Health Service Medical Supplies (Costs) Act 2017

Policy background

Sections relating to remuneration for persons providing special medicinal products

9. In England and Wales, reimbursement prices for community pharmacies for most commonly prescribed special medicinal products are listed in the Drug Tariff. In England, reimbursement prices are based on sales and volume data, which the Department currently obtains from specials manufacturers under a voluntary arrangement. A special medicinal product is manufactured to meet the specific needs of a specific patient. The unique nature of these medicines and their manufacturing arrangements mean that different approaches for special medicinal products need be considered than those used for other types of medicines to ensure that the prices paid by the NHS represent value for money.
10. The Act amends the NHS Act 2006 and the NHS (Wales) Act to enable the Secretary of State and Welsh Ministers to make regulations to establish different payment arrangements for special medicinal products compared to other products. These regulations could include how remuneration should be calculated, for example by means of quotes, and the circumstances in which remuneration would not be provided, for example where special medicinal products are centrally procured.

Sections relating to the control of the cost of health service medicines

11. The Secretary of State currently primarily controls the cost of most branded health service medicines by way of a voluntary scheme agreed with industry. The current voluntary scheme is the 2014 Pharmaceutical Price Regulation Scheme (PPRS). Companies that are members of the scheme make payments to ensure that spending on branded health service medicines stays at the agreed level.
12. The powers under the NHS Act 2006 allow the Secretary of State, after consultation with the appropriate industry body1, to make a statutory scheme for the purpose of limiting the prices of, or profits accruing from, the sales of health service medicines by companies that choose not to be members of the voluntary scheme.
13. Currently, manufacturers or suppliers of health service medicines can choose (primarily based on the nature of their business) to be controlled either by the voluntary scheme or the statutory scheme.

Voluntary scheme

14. There has been a succession of voluntary schemes agreed between the Secretary of State and the Association of the British Pharmaceutical Industry (ABPI) since the 1950s. The schemes are normally agreed on a five-year term.
15. The current PPRS was agreed in January 2014, and includes for the first time a payment mechanism requiring members of the scheme to pay a defined percentage of the value of their sales revenue from specified branded health service medicines to the Secretary of State, provided that the growth in health service expenditure on branded health service medicines exceeds a pre-agreed level set out in the scheme.
16. Section 261 of the NHS Act 2006 refers to the existence of voluntary schemes made between the Department of Health and industry for the purpose of limiting the prices which may be charged by any manufacturer or supplier to whom the scheme relates for the supply of any health service medicines or limiting the profits which may accrue to any manufacturer or supplier to whom the scheme relates in connection with the manufacture or supply of any health service medicines. Although the scheme itself is voluntary, section 261 provides the Secretary of State with specific statutory powers in relation to members of such voluntary schemes.

Statutory scheme

17. Sections 262 to 266 of the NHS Act 2006 provide the Secretary of State with the power, including by way of a statutory scheme, to limit the prices which may be charged by any manufacturer or supplier for the supply of any health service medicine, or to limit the profits which may accrue to any manufacturer or supplier in connection with the manufacture or supply of any health service medicines by way of regulations or directions.
18. The current statutory scheme is set out in regulations2 and applies to any manufacturer or supplier of branded health service medicines who is not a member of the voluntary scheme. The current statutory scheme operates through a cut in list price (i.e. the manufacturer’s published price).

