J Enoch Powell 1966

The Pharmaceutical Service

From the early years of the National Health Service up to the present, a disproportionate amount of the public attention given to Medicine and Politics has centred around drugs. Drugs are an interesting special case that illustrates some of the side-effects of a state service provided free at the point of consumption. The case is special because in this instance, almost alone, the commitment undertaken by the state is literally ‘open-ended’. In this context, what is in question is the supply of drugs through the pharmaceutical service, that is, outside the hospitals. The supply in the hospital service, whether to in-patients or out-patients, represents only a small fraction— about one-tenth by value— of the supply through the pharmaceutical service. In any case, the cost of hospital drugs is an integral part of the budgets of hospital authorities and thus subject to the mutual pressures all items of those budgets exert upon one another. Moreover, the prescribing doctors are employees of the hospital authorities and not independent contractors, like the prescribing doctors in the general practitioner service.In the supply of drugs outside the hospitals the state confronts an array of parties all severally interested in maximising the value and volume of the drugs supplied. The general practitioner, on behalf of his patient, and sometimes in deference to his patient, is interested in prescribing the most efficacious medicines and is insulated from consideration of cost. The patient, equally insulated from consideration of cost, is naturally concerned to get the most efficacious medicines and is equally naturally disposed to gauge efficacy by cost and novelty— the two are closely connected. The manufacturers and patentees of the medicines are naturally concerned to sell as much as possible of the most expensive of these wares and to do so at as high a price as possible; and since price is not here performing its function of balancing supply and demand, there is no point— not at any rate a point fixed by economic considerations— beyond which increase of the price reduces the return. Finally, the distributors  and  dispensers  of medicines— the pharmacists— are naturally interested in maximising the value and volume of their turn-over.All these parties the state confronts without any direct power to protect itself by limiting demand; for the demand arises from that act of personal professional judgement when the individual general practitioner’s biro glides over the prescription pad. Since the state has renounced, or rather could never have secured, the power to control this act of judgement, it has to seek other, indirect forms of control by acting on the will of the various parties. This is not a situation, like the supply of medical care inside or outside the hospitals, where the state effectively controls the supply by declining, or delaying, to draw in more resources by an increase in its bids or its budgets and can thus force demand to ration itself in the ways already investigated (Chapter 4). The ‘budget’ for the pharmaceutical service is not a budget in the ordinary sense of so much and no more. It is only a hopeful guess at how much others are going to spend. The long and arduous story of drugs and the state is the story of the various attempts of the state to ‘get at’ the parties to the drug transaction in spite of its own lack of direct powers.

PRESCRIPTION CHARGES

The most notorious attempt, and perhaps the only one of which the man in the street was conscious, has been the prescription charge. In fact this is barely relevant to the subject at all. The charge was not a price; for it was always at a very low rate, which was also a flat rate, not varying with the cost of the drugs except to a slight extent after 1956, when the charge was made so much per item and not so much per prescription. The only effect on demand was therefore to eliminate the few drugs or the like that could be bought for an even smaller sum and, possibly, to reduce the number of prescriptions with numerous items issued to persons of small means who were nevertheless not poor enough, or who did not bother, to obtain the refund always available through the National Assistance Board.

This is the reason why control or limitation of the drug bill was never officially professed as the justification for the charge after the very early months of its proposal by Earl Attlee’s government in autumn 1949 when Aneurin Bevan used his famous phrase about the ‘cascades of medicine pouring down British throats’. Officially, the charge was treated purely as a small levy that brought in a useful sum towards the general financing of the service without deterring anyone from seeking or obtaining the service they needed. This was a logical contrast with the charges for dental treatment, dentures and spectacles, which were substantial and (except for the treatment) related to the actual cost and which therefore could be, and were, represented as not only providing a revenue but also a means of rationing demand so that priority could be given to selected types of patient, such as the young.

