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Health Bill

moved Amendment No. 33:"Page 30, line 39, after ““applications”” insert ““(other than proposals based on price or discount)””" The noble Earl said: My Lords, Clause 35 sets out new provisions governing applications submitted to PCTs for the provision of pharmaceutical services. In Grand Committee, I raised serious concerns about this clause and, I am sorry to say, despite the Minister’s comments then and his subsequent letter to me, for which I thank him, those concerns substantially remain. The Minister has explained that the provisions in new subsection (2B) are intended to cover what one might term a ““tie break””, where two or more pharmacy applications are considered side by side and are regarded as equally meritorious in the context of the necessary and desirable test. In those circumstances, new subsection (2B) would allow a PCT to take into account a number of other factors, among which would be the availability and price of over-the-counter medicines and other products in each of the pharmacies competing for the approval. My chief worry—it is widely shared in the pharmacy profession—is that this additional criterion carries with it an inherent unfairness, an inherent ambiguity and considerable difficulties for effective monitoring and enforcement. The Minister was at pains to assure me that the price of OTC medicines was not the main driver of this clause but, rather, one of a number of variable factors that PCTs should consider when choosing between otherwise equal applications. I suggest to him that, in practice, that is not how the process is likely to work. The price of medicines is easy to set and easy to quantify. By contrast, what is referred to as the range of improvements to services will be difficult to define and harder to quantify. It is true that applicants are to be encouraged to think of innovative ways of providing new services. The trouble is that the more innovative the bids, the more difficult they will be to judge. Larger companies are therefore likely to find that promising a selection of cheaper medicines is much simpler than spending time thinking up new services. Price is therefore likely to become the dominant defining factor in a tie-break and, because of that, pharmacies will be induced into a downward spiral of price reductions that will affect their profits. If this is not price-fixing, it comes extremely close to it. If retail prices are deliberately manipulated downwards by the NHS, patients will ultimately pay for that. Reductions in profits from OTC sales will have to be recouped somehow or other. They will be recouped either by increasing the prices of non-OTC lines or lines not forming part of the range of improvements, or by reducing other services to patients. Pharmacists have always provided professional services to patients but, ultimately, pharmacy companies are businesses and not charities. Advice and testing, which to the patient may appear to be free, in reality all cost money. That is why the inclusion of the price of medicines in this clause looks set to be self-defeating—in two ways. It will be self-defeating in the bidding process because large price cuts will tend to trump innovative thinking, and it will be self-defeating later because, if those price cuts become a reality, corners will be cut in other areas that are bound to prove unwelcome. However, before we get even this far, we need to remind ourselves of something rather fundamental. The sale of OTC medicines by pharmacies is, and always has been, completely outside the scope of the NHS contract. The governing regulations do not refer to OTC medicines or to their price. The sale of these medicines and the price at which they are sold are matters that have always been determined by the marketplace. It is a private transaction in which the NHS bears none of the risks. For the NHS to attempt to manipulate a market in which it has no locus is, in my view, objectionable and wrong in principle. Aside from the principle, the practical difficulties for the NHS in its monitoring role will be considerable. I wonder whether the Department of Health fully appreciates the extent to which the pricing of OTC medicines varies, particularly for seasonal products. Supplies can vary from week to week, depending on factors such as the weather, promotions or factory constraints. Once a product is out of stock, it can be some time before it comes back into stock, as most products are produced in batches rather than in continuous production. Ranging and pricing decisions within pharmacies are complex and change continually. Against that background, how does one monitor whether a pharmacy is adhering to the terms of its original bid? How is performance to be measured? PCTs will struggle to keep up with what is happening. If they do not keep up, one has to ask the point of such a regulation. Indeed, to make any fist of monitoring pricing agreements, PCTs will have to contact pharmacies at least monthly for the relevant information. At the moment, the monitoring of pharmacies by PCTs relies on annual visits, so the regulatory burden on both parties looks set to increase quite a lot. Alternatively, we may have a situation in which lower prices are offered only at the time of the annual PCT visit. Pharmacies know when a visit is to be undertaken because PCTs have to give notice. I wonder how much of that has been thought through. The detail of how monitoring and enforcement might work is distinctly lacking. When one tries to think it through, it is hard to know how it could be accomplished fairly. If unfairness is perceived, one thing is certain: those who have lost out in the bidding process will challenge PCTs, very probably through the courts. No such difficulties arise when only the provision of services determines the outcome of a tie-break. Pharmacies are not in the least frightened of having to bid on the basis of enhanced services. Not only is that a more reasonable basis for a decision, because it relates to the pharmacy contract, but it is also much easier to monitor. Either a service is being provided to the agreed standard or it is not. The Minister has argued that smaller providers will not be significantly disadvantaged by the provision, but I beg to differ. The smaller providers will find it hard to compete on price. Yes, they may have access to wholesale buying groups, but those are not the same as vertically integrated supplier chains, where costs can be more easily stripped out. Yet we all know that usually it is the smaller suppliers who have the kind of local knowledge that may serve to identify the right range of pharmacy services for a local area and they could well end up doing a better job than some of the bigger providers. I have not been convinced by the rather generalised reasoning deployed by the Minister up to now. I do not feel that he has addressed the concerns that I outlined in Grand Committee or just now. No one argues against the need for a better way to resolve tie-breaks than at the moment and I do not believe anyone seriously argues that a focus on enhanced services is not a reasonable way to proceed. I urge the Minister to rethink the wisdom of allowing medicines’ prices to enter the equation. In my view, that is not the right way to go. I beg to move.