Prevention of Trade Diversion (Key Medicines) (EU Exit) Regulations 2020

They do so by way of second brands, different branding in different markets, different packaging and often different formulations, which make it very difficult for people to try to divert product. Of course, product traceability is an essential part of pharmaceutical marketing, so one hopes it makes it increasingly difficult for these products to be diverted. Of course, some of these products can be counterfeited or falsified, and those who want to make illegal profits are perhaps more likely to go down that route than simply through diversion. Indeed, many of the supply chains we are talking about are becoming more secure; organisations such as the Global Fund and Gavi are making supply chains more secure over time.

So, the evaluation of the regulation back in 2015 did not arrive at the conclusion that the regulation had achieved much. However, it arrived at the view that the regulation was itself an important signal in relation to tiered pricing and the desirability of securing additional lower-cost, higher-volume pharmaceutical presence in developing country markets. It was also a backstop power. If there were not to be many of these other pharmaceutical industry initiatives that would enable these products to be available in those markets, this would create a mechanism by which that could be achieved. On the basis of that, the Commission renewed the regulation, and I think we are due to see the Commission come back to this, after a five-year period, in the latter part of 2021. So the first question is: will we review the regulation, or is our intention for the time being simply to carry on and wait and see whether the Commission proceeds with it?

I will make a general point. The Bill and Melinda Gates Foundation has done research and published its views, with which I very much agree. I take the view that value-based pricing is important for this country—I talked about this in our discussions on the Medicines and Medical Devices Bill. Actually, value-based tiered pricing in different markets across the world is an extremely important objective. It enables the expectation to be that pharmaceuticals are priced at different levels in different markets according, substantially, to the capacity to pay in those markets.

In the absence of that, we are at risk of what is called reference pricing, where everybody thinks that they should pay no more than other people. Very often, what they say is that they should not pay any more than the average; in fact, they all aim to be below the average. We know where such a policy leads us: to a downward spiral in pricing. The significance is that the present United States Administration have pursued the concept of reference pricing themselves, which creates perhaps the largest single threat to the long-term capacity of the pharmaceutical industry to undertake innovation and drug development. As such, as an objective, value-based tiered pricing is really important.

Finally, will my noble friend explain why it would not be simplest, from the industry’s point of view, to retain the EU logo? In this particular context—the one in Annexe V—this is not particularly indicative of the European Union; it is a winged staff with a set of stars around it. It would not hurt us too much to accept the same logo. To be clear: from the point of view of the desirability of making it possible for pharmaceutical companies to produce, the more we add cost and inconvenience, the less likely they are to use this regulation. Many do not do so as it is because of the additional bureaucracy involved, which is not great. We need to minimise the bureaucracy on this regulation.

Additionally, however, I was rather pleased to see that the Government will not try to reproduce the European Commission’s biannual reports. It is reasonable for them simply to review the products that have been put forward. Presumably, it will be the Government’s intention—I hope the Minister can confirm this—that the bureaucracy involved in putting a product into our regulation in parallel with the European Commission’s regulation will be kept to an absolute minimum because the benefits of having products in this regulation to the pharmaceutical companies can sometimes be quite modest. With that, I hope I have explained why I think that there is an interesting issue here, but I do not think it is completely obvious that we would keep this regulation for ever.

We are in negotiations with Ghana, Kenya, Cameroon and Côte d’Ivoire to try to roll over trade agreements but those have not yet been completed. Is there any reason to be concerned that the export of drugs to those four countries, which could reasonably be sold into neighbouring and even poorer countries, might be affected if those crucial trade agreements cannot be rolled over?

At the moment, the pharmaceutical companies which are exporters have to apply to the Secretary of State to have a product listed under the EU regulation. What consultation, if any, has there been with developing countries or experts on access to medicines to encourage pharmaceutical companies to seek listing under these regulations? What are the processes for encouraging pharmaceutical companies to provide drugs for the treatment of other diseases, such as cancers? Rates in developing countries are rising fast in these diseases, so this becomes more important.

Finally, what arrangements are being developed for tiered pricing of Covid vaccines? As the Covid pandemic spins out, access to those treatments and vaccines that will become available in the marketplace will clearly be important. We must do all that we can to ensure developing nations have access to the medicines they need at affordable prices, and all that we can to help protect millions of people to avoid illnesses that are eminently avoidable, right across the world. We therefore support these regulations.

The need for member states to report to the Commission is not relevant to the United Kingdom after withdrawal. This instrument provides for the Secretary of State to review from time to time whether a product listed as a tiered-price product fulfils the requirements of the retained regulation. How that will work is that information on imports and Border Force activity will be collected, reviewed and, where appropriate, made public by the Government as part of standard procedure. We will remain accountable to Parliament in relation to this in the usual way.

As I said, manufacturers or exporters of pharmaceutical products who wish their product to be added to the list have to submit an application to that effect. The noble Lord, Lord Bassam of Brighton, quite properly, and with a great deal of perception, asked what expertise there is in my department, the Department for International Trade, to handle applications in this area. I am happy to reassure the noble Lord that, although DIT has the role of approving these applications, we will work very closely with the Medicines and Healthcare products Regulatory Agency, the MHRA, which of course has the required expertise to assess any medicinal information provided by manufacturers or exporters, to ensure that all considerations are given appropriate weight.

My noble friend Lord Lansley asked about reporting under these regulations. As he noted—having, as always, done his homework very carefully—the last report was published in October 2015 by the European Union. As my noble friend said, the report said that although the net benefits of the scheme are small, what you might call the signalling impact of these regulations is very large, and it came to the conclusion that there was an economic justification for maintaining the regulation. My understanding is that the next report by the EU will be published towards the end of 2020. We await that to see whether it comes to a similar judgment.

The regulations set a requirement for the Secretary of State to publish a report before the end of the period of five years, beginning with the date on which this instrument comes into force. Because we are about to get a report from the European Union, I believe we will not be rushing to do a report of our own under these regulations. We will allow time to pass to assess how these regulations are used, and then we will bring a report forward in due course within the required timescale.

I hope that I have managed to answer all noble Lords’ questions in relation to this short debate, but of course if either of the noble Lords who spoke today wishes to approach me subsequently for any further information or clarification of the points that I have made, as always I will be delighted to do so. On that basis, I commend these regulations to the Committee.