Statutory scheme to control the cost of branded health service medicines: Written statement

My hon. Friend the Parliamentary Under-Secretary of State for Health (Lord O’Shaughnessy) has made the following statement:

This statement is to update the House that Regulations were laid before Parliament on 9 March 2018 to revise the statutory scheme to control the cost of branded health service medicines. The changes will come into force on 1 April 2018, and are estimated to result in £33m of savings in the first year. I have also published a response to the consultation and impact assessment which are attached.

Last year the Government consulted on reforms to the statutory scheme to better align the way the statutory scheme and voluntary 2014 Pharmaceutical Price Regulation Scheme work, and move towards a more level playing field between companies in the two schemes.

Reforming the statutory scheme will also enable the Department to put more effective pricing and enforcement controls in place, whilst increasing the levels of savings of health service medicines covered by the scheme.

Having considered the responses to the consultation, the Government is making Regulations for a statutory scheme requiring manufacturers and suppliers that come within the scope of the scheme’s provisions to pay the Department of Health and Social Care 7.8% of their net sales income received from the supply of health service medicines. A record of the maximum prices that may be charged for the supply of those health service medicines will be published by the Department. The operation of the statutory scheme will be supported by the requirement for manufacturers and suppliers to record and keep information and to provide that information in accordance with the Regulations. Payments received through the scheme will be passed to the NHS in England, with apportionment to Scotland, Wales and Northern Ireland.

After consideration, the Government has amended its approach to the classification of companies in the scope of the scheme, to the exemptions from the payments, and has made a number of minor and technical amendments to ensure the new scheme operates as effectively as possible with the minimum administrative burden to companies.

The Regulations will apply to the whole of the UK. Medicines pricing is a reserved area with respect to Wales and Scotland and devolved with respect to Northern Ireland. A legislative consent motion (LCM) was sought from the Northern Ireland Assembly during the passage of the Health Service Medical Supplies (Costs) Act 2017 (“the 2017 Act”). However, the Assembly was dissolved before the motion itself could be passed. With that in mind, the 2017 Act provided for separate commencement in Northern Ireland, on the basis that it was hoped that a restored executive could complete the LCM process before the provisions were commenced. In the light of the ongoing absence of an Executive, however, a point has been reached whereby a decision on whether to commence the provisions cannot be further deferred. The UK Government has therefore decided to proceed with UK-wide implementation. This decision has not been reached lightly. Yet it is clear that not commencing the provision UK-wide would introduce substantial burdens on companies, and further delay would lead to fewer savings being made by health services across the UK. Given those factors, and noting the support the measures commanded from the previous Executive (with a Legislative Consent Motion laid in the Assembly albeit not passed), I assess that now is the right time to move forward with commencement.

I recognise that I made a commitment to the House during passage of the primary legislation that the provisions would not be commenced in Northern Ireland without an LCM in place. However, there has been no Assembly in place to provide an LCM over a period of more than 13 months and, in its absence, there is a clear public interest in seeing these measures proceed, not least because the measures will generate savings of £1.5m for Northern Ireland in the first year. It is on that basis that I consider we should move forward. When an Executive has been restored I will write to the Northern Ireland Health Minister to confirm that they are content for the commenced 2017 Act to remain in place. I will also continue to consider carefully any further representations from stakeholders in Northern Ireland, while recognising the broad support that these measures have commanded previously.