Medical Devices and Blood Safety and Quality (Fees Amendment) Regulations 2025

Considered in Grand Committee

15:45:00

Moved by

That the Grand Committee do consider the Medical Devices and Blood Safety and Quality (Fees Amendment) Regulations 2025. Relevant document: 23rd Report from the Secondary Legislation Scrutiny Committee

My Lords, I am grateful for the opportunity to debate these regulations, which I think can fairly be described as routine. The Medicines and Healthcare products Regulatory Agency charges fees for most of its services and, to ensure continued cost recovery, updates its fees every two years. This regularity provides certainty to customers and enables better financial planning. This statutory instrument helps to achieve this by doing three things. First, it updates the fees that the MHRA charges in relation to its activities in regulating medical devices and blood components for transfusion. These fees were last updated in April 2023. The implementation date for the proposed changes is July 2025 and they will ensure cost recovery until 2027. This will apply UK-wide, with the fees being the same across the United Kingdom. The total cost to those who pay the MHRA’s fees from this instrument is estimated to be £0.7 million per year after inflation. Secondly, the instrument introduces a fee for a new, optional service: a regulatory advice meeting for medical devices. In addition to publishing guidance and addressing written inquiries, this new service will further support manufacturers in their understanding of the application of the UK’s regulatory framework to their products. I am glad to say that this service was well received in the consultation. It will be mainly for those developing novel and/or complex products where the application of legislation is not as straightforward or easily understood as it might be. We have had many discussions on removing obstacles to getting products to market which support better care for patients. I hope that this will make a contribution in this regard. Thirdly, the instrument will introduce a new payment easement for small and medium-sized enterprises for the MHRA’s medical device clinical investigation fees. While this easement will not reduce the overall fee, which would require cross-subsidisation, it will enable the fee to be paid in two instalments, providing flexibility and, I hope, supporting the businesses concerned. It might be helpful if I highlight the important role that the MHRA plays in safeguarding public health and the importance of the agency continuing to be properly funded to deliver its role. The MHRA is a world-leading regulator of medicines, medical devices and blood components for transfusion in the UK. It plays a vital role in protecting and improving public health. It is, I suggest, an engine for UK growth and innovation; it is certainly an indispensable part of the UK health system and plays a major role globally, working with international partners. The principles for how the MHRA charges fees are set by HM Treasury in its guidance, Managing Public Money. The basic principle is to set statutory fees to recover full costs. This means that the regulated bear the cost of regulation and that the MHRA does not profit from fees or make a loss that would then have to be subsidised by government departments or the UK taxpayer. It is, of course, standard practice for government bodies that operate on a cost-recovery basis to update their fees. It is also standard practice for other regulators, which is the reason why I described this statutory instrument as “routine”. All fees are set by taking into account various factors that reflect the cost of the activity—for example, the activities involved in delivering a service, the time taken and the number and grade of staff involved. This process is informed by the recording of staff activity, which is the practice of monitoring and recording certain activities performed by the MHRA’s staff to establish how long they take and, so, how much they cost. In addition, also in line with the HM Treasury guidance, the MHRA includes the costs of necessary corporate overheads and system investments. Regular fee uplifts ensure financial sustainability and enable the MHRA to deliver the responsive, efficient service that its customers rightly expect. It is worth noting that this instrument does not change the MHRA’s fees in relation to medicines regulations. Given the different legal positions in relation to the powers to make regulations about fees relating to medicines, medical devices and blood components for transfusion, two statutory instruments have been used for the MHRA’s fee uplift. A second instrument for human medicines fees has, therefore, already been laid before the UK Parliament and the Northern Ireland Assembly and has already come into force. In summary, ensuring that the MHRA is sufficiently resourced will help it to deliver its services more reliably and to provide patients, the public and industry with the service that they expect. I beg to move.

