Déjà VPAG – 2025 repayment percentage announced

On 16 December, the DHSC announced that the 2025 headline VPAG repayment percentage for sales of “newer medicines” will be 22.9%. This rate is significantly higher than expected and its announcement has stunned industry as it seeks to come to terms with the financial impact. With a return to a repayment rate of more than 20% after just one year of this voluntary scheme, there will be significant concern that the challenges faced by industry under the predecessor scheme, VPAS, have not been solved and that the remaining four years of the scheme will be bruising ones.

An unwelcome surprise

In November 2023, when the terms of VPAG between the DHSC and ABPI were finalised, VPAG was portrayed as a solution to the problem of ballooning repayment rates, which peaked at 26.5% in 2023, the final year of the previous scheme.

The allowed total growth rate under VPAG increases from 2% to 4% throughout the five years of the scheme. Under previous voluntary schemes, the allowed growth rate was a flat rate for the entire term of the scheme. This change to the mechanism was championed by the ABPI, with it publishing forecast figures that showed repayment percentages returning to historic levels and also in line with other countries in Europe (5-10%) by the end of 2028.

Just one year ago, the headline repayment percentage for 2025 for “newer medicines” was estimated to be 15.3%¹. Many companies will have relied on this estimate and the ABPI’s forecast figures and are now faced with the reality of 22.9%.

Causes

In simple terms, the cause of the elevated repayment rate for “newer medicines” in 2025 is greater than expected NHS spend on newer medicines in 2024.

There was lower growth in sales of “older medicines” and higher growth in sales of “newer medicines” than expected. The growth in the overall sales of branded medicines was 7%, the second highest on record after the pandemic affected 2021.

The reasons behind the unexpected growth are not clear at this stage and are likely to be multifaceted. The announcement from the DHSC only provides very high level insight into the data received from scheme members that was used to calculate the repayment percentage. The ABPI is conducting further analysis, based on IQVIA data sources (as it does not have access to scheme member level data), as regards the underlying factors that have resulted in the increased growth in “newer medicines”.

Some factors that may have resulted in the increased growth of “newer medicines” include increased uptake of key medicines resulting from guidance changes, reduced affect of generic and biosimilar entry in key therapy areas and fewer transitions from newer to older medicine status than predicted.

Consequences

De-branding

Companies struggling with this announcement will be working on strategies to soften the blow of this punishing repayment percentage. Some companies may consider be considering de-branding products to bring sales outside the scope of VPAG repayments. Sales of unbranded medicines are not subject to repayments under VPAG.

In our experience, there are complex considerations associated with a decision to de-brand a product and the decision will be considered on a product-by-product basis.

Statutory Scheme

After this announcement, the repayment percentages under the Statutory Scheme are lower than corresponding VPAG rates. However, VPAG members cannot benefit from dropping into the Statutory Scheme.

The ABPI confirmed in an update held on Tuesday 17 December that the DHSC intends to conduct a further consultation to amend the Statutory Scheme repayment percentage in early 2025. The outcome of the previous consultation consultation was only published on 18 October and reported a 14.1% repayment percentage for “newer medicines” in 2025. This figure was based on out-of-date growth rates and will be updated to a rate that is similar to the VPAG rate for 2025.

Furthermore, it is already too late for VPAG members to jump to the Statutory Scheme for 2025 as VPAG scheme must give notice of their decision to leave at least 3 months before the end of the year. This deadline has long since passed. 

Conclusion

A key question is whether this the 2024 growth in branded medicines a one-off blip is or represents a new trend in the market. With four years left still to run on VPAG and limited scope for renegotiating its terms, industry faces a daunting future if this growth trend continues.

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¹ As set out in Table 1 of Annex 3 of VPAG