Hope for Pharma in UK with new VPAG pricing scheme agreed
The UK pricing scheme for pharma has been a major source of concern, mainly over the pricing mechanism and rebate scheme. This saw a rise in the rebate pharma has had to pay to 26.5% in 2023, but a new deal has now been announced.
There is a new approach to what was previously called the Voluntary Pricing and Access Scheme (VPAS) to seek to enhance the UK as a 'hotspot' for life sciences. Under the 2019 to 2023 VPAS agreement, the Department of Health and Social Care (DHSC) and the Association of the British Pharmaceutical Industry (ABPI) agreed an annual repayment rebate, which suppliers of branded medicines had to pay. The intention for the rebate was to enable growth in the medicines budget to enable more innovation and better health outcomes, but only up to a certain limit.
Industry had been gravely concerned by the ballooning costs of the pricing scheme and the money going into a black hole without support for industry. We had heard concerns about the impact these costs and the uncertainty were having at the 2023 PING Conference, from leading experts Leslie Galloway (Chair of EMIG, the industry body) and Richard Williams (of specialist consultancy RFW Associates).
The DHSC has now announced the heads of agreement for a new voluntary scheme for branded medicines pricing, access and growth (now called VPAG). The new VPAG agreement last for five years starting on 1 January 2024.
Key elements of the new scheme
- Industry will be contributing to the NHS through an allowed growth rate on sales of branded health service medicines, with two different mechanisms, depending on whether the medicines are new or old. The objective is to balance the level of financial risk from industry and government, and the risks from different stages of the lifecycle for medicines.
- There will be some adjustments to create a new, higher baseline for spending for medicines. In 2024 there will be a permitted growth rate of 2%, followed by 3.75% in 2025 and 2026, and then 4% in 2027 and 2028.
- Older medicines will have a basic level of 10% rebate. However, older medicines that have had a reduction in their reference price of less than 35% will pay up to an additional 25% (on a sliding scale).
- For newer medicines (medicines with an unexpired SPC, or if no SPC where any product containing the active ingredient received a marketing authorisation under 12 years ago) the rate will be dynamic. Where the product has sales of less than £6m, there will be a total exemption. Otherwise, the general rate will start at 19.5% in the beginning of 2024, and falling to 15.1% for the rest of 2024. Future rates will be determined by the affordability mechanism, ie linked to the allowed percentage increase in the overall medicines budget described above.
- VPAG aims to strengthen the UK's competitiveness in health and life sciences to drive innovation-led growth. £400m of additional funding across the five years will be provided by industry to invest in three new areas, with 75% going to clinical trials, 20% in manufacturing and 5% in health technology assessment.
- The deal also announced a new UK PharmaScan platform whereby pharma suppliers will provide information about their medicines in development.
VPAG is a voluntary pricing scheme agreed between industry and Government. There is an alternative, compulsory statutory scheme. The Government’s response to the statutory scheme consultation is still awaited, so there remains uncertainty over that alternative.