Debate on the voluntary scheme for branded medicines and the Life Sciences Vision

Background 

All pharmaceutical companies that supply licensed branded medicines to the NHS are subject to one of two schemes designed to control the NHS’ overall spend on branded medicines: 

• The Voluntary Scheme for Branded Medicines Pricing and Access (VPAS), or; 
• The Statutory Scheme. 

Any company that does not choose to join the VPAS is automatically enrolled under the Statutory Scheme.  

The Voluntary Scheme for Branded Medicines Pricing and Access 

The VPAS is a voluntary agreement between the Government and the UK pharmaceutical industry. Its main objective is to achieve a balance between keeping NHS medicines costs low and a fair return for the industry to enable it to research, develop and market new and improved medicines. 

A fundamental part of the scheme is the affordability mechanism; under this, scheme members pay a rebate of their revenue from medicines sales back to the Government if the Government’s total spend on branded medicines exceeds a specified threshold. 

The mechanism does not place any restrictions on the price a manufacturer may set for individual medicines. Instead, the mechanism caps branded medicines’ sales at an ‘allowed growth rate’. The 2019 – 2023 VPAS sets this allowed growth rate at 2% for each calendar year of the VPAS.  

The NHS continues to pay the commercially agreed prices to manufacturers for the medicines it purchases. At the end of a given period, the total spend for branded medicines is calculated. If the total is above the allowed growth rate, scheme members will pay the DHSC a percentage of their eligible sales. The amount that is paid back after each period depends on how much revenue, that is above the agreed growth rate, companies have generated. 

VPAS payment percentage for 2023 

In December 2022, the DHSC announced that the payment percentage for 2023 would be set at 26.5%, based on growth in total measured sales, and following an agreement (with the pharmaceutical companies) to defer part of the payment owed in 2022. It represented a rise from previous payment percentages: 

• 15% in 2022. This followed an amendment, agreed by DHSC and ABPI, to mitigate what would have been a higher rate of 19.1% owing to sales arising from Covid-19 demand. The agreement set out that the payment percentage for 2023 would consequently increase to capture this deferred income. 
• 5.1% in 2021. 
• 5.9% in 2020. 

• 9.6% in 2019  

The DHSC has published data on the total revenue generated by the VPAS and Statutory Schemes since 2018. The DHSC has estimated that the NHS will have saved £7 billion across the five-year VPAS. 

The Government has said the VPAS “includes strong commercial incentives to launch new products in the form of list pricing and exemptions from payments for innovative medicines containing a new active substance”. However, the Government has also said it is working with industry on a successor to the VPAS (which is due to end in 2023), and is open to ideas about how it would operate. 

Representatives of the pharmaceutical industry have objected to the increase in payment percentage, saying that it will reduce pharmaceutical companies’ investment in the UK and decrease the number of clinical trials taking place in the UK. 

The voluntary scheme beyond 2023  

The current VPAS scheme is due to end at the end of 2023.  

The Government has said it is working with industry and is open to ideas about how a successor to VPAS should operate. Sir Hugh Taylor, former chair of Guy’s and St Thomas’ and King’s College Hospital NHS Foundation Trusts, has been appointed to oversee negotiations for a successor scheme to the VPAS. 

The ABPI has set out its vision for a new Voluntary Scheme for Pricing, Access and Growth, in which a fixed payment rate of 6.88 % is levied across all eligible NHS sales. The Government has described the proposal as being “completely unaffordable”. 

Life sciences  

The Government’s Life Sciences Vision (PDF), published in 2021, is its “blueprint for ensuring the UK becomes a world leading science superpower and global life sciences leader”. In the Vision document, the Government reiterated its commitment to “improve the access, adoption and spread of innovation across the NHS”, adding that this was “underpinned by the 2019 Voluntary Scheme for Branded Medicine Pricing (VPAS)” which, it stated, demonstrated “Government, NHS and Industry’s shared commitment to help patients access new treatments while managing affordability”.