The government’s recent announcement of a lower NHS medicines rebate rate for next year has been tentatively welcomed by the pharmaceutical industry.
The Department of Health said on Wednesday that the industry payment rate for newer medicines under a contentious pricing scheme would be 14.5 per cent next year, down from 22.9 per cent in 2025.
The announcement comes after last week’s UK-US trade deal, under which the UK agreed to increase the amount it spent on new drugs in return for Washington maintaining a zero-tariff pharma product import rate into the United States.
US president Trump has been critical of European countries “freeloading” on American innovation and has been threatening them to align the cost of medicines in the US.
From the UK side, the deal was brokered by Varun Chandra, the prime minister’s chief business adviser, and science minister Lord Vallance.
The UK has also committed that the newer medicines payment rate under the voluntary scheme for branded medicines, pricing, access and growth (VPAG) scheme would not exceed 15 percent for the next three years.
The rate is calculated by the extent to which the NHS’s demand for new medicines exceeds its capped spending budget, with industry required to cover the shortfall.
It is designed to protect NHS spending, while encouraging the industry to innovate and launch new medicines.
The pharma industry has been critical of the high rates charged under the VPAG, which they claimed was deterring investors to the UK.
The government has assured that it would consult the industry on reforming the scheme from 2029.
Companies need to decide by Tuesday whether to join the VPAG or opt for a more punitive statutory scheme.
Cautious welcome
Sanofi chief executive Paul Hudson told The Times that the government’s move was welcome, but “There is no single fix to decades of decline.”
Eli Lilly chief executive David Ricks recently told Financial Times that they are "optimistically watching" to see how Britain's move to spend more on drugs works on the ground.
They will take a call on restarting paused projects only if they see major changes.
US investments
Meanwhile, more and more global pharma majors are relenting to the pressure from Trump to set up production facilities in the US.
GSK chief executive Dame Emma Walmsley told the BBC that the company will invest £23 billion in the US by the end of this decade.
She said even after the NHS has agreed to pay more for drugs, GSK is not going to "shy away" from its US investment plans.
Another UK drug maker AstraZeneca, which had earlier paused a planned £200m investment in the UK, is also ploughing tens of billions of dollars into the US.
