The U.K. is upholding its end of a recent trade deal with the U.S., increasing the island country’s potential spending on new medicines by cutting the rebates paid by pharma companies under a cost-control scheme.
The rebate rate for new medicines under the U.K.’s “voluntary scheme” will be 14.5% of sales to the NHS in 2026, down from 22.9% in 2025, the U.K. government said Wednesday. The scheme, also known as VPAG, is one of two tools—and the vastly more popular one among drugmakers—that the U.K. uses to rein in drug spending.
The lower repayment rate follows the landmark U.K.-U.S. trade deal, in which the British government agreed to cap VPAG rebates for newer drugs at a maximum of 15% for the next three years, until 2028. The deal was made following President Donald Trump’s repeated complaints about what his administration has called “global freeloading,” in which other wealthy countries pay less for innovative drugs compared with the U.S.
Before the U.S. stepped in, the U.K. government and the biopharma industry had deadlocked on a new VPAG rate. While the government was trying to contain overall healthcare costs, the industry argued that the proportion of those expenditures allocated to novel medicines was shrinking and lagging behind other developed countries.
High rebate rates dissuade life sciences investments in the U.K., the Association of the British Pharmaceutical Industry has warned. In a June report, the ABPI warned that the U.K. could lose about 11 billion pounds sterling ($14.7 billion) in R&D investments by 2033 if new medicine rebates remain above 20%.
“This lower rate will make the UK a more attractive destination for clinical trials, manufacturing investment and the early launch of new medicines—helping NHS patients benefit sooner from cutting-edge treatments and boosting economic growth,” the U.K.’s Department of Health & Social Care said in a Dec. 10 release.
With the U.S.-U.K. deal, the U.K. plans to increase investment in new medicines from around 0.3% to 0.6% of GDP over 10 years. Spending on all medicines will rise from 9% to 12% of total health spending, according to the ABPI. The bilateral agreement also made U.K. the first—and so far, only—country to secure 0% tariffs on pharmaceuticals exported to the U.S. for the next three years.
In addition to the 14.5% rebate, companies will also pay another 1% of sales as a contribution to support an investment program designed to boost the U.K.’s health and life sciences infrastructure.
Companies have until Dec. 16 to decide whether to join the VPAG or the other pathway, called the “statutory scheme,” which currently has a 24.3% repayment rate for 2026, according to the ABPI. The U.K. government is expected to adjust the statutory rate because the two schemes are meant to be roughly comparable.
While the 14.5% marked a big improvement for pharmas, the rate is still higher than the single-digit rate sought by the industry.
“[T]his is only the first step in returning the UK to a more competitive position,” Richard Torbett, chief executive of the ABPI, said in a Dec. 10 statement. “Payment rates remain much higher than in similar countries, and there is work to do to accelerate the NHS’s adoption and use of cost-effective medicines to improve patient care.”
The ABPI and the U.K. government are slated to start discussing the rebate model for 2029 and beyond in the New Year, the trade organization said.