Corporate report

Annual Review of the Health Service Products (Provision and Disclosure of Information) Regulations 2018 and the Health Service Medicines (Price Control Penalties and Price Control Appeals Amendment) Regulations 2018

Published 12 August 2022

This was published under the 2019 to 2022 Johnson Conservative government

1. Review summary

This is the annual review of The Health Service Products (Provision and Disclosure of Information) Regulations 2018 (the ‘information regulations’) and The Health Service Medicines (Price Control Penalties and Price Control Appeals Amendment) Regulations 2018 (the ‘penalties regulations’). As part of the annual review for 2022, the period for 2021 is also covered in this review.

This review considers the extent to which the regulations have achieved their objectives from July 2020 to June 2022. In summary, we find that both the information regulations and penalties regulations have continued to achieve their objectives and that the objectives remain appropriate.

2. The Health Service Products (Provision and Disclosure of Information) Regulations 2018

2.1 Aim and scope of the review

Regulation 36 of the information regulations requires the Secretary of State to carry out an annual review of the information regulations and publish a report with the conclusion of the review which must:

• set out the objectives intended to be achieved by the information regulations
• assess the extent to which the objectives are being achieved
• assess whether those objectives remain appropriate
• if the objectives remain appropriate, assess the extent to which objectives could be achieved in another way which involves less onerous regulatory provisions

2.2 Overview of the regulations

The Health Service Medical Supplies (Costs) Act 2017 amended the National Health Service Act 2006 to give the Secretary of State the power to make regulations requiring anyone manufacturing, distributing or supplying UK health service products to record, keep and provide information about those products. Such information may only be collected for the purpose of enabling or facilitating:

• the remuneration and/or payment of NHS chemists and primary medical service providers in, or in any part of, the UK
• the availability of products in, or in any part of, the UK and the assessment of whether the products represent value for money
• the cost control powers in the 2006 act

The Health Service Products (Provision and Disclosure of Information) Regulations 2018 entered into force on 1 July 2018. The main purpose of the information regulations is to require persons who manufacture, distribute or supply any UK health service products ^{[footnote 1]} to record, keep and provide information to the Secretary of State about the purchase, supply, price and availability of those products. They also require marketing authorisation holders to inform the Secretary of State about any shortages and discontinuations of medicines.

2.3 Review methodology

To review the effectiveness of the information regulations we have analysed, evaluated and assessed what we consider to be the best data relating to information collection from the period July 2020 to June 2022.

The Department of Health and Social Care (the department) receives and collects the information from relevant manufacturers, suppliers, wholesalers, pursuant to the information regulations. The main data available is the returns through:

• the quarterly information collection of generic medicines and special medicinal products through NHS Digital
• data on concessionary prices is provided by suppliers to the NHS Business Services Authority
• information on medicine shortages and discontinued medicines from the DHSC Medicines Supply team

2.4 Assessment against the policy objectives

As noted above, the information regulations require persons who manufacture, distribute or supply any UK health service products to record, keep and provide information to the Secretary of State about the purchase, supply, price or availability of those products. They also require marketing authorisation holders to inform the Secretary of State about any shortages and discontinuations of medicines. The assessment below outlines how the policy objectives are being met by the information regulations.

Objective 1: to improve the robustness of the community pharmacy reimbursement arrangements by requiring all suppliers to provide quarterly sales and purchase information

The regulations require all manufacturers, importers and wholesalers of unbranded generic medicines (part 2 of the information regulations) and special medicinal products (part 3 of the information regulations) to provide the department with information about their sales and/or purchases of such medicines every quarter.

These requirements replaced voluntary agreements with industry: scheme M (with manufacturers of generic medicines), scheme W (with wholesalers of generic medicines) and the ‘memorandum of understanding (MoU) on specials’ with manufacturers of specials. However, there was no provision to collect information from manufacturers and wholesalers of unbranded generic medicines and special medicinal products who had not signed up to voluntary arrangements. Further, the voluntary arrangements restricted very tightly what the information could be used for and there was limited action that could be taken if those in the voluntary arrangements did not provide the information requested. The information regulations sought to address these limitations.

The information regulations provided for transitional provisions for UK producers who provided information on a voluntary basis under scheme M, scheme W and the MoU allowing them to provide information under the voluntary scheme until the relevant scheme ends. Scheme W ended on 31 December 2018, scheme M ended on 30 June 2019 and the MoU ended on 31 July 2019.

