Spending on medicines and medical devices increases but VPAG clawback reach record levels
NHS spending on medicines, appliances and medical devices in England hit £19.9bn in 2023/24, with £14.6bn in branded medicine sales. However, the VPAG clawback is meanwhile expected to be an unprecedented £3.5bn in 2025, £1bn more than previously forecast
These figures from NHS Business Services Authority (NHS BSA) provides an important signal about the NHS's commitment to higher spending on the pharmaceutical industry, and this growth should be welcomed by players who are advancing patient care and ensuring access to life-changing treatments. However, the industry is being hit even more heavily with this VPAG (Voluntary Scheme for Pricing, Access, and Growth) clawback, with a 22.9% payment rate for newer medicines, much higher than had been expected. From an industry investing heavily in innovation and assuming a lot of risk in these treatments, these clawbacks raise serious questions.
From the £3.5bn clawback on VPAG, £2.8bn of that flows directly back into NHS England. These funds can mean more reinvestment into the healthcare system, but there should still be more transparency around their allocation to show how these repayments genuinely support patient access to innovative medicines.
Despite the headline spending growth, the UK remains a low spender on medicines compared to similar nations, with only 9% of healthcare spending that is allocated to pharmaceuticals—significantly below the 15% average in other leading economies. For example, France spends 15%, and Germany, Japan and Italy all over 17%. Data from the Office for Life Sciences (OLS) suggests that access to new medicines in the UK is worsening, with only 56% of newly authorised treatments having marketing authorisations that are available to patients between 2019 and 2022, declining from 72% in 2016 to 2019. These trends highlight a pressing issue: while the NHS benefits from rising medicine spend, controlling the medicines costs could impact investment and slow the introduction of breakthrough therapies in the UK.
For pharma businesses, VPAG adds to existing pricing pressures. The industry already contributes £631m returned to NHS England through centralised commissioning and Cancer Drugs Fund commercial agreements on specific medicines. However, the VPAG repayments place additional strain on businesses seeking to sustain R&D investment while navigating the UK’s tough pricing environment.
Ultimately, whilst NHS hospitals paid an additional 44.3% on medicines between 2019/20 and 2023/24, most of the increases on branded medicines went back to the Government through rebates. The impact of VPAG and its predecessor VPAS meant that real growth in medicines in 2023 and 2024 was capped at 2%.
The pharma industry needs a system that ensures fair return on innovation while maintaining affordability for the NHS. Greater transparency on how VPAG repayments are used, along with a more predictable pricing framework, is needed to show that the UK is a leading market for life sciences investment.
Richard Torbett, CEO of the pharma industry body, the ABPI, has said that discussions with the Government are taking place to "fully understand what has driven these rates and how we can return the UK to a more internationally competitive position". He praised the successive governments for identifying life sciences as a critical growth sector, but it is challenging to fulfil that potential when payment rates are far in excess of competitor countries.
VPAG had been agreed in December 2023 as a voluntary agreement between industry and the Government. At the time, the ABPI said it was a tough deal, with repayment rates starting at 15.3% with an expectation that rates would follow a trend back to a more internationally competitive and sustainable level over a five-year period. Instead, the latest figures show that the 2025 payment rate has risen to the highest ever level, the ABPI says. It wants to understand why this has happened.