Orders of the Day — NHS Drugs Bill

– in the House of Commons at 11:45 am on 24 March 1993.

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Motion made, and Question proposed, That this House do now adjourn.—[Mr. Robert G. Hughes.]

Photo of Mr Andrew Hunter Mr Andrew Hunter , Basingstoke 12:14, 24 March 1993

At long last, Mr. Deputy Speaker! I greatly welcome this delayed opportunity to raise the subject of the cost of drugs to the national health service and to reflect the disquiet which is expressed by a number of people at a perceived trend in Government's thinking, a disquiet which I share. My only regret about this debate is that I am adding to the burdens on the time of my hon. Friend the Member for Bolton, West (Mr. Sackville) and I apologise to him for that.

Reduced to simplicity, my concern is that Government policy may unintentionally undermine the smooth running of aspects of the workings of the national health service, to the detriment of patients' interests. I further fear that any extension of the selected list scheme, the SLS, could have long-term adverse repercussions for the United Kingdom pharmaceutical industry, an industry which has a significant presence in my Basingstoke constituency. Either development would be undesirable; the possibility of both is alarming.

The greater part of my remarks will be devoted to what I regard as three fallacies in the debate about the size of the drugs bill and about the SLS. The first fallacy relates to a particular policy development. Recently, the Department of Health was understood to have stated that its aim is to keep the rise in the drugs bill in line with retail prices index inflation. I fear that this an inappropriate target.

In view of the continuing recession and deteriorating public finances, it may unfortunately be necessary to keep total NHS spending in line with inflation, despite the 1992 general election commitment to an increase in real terms, but the emphasis on keeping increases in the drugs bill in line with RPI inflation is a disturbing departure and one which should be challenged. Surely the strategic objective should be to ensure that the best use is made of finite resources. How best to achieve this optimum use of finite resources should determine the level of spending on each individual element within the overall total. The factor that determines the size of the bill as a proportion of total NHS expenditure should be whether more or less use of medicines represents the best use of total resources. The Government are, I fear, open to the charge that, in concentrating excessively on one element within total expenditure—the drugs bill—they are losing sight of the wider implications and consequences of such action.

My thesis is simple: further attempts to control the drugs bill are likely to undermine the provision of primary and community health care and, therefore, put greater strain on resources by increasing demand for secondary and more expensive health care.

The second fallacy is the belief that the increase in the drugs bill is significantly due to price increases. That is entirely mistaken. NHS pharmaceutical expenditure has certainly grown ahead of RPI inflation, but this must be seen in its true context. All health care inflation is historically higher than general inflation, for three main reasons. One is demographic change—primarily the aging population. Secondly, there is technological advance, as more and more costly medicines become available. Thirdly, there is apparently insatiable consumer demand.

It is not surprising that the rise in health care costs is an increasing concern for many Governments. Throughout Europe and in the United States, Governments have introduced a variety of measures to contain health care expenditure in general and drugs bills in particular.

My hon. Friend the Minister will know that industry and Department of Health data on the nature of the growth in the NHS drugs bill are complex, but show similar trends. There is a broad consensus on several features. Price rises and the introduction of new products are a consistently small contributor to year-on-year growth, generally accounting for 1 to 2 per cent. each of the total percentage increase.

The Department attributes "product mix", defined as average net ingredient cost, as the main growth. However, the increase in average net ingredient cost has remained steady or slow during the past five years. Conversely, the number of prescription items has increased and now represents a larger percentage of total growth than at any time during the past five years.

The reality is far removed from the mistaken belief that the increase in the drugs bill is significantly due to price increases. It is not difficult to detect the primary cause for the increase in the drugs bill—it is Government policy.

During the past decade or more, there has been a gradual shift from a health service based primarily on secondary, or hospital, provision to a service based on care in the primary sector by general practitioners. The trend has been confirmed by NHS reforms and by moves toward community care, both of which I welcome. The trend was confirmed in the White Paper, "The Health of the Nation". The Government's response to the Tomlinson report, which endorsed fewer hospitals and an increase in primary care, and is further evidence of that trend.

The inevitable corollary of a shift to primary care is the present increase in the NHS drugs bill. Both in absolute terms and as a proportion of total NHS expenditure, it is a classic illustration of money following the patient. A clear correlation can be drawn between the introduction of a new GP contract and the drugs bill. Many instances show how increased prescribing followed the introduction of the new contracts and correspondingly contributed to increases in the drugs bill. Inevitably, more prescriptions are being written and the cost of drugs prescribed has increased the total drugs bill.

