10

historic cost, separating fixed assets from current assets and liabilities, and transfer prices (the charges made for supplies obtained from overseas affiliates) disclosed.

The general approach to profits has been that suppliers to the government should earn the same sort of return as British industry in general. Until January 1985 the government fixed an overall return on capital for the industry and then, within this limit, negotiated an agreed return on investment with each company based on its annual financial return and its contribution to the UK economy. Companies were, in the informal jargon of the industry, awarded 'brownie-points' for increased investment, research and development, value added during manufacture, or export achievement."

Each company has been allowed, at the discretion of the Department of Health, to exceed its individual target rate of return on capital up to a ceiling: 10 percentage points above target until March 1984, from that date until the 1986 scheme, by one-third, and subsequently 50 per cent. The band of profit between the target figure and the ceiling is called the 'grey area'. The Department of Health does not normally seek to recover excess profits within this grey area, so long as it is satisfied that the company has improved productivity or increased sales of existing products without price increases. But while profits are within the grey area no price increases are authorised. The Department of Health does not take a view about individual prices, but will refuse to authorise an increase if it forecasts that profits for the year will exceed the company's target.

In July 1986 negotiations on a revised scheme were completed. From October of that year target rates of return on capital were increased slightly, allowing individual companies to fali within the range 16-18.5 per cent. Since April 1988 the target figure has been linked to the average return on capital of British industry using the FT500 index as an indicator, a formula suggested by the industry in the hope of freeing the PPRS from arbitrary political pressure. Until October 1993 companies were allowed to make a return on capital within the range, 17 to 21.5 per cent.

In October 1993 a new scheme took effect. Each company with sales of over £20m per annum has to submit an annual financial return describing its total sales to the NHS, the costs incurred and the capital employed in the form of manufacturing plant and research and development premises.

Companies are allowed a return on capital employed in supplying the NHS within the range 17-21%. The 'grey area' has been replaced by a 'margin of tolerance' of 25% above or below each company's target. New products can be priced at the discretion of the company, and variations launched within five years of the original Product Licence may also be freely priced. All other products require the approval of the Department of Health.

The amount that may be spent on promotion is fixed as a percentage of total sales to the NHS and distribution between companies is based on the following formula:

i a basic allowance per company of £400,000

ii a company allowance of 6% of sales to the NHS

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iii individual product allowances of £50,000 for three products; £40,000 for a further three; £30,000 for threc more; and £20,000 for the tenth and subsequent products.

There are no fines, as under the 1986 agreement.

The research and development allowance is negotiated with each company with a firm indication give one year ahead, and provisional indications for the following two years. The allowance reflects:

i the average spending of the UK industry as a proportion of sales to the NHS

ii investment in the UK

iii each companies global spending pattern on research and development.

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2

From Paternalism

to Partnership

The doctor-patient relationship has altered substantially since the foundation of the NHS in 1948. At that time it was assumed that the doctor knew best. He or she interpreted symptoms, stipulated a remedy, and the patient took the medicine as prescribed, with little or no effort made by the doctor to explain the risks involved in any particular treatment. In recent years, patients have come to expect more information.

This change is recognised by the BMA in its guide to medical ethics. In the past, says the BMA document:

The doctor, as the expert, used his superior knowledge and made decisions on health care issues which many people could not hope to comprehend. Over many years, this has led to the development of a medical mystique and thus a failure to communicate.

This attitude cannot continue, says the BMA report:

Increasingly patients have begun expressing a desire to know what is wrong with them and to understand the action taken by their doctors. Many wish to participate in decision-making... We are now experiencing a change from paternalism into partnership. Simultaneously, more emphasis is being placed on the patients assuming responsibility for their own health, especially concerning the effects of their own way of life ..."

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The change is recognised by the NHS Patient's Charter, which took effect in April 1992. The Government states that every person has a right:

to be given a clear explanation of any treatment proposed, including any risks and any before you decide whether you will agree to the treatment. 19

alternatives,

The evolution of the doctor-patient relationship has not been uniform, however. The National Consumer Council, in a report published in December 1991, expressed support for a more participatory doctor-patient relationship but it found that not all patients were being told of the risks associated with drug therapy and, therefore, were unable to reach an informed decision. No drug, insisted the report, is 100 per cent safe and the risks should always be explained to patients.20

Nor should the practical difficulties entailed in moving towards a more participatory doctor-patient relationship be underestimated. The relationship with members of the learned professions is different from that between the average customer and the average shopkeeper, but it does not follow that the greater knowledge of the professional should lead to a onedirectional chain of command. The purpose of medical training is to enable doctors to be of service. In some cases the doctor will be dealing with patients who they consider to be their social equals, perhaps with an expertise of their own in another sphere. In others, the knowledge imbalance will be considerable and patients may well decide to lean heavily on the doctor, to borrow his judgement as it were. The choice to be made by someone in that

13 situation is not so much about weighing up the doctor's advice, but deciding which doctor

to trust.

