Pharma accuses UK of ‘mixed messages’ on rebate schemes

Pharma accuses UK of ‘mixed messages’ on rebate schemes

The pharma industry and the UK government may have reached an accord on the voluntary scheme of rebates used to limit rises in medicines spending in the UK, but the alternative statutory scheme remains a prickly subject.

New terms published by the government this morning have maintained the sales rebates payable by drugmakers on the sale of branded medicines to the NHS at historically high levels – namely 21.9% in 2024, 24% in 2025, and 26.8% in 2026.

According to the Association of the British Pharmaceutical Industry (ABPI), that perpetuates levels that “have damaged the UK’s international standing with global life sciences companies,” albeit slightly down on the record 27.5% rebate rate for 2023.

The new statutory scheme terms – published after a lengthy consultation period with industry – come shortly after an agreement on the alternative voluntary scheme that was hailed as a landmark deal by the ABPI last month.

The voluntary and statutory schemes are levies 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 a set amount.

Companies can choose to use the voluntary scheme, which from 1st January will be known as the Voluntary Scheme for Branded Medicines Pricing, Access and Growth (VPAG). The statutory scheme applies to manufacturers who opt out of that, as AbbVie and Eli Lilly did earlier this year in protest at what they described as punitive clawbacks with the voluntary system.

While the problems with the voluntary scheme seem to have been resolved, that statutory scheme will continue to run at a rebate rate well ahead of similar mechanisms in other countries, according to the ABPI. In Germany, for example, the rebate rate is 12%, while in Spain and Ireland it is currently 7.5% and 8.25%, respectively.

The industry group reiterated its position that the decision to press ahead with the government’s initial proposals despite fierce resistance from the industry will be damaging to the life sciences sector and threaten inward investment into the UK.

“This announcement sends a very confusing message to global life sciences investors,” commented ABPI chief executive Richard Torbett.

“The new Voluntary Scheme agreement shows that the government realises that capping the UK medicines market below its natural growth is unsustainable – yet ,,this Statutory Scheme continues to do so, resulting in damaging headline rebate rates which undermine the UK in the eyes of investors.”

The ABPI has, however, welcomed the decision to abandon an earlier plan to introduce a ‘life cycle adjustment’ (LCA) mechanism, which would have levied different rates on branded medicines sold to the NHS, depending on their age and competition in the market, but, according to the organisation, would have been unworkable and likely to result in low-margin branded medicines being withdrawn from the UK market.

That’s not necessarily the end of the LCA, however, as the government’s latest update notes it is “committed to the principle of ensuring sustainable spending on older branded medicines” and will consult again on the matter in 2024. It has indicated that it plans to bring the mechanism into line with what had been laid out in the VPAG.

Manufacturers now have to choose which scheme they will join next year before the end of 2023.

“The government has consistently said it wants to support the international competitiveness of UK-based life sciences,” said Torbett. “To really make a difference, they should use next year’s consultation to unlock the constraints on growth, which are impeding inward investment.”