The big squeeze?

Market Access
the big squeeze

With NHS England highlighting savings of £1.2 billion on medicines in three years coming from both deals on generics and new innovative treatments, Leela Barham takes stock of what we know about the impact on spending.

As industry raises concerns about the multiple ways spend is managed – unsaid but pointing to a big squeeze on drug spending – she argues that industry will need to put together a strong evidence-based case to achieve change.

Savings on medicines make the headlines

Spending on medicines is not always in the headlines, but it sometimes feels like it. On 1 July 2022 NHS England announced how their buying power had secured savings of £1.2 billion in three years. It might not have been much in the way of news coverage, but it was picked up in a few places.


NHS England highlighted how around a third of the £1.2 billion secured related to one product – Humira (adalimumab) – going off patent in 2018.

That savings come from patents expiring is not news, but it does highlight how there can be a major impact on spend. This is especially the case in countries where there is swift switching aided by prescribing habits as well as savvy deals struck with generic manufacturers, which are both features in England.

Savvy buying not just for generics

Whilst it didn’t get a news item from NHS England, the same order of magnitude of savings have been cited for savvy deals struck on medicines for England.

For the first time ever (tell me if I am wrong!) NHS Digital has provided a line of sight into the scale of central rebates in their November 2021 publication of Prescribing Costs in Hospitals and the Community for England in 2020/21.

That says that total spend on medicines was £17.1 billion in 2020/21, but it fell to £16.7 billion once those central rebates were taken into account. That means a saving of £400 million in that year, on a par with the average of £400 million implied from saving £1.2 billion over three years from generics and other deals. (Technically it might be some of the same savings, so these should not be added up for savings in 2020/21, it’s more useful as a cross check).

These savings come from deals struck by NHS England including through the Cancer Drugs Fund (CDF) – so new cancer treatments coming to market – as well as deals for medicines used in routine commissioning.

Savvy buying may have generated even more savings. Whilst the latest from NHS Digital is a step change in transparency on spend on medicines, they recognise that their statistics cannot be used for “providing a final figure represented of the total cost to the NHS.” This is because of not all elements are accounted for, including “remuneration to contractors, discounts, advance payments, and patient charges.”

Freeing up spend for fast access to innovative medicines

Getting a good deal can free up spending to put to a better use. NHS England links the savings that were secured over the last three years to being able to provide access to “cutting-edge treatments.” That used to be called creating headroom for innovation some years back.

Specific treatments are highlighted by NHS chief executive Amanda Pritchard including “better value treatment for arthritis” which is a reference to Humira, but also a “one-shot jab for spinal muscular atrophy”, which is a reference to Zolgensma (onasemnogene abeparvovec).

It’s not just about access, but also speed of access, that gets a mention. Now former Health and Social Care Secretary Sajid Javid, said “The UK is once again at the forefront of giving people early access to the latest cutting-edge medicines.”

No mention of VPAS

If the NHS Digital work includes what they call central rebates – which is because their latest release draws on data which reflects actual costs paid by hospitals rather than list prices – then perhaps it’s best to refer to the payments companies make to the Department of Health and Social Care (DHSC) through the Voluntary Scheme for Branded Medicines Pricing and Access (VPAS) as national rebates. Others might just call them a sales tax as they relate to a percentage of sales.

Whilst VPAS is operated by the DHSC – it’s a UK wide scheme – NHS England are one of the parties who agreed the 2019 to 2023 scheme.

Just to help give the value of these national rebates from VPAS in the context of savings from genericisation and discounting, £569 million was paid by companies in 2020/21, based upon data for quarter 2 to 4 for 2020 and data for quarter 1 of 2021. So in 2020/21, that’s even more than came from other deals at £400 million.

VPAS payments relate to sales of all branded medicines, branded generics as well some of the innovative treatments that are launched in the UK (although companies don’t pay on sales on New Active Substances (NAS) for the first 36 months; instead all of industry picks up the tab for these new treatments). In effect, many new therapies will get a cut more than once; via any deal as well as VPAS and it’s not unreasonable to think that genericisation will hit them later too, at the end of their lifecycle.

Striking the right balance?

While it’s just one year – and one that is arguably not representative given the impact of COVID-19 which has shaped demand for the NHS, as well as led to swings in spend on medicines – the comparison of the drivers of savings in 2020/21 illustrates the relative importance of VPAS. It’s been able to generate more than the business-as-usual discounting and off patent savings in 2020/21. But it’s also clear that it is just one way the NHS can get a good deal.

It's only right and proper that the NHS should seek to get a good deal as you can only spend £1 once and more health can be forgone if it is not spent wisely. NHS England emphasises how they are securing savings for the taxpayer.

But their reference to speed of access to innovative medicines highlights how there is a balance to be struck for innovation too. It’s not just getting the lowest price that matters, it’s also getting innovative treatments to patients fast. And these days there will be other goals as the NHS seeks to tackle health inequalities and more.


Industry has been highlighting their concern about rising payment percentages under VPAS and have cited risks including disruption to supply and risk to investment in the UK, when asked for their views about increasing payments under the alternative to the VPAS, the statutory scheme.

The Ethical Medicines Industry Group, EMIG, has also been pointing out how there are several hurdles for new medicines to be launched in England over and above VPAS. EMIG refers to commercial and managed access agreements and therapeutic tendering – all essentially deals – including the budget impact test as well as the very presence of NICE and the cost-effectiveness threshold, plus the need to pay for NICE technology appraisals.

Some medicines are apparently not even making it to the UK market. In work commissioned by the industry association, ABPI, and conducted by PwC, an anonymous Value & Access Director working at a large pharma company, said, “We have had several medicines now that we have not been able to launch in the UK despite having the lowest prices. That means when we look to launch other therapies, the UK is already being left out of the equation.”

That industry is pushing back is inevitable, even more so as VPAS is up for re-negotiation, with the current scheme running out on 31 December 2023. Industry is also no stranger to highlighting negative consequences if conditions become too tough. It’s always difficult to know as an outsider how real these are: is it a threat or a promise?

Has NHS England – and others that shape their role such as the DHSC and Ministers – struck the right balance? Or is it squeezing the industry too much with deals at both ends of the lifecycle? The onus will be on industry to provide compelling evidence either way.