Pharmacy contractors ^{[footnote 2]} and primary medical care services providers ^{[footnote 3]} are reimbursed for the costs of every medicine they dispense. Reimbursement prices are published in the monthly drug tariff. There are 3 drug tariffs in the UK: one for England and Wales (made by the Secretary of State and the Welsh government), and one each for Scotland and Northern Ireland. All 3 are constructed in a similar way, drawing where appropriate on the information provided under the information regulations.

In addition, the department has used the regulations to collect data from suppliers about products whose reimbursement price is currently not based on supplier data to consider if it may be appropriate to do so. This data has therefore underpinned some of the proposals set out in the department’s consultation on reimbursement reforms published at the end of 2019. The information collected under the information regulations on sales and purchase information for medicines allows the department to model improvements in the reimbursement arrangements for these drugs.

The data collected by the department has improved since the information regulations entered into force.

For generic medicines:

• the number of manufacturers that provide quarterly information has increased from the beginning of the collection and appears to be levelling off (18 in 2018, 53 in 2019, 68 in 2020 and 68 in 2021) and the number of wholesalers also increased and appears to be stable (7 in 2018, 65 in 2019, 78 in 2020, and 72 in 2021)

• the number of generic medicines included in the quarterly collection increased from 1,046 before the information regulations came into force to 2,732 in 2019, 3,259 in 2020, 3,394 in 2021

• market coverage of manufacturer’s quarterly information for 2020 had increased by approximately 112% under the information regulations but had decreased to 101 percent in 2021 (this is not unexpected as the market was potentially over-ordering in 2020 in response to COVID-19). The market coverage had increased by about 70% of dispensed volume under the voluntary arrangements in 2018 (before the information regulations were introduced)

• market coverage of wholesaler’s quarterly information has increased by about 107% in 2020 under the information regulations but had decreased to 102% (this is not unexpected as the market was potentially over ordering in 2020, in response to COVID-19). The market coverage under the voluntary arrangements had increased by about 60% under the voluntary arrangements in 2018 (before the information regulations were introduced)

For special medicinal products:

• the number of manufacturers that provide information has increased 4-fold (from 7 in 2018 (under the voluntary scheme), to 31 in 2019, 30 in 2020 and 29 in 2021) and wholesalers are now also providing information about these products (from zero in 2018 to 31 in 2019, 28 in 2020, and 25 in 2021)

• the number of special medicinal products included in the collection has increased from 468 products in 2018 (under the voluntary scheme), 497 in 2019, 519 in 2020, and 490 in 2021 (including tablets and capsules)

Work is ongoing to ensure that all manufacturers, importers and wholesalers, who should provide information, do so. While the numbers providing information rose considerably as the department moved from voluntary arrangements to statutory arrangements there has recently been a levelling off, and in some cases a slight reduction in the number of companies providing information. This is not surprising, as over the last 2 years companies may have had reduced workforce due to self-isolation and may have had staff working from home unable to access databases. Further, companies do leave the market or may have amalgamated with another company. The department does not consider the levelling off, or slight reduction in the numbers of companies providing information as significant.

As more information is obtained from more producers, the information in the drug tariff becomes more representative of the whole market. Currently, only those drugs classed in category M (and concessionary prices, see below) are reimbursed on a calculation using the average selling price derived from this information. The department consulted in 2019 on a number of proposals, some of which intend to base more reimbursement prices upon actual sales and purchase data. The consultation response was published in November 2021. The department has now moved to the second phase of the consultation, namely negotiations with the Pharmaceutical Services Negotiating Committee (PSNC), with a view to implement the reforms.

The information obtained under the information regulations helps the department achieve its policy objective to improve the robustness of the community pharmacy reimbursement arrangements by requiring all manufacturers, importers and wholesalers to provide information. The department relies on this information to inform the community pharmacy reimbursement arrangements and, as part of the consultation and discussions with the PSNC outlined above, proposes that even more reimbursement prices are based on this information, the policy objective therefore remains appropriate, and the department may need to increase the regulatory provisions to allow the information to be used for setting reimbursement prices of more products.

Further, the department is currently requesting information under section 264A of the 2006 act to obtain prices from manufacturers, importers and wholesalers in Northern Ireland (NI) to consider whether the reimbursement arrangements in NI are fair. The department may need to do this on a regular basis and therefore there may be a need for further provisions in the information regulations.

