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  • Aroudra Outtandy

One step forward, two steps back: Is the UK driving away pharmaceutical manufacturers?

The UK voluntary scheme payment percentage on NHS sales of branded medicines was set to 26.5% in 2023, almost double from 2022 (15%). Pharmaceutical companies are now expected to return approximately £3.3 billion in sales revenue to the NHS. This represents a substantial increase from £0.6 billion in 2021, and £1.8 billion in 2022.

by Aroudra Outtandy - Consultant

The UK’s Department of Health and Social Care (DHSC) announced in January that the voluntary scheme payment percentage on National Health Service (NHS) sales of branded medicines will be set to 26.5% in 20231. The payback rate has almost doubled from 2022 (15%), leading to backlash from multiple industry representatives.

Pharmaceutical companies are now expected to return approximately £3.3 billion in sales revenue to the NHS. This represents a substantial increase from £0.6 billion in 2021, and £1.8 billion in 20222.

The alternative scheme, known as the statutory scheme, has also increased the payback rate to up to 27.5% (previously 24.4% in 2022)3 for members joining the scheme after Q1 2023.

What is VPAS?

In the UK, the price of branded prescription drugs used in the NHS are agreed under two separate schemes4:

  • A voluntary pricing scheme negotiated between the Department of Health and Social Care (DHSC) and the Association of the British Pharmaceutical Industry (ABPI), known as Voluntary Scheme for Branded Medicines Pricing and Access (VPAS)

  • A statutory pricing scheme, which governs the prices of branded prescription medicines sold to the NHS by manufacturers that opt not to participate in the voluntary scheme

The payback rate applies to corporate members of the Voluntary Scheme for Branded Medicines Pricing and Access (VPAS), which replaced the Pharmaceutical Pricing Regulation Scheme (PPRS) in 2019. Companies participating in the VPAS must return any excess sales revenue when a maximum sales growth rate is exceeded. VPAS has three main objectives that aim to benefit pharmaceutical companies as well as the UK healthcare system2:

  • Improve patient access to medicines by getting the best value and most effective medicines into use more quickly

  • Keep the branded medicine bill affordable for the NHS through a cap in growth of branded sales

  • Support innovation and a successful life sciences industry in the UK

Given that the government prefers manufacturers to sign up to the VPAS where possible, it periodically updates the relevant legislation to ensure that the terms of the statutory scheme are not more attractive than the voluntary scheme.

Is an increase in the payback rate justified?

This year’s VPAS payback rate of 26.5% is certainly unprecedented and substantially higher than previous years. The rate was fixed at 5.1% in 2021, and 15% in 20225.

An additional cost burden is the deferment of the 2022 rates which were capped at 15% after the government intervened to reduce the predicted rates of 19.1%, following increased spend on medicines during the pandemic6. The remaining 4.1% has been added to the 2023 bill.

Figure 1: The VPAS payback rates between 2019 and 2023. ABPI5.

The payback rate in the UK greatly exceeds those in Germany (12%), Spain (7.5%), and Ireland (9%)7. Given that the UK spends less than other countries on medicines, manufacturers are finding it very difficult to accept such high payback rates. The UK currently spends 81 pence for every £100 of GDP, compared to £1.95 in Germany or £1.84 in Japan7.

But just how much can the NHS benefit from increased rates? The British Generics Manufacturers Association (BGMA) has warned that the repayments create an unsustainable environment in the context of branded generics and biosimilars. An independent analysis highlighted that the NHS will lose out on almost £8bn of branded generics and biosimilars savings with a VPAS rebate of 25-30% between 2024-20288. Higher payback rates are likely to result in:

  • Increases in reimbursement prices stemming from higher supplier selling costs

  • Reductions in discounts offered to clinical commissioning groups, meaning less local NHS savings

  • Higher secondary care tender prices

It is clear that recent financial pressures have contributed to the increase in payback rates – however, the level of increase is difficult to justify for the reasons mentioned, especially when one compares with other European countries.

Strong backlash from manufacturers

Unsurprisingly, many manufacturers have shared their displeasure with the rate in recent months, including representatives from AbbVie, Amgen, Bayer, Bristol Myers Squibb, CSL Behring, Daiichi Sankyo, Eli Lilly, and Company, Gilead Sciences, Jazz Pharmaceuticals, Merck, MSD, Novo Nordisk, Takeda and Sanofi. In addition to this, AbbVie and Eli Lilly and Company announced that they are quitting the VPAS scheme following the announcement in January, with both companies deferring to the statutory scheme instead.

Much to their frustration, however, the statutory scheme has also increased the payback rate this year from 24.4% in 20223. Companies that join the statutory scheme after Q1 2023 and/or do not make a scheme payment in Q1 2023 will make payments at percentage rate of 27.5% on any sales made under the statutory scheme in Q2 to Q4 2023. Companies that are statutory scheme members and make a payment in Q1 2023 will do so at a rate of 24.4% on sales in Q1 2023, followed by 28.6% on sales in Q2 to Q4 2023. This follows a request from multiple manufacturers for the rate to remain frozen at 24.4%.

