ABPI Satisfied with UK Statutory Scheme’s Alignment with VPAG, yet Raises Concerns About Untested Methods
Newest Proposals to Statutory Scheme
In April 2024 the UK Department of Health and Social Care (DHSC) concluded a consultation on its revised proposals to update the 5-year Statutory Scheme for cost-containment of NHS spending on branded medicines. The DHSC introduced an updated version of the Statutory Scheme from 1 January 2024, as highlighted in Decisive Consulting’s coverage (https://www.linkedin.com/pulse/uk-government-publishes-response-consultation-roxae/?trackingId=Xr7BIX7ES3u6IrKq5PrxiA%3D%3D), while additional updates were due to be phased in throughout the year. As of April 2024 the latest proposed revisions to the Statutory Scheme include(1):
NEW: The introduction of a differential payback mechanism for ‘newer’ and ‘older’ medicines. The separate affordability initiative will use the same definition as in the Voluntary Scheme for Branded Medicines Pricing and Access (VPAG) scheme, however the payment percentages will differ between the two schemes.
Newer medicines: The headline payment percentage will be set according to a target level of allowed sales, with allowed growth maintained at 2% per year, but a series of one-off adjustments will be made to the allowed sales baseline in 2024 (11.6% in Q3-Q4 2024), 2025 (14.1%) and 2026 (16.5%)
Older medicines: A basic rate will apply at 10.03% in Q3-Q4 2024, 10.6% in 2025 and 11% in 2026, and a top-up rate of between 1% and 25%, if applicable, based on the level of observed price erosion from the reference price
NEW: The threshold for an exemption from scheme payments for small companies will be raised from companies with sales of less than £5 million to less than £6 million. This exemption was also introduced in the VPAG scheme. However, the VPAG Scheme also includes an exemption for medium-sized companies with sales up to £30 million who are exempt from payment of their first £6 million of sales. This exemption was not incorporated to the Statutory Scheme update.
ABPI Response
The Association for the British Pharmaceutical Industry (ABPI) is supportive of the DHSC policy to achieve broad commercial alignment between the Statutory Scheme and VPAG. While the ABPI has welcomed the simplicity of the DHSC’s proposal to set payment percentages for Q3 and Q4 2024, the industry association remains cautious due to the untested nature of the differential payback mechanism, particularly with regards to the top-up payments for older medicines. The ABPI highlighted the lack of opportunities that exist in the Statutory Scheme for dialogue between industry and the government, whereas a platform for dialogue and monitoring exists in VPAG. Another key area for concern highlighted by the ABPI is the maintenance of the allowed growth rate at 2% throughout the duration of the Statutory Scheme. The ABPI believes this cap could result in unsustainable repayment rates and thereby could potentially be detrimental to suppliers of medicines to the UK and ultimately affect patient access to certain medicines. In comparison, the VPAG cap on allowed sales is set to increase each year by a nominal allowed growth rate of 2% in 2024 and 4% by 2027. Elsewhere, the ABPI has welcomed the DHSC’s proposals for exemptions for plasma-derived medicinal products (PDMPs), products with sales under £1.5 million, and small-sized companies with sales up to £6 million. Nevertheless, the ABPI has recommended an extension of latest exemptions to fully match those in VPAG.
Looking Ahead
The exact timing for introduction of the DHSC’s revised proposals is unclear but the expectation is that they will be phased in over the coming months to account for the setting of the Q3-Q4 payback percentages. The updated proposals offer a level of transparency and predictability to manufacturers, who will be analysing their positioning at the product level with regard to suitability for both schemes as well as the possibility of applying for exemptions to top-up repayments.
While the headline payment percentages for newer medicines are broadly commercially equivalent between both industry agreements, the VPAG scheme’s methodology employs a dynamic repayment percentage for newer medicines that ensures industry meet the payment requirement for each year to keep overall sales within the cap. The Statutory Scheme proposals utilize a less flexible approach with set payment percentages for newer medicines until 2028.
References
1. Department of Health and Social Care (2024) Proposed update to the statutory scheme to control the cost of branded health service medicines
Written by Craig Smith
Decisive Dialogue 13th May 2024
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