When community pharmacies cannot source a medicine at or below the reimbursement price for that medicine as set out in the drug tariff, the department can grant a concessionary price at the request of the PSNC. The information regulations require manufacturers, importers and wholesalers, within 2 working days, to provide volume and price information to support the process for setting concessionary prices in England (regulation 27).

Before the information regulations entered into force, this information was obtained on a voluntary basis from a small number of companies. Currently, the department contact approximately 130 companies each month with a request for volume and price information. Work is ongoing to ensure that the department requests information from all companies that supply the market with the products whose information the department needs. Between March 2020 and February 2022, information obtained using the information regulations was used to set concessionary prices for 1,270 medicines.

Volume and price information from more manufacturers, importers and wholesalers has made the department’s concessionary price setting process more robust. Concessionary prices that better reflect the market helps to ensure that community pharmacies are paid fairly, if prices suddenly go up. The information obtained under the information regulations helps the department achieve its policy objective to improve the robustness and timeliness of the concessionary price setting process by requiring all manufacturers, importers and wholesalers to provide information within 2 working days. There is a continued need for the department to set concessionary prices, so the policy objective remains appropriate.

A new data collection portal has been established by the NHS Business Services Authority (NHS BSA). The intention is that this will replace the portal operated by NHS Digital (NHS D). In order to be able to apply penalties on suppliers who do not supply the required information, the information regulations will need to be amended to reflect the new arrangement. The requirement for all manufacturers, importers and wholesalers to provide accurate and complete information under the information regulations helps to improve the robustness of reimbursement arrangements, and accuracy of reimbursement prices.

In summary, the information regulations provide the department with the following benefits:

• for quarterly returns for generics and specials and concessionary prices data, the information regulations ensure that the department now receives data from the whole supply chain and possess the leverage to ensure that data submissions are received in a timely manner

• for Northern Ireland, the information regulations enable the department to request information on prices for Northern Ireland to consider whether NI reimbursement arrangements are fair – this may be needed on an ongoing basis

• for the consultation on reimbursement reform, whereas previously the information received from manufacturers could only be used for setting reimbursement prices, the information regulations mean that officials can use the information to consider improvements and to ensure that reimbursement prices are robust and fair. In light of implementation of the reforms more data may be needed on an on-going basis

Objective 2: to require information to be kept about sales and purchases of medicines, appliance and borderline substances

The information regulations require all manufacturers, importers and wholesalers, and anyone supplying to patients other than by sale, to record and keep information about sales and/or purchases of medicines, appliances and borderline substances used by the National Health Service in England, Wales, Scotland or Northern Ireland (part 4 of the information regulations). The period for which the information must be kept is 4 years. The department can ask for this information to be provided for any of the statutory purposes in section 264A of the 2006 act (statutory purpose).

Parts 2 and 3 of the information regulations require manufacturers, importers and wholesalers to provide information every quarter about any generic medicine or special medicinal product already listed with a reimbursement price in the drug tariff. In the same quarterly collection, information has been requested under part 4 about generic medicines and special medicinal products that are not yet listed with a reimbursement price in the drug tariff but that are being considered for listing.

A comparison with the situation before the information regulations entered into force cannot be made as the department did not previously have the power to require companies to provide this information.

The information obtained under the information regulations helps the department achieve its policy objective to improve the robustness of the community pharmacy reimbursement arrangements by requiring all manufacturers, importers and wholesalers to provide information about generic medicines and special medicinal products not already listed with a reimbursement price in the drug tariff. More recently, specifically to consider Northern Ireland. The department relies on this information to inform the community pharmacy reimbursement arrangements and the policy objective therefore remains appropriate.

Objective 3: to enable the Secretary of State to request information about costs incurred with the manufacture or distribution of medicines and appliances

The information regulations require manufacturers, importers and wholesalers to provide information on the costs incurred in connection with the manufacture and distribution of health service products (part 5 of the information regulations). The information requested is information that a UK producer can reasonably be expected to record and keep for the purpose of understanding their own relevant costs. Where this information is in connection with a particular presentation of a medicine or appliance (as opposed to overall costs) an information notice must be issued requesting that information.

The notice must state the statutory purpose for which the information is requested, and a producer can appeal such a notice. An information notice would be used, for example, if the Secretary of State investigated a potentially unreasonably high price of a generic medicine and would like to understand whether the cost of manufacturing that medicine bears any relation to the price that it is sold at.

