Government sends mixed message to global life science investors

The government has published new terms for the Statutory Scheme for branded medicines, maintaining sales rebates at levels which have damaged the UK’s international standing with global life science companies [1].

The announcement follows the agreement in mid-November of a new Voluntary Scheme for Pricing, Access and Growth (VPAG), [2] a negotiated alternative scheme which companies can opt into over the Statutory Scheme.

Under the new Statutory Scheme, companies will pay a rebate on the sales of branded medicines to the NHS of 21.9% in 2024, 24.0% in 2025 and 26.8% in 2026.

While the published rates are down on the record 27.5% rebate in 2023, they remain well above the historical average of 10.6% before this year.

The UK’s statutory rebate rate is significantly higher than other similar mechanisms operated by other countries - for example, 12 per cent in Germany (and under review for future years), 7.5 per cent in Spain and 8.25 per cent in Ireland.

Despite unprecedented levels of objections to the consultation, with an overwhelming majority of the 97 responses rejecting the plans, the government has largely decided to press ahead with plans industry leaders have warned are likely to be highly damaging to UK life sciences and NHS patients’ access to medicines [3].

However, the government has decided not to implement one of the most controversial proposals in the Statutory Scheme, the ‘Life Cycle Adjustment,’ which was widely seen by industry as unworkable and likely to result in low-margin branded medicines being withdrawn from the UK market.

Instead, the government will consult again early in the New Year to ensure arrangements for ‘younger’ and ‘older’ medicines in the Statutory Scheme more closely align to the newly agreed Voluntary Scheme, maintaining broad commercial equivalence between the two.

Richard Torbett, Chief Executive of the ABPI said: “This announcement sends a very confusing message to global life science investors. 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 government has consistently said it wants to support the international competitiveness of UK-based life sciences. To really make a difference, they should use next year’s consultation to unlock the constraints on growth which are impeding inward investment.”

Manufacturers of branded medicines are required to join either the Voluntary Scheme or else be in the Statutory Scheme, and must choose which to be a member of for the following year before the end of December 2023.