My Lords, I thank the Minister for outlining the purpose of these regulations so eloquently and succinctly. It is clear that the change to the fee structure for regulating medical devices and medical products is part of a realm of profound importance both to public health and to the future of healthcare in the UK. As Liberal Democrats, we unequivocally support a robust, efficient and well-resourced Medicines and Healthcare products Regulatory Agency, but it is important that our regulatory bodies possess the financial stability to ensure the safety, quality and efficacy of medical products and blood safety, which touch the lives of millions throughout the year. I am not going to speak on these regulations at great length; I just want to tease out a couple of issues about which I would like a little more information from the Minister. First, increasing the fees will mean that costs will be covered automatically. What mechanisms are in place to ensure that efficiency and effectiveness are in place, rather than just ballooning costs that it would be assumed the industry would absorb? I am not clear from reading the impact assessment or the regulations exactly how the Government will ensure that the cost really is the cost and is not excessive cost. Secondly, it is clear in the impact assessment that most of those who gave feedback to the consultation question were against these fees. How have the Government taken into consideration the reservations, not just of the “no” element but in particular that the fees were seen in some cases to be disproportionately high and to exceed inflation? How has that developed? Why are these costs disproportionately high and why do they exceed inflation? Finally, it is important to increase the fees to ensure the agency’s work can continue but, critically, the impact assessment demonstrates a lack of concrete detail on how these increased fees will translate into tangible improvements in these MHRA services. Although the rationale for increased fees is often framed around enhancing regulatory efficiency and speed, the document provides insufficient assurances of the measurable commitments as to how the additional revenue will be specifically utilised. There is no clear framework for accountability that demonstrates how these funds will lead to faster approvals or increased safety. How will the department measure such improvements? In particular, what improvements are expected on the back of this fee increase? These regulations are a serious matter. They impact on the health of our nation and, to some degree, the vibrancy of our life sciences industry, but we must ensure that our regulatory framework is not only robust but forward thinking and truly serves the best interests of every patient in the UK by ensuring that the increased cost will both increase efficiency and, we hope, improve the services that the MHRA provides.

My Lords, I also thank the Minister for introducing these regulations succinctly, as the noble Lord, Lord Scriven, said. Perhaps in common with the Liberal Democrats, we on these Benches—the numerous people on these Benches—do not seek to oppose this statutory instrument. Rather, we just wish to reflect on its purpose and practical implications, and ask a few questions for clarification that I hope the Minister will be able to answer. As noble Lords have said, this instrument amends three pieces of legislation. We understand that these changes are intended to enable the MHRA to increase the fees to manufacturers, suppliers and other regulated entities involved in the approval of medical devices and blood components. Noble Lords understand that the current model relies primarily on contributions from industry and that the MHRA’s fees were last comprehensively reviewed in April 2023, as the Minister said. Of course, we have seen a rise in operational costs, particularly relating to staff and overheads, so we completely understand that the intention behind these regulations is to bring the MHRA’s income more closely in line with the cost of delivering its services. It is also to place the agency on a more sustainable financial footing, thereby reducing its reliance on central government funding, which I think is something on which we all agree. As the noble Lord, Lord Scriven, said, the impact assessment accompanying this instrument identified the primary benefit of this additional income—to enable the MHRA to continue fulfilling its responsibilities —but, as was raised by some in the industry and in the other place, it is less clear how these changes will directly benefit patients, healthcare providers or, indeed, medical innovators, in particular those operating in the small and medium-sized business sector. We understand that the Government decided to pause their proposed reforms to the medical device registration fee following concerns raised by stakeholders. That decision is welcome, and I thank the Minister and the Government for that. The paused proposals would have had a disproportionate impact on companies registering a large number of products, particularly due to the proposed fee model linked to the global medical device nomenclature codes. However, the broad uplift in the other fees will still go ahead, and it is in this wider context that we seek some reassurance about these changes. I shall look at some of the areas on which some clarity would be welcome. First, we recognise the MHRA’s need for stable funding, but we want to make sure it does not create barriers to innovation, in particular for start-ups and SMEs, which, as we know, often operate on much narrower margins and already navigate a complex regulatory environment. What assessment has been made of the cumulative impact of these fee increases on smaller firms? Do we know how these changes compare with the regulatory costs faced by manufacturers in other major markets, such as the EU, the US or Asia? Is the Minister able to give some international context here? Secondly, the impact assessment confirms that the staffing costs remain the largest cost driver for the MHRA and assumes a 2.2% annual pay increase through to 2027—below the current rate of inflation. Has any thought been given to whether that is a realistic assumption and basis for planning? If the actual costs prove higher than forecast, how will that impact the MHRA’s progress towards the full cost of recovery? Would the agency be forced to scale back its services, or would the taxpayer be expected to cover any shortfall?

