The rise in the Voluntary Scheme for Branded Medicines Pricing and Access payment rate will put a strain on companies which have not factored this into their plans.
The Voluntary Scheme for Branded Medicines Pricing and Access (VPAG) payment rate for newer medicines has been set at 22.9% for this year.
The VPAG is a longstanding policy tool used in Britain and is intended to ensure the NHS gets the best value from the medicines it uses and doesn’t overspend its allocated branded medicine budget. If it ends up using more medicines than forecast, the pharmaceutical industry commits to returning NHS overspend in the form of sales rebates.
In December 2023, the industry signed up for a new VPAG agreement, an agreement between the UK government, the NHS and the pharmaceutical industry, which aimed to balance the cost of branded medicines to the NHS with predictability and increased headroom for the UK pharmaceutical industry to grow over a five-year period.
An initial rate was agreed at 15.3%.
Above expectations
The change in rates has come under fire by the Association of the British Pharmaceutical Industry (ABPI), the organisation that represents companies that research and develop medicines and vaccines.
“Successive governments have rightly identified life sciences as a critical growth sector for the economy. However, the sector can’t fulfil this potential when payment rates are far in excess of those set in competing countries,” said chief executive Richard Torbett.
“We are in close discussions with the government fully to understand what has driven these rates and how we can return the UK to a more internationally competitive position,” he added.
The industry will need to pay around £3.4 billion to the government this year, which is more than the total payments made over the five-year scheme 2014-2018.
“This puts a very real strain on companies, which will not have factored this rate into their business plans for 2025,” the ABPI said.
In a statement, the organisation pointed out that NHS currently invests a smaller share of overall healthcare costs on medicines than any comparable country. In Britain, it makes up 9% of the country’s overall healthcare spend compared to Germany and Italy, which invest 17%, or France, which invests 15%.
