Crippling VPAS Rebate Scheme Killing Availability of Cheaper Generic Medicines
Pharma organisations came to the fore during the COVID-19 pandemic and became household names.
Innovating with developing vaccines at warp speed was hailed by people and businesses around the world, as life could return to normal. However, now pharma is being punished for innovation - with crippling costs, which may impact on whether people can get access to medicines.
Branded generics and biosimilars are being hit particularly hard through the VPAS scheme, according to a report from the London School of Economics and the British Generic Manufacturers Association (BGMA).
What Is VPAS?
VPAS is the Voluntary Scheme for Branded Medicines Pricing and Access. This is an agreement on pricing and rebates between the Government - through the Department of Health and Social Care (DHSC) as well as NHS England - and the Association of the British Pharmaceutical Industry (ABPI) and manufacturers or suppliers who signed up to VPAS. The ABPI represents many of the big pharma innovator companies. Industry may not have wanted to enter into VPAS in an ideal world, but this is at least a voluntary agreement rather than something else that is imposed under the non-voluntary statutory scheme.
Although not desirable to agree to the rebates, bigger pharma may be more able to protect themselves. Notably absent from the negotiations, though, were some smaller and medium sized pharma, as well as the BGMA. The BGMA represents manufacturers who supply 80% of the medicines used in the NHS.
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.
The repayment percentage for each year of VPAS therefore depends on the difference between the allowed annual growth in sales to the NHS of branded medicines and what is actually spent. In 2019, in the first year of VPAS, the repayment percentage was 9.6%, and the industry repaid DHSC £850 million in total. It is predicted to be as high as 30% or even higher in 2023. This is sending shockwaves through the industry.
Who Is the BGMA and How Are They Affected?
The BGMA is the trade body representing generic and biosimilar manufacturers. Suppliers of generic medicines are those that come into the market to supply when the originator's patent or exclusive period has run out. When the original patent holder's period expires, others can come into the market, and supply medicines cheaper and at much lower margin. Generics can be branded because the Medicines and Healthcare products Regulatory Agency (the MHRA) sometimes requires that, in order to protect patients - by requiring certain treatments to be maintained on a single manufacturer's brand.
A biosimilar is a new biological product that has been developed to be similar to an existing biological 'reference' product.
About one third of the branded medicines are branded generics or biosimilars. They are all caught by VPAS.
If having to pay a rebate of 30% is huge for the supply of branded medicines who have patent or other exclusivity protection, this is crippling for suppliers of branded generics and biosimilars, as they are already selling at much lower prices due to the increased competition. The average branded generic costs just one third of the price that the originator sold at immediately before it lost its exclusivity. The system of generics and biosimilars saves the NHS about £15bn per year and enables the UK to benefit from much lower medicine prices than would otherwise be the case.
Could VPAS Make the Supply of Cheaper Medicines Harder to Achieve?
Although VPAS is intended to restrict the amount spent on medicines, in fact this system may end up leading to medicines costing more with less to go round (if the overall drugs budget stays the same) - meaning fewer people will get access to the medicines they need. With the VPAS cost rising so much, this is making the supply of some medicines economically unsustainable. This is according to analysis from the Office of Health Economics (OHE) supported by the London School of Economics (LSE). This analysis shows that, rather than controlling costs for the NHS, the scheme could cost billions of pounds in forfeited savings every year due to the growth of the annual levy and its detrimental impact on competition. In short, suppliers of low-cost, low-margin alternatives will be forced out of the market due to these unsustainable additional costs.
Mark Samuels, Chief Executive of the BGMA, warned: "I have heard from companies directly that they are having to withdraw products as the operating environment is simply unfeasible."
Kim Innes, the UK General Manager of Teva, one of the leading generics companies, said VPAS was a "real threat for companies like Teva, the consequences of which will impact patients too and their ability to access medicines".
What Is the Solution?
The BGMA's position is simple: take generics and biosimilars out of the remit from VPAS, or there will be a loss of cheaper medicines. Unless this happens, either medicines will cost the taxpayer much more, or fewer patients will be able to be treated.
Hear More About the Issue of Pharma Rebates and Its Impact
At the 2023 invitation-only PING Conference, we will be hearing about the impact of VPAS on suppliers of medicines, as well as what is likely to be coming round the corner with the new VPAS scheme, which will be in place from 2024.