16:00:00

Thirdly, some ambiguity remains around the implications of the increase in employer national insurance contributions. It has been confirmed, I think, that the MHRA is not exempt; therefore, will the agency be reimbursed for these additional costs? If so, will that reimbursement be based on actual expenditure or estimated figures? The Minister will have heard from many people from other industries, but across this sector people are concerned about the compensation they will get to off-set the increase in national insurance contributions.

Fourthly, following what the noble Lord, Lord Scriven, alluded to, what performance and accountability measures will be introduced to ensure that these increased fees translate into improved regulatory outcomes and do not just cover extra costs? Many stakeholders have argued that higher costs should come with higher service standards, such as for turnaround times, transparency or guidance. I appreciate that these metrics are often very difficult to put in place and to measure, but can the Minister tell the Committee how this will be measured in terms of performance and accountability?

Finally, can the Minister outline what mechanisms will be put in place to review the impact of these changes once implemented? I am sure noble Lords agree that it is important to monitor not just the revenue generated but the wider consequences for the UK’s regulatory competitiveness, for market access and, above all, for patients. Will there be a formal post-implementation review, and how will industry feedback be captured and acted on?

I think we all agree that the MHRA plays a critical role in ensuring the safety, effectiveness and quality of medical devices and blood components in the United Kingdom. It is in everyone’s interest that the agency is properly resourced and capable of meeting its obligations. Although we on these Benches support the principle of cost recovery, we believe that the approach should be proportionate, carefully assessed and subject to clear oversight. Let me be clear: we do not raise these questions because we oppose these regulations. None the less, we urge the Government to proceed with care to ensure that the fees are fair, that innovation is supported and that the regulatory burden does not risk deterring investment or undermining the UK’s position in global life sciences. I know that all parties want to see the UK at the forefront of the global life sciences industry. I look forward to the Minister’s response.

I am most grateful to both noble Lords for their constructive contributions and their support for these measures. I welcome their questions and will do my best to respond to them. I will first make a few general points that may assist. Noble Lords acknowledged the role of the MHRA, the essential services it offers and the crucial role it plays. It is also understood that it needs financial backing to do that. Therefore, in supporting these regulations, we will enable the MHRA to continue to contribute to the Government’s health mission and to balance its responsibilities to maintain product safety and champion innovation. As the noble Lord, Lord Kamall, said, that is so important to us as a country and an economy, as well as to the National Health Service. The MHRA is not alone in how it is funded. Most regulators levy charges for their work, and—in response to the question about international comparisons—it is also accepted international practice for healthcare product regulation to follow this trajectory; for example, the European Medicines Agency and the US FDA also charge fees. I certainly feel that the cost recovery approach, which neither noble Lord questioned as a fundamental, ensures that services are paid for by those who use them rather than by the taxpayer—namely, patients. The noble Lord, Lord Kamall, raised some questions about small and medium-sized enterprises. While I understand that increases in costs can place more relative strain on SMEs compared with larger companies, the MHRA has existing SME payment waivers and easements, and the instrument creates a new SME payment easement for some fees for the medical device clinical investigation service. We have sought to be responsive in this regard. On supporting innovation and maintaining the UK’s attractiveness as a place to develop and launch medical products, I certainly want to see the UK as the go-to country for that. It does this in several ways— for example, by providing scientific advice and stream- lining regulatory processes to help reduce costs and the time to market. This is a high priority within our Government. The noble Lord, Lord Scriven, raised questions relating to where costs have exceeded inflation, why this is and what the Government are doing about it. All fees are set to recover costs and it is the case that some services were found to be underrecovering more than others, so this is putting it back in the right place. It is not related directly to inflation but to the real costs and, in some areas, there are concerns about that.