The UK revenue rebate is the latest setback for manufacturers and comes on top of other rising business taxes and the costs of doing business in the UK. The rocketing charges are forcing pharmaceutical companies to reduce their footprint, as well as R&D and manufacturing investments in the UK. Bayer and Bristol Myers Squibb have both suggested that they will reduce their UK footprint amidst challenging market conditions9.

The number of participants recruited to industry clinical trials on the National Institute for Health and Care research Clinical Research Network (NIHR CRN) has decreased by 44% from 2017/18 to 2021/2210. Reduced access to industry clinical trials has substantial consequences for patients seeking to access innovative treatments, especially for those with limited treatment options. The ABPI states that slow and variable study set-up timelines, driven by costing and contracting challenges, are the main drivers behind this decline. Between 2018 and 2020, the median time between a clinical trial in the UK applying for regulatory approval and that trial delivering its first dose to a participant rose by 25 days to 247 days – placing the UK 7th amongst a basket of comparator countries10. Pharmaceutical companies are increasingly conducting their trials in other countries (Table 1) and reviewing UK research affiliate headcounts.

Figure 2: Number of industry clinical trials initiated in the UK per year, by phase (2012-2021). ABPI10

Table 1: Global rankings – Number of industry clinical trials initiated in 2021, by country, by phase. ABPI10

The pharmaceutical sector in the UK has already seen a substantial decline in innovative research over the last few years for multiple reasons, and the increase in revenue clawback is likely to contribute further to this trend.

Is the UK providing any opportunities to manufacturers?

It has certainly not been entirely ‘doom and gloom’ for pharmaceutical manufacturers in the UK. Steps have been taken to promote innovation and drug launch in recent years, with a focus on expediting access to new medicines. Examples of such recent initiatives include4:

  • The Innovative Medicines Fund (IMF), launched on 7 June 2022, which aims to provide NHS patients in England with early access to potentially life-saving and cutting-edge non-cancer treatments – particularly those for rare diseases. It operates much like the Cancer Drugs Fund (CDF): as a managed access fund for innovative non-cancer drugs for which there is uncertainty in relation to their efficacy and cost-effectiveness.

  • The Early Access to Medicines Scheme (EAMS), which is designed to enable the most innovative new medicines to be made available to patients before marketing authorisation has been formally granted.

  • Project Orbis, a scheme enabling participating regulatory authorities to pool resources in order to more quickly approve innovative cancer medicines.

  • The Innovative Licensing and Access Pathway (ILAP), which aims to facilitate closer collaboration between the MHRA and manufacturers in order to speed up approval of new medicines.

  • Rare diseases action plans for England and Northern Ireland (launched in February 2022 and March 2022 respectively), which aim to ensure that patients obtain faster diagnosis and new treatments through a number of commitments to improve care.

  • A new “subscription” style reimbursement model that allows companies to be paid upfront based on a drug’s value to the NHS (rather than volume) led to a pioneering agreement with Shionogi and Pfizer in June 2022 to make their antimicrobial drugs available to patients in the NHS.

The UK’s departure from the European Union (EU) has added an extra step for manufacturers to achieve market access in the UK, as they must obtain marketing authorisation from the Medicines and Healthcare Products Regulatory Agency (MHRA). It has been imperative for the UK to introduce initiatives that will fast-track access to innovative medicines


The UK has taken some positive steps in the last couple of years to encourage and incentivise innovation within the pharma industry. The sector is currently trying to find its footing to some degree, but it is clear from recent trends that manufacturers are starting to focus their efforts on other markets. The UK government will rightly point towards the pressure on budgets for restricting pharma sales growth rates, but they must be careful not to counter any steps forward with decisions that could result in setbacks. The pharmaceutical industry has recently entered a new era of innovation with the arrival of cell and gene therapies, and it is imperative that the UK does its utmost to ensure that patients are not restricted from accessing cutting-edge novel therapies.


  1., The 2019 voluntary scheme for branded medicines pricing and access: payment percentage for 2023:

  2. Forbes, U.K.’s Voluntary Scheme For Branded Medicines, Pricing, And Access (VPAS) Faces A Potential Crisis:

  3. European pharmaceutical review, Pharma responds to UK government Statutory Scheme rise:,24.4%20percent%20to%2027.5%20percent

  4. IQVIA, Pharma pricing and reimbursement country guide – UK

  5. ABPI, UK medicines revenue clawback rockets to 26.5% putting Life Sciences Vision at risk:

  6. Pharmaceutical Technology, Pharma sector reels as UK Government doubles VPAS payback rate on NHS drugs:

  7. Pharma Times, Medicines policy may be halting Government’s drive for growth:

  8. British Generics Manufacturers Association, A consulting report: The impact on the NHS of the VPAS levy on branded generics and biosimilars:

  9. Financial times, Bayer shifts pharma focus away from ‘innovation unfriendly’ Europe:

  10. ABPI, Rescuing patient access to industry clinical trials in the UK:


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