The 2024 Voluntary Scheme for Branded Medicines Pricing and Access (VPAG) represented an unprecedented pharmaceutical policy experiment, attempting something no other pricing scheme had tried before: achieving three ambitious objectives simultaneously that have traditionally been seen as mutually exclusive [1]:

Preserve NHS financial sustainability (controlling medicines expenditure growth to safeguard broader healthcare budgets),
Achieve UK economic growth (boosting the life sciences sector as a key economic pillar)
Improve patient access (accelerating the availability of innovative medicines)

Conventional pricing schemes typically focus solely on cost control, making VPAG’s effort to balance all three objectives at once a bold policy innovation.

The five-year agreement between the government, NHS England, and the Association of the British Pharmaceutical Industry (ABPI) established differentiated mechanisms for newer medicines (patent-protected or within 12 years of authorisation) versus older medicines, while allocating £400 million into UK clinical research infrastructure through an innovative Investment Programme.

What Has Gone Wrong Thus Far: The Triple Mandate Under Threat

Since the advent of VPAG in 2024, payment rates have risen from 15.3% to 22.9% in just one year - a nearly 50% increase driven by additional NHS funding and higher-than-expected medicines utilisation [2]. This sharp rise resulted in £597 million in Q1 2024 alone, surpassing all quarterly payments from 2019–2022 combined under the previous scheme [3].

The situation worsened further with the implementation of July 2025’s statutory rate at 31.3%, creating a complex dual-scheme environment where companies face uncertainty about future obligations [4]. The ABPI declared a “VPAG crisis,” warning that current rates make the UK “uninvestable” and threaten the country’s life sciences ambitions [5].

This volatility fundamentally undermines each pillar of VPAG’s triple mandate: while attempting to ensure NHS financial sustainability through high rebate rates, the scheme now threatens UK economic growth by deterring investment and paradoxically risks reducing patient access as companies delay launches or withdraw products.

The Turning Point (August 2025): Streeting’s Ultimatum and Pharma’s Rejection

In August of 2025, negotiations between the government and the pharmaceutical industry reached a breaking point. Health Secretary Wes Streeting issued a private ultimatum to the ABPI, demanding acceptance of a revised package that included:

Lower rebate rates in future years to ease the burden on industry.
Double-digit price increases for new medicines to improve patient access.
Commitments to increase NHS net spending on branded medicines over the next decade [FT, Guardian].

Despite these concessions, the ABPI rejected the offer as vague and insufficient, citing concerns about competitiveness and the lack of a clear roadmap. On 22 August 2025, Streeting formally ended the talks, confirming that VPAG would continue unamended - locking manufacturers into paying rebate rates of around 22.9% for the foreseeable future [Guardian].

Streeting subsequently adopted a combative tone, accusing pharma firms of being “short-sighted” and vowing not to let patients or taxpayers be “ripped off.” His tough stance plays well politically but risks deepening the rift with an industry central to the UK’s life sciences strategy.

Why This Matters: All Three Pillars at Risk

Economic Growth Pillar: With UK medicines spending at only 9% of healthcare budgets compared to 17% in Germany and Italy and 15% in France, the UK is becoming “increasingly far from internationally competitive levels” [4,6]. Nineteen per cent of pharmaceutical companies now expect R&D investment cuts due to 2025 payment rates, directly threatening the UK’s £11 billion health research sector [7].

Patient Access Pillar: High effective rates (rebates plus NHS discounts) of up to 35% make older medicines unviable, threatening withdrawals and reduced competition. Delayed or skipped launches mean UK patients increasingly wait longer for innovative treatments.

Financial Sustainability Pillar: While rebates provide short-term NHS savings, long-term risks include reduced competition, innovation flight, and higher downstream healthcare costs as patients lack timely access to effective therapies.

Investment Programme: A Partial Offset

Despite these challenges, VPAG’s £400 million Investment Programme remains a sincere attempt to square the circle: 75% earmarked for clinical trials infrastructure, 20% for sustainable manufacturing, and 5% for HTA innovation. Yet, without stabilising rebate rates, these measures risk being outweighed by lost industry investment.

The Strategic Dilemma: Confrontation or Compromise?

The August breakdown highlights the fragility of trying to reconcile three competing objectives within a single scheme. Streeting’s stance may bolster his reformist credentials, but the standoff leaves UK competitiveness vulnerable just as global life sciences competition intensifies - and while US policy pressures on drug pricing remain high.

The risk is clear: without compromise, VPAG risks becoming a cautionary tale rather than a reliable model. The opportunity remains: recalibrating the scheme to create a virtuous cycle where NHS sustainability, economic growth, and patient access reinforce each other.

Conclusion: Beyond VPAG

The UK’s bold triple mandate remains an important experiment - but the events of last week underscore its fragility and sustainability. Whether VPAG evolves into a sustainable global model or becomes remembered as an ambitious failure now depends on whether political will and industry pragmatism can converge.

References

[1] Department of Health and Social Care. '2024 voluntary scheme for branded medicines pricing, access and growth.' GOV.UK, December 14, 2023.

[2] ABPI. 'ABPI comment on 2025 VPAG rates of 22.9%.' January 27, 2025.

[3] The Pharmaceutical Journal. 'Manufacturers repay nearly £600m to NHS in first three months of new voluntary pricing scheme.' October 15, 2024.

[4] ABPI. 'UK doubles statutory payment rate on pharmaceutical sales from July.' June 11, 2025.

[5] Pharmaceutical Technology. 'ABPI calls on UK Government to resolve ‘VPAG crisis’.' April 3, 2025.

[6] ABPI. 'Life sciences growth requires payment rates to return to internationally comparable levels.' May 8, 2025.

[7] ABPI. 'The UK must act to stem £11bn loss to health research.' June 4, 2025.

[8] NICE. 'Health Technology Assessment Innovation Laboratory (HTA Lab).' NICE, 2025.

[9] The Guardian. 'Wes Streeting’s row with pharma firms grows as they reject NHS drug pricing offer.' August 22, 2025.

[10] Financial Times. 'Wes Streeting issues private ultimatum to pharma groups in NHS pricing talks.' August 20, 2025.

[11] The Guardian. 'Wes Streeting criticises ‘short-sighted’ drug firms for rejecting pricing offer.' August 25, 2025.

[12] The Guardian (Nils Pratley). 'Tough talk from Streeting – but he still needs a deal with big pharma.' August 27, 2025.

Written by Nic Gwatkin

Decisive Dialogue 28th August 2025

Beyond Crisis: Transforming VPAG into a Model for Medicines Access