Maybe I was not clear in my questioning. It is not about where it goes but this: if there is an automatic assumption that industry will cover the cost, what mechanisms are in place to make sure that there is efficiency, rather than a bloated approach where people think that, as costs will be recovered, they can do whatever they wish? That was the question, particularly regarding the inflation issue.

That is understood. I am going to come on to that, because I think it is important. Of course, with any uplift in fee, I would expect that to be the case, but I have a particular response as I continue. The uplifts we are speaking about today ensure ongoing, reliable delivery. They are necessary for the continued delivery of initiatives that promote growth and innovation. We are not just standing still; we are looking to the future. To the noble Lord’s point, industry has been clear that it supports these fee uplifts as long as they are accompanied by reliable performance. Although noble Lords have not specifically raised this, I add that the MHRA recognises that there have been some delays in some of its regulatory services of late and these delays were felt by those who pay fees. I am pleased to say that, from 31 March this year, all backlogs were cleared that relate to its statutory functions. Throughout its work to eliminate these backlogs, the MHRA put patients first and prioritised licence applications according to public health need, including those needed to avoid medicine shortages. Importantly, the MHRA is working to ensure that this continues, so that we have predictable, optimised and sustainable services across all the functions. I can assure the noble Lord, Lord Scriven, that the MHRA is taking steps to improve its performance and efficiency, not least because it does not wish to get into the situation of a backlog again. This includes a modernised RegulatoryConnect IT system and improved agency structures and processes. On accountability, it will also publish performance targets and report against them online and in its annual report and accounts. There are also mechanisms in place for monitoring the impact of these changes. Ministers, including me, meet the MHRA regularly and the MHRA and the department monitor the impact via stakeholder feedback and ongoing performance and finance reporting. I assure the noble Lord, because I know it is a particular interest, that we have key performance indicators in place to monitor the delivery of these services. I return to the point about small and medium-sized enterprises that the noble Lord, Lord Kamall, raised. In most cases, SMEs are dependent on grants from the NIHR and others, so there is no cost to them as a company when they submit an application to the MHRA. The noble Lord also asked about the assessment of increased fees on SMEs. Benchmarking fees compared to those of other regulators is somewhat difficult, to be quite honest, because of the difference in the way that the regulators operate and their different funding models. For example, a different model is where the regulator is subsidised, which is not the case here. With regard to employer national insurance contributions, the noble Lord is correct that the MHRA is subject to the increases in employer national insurance contributions. The agency believes that these fees will cover the costs of the increase in NI contributions. If there are any shortfalls, efficiency savings will have to be used to manage them appropriately.

If fees equal cost, I am not clear how calculations have been made that say that the NIC increases have not been put into that cost to be part of the fee increase, because it is a known cost. I am not clear why that suddenly becomes a potential cost reduction or inefficiency gain within the service.

I may not have been as clear as I would like to have been. I will try again. The national insurance contributions increase is an increased cost and that will have been factored into the new fees that are being put forward. The gentle challenge from the noble Lord, Lord Kamall, was about whether the MHRA could manage it. I am saying that if there were any difficulty in management, it would not be a case of putting up the fees further; it would be a case of managing efficiency costs within the MHRA.

Just for clarity, is the NIC cost known and has it been included in these fee increases? It is an important point. I do not want to push the Minister in terms of the actual figures, but I assume that the NIC figure is known and has been included in this fee increase. Therefore, there would be no need for the agency to deal with any difference, because it is a known figure and will be in the fee structure.

I am just waiting for a bit of inspiration.

Does the Minister want me to continue talking?

Perhaps it would be best on this occasion if I review what the noble Lord has said and what I have said and write to him to clarify anything that is not quite clear. In conclusion, I thank noble Lords for their contributions and for their support for the MHRA to ensure that it has the resources that it needs to continue delivering reliable services and can deliver its important public health role. Motion agreed.