Following its deal with the US, the government has cut the payment rate for newer medicines under the Voluntary Scheme for Branded Medicines Pricing and Access. 

The payment rate next year for newer medicines under the Voluntary Scheme for Branded Medicines Pricing and Access (VPAG) will be 14.5%, down from 22.9% this year. 

In a statement, the government said that the lower rate has been driven by “falling costs, including due to drugs going off patent, so lower revenues can be absorbed within existing budgets”.

In reality, however, the rate has been cut to appease US president Donald Trump, who had threatened additional tariffs on Britain’s pharmaceutical sector. As part of the deal, the UK agreed that the newer medicines payment rate scheme would not exceed 15% of company sales revenue to the NHS for the next three years.

Britain’s pharmaceutical sector has long campaigned against the VPAG and demanded that it be cut. 

The payment rates for older branded medicines remain unchanged next year, with companies continuing to pay between 10% and 35% on their sales of each older medicine to the NHS, depending on the levels of price discount already offered to the NHS.

Companies will also pay an additional 1% on top of the newer and older payment rates next year as a pre-agreed voluntary contribution to support an industry-funded investment programme aimed at improving the UK’s health and life sciences sector infrastructure. For example, 18 new clinical trials hubs have been created across the UK to accelerate research. 

A boost?

It is hoped that the cut in the VPAG will provide a boost to the life sciences sector. 

The government believes that the lower rate will make the UK a more attractive destination for clinical trials, manufacturing investment and the early launch of new medicines.

“As a practising surgeon, I know first-hand how vital it is that patients have access to the latest medicines and innovative treatments,” said health innovation minister Zubir Ahmed, adding that this would help secure and drive investment in the sector. 

Over the next ten years, the UK plans to increase investment in new medicines from around 0.3% of GDP to 0.6% of GDP. Spending on all medicines will rise from 9% to 12% of total health spending, with key target milestones along the way. The UK government has stated that it expects this to cost up to £1 billion in additional spending over the next three years.

“It’s good that the amount of revenue companies will need to pay to the UK government has come down in 2026. The newly proposed cap on future payment rates for newer medicines should also provide companies with greater certainty up to 2028,” said Richard Torbett, chief executive of the Association of the British Pharmaceutical Industry. 

This year has seen a flurry of international pharmaceutical companies leave the UK in opposition to what they see as an uncompetitive environment.

AstraZeneca announced in February that it had halted a planned £450 million investment in Speke after the government pulled back from the previous government’s offer of support, and US pharmaceutical giant Merck scrapped plans for a £1 billion research centre in London and made 125 scientists redundant in September.