The great factor in the drug bill was not the number of items prescribed, on which the charge might marginally bite, but the growth of expensive drugs, reflected in the increasing average cost per item. In so far as the charge did affect demand, it might thus be regarded as slightly controlling the demand for frivolous consultation of the general practitioner designed to obtain ‘a bottle of something’ or to get some standard article of use gratis. This is the reason for the volte-face of the British Medical Association which, after passing resolutions against the charge year after year from its inception, switched over in 1963, when abolition became a possibility of practical politics, and condemned abolition instead. Anxiety to ensure that nothing militated against demand for doctors’ services had been replaced by anxiety to mitigate the effects of excessive demand.

It may be wondered why no attempt was made to raise the charge further or even to use it as a price, rather in the manner of dental and optical charges. In fact, there is an esoteric reason, which only came to light in 1961 when the charge was doubled, why the flat-rate charge was bound to be very low. The higher such a charge is fixed, the more medicines it would be cheaper to purchase across the counter outside the National Health Service. Beyond a few of the simplest articles and remedies, however, these medicines, if not obtainable only on prescription, require to be indicated by way of prescription. The problem would therefore arise of a National Health Service prescription, which is an order given within the service, being in effect dispensed outside the service, which would raise the most complicated ethical, professional and administrative problems. On the other hand, if the charge were varied according to the cost of the item, it would run headlong into the accusation of ‘charging the sick’, which the dental and optical charges do not seriously raise, and it would be assumed, with some reason, that the expensiveness of the medicine bore some relation to the seriousness and acuteness of the condition for which it was prescribed.

INFLUENCING THE PRESCRIBER

The state, in short, has drawn blank in the attempt, so far as it was ever seriously made, to restrain demand from the patient. Meanwhile, enormous effort in total has been lavished on the attempt to influence the prescriber. Some actual powers were theoretically available, in that wasteful or excessive prescribing is a breach of the general practitioner’s contract and can therefore be dealt with through the so-called disciplinary procedure. But the theory is remote from the reality. The difficulty of establishing the fact of excessive prescribing is enormous. For example, the pattern of prescribing varies bafflingly from one region to another, and a doctor whose prescriptions consistently show a higher cost per item than those of his colleagues in the same area is entitled to argue, and will sometimes be right in arguing, that this is because he is doing the job for which he is engaged more efficiently and more expertly than they. Certainly, the reverse proposition, that a low average cost per prescription is evidence in itself of good doctoring, is grotesque. In any case, except in the most flagrant and extreme instances, only professional judgement, and that in a matter where professional judgement can legitimately vary, could establish waste or excess, and to do so involves the specially repugnant process of one doctor or set of doctors sitting in judgement on another’s prescribing for his patients. The idea, therefore, that disciplinary powers could limit prescriber demand is foredoomed.

The alternative is to try to persuade the prescriber to behave voluntarily as it is supposed he would behave if he and his patient had to have regard to the cost of what he prescribes. The attempt shares the weakness of all policies that assume the fulfilment of an unfulfilled condition. In the pursuit of it doctors have been bombarded with information about the comparative cost of drugs, advised on equivalents or near-equivalents, urged to prefer non-proprietary to proprietary preparations where possible, coached and lectured on how to write a non-proprietary prescription instead of an easy, ear- and tongue-catching brand name, and stiffened to resist the visual and personal blandishments of the advertisers and salesmen of proprietary medicines— and all to little purpose.

The whole operation was swimming against the current of medicine. The two decades of the National Health Service happen to have coincided with a continuing revolution in the nature and presentation of drugs and in the practice of prescribing and dispensing. That revolution is too plainly allied with other contemporary trends to be regarded as perverse or as a by-product of the National Health Service. The relative increase in the cost of pharmaceuticals and the movement towards brand-prescribing are part and parcel of the scientific and technological changes of our time. The same trend is present where consideration of cost bears directly upon prescriber and patient. Indeed it is present outside the sphere of prescribed drugs altogether— the so-called ‘ethicals’, which are not advertised to the public. One of the most impressive pieces of evidence bearing on the attempt to influence prescribing in the National Health Service is that sales by value of ‘patent medicines’ or non-ethicals (in other words, expenditure on self-medication) followed precisely the same course as expenditure on ethicals by the National Health Service— even to the kink in the year 1957, when both lines halted simultaneously, only to resume their upward course together.

While attempting to operate on demand from the side of the patient and prescriber, the state also interested itself in the prices it had to pay to manufacturers and dispensers for the articles the prescribers forced it to buy.

