VPAG payment rate for newer medicines will be 14.5% in 2026

The government has announced that the 2026 payment rate for newer medicines under the Voluntary Scheme for Branded Medicines Pricing and Access (VPAG) will be 14.5 per cent, down from a record 22.5 per cent in 2025 [1]. 

The fall in the VPAG newer medicines payment rate follows last week's announcement of a new UK-US trade agreement, which included a commitment to ensure that the newer medicines payment rate in the Voluntary Scheme would not exceed 15 per cent of company sales revenue to the NHS for the next three years [2].

The VPAG’s newer medicines payment rate is calculated by the extent to which the NHS's demand for new medicines exceeds its capped budget for such spending, with industry required to cover the shortfall. 

The 15 per cent cap agreed under the UK/US deal has not been applied in 2026, due to a slowdown in the growth of NHS use of newer medicines across 2025, resulting in a 14.5 per cent payment rate as calculated under the existing VPAG scheme.

The payment rates for older branded medicines remain unchanged in 2026, with companies continuing to pay between 10% and 35% on their sales of each older medicine to the NHS, depending on the levels of price discount already offered to the NHS.

Companies also pay an additional one per cent on top of the newer and older payment rates in 2026 as a pre-agreed voluntary contribution to support an industry-funded investment programme aimed at improving the UK’s health and life sciences sector infrastructure [3]. For example, 18 new clinical trials hubs have been created across the UK to accelerate research [4]. 

This means that the total rebate for newer medicines will pay in 2026 is 15.5 per cent of revenues, once the investment programme payment is included. 

The high and unpredictable payment rates found in the UK have been a significant drag on UK life science competitiveness in recent years [5]. The UK/US deal commits the UK to addressing the country's past decade of underinvestment in medicines. 

Over the past decade, UK spending on medicines has been 9 per cent of total health spending, while similar countries spend around 15 per cent of their health budgets on medicines. For example, 17 per cent in Italy and Spain, and 14 per cent and 13 per cent in Germany and France [6].

Over the next 10 years, the UK plans to increase investment in new medicines from around 0.3% of GDP to 0.6% of GDP. Spending on all medicines will rise from 9 per cent to 12 per cent of total health spending, with key target milestones along the way. The UK government has stated that it expects this to cost up to £1 billion in additional spending over the next three years.

To ensure this is delivered, rapid talks between the ABPI and the UK government to design and agree a new, more sustainable scheme model from 2029 onwards will begin in the New Year.

Companies now have until 16 December to decide whether to participate in the VPAG scheme [7]. If they do not, they will join the Statutory Scheme, which currently has a 24.3 per cent payment rate for 2026. [8] 

Richard Torbett, Chief Executive of the ABPI, said: “It’s good that the amount of revenue companies will need to pay to the UK government has come down in 2026. The newly proposed cap on future payment rates for newer medicines should also provide companies with greater certainty up to 2028.

“However, this is only the first step in returning the UK to a more competitive position. Payment rates remain much higher than in similar countries, and there is work to do to accelerate the NHS's adoption and use of cost-effective medicines to improve patient care.

“The ABPI looks forward to working with the government to set out a sustainable alternative to the VPAG scheme, which will better support the NHS use of medicine, while also encouraging more UK-based research, and larger investment into UK life sciences.”