The British Generic Manufacturers Association (BGMA) has warned that a ‘crippling’ VPAS rate paid by the pharmaceutical industry will have ‘significant’ implications for medicines supply if it continues to rise.

As negotiations on the next VPAS agreement are underway, BGMA said that patented and off-patent medicines should not be treated the same under the next agreement, and railed against the High Court’s decision not to allow the trade body for generic and biosimilar medicines to participate in the discussions.

The current VPAS scheme is due to expire at the end of 2023 and negotiations are expected to conclude this autumn, ahead of a new scheme beginning on 1 January 2024.

BGMA warned that increasing rebate rates could cause manufacturers of branded generics and biosimilars to withdraw their products from the market and discourage any new launches.

This could reduce competition in the medicines market, which the BGMA said is essential for low costs and increased patient access.

The voluntary scheme for branded medicines pricing and access (VPAS) asks manufacturers of branded medicines to return over a quarter of their revenue to the Department of Health and Social Care – an increase from 5.1% of their sales revenues in 2021 to 26.5% in 2023.

VPAS was introduced in 2019 to ensure that government spending on branded medicines increases by no more than 2% per year.

But the BGMA said that patented branded medicines and off-patent branded generics and biosimilars should not be treated the same under the scheme.

And it warned that if the ‘current rocketing rebate rate’ continues, manufacturers might choose not to launch off-patent branded ranges and may even reduce their current portfolio, which BGMA said would cost the NHS ‘billions of pounds of vital savings’.

It is estimated that generics and biosimilars, which make up four in five prescription medicines dispensed by the NHS, saves the health service around £15bn each year, because when a branded drug loses its patent, generic or biosimilar competition can offer an off-patent version at 95% less of the price.

However, in addition to operating within the competitive off-patent market, all biosimilars and some generic medicines are required to have a brand and pay the VPAS rate, often for regulatory compliance reasons.

Mark Samuels, chief executive of the BGMA, said in a statement this month that it was ‘not sustainable for manufacturers to have to pay a further spiralling VPAS rebate on their revenues on top of a successful and well-functioning competitive market’.

He added: ‘Over the past 10 years, VPAS has created a system which has treated on- and off-patent medicines in the same way, despite their supply being driven by different business models, cost pressures and market dynamics.’

He said that when while the value of on-patent medicine sales (branded medicines) had increased, on average, by 18% per year since 2108, the value of off-patent sales (branded generics) had grown by an average of 2% each year.

‘If you add the need to pay a VPAS claw back on that 2% sales growth, manufacturers have on average not been able to grow at all in recent years. And it means that one part of the pharmaceutical industry is disproportionately paying for growth in another part of the industry,’ he added.

He said that off-patent manufacturers were already operating on ‘razor thin margins’ and the increase in VPAS rate was ‘simply economically unsustainable and crippling for manufacturers’.

He warned: ‘The impact will be that companies reluctantly take the tough decision to rationalise their portfolios reducing competition and the money the NHS saves. We will also see a reduction in launches of new products in the UK which will also significantly reduce competition.’

And he said that the BGMA should have been included in the upcoming negotiations around VPAS.

DHSC said that the negotiations between the government, NHS England and manufacturers, represented by the Association of the British Pharmaceutical Industry (ABPI), intend to keep the price of branded medicines affordable for the NHS, secure resilient provision of safe and effective medicines at reasonable prices, and encourage efficient competition in medicines supply.

The BGMA was offered formal observer status, which would have allowed the trade body to make representation on points relevant to its members, as well as having sight of materials and proposals throughout the negotiations.

But it was not allowed to participate in the negotiations, to which the BGMA launched a High Court appeal, which was recently dismissed.

Mr Samuels commented: ‘We have only ever wanted an equal opportunity to be a proper part of the negotiations discussions given the significant impact they have on our sector.

‘We don’t feel one trade association can adequately balance all needs of the industry.

‘For us to be denied this is entirely illogical in our view and the High Court judgment fails to address the fundamental issue of the differing priorities of the on and off patent sectors.’

But a DHSC spokesperson said that it welcomes the court’s decision.

‘Our priority in negotiations remains to agree a mutually beneficial new voluntary scheme that supports better patient outcomes, a strong UK life sciences industry, and the sustainability of NHS spend on branded medicines,’ they added.