B779 - Profit From NHS Purchased Pharmaceuticals Bill 2015 (Second Reading) Watch

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Birchington
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B779 - Profit From NHS Purchased Pharmaceuticals (Second Reading), TSR Conservative and Unionist Party
PROFIT FROM NHS PURCHASED PHARMACEUTICALS BILL 2015



A Bill to legislate a limit upon the percentage gross profit that can be generated from vital pharmaceuticals for purchase by the NHS.
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BE IT ENACTED by The Queen's most Excellent Majesty, by and with the advice and consent of the Commons in this present Parliament assembled, in accordance with the provisions of the Parliament Acts 1911 and 1949, and by the authority of the same, as follows:

1. DEFINITIONS
(1) 'Pharmaceutical Company' shall refer to any business registered in the United Kingdom under Companies House that produces any drug.
(2) 'Drug' shall refer to any chemical or biological substance that is intended to treat or prevent disease in humans.

2. RESTRICTIONS ON NET PROFIT PER UNIT
(1) All drugs produced for consumption by the NHS and all NHS subsidiaries therein shall be subject to a net profit limit of 150% per unit before research costs have been recuperated.
(2) After research costs have been recuperated, such drugs produced for consumption by the NHS and all NHS subsidiaries therein shall be subject to a net profit limit of 25% per unit.

3. ENFORCEMENT AND PUNISHMENT
(1) Any Pharmaceutical Company found to be in breech of this Act shall be subject to a fine, that shall be a percentage of the Company's reported net profit for the year of when the offence was committed. The fine shall be decided upon by judicial discretion, but shall not exceed 80%.
(2) The Department of Health shall be charged with enforcing the above. In the event that any breeches of the above are found, an application shall be made to the Crown Prosecution Service.
(3) Trading, Profit and Loss Accounts must be submitted by these companies at least bi-annually for inspection, or else whenever the Department for Health demands it.
(4) Any legal proceedings taken by the Crown Prosecution Service shall be made in conjunction with the Companies Act of 2006, or else the most recent legislation regarding the prosecution of companies.

4. EXEMPTIONS
(1) Any exemptions to the above shall be granted by the Department for Health.

5. CONCESSIONS FOR RESEARCH
(1) The Department for Health shall be responsible for the allowance of any concessions on said profit in the name of research.
(2) The Company must provide sufficient evidence that any funds generated by concessions granted as a result of 4(1) have been used appropriately.
(3) Any misuse of concessions granted in accordance with 4(1) shall be treated as an offence as outlined in 3.

6. REPORTING PROFIT IN THE FINAL ACCOUNTS
(1) Research costs must be shown outside of 'less expenses' of the Profit and Loss Accounts, or else outside of the Trading Accounts.

7. COMMENCEMENT, SHORT TITLE AND EXTENT.
(1) This Bill may be cited as the Drugs Profits Bill 2015
(2) This Bill shall extend to the entire United Kingdom; and
(3) Shall come into force immediately following Royal Assent.


Notes
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1. The cost of prescriptions to the NHS last year was £14.4bn, and it is estimated that this Bill could save the NHS ~£4.3bn. This is of course subject to fluctuations in demand. Drug companies have been holding the NHS to ransom with regard to unit price; and it is clear that previous measures have not gone far enough.
Redmayne - GSK Accounts
BBC - Pharmaceutical Industry Gets High on Fat Profits
Telegraph - Companies Boast of Large Profits on Drugs That Cost Pennies
The Motley Fool - Profiteering Motive for Pharmaceutical Shareholders
EOHS - Regulating Pharmaceuticals
NHS Trust - Accounts

Changes for Second Reading
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Changes for second reading;
2(1) has been altered in order to make it easier for companies to cover the cost of research, if they are not granted concessions.
2(2) has been altered in order to cut out excessive profiteering after the cost of research has been covered.
3(3) has been introduced to ensure accounts are inspected regularly, to avoid 'bogus' accounting to avoid the caps.
6(1) has been introduced to make the enforcement of 3(3) less complicated, and to allow members of the public and shareholders to see a full breakdown of costs, where previously, research costs could be expressed as 'contribution per unit'.
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Aph
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I'd say that this is worse then the first bill.
Also there is no point in saying 'there is a limit, but we can break it at anytime we want'
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Jean-Luc Picard
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Nay, the limit is a joke, as is letting people break it.
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Saracen's Fez
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Aye.
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username1524603
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I like the intentions of this bill but it is optimistic to think the government can inspect accounts of all pharmaceutical companies to make sure the requirements in this bill are met. This bill will start a cat and mouse game where the accountants will be trying to outwit the Department of Health by using increasingly elaborate accounting techniques akin to Hollywood accounting.
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Jammy Duel
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(Original post by Nigel Farage MEP)
I like the intentions of this bill but it is optimistic to think the government can inspect accounts of all pharmaceutical companies to make sure the requirements in this bill are met. This bill will start a cat and mouse game where the accountants will be trying to outwit the Department of Health by using increasingly elaborate accounting techniques akin to Hollywood accounting.
But is it not still better than what we have now where the pharmaceutical companies have free reign.
It maybe cat an mouse, but even within that there is a limit as to how far they can go.

