NHS medicine pricing policy row escalates after talks break down

An impasse has developed between the UK Government and the pharmaceutical industry over NHS medicine pricing, with negotiations breaking down after the Association of the British Pharmaceutical Industry (ABPI) rejected the government's latest proposals as ‘unsustainable’. 

At issue is a voluntary pricing scheme for branded medicines agreed in 2023 by the government, NHS England, and the ABPI as a five-year deal.  

The scheme sets an annual cap on how much the NHS can increase its spending on branded medicines. When spending exceeds this cap, pharmaceutical companies must pay rebates to the government – essentially returning excess revenues above the agreed threshold.  

These rebate rates were initially forecast at around 15% but have risen to about 23% this year as NHS spending on branded medicines grew from £6.9bn to £8.4bn. 

As a result, the pharmaceutical industry requested an earlier mid-scheme review – originally scheduled for October – to discuss why the scheme had not delivered the falling rebate rates forecast and to reach a new agreement. 

The government put forward what it called an ‘unprecedented offer to bring down payment rates for all future years of the scheme’, claiming it would reduce the industry’s costs by around £1bn over three years and much more over the next decade. 

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The government claim their offer would have enabled 

• Lower VPAG rates in all future years of the scheme; 

• Incentives to boost investment in UK-based clinical trials; 

• An average percentage increase in the price of news medicines in the double digits, supporting wider patients access to a range of medicines; 

• A commitment to accelerating net spend on innovation medicines. 

However, drug companies forecast repayments totalling £13.5bn over the same period, so the ABPI rejected the government’s deal, and no agreement was reached.  

A government spokesperson said: ‘This was an unprecedented offer, so it is regrettable that, following weeks of delay, ABPI members are unwilling to take our proposals to a board vote. 

‘We have therefore determined that the interests of patients and the NHS are best served by concluding the review and continuing with the existing VPAG scheme unamended, while continuing to support the UK’s world leading life sciences sector through investment, innovation and reform as set out in our Life Sciences Sector Plan and 10 Year Health Plan.’ 

According to the ABPI, the knock-on effect of this impasse will be:  

• Fewer new medicines launched in the UK; 

• Greater difficulty running clinical trials; 

• More examples of medicines being ‘optimised’ by NICE, restricting their use to smaller patient populations than they are licenced for; 

• And a general reluctance from pharmaceutical companies to invest in the UK market. 

A spokesperson for the ABPI said: ‘Despite good faith and best efforts on both sides, the industry and government have not yet been able to reach an agreed way forward during the accelerated and extended VPAG mid-scheme review. 

‘The issues it was set up to fix remain to be solved. Specifically, we need to reach a solution that does not require the industry to pay back nearly three times as much as is required in other European countries. 

‘This means agreeing to changes that will rapidly return the UK to single-digit, internationally competitive payment rates on industry sales to the NHS, and addressing NICE’s baseline cost-effectiveness threshold, which has not changed for almost a quarter of a century.’ 

American biopharmaceutical company, Gilead Sciences, recently decided to withdraw from the NICE appraisal of Trodelvy in HR+/HER2- metastatic breast cancer (mBC). They said: ‘Despite positive Phase III data, and the potential to help patients with few remaining options, we have no confidence that the current NICE cost-effectiveness framework would enable a positive recommendation in this indication’. 

If there was greater flexibility built into the system or a path for Gilead to have ‘bespoke discussions’ for this situation, they wouldn’t hesitate to move forward, they added. 

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Community Pharmacy England said: ‘We hope government and the ABPI can find a resolution soon to help prevent any knock-on effects in the medicines supply chain, which would negatively impact pharmacies and the patients they serve.’ 

NPA director of corporate affairs, Gareth Jones added: ‘This dispute on the VPAG scheme brings to mind that our sector can be buffeted about by decisions made far away, including the other side of the Atlantic. Ultimately community pharmacy income needs to be less exposed to market factors that we can’t control – this will help us have a firmer grip on our own destiny as well as giving us a more sustainable, service-led role in the health care system.’ 

The pricing dispute is further complicated by concerns over how NICE evaluates new medicines for NHS use. The regulator currently approves drugs that cost £20,000-£30,000 for each additional year of quality life they provide to patients, but the pharmaceutical industry argues these thresholds are too restrictive given rising drug development costs. 

Richard Torbett, ABPI chief executive, said: ‘The industry continues to believe that finding a solution is possible, and that doing so is the necessary first step in unlocking our sector's potential to improve UK health and economic growth. 

‘This is also essential for the NHS patients who may be unable to benefit from new innovations if companies do not think their medicines are likely to be approved for use on the NHS or approved but not made available to all the patients who might benefit.’ 

The dispute comes amid uncertainty in the pharmaceutical sector over potential US tariffs. Pharmaceuticals are currently exempt from the 10% baseline tariff the US has imposed on UK goods, but President Trump has indicated that tariffs on pharmaceuticals could be on their way. 

He’s also put pressure on global pharmaceutical companies to reduce their US medicine prices to European levels.  

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During a press conference on 12 May, Trump highlighted the disparity in international medicine pricing by recounting a conversation with a friend in the UK about weight loss drugs.  

He quoted the friend saying: ‘I’m in London and I just paid for this damn fat drug I take. It's the identical pill that I buy in New York but here I'm paying $88 and in New York, I'm paying $1,300. What the hell is going on?’ 

Trump’s comparison of US and UK medicine pricing has placed even greater strain on negotiations between the ABPI and government.