The third fallacy is the argument that an ever-increasing drugs bill is taking up too great a share of a finite NHS resource, to the detriment of the service as a whole. Again, the reality is very different. There are many published examples to show that increased expenditure on medicines reduces the overall cost to the health service. Perhaps the most dramatic example has been the reduction in major gastric surgery, which has been brought about by the use of H2-receptor blocking agents, such as Zantac and Tagamet, which, incidentally, were both discovered and developed in the United Kingdom.

One survey shows that those medicines have increased drug costs for ulcer patients sixfold, but have reduced the total treatment costs by 66 per cent. It is therefore entirely misleading merely to judge matters by the increase in the cost of the drugs, when the overall saving to the service can be so much greater. Significantly, the Office of Health Economics calculates that, as a result of the reduction in hospital bed days, savings from seven groups of diseases had amounted to nearly £4 billion a year by 1991. By contrast, the cost of all medicines prescribed in general practice for all diseases in that year was only £3·3 billion. The overall message is simply that medicines are a very cost-effective way of spending health care resources.

I turn, penultimately, to the way forward. I believe that there are questions to be answered, and I put them to my hon. Friend the Minister. First, will not he accept that it is illogical to seek to index-link the growth in the NHS drugs bills to inflation? Secondly, does not he accept that, as Government policy is to shift the balance of health care from hospital provision to treatment by GPs in the primary sector, medicines will consume an ever-higher proportion of total NHS resources? Thirdly, does not he accept that price rises and the introduction of new products are relatively small contributors to the overall rise in the drugs bill? Fourthly, what will be the implications for the provision of health care within the Government's overall strategy if further restrictions on the use of medicines are introduced? Surely this is a matter for an urgent, in-depth inquiry. Lastly, what will be the implications for the pharmaceutical industry if the market is further restricted by an extension of the SLS? The United Kingdom is greatly indebted to the pharmaceutical industry as an investor, employer and innovating producer. Will investment, employment and innovation continue?

My thesis is straightforward. Noises coming from the Department of Health warn that, in their reaction to the rising NHS drugs bill, the Government may be on the point of pursuing a mistaken course of action. Trends within the health service rightly emphasise the importance of primary and community health care. This inevitably results in increased prescribing. But devoting resources to medicines is a most cost-effective use of those resources, as it reduces demand for more expensive secondary health care. An extension of the SLS would have a detrimental effect on the United Kingdom pharmaceutical industry, with repercussions for employment and investment.

Finally, further restrictions on the availability of medicines would not be in the patient's interests. They could undermine the reforms and the smooth running of the national health service. I rest my case.

Photo of Mr Tom Sackville Mr Tom Sackville , Bolton West 12:27, 24 March 1993

I begin by congratulating my hon. Friend the Member for Basingstoke (Mr. Hunter) on his success in the ballot for an Adjournment debate and on his choice of subject.

The question of the cost of drugs to the national health service is a complex one, requiring a balance to be struck between the need to ensure that patients get the drugs they really need, the encouragement of a research-based pharmaceutical industry and the need to contain costs. It is right and proper that those issues should be the subject of public debate.

I must start by correcting something my hon. Friend said at the beginning of his speech. It is not, as he suggested, our aim to keep the rise in the drugs bill in line with GDP inflation. But it is our aim to reduce the annual rise in the drugs bill to something closer to the rate of inflation.

Over the 10 years 1982–83 to 1991–92 the total drugs bill for the NHS in England rose from £1·2 billion to £2·9 billion—an increase of 39 per cent. in real terms. Over those 10 years, the cost of drugs prescribed in the family health service has risen from 8·2 per cent. of total expenditure on the NHS in England to 8·7 per cent. Indeed, in 1989–90 it was as high as 9·2 per cent. In total, expenditure on the family health service drugs bill reached £2·3 billion in England in 1991–92, and is likely to increase by a further 14 per cent. this year.

