Will ABPI’s ambitious VPAG plans succeed VPAS? 15 May 2023
Negotiations on the successor to the UK’s voluntary scheme for branded medicines, pricing and access (VPAS) began on 4 May 2023, between the government, NHS England and the pharma industry – represented by the Association of the British Pharmaceutical Industry (ABPI).
The current VPAS replaced the 2014 Pharmaceutical Price Regulation Scheme (PPRS) in 2019. The mechanism is designed to improve patient outcomes, manage the NHS’ medicines bill and support the life sciences sector. It sets a cap on the total allowed sales to the NHS, which grows at 2% per year, with revenues above that paid back to the Department of Health and Social Care (DHSC). It is reviewed every five years, with the next agreement set to cover the period from 2024 to 2028.
The government calculates that the industry will have paid back £7 billion to the DHSC during the five years of VPAS since it was established in 2019.
However, there has been turbulence between the industry and government in recent months over both VPAS and the parallel Statutory Scheme for branded medicines, with the government introducing a VPAS rate hike from 15% to 26.5% in 2022. This was followed by a rise in the clawback rate paid by companies under the Statutory Scheme from 24.4% to 27.5%, beginning on 1 April 2023, which the government said was intended to bring the scheme more in line with the VPAS rate.
Speaking before the Statutory Scheme decision was confirmed, as the proposal was put out for consultation, ABPI Chief Executive Richard Torbett said, “Hiking these clawbacks to such uncompetitive levels risks undermining the UK’s offer to global life sciences companies. The government must use this opportunity to send a clear signal that it understands the real challenges facing our industry, and show they are ready to work with us to fix this broken system and put the UK back on the path to innovation-led growth.”
As VPAS clawback rates have risen sharply in the wake of greater NHS demand following the pandemic, the ABPI sees the scheme as no longer fit for purpose, as it has driven up repayment rates ‘far beyond sustainable levels’.
Now the industry is looking to convince the government to agree a more balanced approach, noting that the life sciences sector is at a ‘crossroads’ as negotiations begin on the new voluntary scheme.
The ABPI’s vision to replace the current VPAS centres on what it calls the Voluntary Scheme for Pricing, Access and Growth (VPAG). In its proposal document, the organisation states that the current difficult commercial environment for companies operating in the UK is the main reason why ‘the UK is losing out in investments in manufacturing and research, clinical trial numbers are falling, and we risk NHS patients having to wait for, or not get access to, medicines available in Europe’. It points to the recent rapid rises in the VPAS and Statutory Scheme revenue taxes as particular challenges and outlines the limitations of the existing VPAS.
Plans for Growth
Against this backdrop, the ABPI is calling for a mutually beneficial agreement that supports better patient outcomes, a financially sustainable NHS and UK economic growth. It details proposals to achieve these aims under the VPAG. These include a fixed payment rate levied across all eligible NHS sales of 6.88%, designed to bring such payments in line with comparator countries to unlock investment and growth in the UK.
A second strand would be the establishment of an Investment Facility of over £1 billion to maximise economic growth, funded by an additional 1.5% premium from the pharma industry. This investment would be used to support clinical research and genomics capacity, plus real world data recruitment, as well as to establish a new Medicines Equity Partnership with the aim of reducing healthcare inequalities across the UK.
Another important aspect of the VPAG would be backing for rapid patient access and adoption of new medicines from ‘a dynamic, independent, post-Brexit regulatory system with MHRA, NICE and SMC’. The ABPI believes that, if an internationally competitive framework can be agreed, the industry would be willing to investigate prioritising the UK as an early launch market, benefitting both patients and the economy.
While there are several issues to be ironed out on the journey to realise the ‘G’ for Growth in the new VPAG, the ABPI document points to analysis by PwC indicating some of the benefits that could be realised if the government were to adopt its plans. These include: the generation of an additional £68 billion in GDP over 30 years from increased R&D investment; a £16.3 billion boost to annual GDP from increased pharma exports, and the creation of over 100,000 additional jobs from pharma exports, foreign investment and greater numbers of life sciences IPOs. Additionally, improved patient access and innovative treatments would deliver more healthcare, improve outcomes and support the delivery of the NHS Long Term Plan.
Health Minister Will Quince said at the launch of the discussions, “These negotiations will ensure a new scheme continues to deliver value for money by providing significant savings for our health services, securing access to innovative, lifesaving drugs for NHS patients, and helping to reduce waiting times – one of the Prime Minister’s five priorities.
“It’s vitally important that the successor to the current scheme delivers for the taxpayer, patients, the NHS, and life sciences.”
Time will tell whether a balance can be struck that satisfies all these stakeholders. Negotiations are set to conclude in the autumn before the new scheme starts on 1 January 2024.