To date, the department has not considered it necessary to request information. However, because there are, and it is anticipated there will continue to be, situations where the cost of a product has caused concern, it remains appropriate for the provision to be retained. This will enable the department to understand the costs of manufacturing and distribution of a product should it wish to consider utilising its price limiting powers for products not already covered by a voluntary scheme.

Objective 4: to support the department’s management of supply issues by requiring marketing authorisation holders to provide information on discontinuation and anticipated supply shortages

The information regulations require manufacturers or marketing authorisation holders to notify the department of their plans to discontinue the manufacture of any health service medicine and of any anticipated supply shortages of health service medicines (part 6 of the information regulations). This legal requirement replaced voluntary guidelines with the industry under which the department estimated that only about half of all supply shortages were notified. This requirement entered into force on 1 January 2019 and supporting guidance for industry has been published. The department can also require manufacturers, importers and wholesalers to provide information about available volumes when there is a supply shortage. This has been more important than ever as the UK’s exit from the EU and the COVID-19 pandemic have both tested the resilience of supply chains

A development in the way the regulations are implemented is the Discontinuations and Shortages (DaSH) Portal. It was put in place in October 2020 to improve the process by which marketing authorisation holders of relevant products notify DHSC of potential shortages and discontinuations which may affect the supply of their medicines marketed in the UK. By March 2022 around 1,700 shortages and 1,500 discontinuations had been reported via the portal, allowing the department to take mitigating action.

The introduction of the information regulations has increased both the quality and quantity of information provided on supply shortages and discontinuations. This supports the department in its role of managing supply issues and mitigating the impact on patients. Most supply issues do not have an impact on patients because mitigation measures are put in place by the department. More information, and more timely information, means that the department can put these timely measures in place to ensure that patients are not impacted or if that is not possible, to minimise the impact on patients. As such, the information obtained under the information regulations helps the department achieve its policy objective to have better information to support its work to manage supply shortages and mitigate the impact on patients. There is an ongoing need for managing supply shortages and therefore the policy objective remains appropriate.

2.5 The extent to which the objectives could be achieved with less regulation

The Health Service Medical Supplies (Costs) Act 2017 introduced a power into the 2006 act for the Secretary of State to make regulations to require the supply chain to record and provide information for specific purposes:

• the remuneration and/or payment of NHS chemists and primary medical service providers in, or in any part of, the UK
• the availability of products in, or in any part of, the UK and the assessment of whether the products represent value for money

The information regulations introduced a range of statutory duties on suppliers to record and provide information, either upon request or routinely. The department considers that the information regulations are proportionate and that the objectives could not currently be achieved with less onerous regulatory provisions. Before the powers in the 2006 act were brought forward:

• voluntary arrangements were in place and only applied to a limited number of companies that had signed up to them
• there was a restriction on the use of the information to informing reimbursement prices and shortages

The department did not get data from all of the market, so reimbursement prices were less robust, and the department had no sanctions or leverage if companies stopped or were late providing data, this left the reimbursement price setting arrangements vulnerable and dependant on suppliers’ goodwill. The same applied to suppliers informing the department of shortages or discontinuation – it relied on goodwill.

The information regulations are necessary and proportionate in helping ensure that information is obtained from all relevant companies and therefore more companies than was the case under the voluntary arrangements and in a timely way. The outcome is more representative of the market and more resilience improvement to the community pharmacy reimbursement arrangements including the concessionary price setting process and the department’s capability to manage supply shortages and mitigate the impact on patients.

The information regulations have also enabled us to obtain ad hoc data to consider improvements to the reimbursement arrangements. The voluntary arrangements only allowed a very narrow use of the data which would not have included using it to model new proposals. Should the department progress some of those proposals the department may need to consider expanding the data routinely collected under the information regulations to support the new arrangements.

The department continues to regularly review whether the information regulations remain fit for purpose and are supporting us in meeting our policy objectives; as part of that the department considers whether they can be reduced or if there is a need for them to be expanded to capture additional data. As identified above, it is likely that in the near future the department may look to expand the provisions. If changes were to be identified, consultation with stakeholders on significant proposals will take place.

3. The Health Service Medicines (Price Control Penalties and Price Control Appeals Amendment) Regulations 2018

3.1 Aim and scope of the review

Regulation 6 of the Health Service Medicines (Price Control Penalties and Price Control Appeals Amendment) Regulations 2018 (the Penalties Regulations) requires the Secretary of State to carry out an annual review of the regulations and publish a report with the conclusion of the review, which must:

• set out the objectives intended to be achieved by the penalties regulations
• assess the extent to which these objectives are achieved
• assess whether those objectives remain appropriate and, if so, the extent to which they could be achieved with a system that imposes less regulation

3.2 Overview of the penalties regulations

The penalties regulations apply when the Secretary of State uses powers under section 262(1)(a) of the 2006 act to limit prices of health service medicines.