The reasons for the rise in the family health service drugs bill are complex and, not surprisingly, the Government's analysis differs in some respects from the industry's. As we have in Britain a good record of co-operation between industry and the Government, we are keen to reconcile those differences. We have, therefore, agreed that officials of the Department will meet the Association of British Pharmaceutical Industry to discuss our respective analyses, and seek to agree a common basis for assessing the causes of the rise in the NHS drugs bill. Undoubtedly, some of the rise is due to changes in demography, but we should not exaggerate the importance of those factors. Much more important is the fact that doctors have been writing more prescriptions per head of the population and that those prescriptions have been becoming more and more expensive. Over the 10-year period, the number of prescriptions has risen from 332 million to 415 million—an increase of a quarter. We expect the number of prescriptions to rise by a further 4 per cent. this year. The average cost of a prescription has risen from £3·04 to £5·58, an increase of 84 per cent. in cash terms or 10 per cent. in real terms.

One issue on which we can broadly agree is that increases in the prices of medicines that are already on the market have not contributed very much to the increased cost. Over the past five years, the average ingredient cost of a prescription has gone up by just under 8 per cent. each year. Of that 8 per cent., only about 1 per cent. is due to price increases for medicines already on the market. Just over 1 per cent. of the annual 8 per cent. increase has been due to a continuing rise in the average quantity of medicine in each prescription. But the bulk of the rise in the average cost of a prescription is accounted for by what might best be described as the product mix—changes in the medicines that are being prescribed. Newer medicines are taking the place of the older medicines whose prices, as we have seen, have not been increasing very much. Those new medicines have a very substantial price premium over existing medicines—on average about 150 per cent.—even when they are very similar in therapeutic effect. The switch to newer medicines has been offset to some extent by an increase in the proportion of prescriptions that could be dispensed using generic medicines, which has risen from 16 per cent. in 1982 to 35 per cent. in 1992.

Of course, people are becoming more health conscious. Some new medicines are more effective than older ones, while some new medicines treat conditions that previously could not be treated at all. But, likewise, there is no bottomless pit of cash for the health service. It is all the more important, therefore, for us to seek to ensure that the money that is spent on medicines is well spent. Our policies seek to ensure that by action on two main fronts—first, to ensure that we are not paying more than we need to for an effective range of modern medicines and, secondly, to encourage better prescribing.

The proposals for the extension of the selected list are part of the first of these areas of action. As my hon. Friends knows, the selected list scheme was introduced in 1985 and included seven therapeutic categories of drugs. Experience with the scheme has shown that the drugs bill can be reduced without detriment to patients, and we have therefore asked the Advisory Committee on NHS Drugs to see whether similar savings can be made in other categories.

There are no targets for savings from extending the selected list scheme and decisions on which individual drugs may no longer be available on NHS prescription will be taken only on the basis of advice from the advisory committee. That is an independent body of experienced doctors, dentists and pharmacists who have been appointed, following nomination by the relevant professional organisations. Their remit is to ensure that drugs to meet all real clinical need can be provided as economically as possible under the NHS.

Photo of Mrs Teresa Gorman Mrs Teresa Gorman , Billericay

I thank my hon. Friend for giving way and for his courtesy in the recent past when I have been to see him about the selected list. Will he give us the make-up of the advisory committee and state, in particular, whether it contains any young women who are likely to be taking oral contraceptives? As he knows, I am most concerned that adding oral contraceptives to the limited list could cause much distress to young women taking the pill. The change in prescription can have a profound effect, not just on the women's physical reaction, but on their mood. The long-term effects of giving up oral contraceptives could be an increase in abortions and in the cost of maintaining unwanted children. As my hon. Friend said, we could be penny wise and pound foolish.

Photo of Mr Tom Sackville Mr Tom Sackville , Bolton West

I shall let my hon. Friend have a complete list of the members of the committee. I assure her that they represent a fair cross-section and that the committee contains a number of experts on oral contraception who will be well aware of the factors that my hon. Friend has outlined. I look forward to receiving further representations from her if she wishes to make them.

I was speaking about the general criteria. Drugs will not be rejected purely on grounds of cost and the committee will take full account of patients' needs as well as the therapeutic value of the drugs under review.

We cannot predict which products will be affected by those changes, but I can offer reassurance that manufacturers will be informed as soon as possible if their products are to be considered by the committee. They will also be given an opportunity to make representations to the committee against any provisional view that a product should not be prescribable under the NHS.

I appreciate that there is concern about the timing of the changes and, while it is not possible at this stage to announce the dates on which the committee will be reviewing the drugs in the new therapeutic categories, preliminary work is already under way and we intend to announce further details of the products involved later in the year.

