UK Pharma leaders: VPAG is making the UK “un-investable”

Various UK pharmaceutical companies yesterday co-signed a report warning that future UK investment is unlikely unless the Government addresses the current VPAG levy on manufacturers of branded medicines. This comes as the Government prepares for a summit in early April, which pharmaceutical companies hope will lead to a return to the negotiating table to change the terms of VPAG.

In December, the DHSC announced that the 2025 VPAG headline payment percentage for newer medicines increased from the predicted 15.9% to 22.9%¹. The report sets out that this repayment rate is significantly out of line with comparable countries with the average rate of payment across France, Italy, Germany, Spain, Belgium and Ireland sitting at just over 7%. The report concludes that such repayment rates are “making the UK un-investable”.

The report explains that the assumptions that were considered during the negotiations for VPAG in 2023 are now very different, in part as a result of the change in government in 2024. The report concludes that if the repayment rate is not brought back in line with international comparators this could lead to scenario in which companies are forced to withdraw from VPAG rather than “voluntarily” signing up to such a punishing scheme. The report proposes two solutions to avoid this scenario.

The first solution would adjust the allowed growth rate under VPAG in line with NHS budget increases. The report notes that since VPAG was agreed, the NHS has received more funding from the new Labour government. Higher NHS funding has lead to increased NHS spend on branded medicines without increasing the allowed growth rate under the scheme.

The second solution would be a more nuanced, and wider range of risk-sharing mechanisms in VPAG on a product-by-product basis. A degree of risk-sharing was introduced into the scheme through differential repayment rates for newer and older medicines. The report proposes additional risk-sharing mechanisms.

In conclusion, the report paints a damning picture of the future UK life sciences industry if changes are not made to VPAG. Despite the advent of a new voluntary scheme at the start of 2024, the problem of unsustainably high repayment rates continues to persist.

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¹ This rate is in real terms 23.5% when the VPAG investment programme funding is factored in.