendment would cost the NHS more than it would deliver through lower prices—and we do not yet know whether it would lead to lower prices.
I also have concerns about the delay that it could create in getting medicines to patients, especially when a pharmacy may struggle to get a quote from an NHS manufacturer in a timely manner. We are uncertain whether NHS manufacturers produce all specials—for the reason I mentioned of the availability of data—including those prescribed in primary care. An NHS pharmacist in England is under a legal duty to provide medicines with reasonable promptness—an issue to which the noble Baroness alluded. The Government, together with the representative body of pharmacy contractors, the PSNC, previously considered introducing quotes, but that was not for those reasons.
We recognise that the arrangements need to do more to provide incentives for pharmacy contractors to source products, including specials, with lower prices. My officials work continuously with the PSNC to look at how we can improve reimbursement arrangements for specials.
Finally, I will comment briefly on some technical aspects of the amendment. The making of drug reimbursement determinations is a Secretary of State duty rather than an NHS England duty. Placing a duty on NHS England through the Bill would not be appropriate. Further, the drug tariff does not apply to secondary care or CCG procurement. Embedding in primary legislation the need for three quotes for non-drug tariff items would constrain hospitals in how they source specials—possibly inadvertently, for example if they do not procure medicines because they manufacture them on site.
The amendment also proposes changes to the way we reimburse pharmacy contractors for dispensing specials. Section 165 of the NHS Act 2006 sets out the Secretary of State’s duties in respect to drug tariff determinations on reimbursement and states that,
“the Secretary of State must consult the representative body of pharmacy contractors—the Pharmaceutical Services Negotiating Committee (PSNC); and …may consult other persons as he considers appropriate”.
The NHS (Pharmaceutical and Local Pharmaceutical Services) Regulations 2013 further set out that the determinations must be published in the drug tariff. With that in mind, an amendment to primary legislation,
which sets out detailed reimbursement arrangements, would not be appropriate. The purpose of the monthly drug tariff is to set out the reimbursement arrangements, which are not typically set out in primary legislation, to enable determinations to be amended to reflect the continuous change in the market.
Finally, the Secretary of State can require contractors to get three quotes for reimbursement prices, including from NHS manufacturers, if it is thought that doing so would be appropriate—although, as I indicated earlier, we are not certain that it is.
In conclusion, I hope that I have reassured the noble Baroness that we are engaged in considerable work to improve the value for money that the NHS gets in the procurement of specials. This Bill provides a key element of that ongoing work by enabling us to get information from NHS manufacturers to achieve the result that the noble Baroness and, I believe, all noble Lords seek. However, I have concerns about the impact that the first part of her amendment would have on the cost of operating the system and on prompt access by patients to specials. On that basis, I ask the noble Baroness to withdraw her amendment.