Pharmaceutical industry backs Budget move to lift VAT barrier on free-of-charge medicines

In today's Budget, Chancellor John Healey moved to settle a long-running VAT issue that had become a barrier to pharmaceutical companies providing free-of-charge medicines to NHS patients.

Commenting on the move, Joe Edwards, ABPI Executive Director, UK Competitiveness, said:

“Removing the VAT charge on medicines that companies provide free of charge is a significant win for patients, lifting a barrier to access, protecting continuity of care and supporting the clinical research that brings new treatments to the UK.

“We support this measure, which follows sustained work by patient groups, the ABPI and our members to inform this change. We will keep working together to ensure the relief is simple to use and covers the full range of programmes that matters to patients.”

Medicines supplied free of charge can provide a vital route to treatment for patients with serious conditions. Companies supply them through early access and compassionate-use programmes, including where patients have limited treatment options, and to allow people who have benefited from a medicine during a clinical trial to continue receiving it afterwards. These programmes can also bridge the period before a medicine becomes routinely available through the NHS.

Until now, companies could face a VAT bill on medicines they provided without receiving any payment. That additional cost has put pressure on programmes intended to help patients, creating a tax barrier to companies supplying medicines free of charge.

The Budget also included measures of wider relevance to the UK’s life sciences sector, including:

• over £1 billion of new investment from Convatec, Vertex Pharmaceuticals and Kindeva, backed by almost £70 million of government grant funding

• a continued commitment to the Corporate Tax Roadmap, keeping corporation tax capped at 25 per cent and maintaining full expensing

• new powers under the Regulation for Growth Bill to test innovative products, including medicines, under temporary and controlled changes to regulation