ABPI slams UK government consultation on drug levy

For all the UK government’s rhetoric on supporting the life sciences industry, it seems destined to alienate the very sector it is trying to court.

Amid delicate negotiations with the pharma industry on the replacement for the voluntary scheme of revenue rebates for branded treatments, known as the Voluntary Scheme for branded medicines Pricing and Access (VPAS), the government has launched a consultation on a new statutory scheme that seeks to hold average clawback rates at highs of between 21% and 27%.

That compares to pre-pandemic rates of 9.4% for the statutory scheme, and 6.88% for VPAS, according to the Association of the British Pharmaceutical Industry (ABPI), which said the proposals would damage confidence in the UK as “a viable place to research, launch, and supply medicine.”

“Consulting before talks on a new voluntary scheme have progressed will be seen by the industry to be highly prejudicial to the outcome of negotiations,” said the industry group in a statement.

The voluntary and statutory schemes are levies that are both designed to control the prices of branded medicines to the NHS, with companies forced to pay a percentage of their UK revenues to the government if the NHS drugs bill rises by more than 2% annually.

The VPAS has been in place since 2019 and is due to expire at the end of this year, and the ABPI is currently negotiating with the government and NHS England on a successor, seeking a return to sub-10% rates that were prevalent before the pandemic.

The statutory scheme applies to manufacturers who opt out of the VPAS, as AbbVie and Eli Lilly did earlier this year in protest at what they described as “punitive” clawbacks with the voluntary system that are out of step with the rest of Europe, where clawbacks tend to be much lower.

Last year, only around 0.3% of branded medicines were subject to the statutory mechanism.

The ABPI claims that the statutory scheme proposals ignore any negative impact the decision to maintain rates at high levels will have on medicine supply and wrongly claim it will boost investment.

It comes right after government data published last week showed that life sciences foreign direct investment (FDI) fell by 47% between 2021 and 2022, a reduction of £900 million year-on-year, which coincided with a rise in the VPAS levy from 5% to 15% and, according to the ABPI, is linked to that increase.

The government maintains in its consultation that it intends to ensure that the two schemes work "in a complementary way". It adds, however, that the updates are “intended to ensure the scheme can continue to meet its objectives from 2024 onwards, whether this is alongside a successor voluntary scheme or as a standalone scheme in the absence of this.”

The proposals also include an increase in the statutory scheme’s allowed growth rate for NHS spending of 1.1% to 2%, to bring it into line with the VPAS, and revising which branded medicines are exempt.

They also include a mechanism for drugs at the end of their lifecycle that would impose a higher levy if they are in markets with low competition, and lower payments if there are higher levels of competition. The aim of that would be to allow for a reduction in the headline payment percentage paid by ‘newer’ products.

The ABPI contends that this lifecycle approach could result in the majority of branded generic and biosimilars facing “ultra-high clawback rates” at a time when manufacturers are warning that rebates are threatening the security of medicines supply.

“These proposals will set back any ambition to make the UK the best place in the world to research, launch, and supply medicines,” said ABPI's chief executive, Richard Torbett.

“Government data shows that when clawback rates rise, inward investment falls, along with the economic growth and jobs such vital investment delivers.”

Guy Oliver, general manager at biopharmaceutical company Ipsen UK & Ireland also weighed in on the development, saying: “As a growing inward investor with a strong UK footprint, Ipsen passionately shares the government’s ambition to make the UK a life sciences superpower. But we are disappointed that so soon after setting out proposals to improve the clinical trials environment, the government has undermined its own progress towards realising this ambition, with a move that could ultimately threaten the security of medicines supply to the UK.”

He added: “If we want to make the UK the innovation nation that it has the potential to be, then we need to invest in all parts of the life sciences ecosystem and that includes fairly rewarding innovation and creating an internationally competitive commercial environment. Today’s move is a backwards step in establishing the UK as a global leader in life sciences.”