Dismay as UK raises clawback rate on NHS drug spending

The UK government’s decision to raise the revenue clawback rate in the Statutory Scheme for controlling the costs to the NHS for purchasing branded medicines has prompted a swift rebuke from the pharma industry.

The decision to raise the rate to 24.4% to 27.5% from 1st April will make it less likely that pharma company investments will be made in the UK, undermining the government’s drive to make the UK a life sciences superpower, warned the Association of the British Pharmaceutical Industry (ABPI).

The Statutory Scheme was established alongside the voluntary scheme for branded medicines pricing and access (VPAS) as a means of limiting the growth in spending on medicines by the NHS. Drug manufacturers pay back a percentage of sales if spending growth rises above a threshold level – currently 1.1% in the case of the Statutory Scheme, and 2% for the VPAS, in the form of a levy.

Both vehicles have seen rapid acceleration in the clawback rate in the last couple of years, with the VPAS set to rise to 26.5%,including a 4.1% deferral from 2022, resulting in around £3.3 billion in returned sales to the government, according to ABPI estimates.

The government said when the proposal was first unveiled that the rise in the Statutory Scheme rate is designed to bring the two schemes into closer alignment in light of “higher than originally forecast growth in measured sales in 2022 and a subsequent increase in the VPAS payment percentage for 2023”.

The hike in VPAS has already caused two big pharma groups to exit the scheme – Eli Lilly and AbbVie – which said in January that the planned increase was “punitive”. Their decision to switch to the Statutory Scheme, which has historically carried a higher repayment rate, has been taken as a warning message to the government over the issue.

Lilly’s general manager for Northern Europe, Laura Steele, said the decision was a “missed opportunity” by the UK government to show its support of the life sciences industry and “show its commitment to ensuring patients can benefit from world-leading research and medicines in the UK.”

“This decision ignores industry’s response to the flawed impact assessment during the consultation, and signals that government is increasingly unlikely to address the barriers our industry is facing in bringing life-changing medicines to patients,” she added. “Holding the UK to a sustainable and internationally competitive rebate rate is crucial if we are to halt the trend of disinvestment in the UK, deliver on the Life Sciences Vision, and accelerate patients’ access to new medicines.”

The ABPI, meanwhile, maintains that the move will damage the UK economy, pointing to a just-published study by WPI Strategy that suggests maintaining high clawback rates for the next five years would cause a £50 billion hit to UK Gross Domestic Product (GP) by 2058.

“Such rates impact company investment decisions and have a detrimental economic impact and it is critical that the government understands this evidence,” said ABPI chief executive Richard Torbett.

Earlier this week, the trade organisation laid out a framework for a new agreement with the government to replace the VPAS, which will come to the end of its five year-cycle this year. It includes an annual £1 billion boost to the NHS, as well as an additional £1 billion new investment facility to “maximise the potential of the UK’s health and life science ecosystem”.

Central to the proposals is a fixed rebate rate of 6.88% from the industry that would be levied across all eligible NHS medicine sales. The investment facility would be provided by a 1.5% premium on NHS sales paid by scheme members in addition to the scheme payment rate.