Before the imposition of a public sector monopoly it was easier for consumers to make such judgements. People from a poor background, for instance, would frequently choose a doctor who commanded the confidence of the 'gentry' or the middle class. Today, under a uniform system which suppresses comparative information about doctors, it is more difficult, but in the near future perhaps people will come to rely on the recommendation of the Consumer's Association, or the 'seal of approval of the Patient's Association

In any event, it is likely that there will always be some patients who are content to be given minimal information because they prefer simply to put their trust in the doctor's skill and judgement. Such feelings should be respected, but by the same token, patients who want to be properly informed should not have their wishes disregarded.

It is not only that patients are entitled to be warned of the risks that they personally face by following a doctor's advice, there are sound clinical reasons for full discussion between doctor and patient. Different people experience different reactions to the same drug and there is more chance of avoiding adverse reactions if the patient's full medical history is presented to the doctor. A hasty, one-sided consultation is unlikely to reveal all relevant facts. Moreover, there is a continuing tendency to demand complete freedom from risk and to call for compensation when someone suffers an adverse reaction. And there is an expectation that regulatory agencies should be able to predict harmful side-effects and ban drugs which cause them. But total freedom from risk is impossible, and the complex risk/benefit balances entailed in modern prescribing can satisfactorily be made only at the level of the individua! patient. Regulatory bodies cannot foresee all the possible clinical situations that might arise. The safety of medicines simply cannot be guaranteed before the drugs reach the patient. The balance between risk and benefit, and judgements about the safety of any given medication, are consequently an unavoidable part of the doctor-patient relationship.

Patients, therefore, are inescapably involved in the assessment of the clinical risks they are taking. But this unavoidable reality calls into question our attitude to consumer payment. Such judgements are not easy, yet, if we consider people fit to balance the risk of suffering an adverse reaction or side-effect against the possible benefits of treatment, why is there continuing reluctance to permit people to assess the potential risks and benefits in the ligh: of the cost?

There remains an inconsistency in the public mind. The NHS was founded under the influence of a collectivist ethos which saw the state in the image of an indulgent parent charged with caring for its child-citizens. For the British of all people to have fallen uncer the sway of this debilitating doctrine was an historical aberration. Britons have usually thought of themselves as bold, thinking, valuing individuals, invincible in war, magnanimous in victory, kindly towards the underdog, and just in all dealings. This self image is incompatible with the collectivist view that we need to be shielded from the burden of paying for medicines.

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The paternalistic ethos which took root during the Second World War has persisted into the 1990s because politicians are afraid to put forward proposals for consumer payment. They know full well that a system of free medical care is unsustainable in the long run. And few politicians or civil servants believe there is an intellectually reputable case for current policies, but there is a marked reluctance to contemplate change because of the perceived political difficulty of withdrawing exemptions. Once a public subsidy has been introduced it is difficult to withdraw it without upsetting the immediate beneficiaries

The present position is that when political leaders or civil servants can be persuaded to go 'off duty' for a moment and reflect on the wisdom of their policies, few defend them. They know that it is very difficult to mount an intellectually sound defence of the status quo, but are swayed by fear of the political cost of change.

The confused state of public opinion was highlighted during May 1993 when it became public knowledge that the Government was considering the possibility of charging pensioners for prescriptions. Pensioners appeared on TV and radio programmes arguing that they had saved over the course of their lives only to find that they were to be made to pay for a service which they had been told would be free. To some it seemed as if they were being 'punished' for saving, because pensioners who had not saved would be on income support and therefore qualify for free drugs.

Thus, the ironic result of promising free medicines has been to undermine the independent spirit of the people. Staunch Conservative-voting pensioners, with a deep-felt belief in dignity and self-reliance, were the most prominent in complaining about the prospect of paying for drugs. The irony is that high taxes make it harder for people to be self-reliant and it is the provision of 'free' government services which keeps taxes high. Thus, the people who want to enjoy independence, but find it harder to do so because of the high taxation necessitated by high public spending on ostensibly free services, are the very people who demand that drugs should remain free (and taxes consequently high), thereby diminishing their own chances of being independent in old age. The contradictory state of public opinion makes rational change very difficult, but sooner or later Britain's holiday from reality will have to end.

There are some legitimate anxieties. First, there are the poor, who should obviously be, protected as at present. Second, any future scheme should also protect people who can afford to pay for pharmaceuticals most of the time but who would be unable to foot the bill during a period of prolonged or intense illness. The proposals in the final Section accommodate both groups.