I know that there is serious concern about the impact that the changes may have on research, investment and employment in the drugs industry. The changes that we are introducing mirror measures being taken throughout Europe to limit the growth of drugs bills. Investment in the United Kingdom pharmaceutical industry and decisions on product development depend on a number of factors in both the United Kingdom and other key pharmaceutical markets. Therefore, it is not possible to identify separately the impact of the proposed extension to the selected list scheme from that of other changes in both the United Kingdom and other countries.

In the same area are the arrangements for controlling, indirectly, the price of branded prescription drugs sold to the NHS through the pharmaceutical price regulation scheme. This is a voluntary agreement, negotiated between the Department of Health and the pharmaceutical industry, which regulates the profits that companies may make from the sale of drugs to the NHS.

The present scheme, which was agreed in 1986, is now being renegotiated with the ABPI. The scheme has been successful in its purpose of making drugs available to the NHS at reasonable prices while encouraging the development of a strong and innovative pharmaceutical industry.

It is essential that any new agreement continues to achieve those objectives. The scheme is voluntary, of course, and depends on the co-operation of the industry. The discussions taking place between the Department and industry representatives involve a recognition by both sides that the rate of growth in the drugs bill needs to be limited, and that constraint in the pricing of new drugs has a role to play, along with the other initiatives that I have mentioned.

As well as ensuring that we are not paying more than we need for an effective range of modern medicines, we are also taking action to encourage better prescribing. Let me stress the word "better". We are seeking to improve the care of patients, not just to cut costs, although, of course, cutting out wasteful and unnecessary prescribing is part of improving prescribing. I have time to refer only briefly to the steps that we are taking.

First, all GPs are given details of their prescribing costs every month through prescribing analyses and cost data—PACT. Secondly, professional advice about prescribing is now available in all family service authorities through the medical advisers and, increasingly, also through pharmaceutical advisers. Those advisers are the NHS's main resource in the field, working through the regular face-to-face visits to GPs. In addition, all FHSAs, regions, and my Department now have electronic access to PACT data on a monthly basis. We now have the means to analyse variation from the GP across regions. Understanding what is happening is clearly vital if we are to target further initiatives to improve prescribing.

Finally, there are the fund-holding and indicative prescribing schemes. We have just introduced a new drug budget system for the indicative prescribing and fund holding schemes. The new system retains budget setting at practice level based on identified need, but it also ensures that budgets, when aggregated, are set with regard to the estimated requirements for prescribing at regional and national level.

GP fund holders have a direct interest in improving the cost effectiveness of prescribing. They can retain any savings on drugs to reduce the demand on the hospital referral element of their budget. That is not just theory. In 1991–92, fund holders' prescribing costs increased by an average of 3 per cent. less than those of other GPs—and without any loss of quality. And that was starting from a baseline cost 10 per cent. lower than other GPs. All the indications are that that trend will be repeated this year.

Up to now, however, the majority of GPs have had no direct incentive to prescribe economically, because there has been no visible and direct reward for the patients in their practices. On 11 March, my hon. Friend the Minister for Health invited regions to submit proposals for incentive schemes for GPs who prescribe economically. Those schemes will have to be agreed with the Department. If acceptable, they will operate on a pilot basis from 1 April. GPs whose prescribing costs fall below a target level will be able to retain part of their savings to spend on improving services for their patients.

I echo my hon. Friend's remarks and I want to acknowledge and to applaud the major contribution that the pharmaceutical industry makes to the economy of the country. The pharmaceutical industry in Britain has a record of which it can be proud, in terms of production, exports, research and employment. Although Britain is only 3 per cent. of the world market, our industry provides some 6 per cent. of the world production, making us the sixth largest producer. In 1991, the industry in Britain had record exports of £2·5 billion, and a record balance of trade surplus of £1·2 billion. Much of that success is due to a record on innovation which is second to none, thanks to the quality of its research efforts. I understand that investment in R and D reached £1·2 billion in 1991, which represents some 8 per cent. of the world R and D expenditure. The industry employs more than 87,000 people in the United Kingdom, of which some 18,000 are scientists and technicians working on medical research and development.

We are all well aware of that fine record, and we do not wish to cause any harm, but we must ensure that the money that is spent on medicines is well spent. I have tried to show that we are addressing this need in a balanced way through a number of different schemes—striving both to ensure that we are not paying more than we need to or more than is reasonable for an effective range of modern medicines, and to encourage better prescribing. I have also tried to show that we are not deaf to the legitimate needs and concerns of the industry, and that we will take those into account as we take our policies forward.

Question put and agreed to.

Adjourned accordingly at eighteen minutes to One o'clock.