The UK government has published new terms for the Statutory Scheme for branded medicines, which controls the prices of medicines paid by the NHS.
The announcement follows the agreement in mid-November of a new Voluntary Scheme for Pricing, Access and Growth (VPAG), a negotiated alternative scheme which companies can opt into over the Statutory Scheme.
Despite a consultation on the proposals that saw a large number of objections from the industry, the UK government said it has decided to continue to operate the Statutory Scheme in a way that is “broadly commercially equivalent to the Voluntary Scheme”.
It intends to set amended payment percentages for 2024 to 2026 based on an allowed growth rate that has been increased to 2%. This means that companies will pay a rebate on the sales of branded medicines to the NHS of 21.9% in 2024, 24% in 2025 and 26.8% in 2026.
Exemptions from payment will be implemented for medicines containing a new active substance, exceptional central procurements and centrally procured vaccines.
While the published rates are down on the record 27.5% rebate in 2023, they remain well above the historical average of 10.6% before this year, according to the Association of the British Pharmaceutical Industry (ABPI).
They are also significantly higher than other similar mechanisms operated by other countries – for example, 12% in Germany, 7.5% in Spain and 8.25% in Ireland.
The industry has responded that these sales rebate levels have damaged the UK’s international standing with global life science companies and are likely to continue to negatively impact UK life sciences and NHS patients’ access to medicines.
Life cycle adjustment
A life cycle adjustment will not be introduced, which has been welcomed by the industry. The government statement added: “We intend to consult on alternative proposals to maintain broad equivalence with the terms agreed in the 2024 voluntary scheme for branded medicines pricing, access and growth for setting statutory scheme payment percentages in a way that distinguishes between medicines at different stages in the product life cycle”.
The proposed adjustment had been criticised as unworkable and likely to result in low-margin branded medicines being withdrawn from the UK market.
Richard Torbett, Chief Executive of the ABPI, said: “This announcement sends a very confusing message to global life science investors. The new Voluntary Scheme agreement shows that the government realises that capping the UK medicines market below its natural growth is unsustainable – yet this Statutory Scheme continues to do so, resulting in damaging headline rebate rates which undermine the UK in the eyes of investors.
“The government has consistently said it wants to support the international competitiveness of UK-based life sciences. To really make a difference, they should use next year’s consultation to unlock the constraints on growth which are impeding inward investment.”
Criticism from the pharma industry
In October, over 20 pharma companies rejected the proposed changes to the Statutory Scheme.
The main concern was an arbitrary cap on growth in the UK branded medicines market, which has led to revenue clawbacks in the UK rising from around 5% to 27% in just three years.
Pharma companies and associations that are based or operate in the UK collectively rejected the plans, including Janssen, Lilly UK, Merck UK, Novartis, Pfizer, Roche Products and Sanofi, saying they will discourage innovation and investment in the UK.
These companies are now required to join either the Voluntary Scheme or else be in the Statutory Scheme, and must choose which to be a member of for the following year before the end of December 2023.
Diana Spencer, Senior Digital Content Editor, DDW