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Jeremy Hunt accuses drugs firms of monopolising medicines and hiking prices

Published 24/10/2016

The Health Secretary has described the pricing strategy of some drugs companies as
The Health Secretary has described the pricing strategy of some drugs companies as "unethical and unacceptable".

Health Secretary Jeremy Hunt has accused pharmaceutical companies of "unethical and unacceptable" pricing strategies which cost the NHS millions.

The Government has moved to tighten up its regulation of medicine prices, with some companies having hiked prices by thousands of percent over just a few years.

Introducing the Health Service Medical Supplies (Costs) Bill for its second reading, Mr Hunt told MPs the price of one product had increased by 12,000% between 2008 and 2016.

If the price had stayed the same the NHS would have spent £58 million less, Mr Hunt said.

He added: "What has become clear to us is that there is a particularly unethical and unacceptable practice, with respect to drugs companies getting control of generic drugs, in which they command a monopoly position, and hiking the prices."

Later on in the debate, Mr Hunt added: "We rely on competition in the market to keep the price of these drugs down.

"This generally works well and has, in combination of high levels of generic prescribing, led to significant savings.

"However, we're aware of some instances where there's no competition to keep prices down, and companies have raised their prices to what looks like an unreasonable and unjustifiable level.

"There are companies that appear to have made it in their business model to purchase off-patent medicines, for which there are no competitor products.

"They then exploit a monopoly position to raise prices. We cannot allow this practice to continue unchallenged."

The Bill intends to make a number of amendments to the National Health Service Act 2006.

The prices of the sale of NHS branded medicines is regulated in the UK through two schemes, the voluntary Pharmaceutical Price Regulation Scheme (PPRS) and a statutory scheme, both of which use measures to control the prices of branded medicines.

Manufacturers and suppliers of NHS branded medicines can choose to sign up to the PPRS, or will automatically fall under the control of the statutory scheme for their branded medicines.

The prices of unbranded generic medicines are not controlled, with competition in the market relied upon to control prices.

The changes proposed in the Bill will make the statutory scheme more aligned to the PPRS, and introduce price controls on unbranded generic medicines.

Shadow health minister Justin Madders said the Government's proposals show an " increased appetite for state intervention into the market", adding he hopes this spreads across departments.

He joked: "They used to call this kind of approach Marxist, anti-business interventionism.

"I never thought I'd say that I believe (Mr Hunt) is now a fully-fledged Corbynista having heard what he said today.

"But in all seriousness, it's clear the market isn't serving the patients or taxpayer as well as it could.

"As we've heard, expenditure on medicines is a significant and growing proportion of the NHS budget - standing at £15.2 billion in England in 2015/16, an increase of more than 20% since 2010/11.

"One could only imagine where we'd be now if the whole of the NHS had seen such an increase in the same period."

Mr Madders said the Opposition supports the rationale between aligning the two schemes for branded medicines, noting it will create a "more level playing field" between companies and increase the chances of saving cash.

But he said there is a "level of anxiety" about what costs could be created by an "additional administrative burden" in the Bill.

Mr Madders said prices need to be regulated in a transparent, formal process and "not through behind-the-scenes talks" involving pharmaceutical companies and ministers.

He added: "I would ask the minister if he could confirm that if it's become clear in a few years time that ... we've opened up another set of loopholes, whether we can expect the department to take a lead on this and be proactive in their investigations rather than relying on a team of journalists to expose the problem?"

Mr Hunt also faced criticism from Labour MP Rob Marris (Wolverhampton South West), who was critical of the Government's approach to tackling unbranded generic medicines.

"I have to say to the Secretary of State, particularly for a Conservative Government, profit controls is pretty draconian," said Mr Marris.

"The Secretary of State is now proposing, in something which would no doubt be loved by the Leader of Her Majesty's Opposition, to extend profit controls to a major part of the economy.

"On the face of it, to a socialist like me, a Conservative Secretary of State doing that, it does seem a bit counter intuitive."

Mr Hunt responded: "Our march onto the centre ground carries on apace."

He added: "We will be very fair and proportionate in our approach. This is not about bringing in widespread profit controls."

The proposed changes would also reform the statutory scheme - which is less used by drugs companies, and is therefore delivering lower savings than predicted for the NHS - to make its payment mechanism the same as the voluntary PPRS.

"What's happened over successive PPRS voluntary agreements is there's been a voluntary agreement that's covered the vast majority of sales to the NHS, and then you've had the statutory scheme as a back-up," said Mr Hunt.

"What we've seen appearing recently is an element of gaming of the system, whereby more and more people have been moving away from the voluntary scheme into the statutory scheme.

"Our concern is that companies have been exploiting the fact there are differences between the voluntary and statutory scheme, and indeed exploiting a particular loophole this Bill seeks to close."

The drugs bill for the NHS is second only to staffing costs, costing an estimated £15.2 billion last year - a rise of almost 20% in five years, Mr Hunt said.

Mr Madders said Labour supports the broad aims of the Bill, but added it would seek more detail about its impact on the supply chain.

The SNP's Philippa Whitford, a member of the Health Select Committee, said the Bill helps to close loopholes but urged the Government to be more radical.

She said there is an appetite in the industry for a new approach to help encourage expensive drug development.

"Perhaps it could be that if prices were much lower but they had a guaranteed number of patients before a drug became generic," she said.

"It might be looking at risk-sharing because at the beginning we often don't know whether that drug is going to be as good as it's cracked up to be and if it's starting like some of the cancer drugs at £100,000 we're going to struggle to get it through any of our pricing systems.

"And I think one of the other things that is coming up is how do we expect pharmaceutical companies to make a profit on drugs we never intend to use?

"We know that we need new antibiotics but we know any brand new class of new antibiotics will have to be left on the shelf.

"So the system we have will simply not fund the research for that new kind of drug."

Lib Dem former health minister Norman Lamb hit out at "outrageous increases" in the cost of generic medicines, warning the NHS is being "ripped off" by "profiteering" drugs companies.

Mr Lamb said: "It means other patients in the NHS, particularly those in the more marginal areas which don't get the attention that they deserve, they lose out because there is less money to spend."

He said the drugs bill is rising at an "unsustainable rate", and warned the NHS is not doing enough to make sure innovative modern medicines are being offered to patients because they are struggling with the cost.

Some drugs, including a new treatment for Hepatitis C, have been delayed despite being recommended.

Mr Lamb warned this amounts to a "creeping step towards the rationing of approved treatments in the NHS".

He added: "At some point the Government has to recognise that they are simply drifting towards a crash with the NHS.

"We face, I think, an existential challenge which this debate has highlighted, which has to be confronted at some point."

Health minister Philip Dunne said the Conservative Party had not "broken out in a rash of Corbynism".

He added: "What we are seeking to do through this Bill is to rectify points that have been made by members on both sides about the potential for exploitative pricing, in particular of unbranded generics which are of low volume and where there isn't competition from an alternative supplier in the market."

The Bill received an unopposed second reading and will proceed to committee stage for further scrutiny.

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