NHS medicines spending in England in greater focus

Leela Barham provides a perspective on the ABPI blog that covers understanding NHS medicines spending in England.

NHS stats on medicines spend exclude voluntary scheme rebates

On 10th March, the ABPI’s Pinchas Kahtan posted a blog that discussed what statistics from the NHS Business Services Authority (NHBSSA) on medicines spend by the NHS tells the public.

Kahtan starts by referring to the “lastest NHSBSA data release.” Kahtan said these latest NHSBSA figures put the total cost to NHS commissioners in England for medicines, appliances, and medical devices at £19.9bn for 2023/24. Kahtan notes that this “does not reflect the real cost to the NHS because industry payments back to government and other financial adjustments are not included.”

Kahtan is pointing out how NHSBSA reporting is gross spending, not net, at least when it comes to branded medicines.

Biggest voluntary scheme rebates ever expected in 2025

Missing from Kahtan’s blog is how the latest data is from November 2024, three months ago. So, why the blog now?

Could it be because the amount that the ABPI expects members of the Voluntary Scheme for Branded Medicines Pricing, Access and Growth (known as VPAG), to pay back to the Department of Health and Social Care (DHSC) is the highest annual amount in the history of voluntary scheme rebates? In January 2025, the ABPI said they expected VPAG rebates to be worth around £3.4bn in 2025.

The VPAG rebates are directly related to NHS spending on branded medicines (with some adjustments), but it’s not related to how NHS funding actually flows on those very same branded medicines. Perhaps this explains why the NHSBSA don’t mention it; their work is based upon volumes and costs of prescriptions that are seen on NHS records. VPAG payments sit above this and are calculated by the DHSC using data submitted by member companies. Understandable, then, why NHSBSA doesn’t include VPAG rebates in their number crunching.

What else is worth £3.4bn? It’s the same as the capital allocated over three years to invest into digital, data, and improvement-powered transformation in the NHS starting in 2025/26, announced in the March 2024 budget. The Department for Business and Trade had total group operating expenditure of £3.4bn in 2023/24. £3.4bn was also turnover on the GSK shingles vaccine in 2023/24. So, £3.4bn is a lot. Understandable, then, for the ABPI to want to raise awareness.

Now, the ABPI thinks the payback will be £3.5bn in 2025, due to an added £0.1bn from an underpayment in 2024 amortised across future years of VPAG, which is due to run until 2028.

Kahtan’s blog also suggests that £2.8bn of the 2025 payback will go back to the NHS in England. It begs the question, though: where will it go after that?

“Real” costs and “paper” costs

There are complexities even leaving aside the issue of accounting for the VPAG rebates because of what Kahtan calls “paper costs” related to NHS spending on medicines. These are costs that are recovered by the government.

Kahtan notes Value Added Tax (VAT) is on some, but not all, medicines. VAT goes back to HMRC, but Kahtan points out that this is not necessary redirected back into the NHS.

Dispensing costs are also highlighted as being part of NHSBSA stats, considered by Kahtan as a “real cost”, but also described as having the impact of “inflat[ing] the apparent cost of the medicines themselves.” But, since they have to be incurred in order for the medicines to be given to patients, from an NHS perspective it’s what it costs for medicines in a meaningful sense. Identifying the costs separately is useful, though, because those costs could change over time.

Greater transparency on central rebates

Rebates are given a special mention by Kahtan. It’s an improvement in the NHSBSA stats that they now have an adjustment for central rebates given by companies. That includes rebates under the Cancer Drugs Fund (CDF), as well as rebates agreed as part of other commercial agreements. Historically, NHS stats haven’t accounted for these.

Central rebates amounted to £631 million in England in 2023/24. This explains the headline stat of a £19.9bn spend on medicines, appliances, and devices by the NHS in England, because gross spending was £20.6bn before those.

Medicines spend should be an investment

Kahtan suggests that the NHSBSA spend data can be looked at differently, as “investments into innovation and the kinds of treatments available to patients.” That leads to a discussion of how the UK does not spend as much on medicines as similar countries.

The trouble with these comparisons is that, whilst there should be a debate about the amount that the NHS spends on medicines, it’s not clear if other countries have gotten the amount right either, especially when there is no consideration of the benefits for that spend.

Call for transparency

Kahtan makes a plea for transparency. “There is a need to ensure transparency in NHS spending data, including what it covers, the impact of industry payments, and the bearing of these on NHS funding decisions,” according to the blog. However, there aren’t any suggestions made about how to deliver these.

Simple steps to increase awareness of VPAG

Paybacks to government linked to NHS spending on branded medicines have not been referenced in NHS medicines stats since industry first underwrote the NHS branded medicines bill in 2014. Probably, at the very least, not since pharmaphorum looked at this issue back in February 2020.

The simple steps to increase awareness of VPAS – as it was then called – set out in 2020 still apply. Providing weblinks to routine reporting from the DHSC on VPAG into NHSBSA publications that cover branded medicines spend along with a short explanation of the scheme rebates can’t be that hard to implement?

Having a clear link on spending on medicines by different parts of the NHS and VPAG rebates – presumably what is needed so that VPAG rebates can have a bearing on NHS funding decisions – as well as just where VPAG rebates go will be tougher to deliver. These are issues that began in 2014, but haven’t been resolved in successor voluntary schemes. Will they be tackled in the next?