Where do VPAS rebates go?

The 2019 Voluntary Scheme for Branded Medicines Access and Pricing (VPAS) saw the industry agreeing to make payments to the Department of Health and Social Care (DHSC). Payments are expected to exceed a total of £7 billion across the five years of the deal by the end of this year. But where have those billions gone?

In the first in a two-part series, Leela Barham used Freedom of Information (FOI) requests to try and find out, whilst the second looks at where VPAS rebates should go.

VPAS rebates worth over £7 billion

The 2019 VPAS, agreed by the ABPI and the government back in 2018, committed companies to make payments to the Department of Health and Social Care (DHSC) when growth in spending on branded medicines went above 2%.

The annual payment rates to ensure that this allowable growth rate is not exceeded have varied: from a low of 5.1% in 2021 to a high of 26.5% in 2023. The ABPI suggests that, collectively, companies will pay around £7.1 billion from 2019 to the end of 2023.

As Richard Williams put it in a March 2023 briefing, “The elephant in the room continues to be ‘Where is the money?’”

VPAS rebates shared across the UK

VPAS monies are paid to the DHSC, but because it’s a UK-wide scheme the DHSC then allocates monies across the four nations.

The DHSC said in an FOI response that the “current method for apportioning payments is based on primary care data for spend on licensed branded medicines.” The reason why is that this is the “most consistent data set available across the UK.” Calculating the proportionate shares suggests that this split does not change year to year.

The DHSC also noted that “the amount allocated to NHS England under VPAS each year is solely based on the income generated through the scheme in that year.” That presumably explains why they did not include England in their figures for allocations across the UK, but this has been estimated by taking the sum of VPAS payments and working out the balance (Table 1). That is a best guess, but uncertain, especially as the figures for Northern Ireland and Scotland differ – sometimes by quite a bit - based on their FOI responses.

That also seems to imply that NHSE is in for a bumper year in 2023. The ABPI estimates that VPAS payments will hit £3.3 billion this year alone. NHSE gets the lion’s share of paybacks, so it could be in for over £2.6 billion.

Table 1: VPAS allocations to devolved nations, 2019/20 to 2021/22, £ million

NHSE use VPAS rebates to support general funding of the NHS

NHSE suggest that they get allocations from VPAS in advance and as an estimate. NHSE put in their FOI response, “An estimate of the level of VPAS income which is expected to be received is assumed when the mandate is set.” 

The mandate provides the objectives and budgets for the health service in England each year.

The VPAS monies, therefore, go into a general pot. NHSE said, “The total mandate is then used as part of setting allocations to local systems. The proportion of funding received on an annual basis does not separate out VPAS funding from the combined title.”

The result is that it’s not clear how much of VPAS monies are kept by NHSE for their specialised services spending, or how much goes to the local NHS (which used to be Clinical Commissioning Groups (CCGs), but are now organised as Integrated Care Systems (ICSs)), or - in essence - where it ends up and what it is used to pay for.

Scotland uses VPAS rebates to fund the New Medicines Fund

The situation in Scotland differs. According to an FOI response from the Scottish Government, they have committed to using VPAS rebates to fund their New Medicines Fund.

The New Medicines Fund was worth £80m in 2019/20 and 2020/21, and £50m in 2021/22.

In practice, VPAS income has varied over time, so the Scottish Government has, in effect, had to top up. The FOI notes that they added £30m to the NMF in 2020/21. VPAS receipts from the DHSC were £50m in that year.

The FOI also notes how there will be a reconciliation process at the end of the VPAS term (although they do get that term wrong, referring to a four-year deal) to “ensure the commitment to fully invest the rebate in new medicines has been met.”

Scotland also treats VPAS monies as non-recurring.

Northern Ireland uses VPAS rebates to fund drugs

The situation in Northern Ireland differs again. According to an FOI response from the Department of Health, “When rebate monies are received, the value is logged against overall drug-related expenditure, effectively reducing the net spend in this area.”

The response added, “However, the receipts are not considered as ringfenced for solely drug-related expenditure purposes.” If the rebate was more than they spend on drugs, that money is then used for general funding of health and social care in Northern Ireland. If it was less, then the gap has to be filled with general funding.

The FOI response (very helpful!) noted that the percentage of VPAS rebates received in Northern Ireland covered 82% of drug expenditure in 2019/20, 98% in 2020/21, and 93% in 2021/22.

VPAS monies are also considered non-recurrent.

Wales does not use VPAS monies for the New Treatment Fund

In Wales, there is a New Treatment Fund. That fund supports faster access to medicines that have been recommended by NICE and by the Welsh HTA agency, the AWMSG.

According to an FOI response from the Welsh government, £16 million a year is allocated to the New Treatment Fund. They said that none of that comes from VPAS monies. Local health boards aren’t required to report back on their spending against that funding, so hard to know if it’s all spent, or not, overall.

Considering the DHSC FOI response, it is also clear that VPAS monies are far more than the £16 million allocated to the fund in Wales.

Four answers

It’s not unusual, and perhaps even predictable, to see the four nations of the UK take different approaches to health policy and what they do with VPAS rebates illustrates that variation. This is a reflection of the VPAS deal itself: it never said where the VPAS rebates should go and it never set out any mechanisms to find out. Should that change in a successor deal?