BGMA Seeks Judicial Review to Be Involved in New VPAS Negotiations Alongside ABPI

The new five year deal is being negotiated with the Department of Health and Social Care (DHSC) by the Association of the British Pharmaceutical Industry (ABPI) on behalf of the whole of industry, but the British Generic Manufacturers Association (BGMA) is concerned that its interests will not be as keenly negotiated unless it is involved in the negotiation. The ABPI represents mainly big pharma originator suppliers.

Different parts of the pharma industry have warned of dire consequences given the state of the current pricing deal, which ends on 31 December 2023. The ABPI has recently said the industry is at a crossroads. This comes after two big pharma companies, Eli Lilly and AbbVie, have pulled out of the current voluntary pricing scheme. Meanwhile, Leslie Galloway, Chair of the Ethical Medicines Industry Group (EMIG), warned that a survey showed that 50% of its members were reducing supplies of medicines in 2023 and a further 40% were discussing a reduction. David Watson, the ABPI lead responsible for strategy on the next pricing deal, has also recently said that the current VPAS scheme was "in crisis".

Mark Samuels, the Chief Executive of the BGMA, already warned last year that branded generics companies were having to withdraw products as the operating environment is simply unfeasible. There has been some hope with a new deal being negotiated, but the BGMA is concerned that its interests are not being represented, as the DHSC had only offered the BGMA 'observer status' in relation to the negotiations, but the BGMA considers this insufficient in light of the existential impact that the current position has, and will have, on branded generic and biosimilar manufacturers.

The BGMA said: "We do not believe the ABPI - who are the only party with whom the Government currently negotiates - can adequately represent or balance the interests of the off-patent sector in these negotiations. Therefore, in the Government’s continued refusal to allow us to participate fully, we have begun a judicial review process to challenge the decision to exclude us as a full partner in the forthcoming VPAS negotiations."

The ABPI has responded by saying that it has acted as the sole representative industry body for negotiations on the voluntary scheme for branded medicines for over 60 years. It says: "We are disappointed that the BGMA has decided to take this action - but we recognise that it has been perpetuated by the extreme challenge placed on all parts of the industry from the surge in the branded medicine payment rates. The ABPI takes our responsibility to represent the entire branded medicine market extremely seriously, consistently engaging and involving the wider life sciences industry and trade associations as we approach the start of formal negotiations."

The Voluntary Pricing and Access Scheme (VPAS) is an agreement on pricing and rebates between the Government - through the DHSC - and the ABPI and manufacturers or suppliers who signed up to VPAS. Under VPAS, there is an annual repayment rebate, which suppliers of branded medicines including branded generics, in vivo diagnostics, blood products, dialysis fluids, branded products supplied through tenders or central contracts and biological medicinal products (whether branded or unbranded) have to pay. The reason for the rebate is to enable growth in the medicines budget to enable more innovation and better health outcomes, but only up to a certain limit. If too much is spent on medicines, then the industry has to pay some money back through the VPAS rebate.

As recently as 2021, the VPAS rebate meant pharma suppliers in the UK paid around 5% of their revenue back to the NHS as a sort of revenue tax. This rose dramatically to 15% in 2022 and an eye-watering 26.5% in 2023. This is totally outside of historical and international norms.

An ABPI report recently said: "It is clear that the 2019 VPAS has become unfit for purpose. It is time for a more balanced approach and with the current voluntary scheme due to expire at the end of this year, the moment to create one is now."

The ABPI set out its vision for a new voluntary pricing scheme comprising proposals for the following:

• Delivers a sustainable approach to medicines provision.
• Maximises the potential of the UK life sciences industry as an engine for growth - including through the UK as a destination for R&D.
• Ensures rapid patient access and adoption of new medicines - in partnership with a dynamic post-Brexit regulatory system with the Medicines and Healthcare products Regulatory Agency (MHRA) and National Institute for Health and Care Excellence (NICE).
• Improves health outcomes and productivity for the whole country.

However, the BGMA's members' model is not based around R&D but providing the DHSC with cheap access to generic and biosimilar medicines. It says: “Four out of ten products in the current scheme are branded generics or biosimilars. As the representative trade body for both generic and biosimilar UK manufacturers, we must play a full part in the VPAS negotiations for the next period of the scheme from 2024 to 2028.

“The industry subsists on thin margins because these medicines do not benefit from patent-protected prices. Off-patent medicine manufacturers operate in a highly competitive market – it keeps prices low, and the NHS’s drug bill would be unaffordable without them. Generic and biosimilar medicines are often over 80% cheaper than the originator’s product. Despite delivering the lowest generic medicine prices in Europe – our manufacturers currently have to pay an additional 26.5% VPAS tax on their revenues as a result of VPAS. This makes some products lossmaking; hence we must play a full part in the VPAS negotiations to find ways to avoid damaging one of the UK’s most critical industries.

“The off-patent sector provides the UK with the lowest medicine prices in Europe, but that is in serious jeopardy as a result of VPAS, which, if not changed, will mean the NHS paying substantially more and the supply chain becoming significantly less resilient."

Hear More About These Issues at the PING Conference

Different parts of the industry are affected by this pricing deal in different ways, and they are all warning of dire consequences if the next deal is not right. It is no surprise, therefore, that there is unprecedented legal action being taken by the BGMA here.

At the invitation-only PING Conference, which VWV is holding on 19 June 2023 in association with EMIG, we will be hearing about the impact of VPAS on suppliers of medicines, as well as the likely new pricing scheme, which will be in place from 2024.

Given the judicial review proceedings, we will no longer be hearing in person on the day from the ABPI's David Watson or Mark Samuels. However, Richard Williams, an expert on VPAS issues, will be updating us and will be in conversation with EMIG's Leslie Galloway and they will cover what they expect to happen next on this hot topic.

Other themes at this year's PING Conference will include issues over regulatory approvals, skills and space.

If you would like to be invited to attend the PING Conference in association with EMIG, in June, please contact Paul Gershlick in our Pharmaceuticals and Life Sciences team on 07795 570 072, or complete the form below.