Rising drug taxes may necessitate ICBs to secure an additional £37 million annually, says BGMA    

The spiralling tax rates will raise NHS costs and affect pharmacy contractors cashflow

The British Generic Manufacturers Association (BGMA) has warned that England's 42 integrated care boards (ICBs) may need to allocate an extra £37 million from their budgets annually for the next five years due to the spiralling tax rates.

The government's Voluntary Scheme for Branded Medicines Pricing and Access (VPAS) rebate rate increased more than five-fold in the past two years, the BGMA said in its white paper released on Monday (October 30).

The report, conducted by consultancy firm Conclusio in consultation with local NHS leaders, examined the potential effects of the VPAS on ICB budgets.

BGMA said that due to the elevated VPAS rate, each ICB in England will experience significant increases in expenses for branded generics and biosimilars annually – a consequence of reduced competition.

In many cases, this increase will wipe away any projected surplus. While sizes of ICBs vary, the report calculated that £37 million is roughly 10-20 per cent of ICBs entire pharmaceutical spend.

For the current VPAS period, the allowable growth rate is set at 2 per cent per annum and the payment percentage (levy) in 2023 is 26.5 per cent, which is over five times what it was just two years ago.

“The VPAS rate has spiralled, rocketing to 26.5 per cent with every chance it could go higher in the future,” said Mark Samuels, chief executive of the BGMA. “For off-patent medicines such as branded generics and biosimilars, this is an unsustainable position as companies cannot afford to keep absorbing an increasing rate on top of having their prices constrained by competition.”

Meanwhile, the negotiations between DHSC, NHSE and ABPI are currently underway for the next VPAs, which will run from 2024 to 2028. Presently, nearly half the current scheme is made up of branded generics and biosimilars, which face a double whammy of having their prices constrained by competition as well as having to pay the increasing VPAS levy on their revenues.

Samuels said that manufacturers are already having to make very difficult decisions as to whether they can continue to maintain supply of products. “More than 85 biological medicines will lose their exclusivity in the next five years including blockbuster products such as cancer medicine Keytruda and wet macular product Eylea,” he said.

“These represent a great savings opportunity to the NHS, but they won’t fulfil their savings potential if competition is reduced because fewer companies enter the market,” Samuels added. “The reduced savings will undoubtedly be felt at the frontline of delivery and is likely to add even further strain on already thinly stretched local NHS budgets.”

As well as a reduction in savings, the report also states that an increase in medicines shortages is inevitable as a result of a more volatile market stemming from fewer suppliers, potentially less stock being earmarked for the UK and product withdrawals.

This is likely to not only raise prices for the NHS, but also affect the cashflow of pharmacy contractors. Pharmacists may spend up to a third of their working week addressing shortages instead of assisting the NHS in providing patient advice and prescribing specific treatments.

According to BGMA, limiting access to preventative treatments could lead to reduced management of chronic conditions and an increased likelihood of costly acute hospital care, potentially resulting in poorer patient outcomes.

BGMA recently backed the UK government’s proposed changes to the Statutory Scheme for branded medicines, which includes a ‘Life Cycle Adjustment’ (LCA) mechanism to permit a lower rebate rate for medicines sold in competitive markets.