Amendments to the NHS Act 2006

19. The Act amends the NHS Act 2006 to clarify that the Secretary of State can also make a statutory scheme for the purpose of requiring any manufacturer or supplier to whom the scheme applies to pay to the Secretary of State an amount calculated by reference to sales or estimated sales of any health service medicines.
20. Additionally, the Act amends the NHS Act 2006 to clarify that the powers relating to voluntary schemes are exercisable in relation to voluntary schemes whereby scheme members make payments based on their sales of health service medicines. The Act adds a new power to the NHS Act 2006 to enable the Secretary of State to require a voluntary scheme member to pay a sum due under that scheme. If the scheme member fails to pay, the existing provisions (in section 265 of the NHS Act 2006) would allow recovery through the courts. The amendment also makes clear that payments owed whilst the manufacturer or supplier was a member of the voluntary scheme may be recovered notwithstanding that a member of a voluntary scheme moves to the statutory scheme or vice versa.
21. Currently, provisions in the NHS Act 2006 state that regulations or directions made under sections 262 or 263 for the purposes of limiting prices of, or profits accrued from health service medicines cannot apply to members of a voluntary scheme. This is the case, even if the regulations or directions are directed at health service medicines manufactured or supplied by that scheme member which are not covered by the voluntary scheme. For example, the current PPRS covers branded health service medicines. However, a member of the PPRS may also manufacture unbranded health service medicines. The current provisions in the NHS Act 2006 prevent the Secretary of State from making regulations or directions to limit prices or profits that apply to a member of the PPRS, even if the regulations or directions are directed at the member’s unbranded medicines. The Act therefore amends the provisions of the NHS Act 2006, so that the Secretary of State can make directions or regulations under section 262 or 263 to limit the prices of, or profits relating to, health service medicines of a manufacturer or supplier in the voluntary scheme, as long as their health service medicine to which the directions or regulations relate is not covered by the voluntary scheme. The Secretary of State will continue to be able to exercise their power in relation to a supplier not in the voluntary scheme even where the health service medicine has already been subject to controls under the voluntary scheme by virtue of the manufacturer of the health service medicine being a member of the voluntary scheme.

Section relating to the control of cost of other medical supplies

22. Section 260 of the NHS Act 2006 provides the Secretary of State with the power to control the maximum price of medical supplies other than health service medicines. Section 7 of the Act amends sections 260, 265 and 278 so that the enforcement provisions at section 265 (which currently only apply to health service medicines) and the relevant territorial extent provisions at section 278 (which currently only extend the health service medicines provisions to the United Kingdom) also apply to the control of cost of other medical supplies required for the purposes of the health services in the United Kingdom.
23. The Act amends the NHS Act 2006 to provide that before making an order to control the maximum price of medical supplies the Secretary of State is required to consult industry representative bodies. A similar requirement is already in the NHS Act 2006 for the control of costs of health service medicines. The Act also amends the NHS Act 2006 to provide that the first order to control the maximum price of medical supplies would be subject to the affirmative procedure, so that both Houses of Parliament debate the order.

Sections relating to the provision and disclosure of information

24. The Act amends the NHS Act 2006 to provide for a single information gathering power in relation to health service products which will replace the existing statutory information gathering powers relating to the statutory and voluntary schemes, providing a clearer basis for collecting and using that information. The Act amends the NHS Act 2006 so that information can be shared with specified persons for specified defined purposes.
25. The Act amends the NHS Act 2006 to remove existing powers to request information under sections 260 to 264, and introduces a new section to the NHS Act 2006 to allow the Secretary of State to make, subject to certain limitations, regulations to require a person who manufactures, distributes or supplies health service medicines, medical supplies or other related products required for the purposes of the health services in the United Kingdom, to keep and supply information with regards to those products.
26. It is also possible for the Secretary of State to disclose that information to specified persons for specified purposes (see commentary on section 8 below).
27. The amendments to the NHS Act 2006 do not provide the Secretary of State with the power to request information from persons providing primary care services and pharmaceutical services in Wales, Scotland and Northern Ireland, where those persons are supplying products used or required for the purposes of the health services in their nation, and where those products are supplied under primary medical services or pharmaceutical services as part of their health services. This reflects the agreement between the Department and the Devolved Administrations that the Secretary of State collects information from wholesalers and manufacturers from across the UK and that each nation collects information from pharmacies and GP practices across their own territories.
28. The Act also amends the NHS (Wales) Act to allow Welsh Ministers to request information from pharmacists or GPs for Welsh purposes as specified in the Act (see commentary on section 9 below).