THE PRICE OF DRUGS

The government still possesses statutory power to control the prices of drugs. It is a power about as useful, for practical purposes, as a hydrogen bomb in the Vietnam war. Maybe the knowledge that it exists exerts some influence on relations between the state and the firms whose pharmaceutical products the state buys but does not order; but I doubt it. Those relations are peculiar, if not unique. They are not, contrary to what the spokesmen of the drug firms often contend, the conditions of monopsony. The state is not the sole purchaser of the output of the pharmaceutical industry in the United Kingdom. On the contrary, only one-third of its output of pharmaceuticals is sold to the state through the National Health Services— not to mention the products for agriculture which amount to half the value of the pharmaceuticals. What is true is that the state pays for three-quarters of the ‘ethicals’ that the industry sells in the home market. As already explained, however, the state has only a tenuous and indirect influence on what and how much it buys, since in this field the payer (the state) is a separate person from the orderer (the prescribing doctor) and the consumer (the patient).

Such strength as the state possesses as a customer has nothing to do with consumer resistance. It is based on countervailing political fear. The state dare not take any measures that would expose it to the accusation of having driven or held off the market drugs by which patients would have benefited, nor could it ignore the allegation, however hard to substantiate, that its actions had made the discovery of new ‘wonder drugs’ less attractive or more difficult. On the other hand, the pharmaceutical firms cannot view with indifference the danger of being branded as profiteers; for in a country where making a profit is anyhow treated as prima facie calling for apology, to be represented as making large profits ‘out of the sick’ would be highly dangerous: nationalisation or some other almost equally unpleasant form of interference could not be ruled out if that cry once took hold. So, in the informal negotiations the Ministry and the drug manufacturers hold about the prices at which the latter’s products are sold on the ‘soft’ home market financed by the state, mutual fears are at work.

For six or seven years there has been in force a ‘voluntary price regulation scheme’ which provides a framework for these negotiations; but new preparations are outside its scope for four years if they are held to be ‘research-based’, and two if not; and it is in the early years of a new preparation that the manufacturer looks to make his killing. While the state may, by the use of countervailing fear, be able to get some concession to its position as provider of the home market, it is essentially the world market— both because pharmaceuticals are readily imported into this country and because the United Kingdom pharmaceutical industry depends so much upon its exports— that provides the effective test and limit of the prices the state has to pay in the National Health Service.

The test at least ensures that the state is not paying more at home than customers elsewhere are having to pay, where demand is only partially state-financed or not at all; but an enquiry into prices in the world market would have to consider the effects of patent law and the international agreements between patent-holders. This was accidentally illustrated by the curious episode of the importation of tetracycline and certain other patent-protected drugs for the hospital service from 1962 under the powers of section 46 of the Patents Act 1949.

At the end of 1961 a number of hospitals reported that they were being offered these drugs by importers at prices far below those ruling in this country. Investigation soon established that the quality was unexceptionable, but that the vendors were probably in breach of the Patents Act, since the drugs were being manufactured and sold without licence from the patentees. They came from Italy, which did not allow patents on drugs, and from certain iron curtain countries, which do not recognise Western patents at all. Under the Patents Act, however, patented articles can be manufactured and sold without licence from the patentee ‘for the service of the Crown’, subject to payment to the patentee of a royalty either agreed with him or, in default of agreement, determined by the Court. There was only one reasonable course open. That was to purchase under this power for the hospital service— it was not held that supply outside the hospitals through the pharmaceutical service was ‘for the service of the Crown’. This course was fair to all concerned. It ensured that the patentees would receive at the least whatever royalties the Court found to be just and that the public service would be assured of not having to pay more than was necessary.

In the event, the patentees contested the Minister’s right to act in this way right up to the House of Lords; but they never accepted the royalties that were offered or applied to the Court to assess them. The House of Lords gave its decision in the Minister’s favour in November 1964. When the current contracts with importers ran out in 1965, they were not renewed. It proved that the patentees and licencees offered what the Ministry describe as ‘acceptable prices’, and in fact no further contracts have been placed under the powers of the Patents Act.

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