Navigating the Evolving UK Life Sciences Landscape: Unveiling of the VPAG Scheme

The DHSC, NHS and ABPI have agreed a new deal to replace the Voluntary Scheme for Branded Medicines Pricing and Access (VPAS) with a new scheme effective 1 January 2024; the Voluntary Scheme for Branded Medicines Pricing, Access and Growth (VPAG).

The deal is set to save the NHS £14 billion over the length of the 5-year scheme, promoting affordability of medicines and speed up access to new treatments. The announcement follows the recent commitment from the government to invest an additional £520 million into the life sciences manufacturing industry over the next 5 years.

The predecessor scheme VPAS was effective from January 2019 and is set to conclude in December 2023. Whilst the original VPAS levy was 9.6% of annual eligible sales, as branded medicines revenues greatly increased, the associated VPAS levy scaled to 26.5% in 2023. This drew criticism from the pharmaceutical industry as it was considered detrimental to the core principle of promoting innovation in the UK.

The successor scheme VPAG is set to increase the annual allowed growth in branded medicines revenue from 2% in 2024 to 4% by 2027. A base rate levy of 10% will be applied to older medicines, while those which have not seen a price reduction within a certain timeframe will incur an additional 25% levy. This new mechanism intends to use the additional income to support lower payment rates for more innovative treatments. The VPAG scheme will be in effect from 1 January 2024 to 31 December 2028.

Following the surge in the VPAS rate to 26.5% from 15% in 2023, Celltrion withdrew Herzuma from the UK market, whilst AbbVie Inc and Eli Lilly and Co left the scheme and opted into the statutory scheme (27.5%) in response to the perceived "harmed innovation" associated to the VPAS levy mechanisms. Imminently, after the announcement of VPAG, Eli Lilly welcomed the successor scheme as a strong compromise to balance affordability and innovation in the UK, whilst reducing uncertainty for UK pharmaceutical manufacturers.

The agreement also committed to investing £400 million over the duration of the scheme to fund the Life Sciences Investment Programme, driving innovation, sustainability and growth. In particular, the investment programme is to focus on pioneering clinical trials, positioning the UK as a sustainable manufacturing hub, and supporting access to innovative medicines.

Certainly, the pioneers of the agreement were pleased with the compromise. Whilst Chancellor of the Exchequer Jeremy Hunt focussed on the savings to the NHS and to position the UK as a leader in the Life Sciences industry, Richard Torbett, Chief Executive of the ABPI cited the commitment to increased access to transformative treatments for patients and recognising the need to invest in the NHS to support R&D and economic growth within Life Sciences.

While the VPAG is a positive announcement for manufacturers of new and innovative medicines in the UK, the full impact remains unclear with rebate rates yet to be confirmed. Evidently, VPAG will have large ramifications for medicines which are no longer classified as “new” and haven’t undergone any price renegotiations in recent years. Given the longstanding concern over medicine supply issues in the UK, the impact of the new scheme on medicine shortages will be closely monitored by the NHS, industry bodies and manufacturers alike.

Are you considering how VPAG may impact your existing portfolio? Were you concerned VPAS may deter potential UK launches?

Get in touch with Decisive Consulting Ltd to explore how we can help navigate your journey through Market Access.

Written by Rob McCaskill and Craig Smith