The biopharma industry’s bid to increase drug spending in the U.K. has reached an impasse.
The industry and the U.K. government were unable to reach a new agreement to bring down drug rebate rates under a national cost-containment framework known as the Voluntary Scheme for Branded Medicines Pricing, Access, and Growth, or VPAG, according to the Association of the British Pharmaceutical Industry (ABPI).
VPAG is one of two tools that the U.K. government uses to control the costs of branded medicines to the National Health Service. The current scheme, which runs from 2024 to 2028, caps the allowed annual growth of drug expenditure at 3.75% for this and next year and at 4% for the remaining two years.
As a result, biopharma companies are repaying about 23.5% to 35.6% of their U.K. revenue from branded drugs to the NHS under VPAG, according to a WPI Economics analysis cited by ABPI in June. Meanwhile, the British government recently set the 2025 annual rebate rate under its other drug cost program, called the statutory scheme, at 23.4%.
While the terms of the current VPAG period were reached in 2023, rising health demands and the introduction of newer drugs have put more pressure on the pharma industry to swallow the extra cost. The government and ABPI then decided to move up a planned midterm review to this summer.
“Despite good faith and best efforts on both sides, industry and government have not been able to reach an agreed way forward” that will meet both parties' needs, ABPI said in an Aug. 22 release.
Specifically, the industry is asking for changes to “rapidly return the UK to single-digit, internationally competitive payment rates,” according to ABPI.
The U.K. government had made an “unprecedented offer,” which would have increased spending on medicines by around 1 billion pounds sterling ($1.35 billion) by 2028, although ABPI was “unwilling” to take the offer to a board vote, the Independent reports.
“We need to reach a solution that improves patient access to future innovation, allows the sector to fulfil its growth potential, and does not require industry to pay back nearly three times as much of its revenues as is required in other European countries,” Richard Torbett, chief executive of ABPI, said in a statement on Friday. “Together with global industry leaders, we want to continue constructive dialogue with government to find that solution.”
Drug companies are paying average rebates at around 5.7% to 7.9% in France, Germany, Italy and Spain, according to data cited by ABPI.
The pharma industry has been criticizing Britain’s drug cost-control schemes, saying they may dissuade life sciences investments in the country. But the industry recently escalated its demands for urgent action, as the Trump administration is dangling tariffs on pharmaceuticals to drive more U.S. investment.
The U.K. could lose about 11 billion pounds sterling ($14.9 billion) in R&D investment by 2033 if the new medicine rebate rates stay above 20%, ABPI and its member companies warned in June.
Simultaneously, President Donald Trump has again rolled out a “most favored nation” policy, which aims to match the costs of prescription drugs in the U.S. to the lowest price offered in other developed countries. And one of those efforts reportedly includes pushing for higher drug spending in foreign countries.