For the record, from the start I've hardly been in support of the bill,but understand and respect the objective, evenif it is un-Tory.

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username1524603
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(Original post by Jammy Duel)
But is it not still better than what we have now where the pharmaceutical companies have free reign.
It maybe cat an mouse, but even within that there is a limit as to how far they can go.

For the record, from the start I've hardly been in support of the bill,but understand and respect the objective, evenif it is un-Tory.
I lend my full backing to the objective of the bill but I am not convinced the objective is possible as the pharmaceutical companies will continue to have free reign. There is currently an infestation of reclassification in accountancy which allows big companies to legally avoid paying tax, and pharmaceutical giants will use the technique to disguise R&D costs; address reclassification to solve the problem.
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Jammy Duel
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(Original post by Nigel Farage MEP)
I lend my full backing to the objective of the bill but I am not convinced the objective is possible as the pharmaceutical companies will continue to have free reign. There is currently an infestation of reclassification in accountancy which allows big companies to legally avoid paying tax, and pharmaceutical giants will use the technique to disguise R&D costs; address reclassification to solve the problem.
I did accounting at a level and within the party when debating it I think like an accountant and a cynic to try to find the loopholes to aid in trying to close them.

What I also think people miss in this bill is that internationally and to the private sector there is no cap, although, that comes with its own difficulties for the regulation of this bill
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(Original post by Jammy Duel)
I did accounting at a level and within the party when debating it I think like an accountant and a cynic to try to find the loopholes to aid in trying to close them.

What I also think people miss in this bill is that internationally and to the private sector there is no cap, although, that comes with its own difficulties for the regulation of this bill
The loophole that jumps out at me is setting up a subsidiary that sells research materials to the company at an inflated price. According to books the company will never manage to cover the costs of research as they are extortionate but in reality the company is charging itself. It is a loophole used extensively in the metal industry that has not been closed down because no one has thought of a way which would not penalise genuine subsidiaries.
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Jammy Duel
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(Original post by Nigel Farage MEP)
The loophole that jumps out at me is setting up a subsidiary that sells research materials to the company at an inflated price. According to books the company will never manage to cover the costs of research as they are extortionate but in reality the company is charging itself. It is a loophole used extensively in the metal industry that has not been closed down because no one has thought of a way which would not penalise genuine subsidiaries.
And the film industry until such loopholes were closed

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username1524603
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(Original post by Jammy Duel)
And the film industry until such loopholes were closed

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At the very least the bill needs to state if GAAP or IFRS will be used by the authorities to check the accounts.
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thehistorybore
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I should add that exemptions are to be granted for a few niche drugs. For example, a rare form of cancer which may have an incidence of 1/1,000,000 or something ridiculous, would be justifiable for exemption, as the company could never hope to cover the massive cost of production with only 150% profit, and thus would not produce it. The people who suffer from the rare form of cancer would die of it, because its not financially viable to produce the drug. In essence, the exemption is there to prevent companies from refusing to produce the drug outright.

The exemption is not there just to be 'abused' by companies. This Bill puts the power to save lives in the hands of the DfH, not the companies, as it should be. They shouldn't have the right to decide whether people live or die.

On that basis, its an aye from me.
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Rakas21
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(Original post by Nigel Farage MEP)
I lend my full backing to the objective of the bill but I am not convinced the objective is possible as the pharmaceutical companies will continue to have free reign. There is currently an infestation of reclassification in accountancy which allows big companies to legally avoid paying tax, and pharmaceutical giants will use the technique to disguise R&D costs; address reclassification to solve the problem.
Since HMRC will surely check the accounts anyway for tax purposes, we could possibly have HMRC do it and simply report the findings to the SOS for Health.
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Jammy Duel
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(Original post by Rakas21)
Since HMRC will surely check the accounts anyway for tax purposes, we could possibly have HMRC do it and simply report the findings to the SOS for Health.
Doesn't resolve the issues

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Birchington
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This is in cessation.
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