Vote 5. National Health Service, England and Wales

Part of Orders of the Day — Supply – in the House of Commons at 12:00 am on 12 March 1959.

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Photo of Mr Richard Thompson Mr Richard Thompson , Croydon South 12:00, 12 March 1959

That was the point I was making. I have seen the calculation of the hon. Gentleman—indeed, I replied to his letter—but I do not necessarily accept the arithmetic.

As I was saying just before his intervention, I think that it is unrealistic to compare raw material costs. After all, we ought to know whether the raw material has the same potency and the same efficacy as whatever may be used in the finished product over here. It is unrealistic simply to deduct a figure for raw material cost from the price of the finished product over here and call the difference gross profit. It leaves out of account processing, packaging, cost of research and marketing, and also the possibly short life of a drug.

I would not accept the hon. Member's view that all these drugs have a life of only two or three years. I think that many have a life longer than that. But it is a factor, when putting a price on these drugs, that if they are likely to be superseded in a very short few years it follows that the development expenditure which went into them, plus all the development expenditure which went into other drugs which did not find acceptance, has to be recouped in a much shorter time. Therefore, it is unfair to single out one product and make an oversimplified calculation based on the cost if its raw material alone. It is with the factors I have mentioned in mind that a free period is allowed under our voluntary price regulation scheme.

Nevertheless, all this is public money, and my right hon. and learned Friend is closely concerned to ensure that reasonable prices for new drugs in category 1 or categories 2, 3 or 4 after the three-year period should be secured. I think that the best thing that we can do is to review this scheme very thoroughly, as I have said we shall, before it comes to its end to see whether it is fulfilling its function and whether there are grounds for the kind of allegation that the hon. Gentleman made—which, while not accepting, I certainly take seriously—and also to see whether there is a case for replacing or improving it.

On the question of American subsidiaries as a whole, I would say that if new drugs are not manufactured in Britain the alternative is to import the finished product; and that is always more expensive. It is not right to think of these firms as plunderers. Foreign firms have sunk considerable sums in setting up appliances here and we derive a valuable export trade and thriving industry from it apart from the benefit to the National Health Service of having these drugs which would otherwise be unobtainable from home production. I would hope that nothing that is said in this Committee would have the effect of frightening away foreign firms who are prepared to export their brains and sink their capital in the drug industry, supplying employment to people in this country.

We must not allow the rise in the drug bill to obscure the fact that the increasing use of these drugs has led to much quicker recovery of patients and that more patients have been treated more cheaply at home rather than in hospital, and that the more rapid turnover of hospital beds has been possible. Unless there were to be some restriction on the freedom of doctors to prescribe as they think best, we cannot limit the use of new drugs, although we can and do, in the way I have described, keep the need for economic prescribing constantly before them.

I should like to say a word on research, because the hon. Gentleman the Member for Lichfield and Tamworth (Mr. Snow) had a word to say on that. The drug industry is spending about £4 million annually on pharmaceutical research. It is of two types, long-term fundamental, which can only be undertaken by the largest firms, and short-term progress and development research. A measure of the work undertaken is shown by the fact that, on average, about 1,000 new substances are synthesized to produce one for the market.

Each firm which does research on any scale has a research team or teams working as a closely integrated unit. For instance, a large firm may employ over 100 graduates. Research in the industry is not into a single product or allied group of products, as in some other industries, but into a wide range of substances designed to have quite different effects on the human body.

Central research which, I think, was implicit in something that the hon. Gentleman said—