The penalties regulations make a manufacturer or supplier liable to the payment of a penalty where that manufacturer or supplier charges a higher price than the limit specified by the Secretary of State.

The penalties regulations also amend the Health Service Medicines (Price Control Appeals Regulations 2000 (‘the Appeals Regulations’). The appeals regulations make provision for the appeals process where a manufacturer, supplier or, where relevant, other UK producer of health service medicines or health service products has a right of appeal in relation to an enforcement decision made by the Secretary of State or any other person. The penalties regulations amend the appeals regulations to remove reference to the Council of Tribunals, which no longer exists.

3.3 Review methodology

No price control determinations have been made by the Secretary of State pursuant to the penalties regulations in the period July 2020 to June 2022. Therefore, this review focuses on whether the penalties regulations remain appropriate from a policy perspective.

3.4 Assessment against the policy objectives

The objectives intended to be achieved by the regulations, the extent to which they are being achieved and their continued appropriateness

The penalties regulations entered into force on 11 April 2018. The policy objectives of the penalties regulations are set out in section 7 (policy background) of the explanatory memorandum which accompanied the penalties regulations. This section summarises each objective, assesses the extent to which each objective has been achieved and whether the objective remains appropriate.

The main objective of the penalties regulations was to ensure the Secretary of State can issue penalties where a manufacturer or supplier charges in excess of the limit specified in a direction made under section 262(1)(a) of the 2006 act. In relation to this objective, the penalties regulations also specified the level of penalty and provided a right of appeal against any penalty notice issued. Separately, the penalties regulations updated some of the references in the Health Service Medicines (Price Control Appeals) Regulations 2000.

Under section 262(1)(a) of the 2006 act the Secretary of State can limit the price of any health service medicine that is not covered by the voluntary scheme for branded medicines pricing and access. While no price control determinations have been made there are still situations where the cost of a product has caused concern. For example, there may be instances when a product’s price considerably increases with no obvious justification. It therefore remains appropriate for the provision under section 262(1)(a) of the 2006 act to be retained by the Secretary of State, should this price limiting power be used going forward.

The Health Service Products (Pricing, Cost Control and Information) Appeals Tribunal has been set up to hear appeals from companies against the enforcement of any direction under section 262(1)(a) of the 2006 act that limits the price of a health service medicine. Further to that the department is currently considering what additional operational guidance would be helpful to support the process.

3.5 The extent to which objectives could be achieved with less regulation

As outlined above, the ability to issue penalties is essential for the enforcement of any direction under section 262(1)(a) of the 2006 act that limits the price of a health service medicine. Penalties cannot be issued without the power to do so in legislation. Therefore, the department considers that the penalties regulations are proportionate and that the objectives cannot be achieved with less regulation.

3.6 The review period

The information regulations and the penalties regulations currently commit to an annual review. However, as part of this review the department proposes a number of changes and developments for consideration. As part of this we will also consider whether the annual review is necessary and proportionate or could be less frequent.

3.7 Legal duties

A full and considered assessment of the Secretary of State’s legal duties with regards to the 2006 act, the public sector equality duty and the family test were undertaken before the regulations were laid. The department considers that those documents set out the implications and effects of those duties and continue to be relevant to this annual review.

4. Recommendations and conclusions

The review finds that both the information and penalties regulations have continued to achieve their objectives and that the objectives remain appropriate.

As highlighted in the review, the department will be considering the need to amend the provisions in the information regulations including whether the annual review is necessary and proportionate or could be less frequent. The department will consult with stakeholders on significant proposals.

References

1. UK health service products means any English health service products, Welsh health service products, Scottish health service products or Northern Ireland health service products used to any extent for the purposes of the health service and any other medical supplies, or other related products, required for the purposes of that health service ↩

2. Pharmacy contractor means a person providing pharmaceutical services or a person providing local pharmaceutical services from registered pharmacy premises in the area for which the Local Pharmacy Committee (LPC) is formed ↩

3. Primary care services provide the first point of contact in the healthcare system, acting as the ‘front door’ of the NHS. Primary care service providers include general practice, community pharmacy, dental and optometry (eye health) services ↩