Key Summary
- Patients to benefit from innovative treatments and better outcomes
- Lower rate will make the UK more attractive destination for clinical trials and early launch of new medicines
- The move follows UK-US pharmaceutical deal announced on December 1
The government on Wednesday (10) announced a cut in rebate costs for innovative medicines from 2026, which is expected to benefit the patients and improve treatment outcomes.
The Voluntary Scheme for Branded Medicines Pricing, Access and Growth (VPAG) requires companies to pay the government based on a percentage of their sales of branded medicines to the NHS.
The 2026 payment percentage will be 14.5 percent - down more than a third from 22.9 percent in 2025.
The lower rate has in part been driven by falling costs, including due to drugs going off patent, so lower revenues can be absorbed within existing budgets.
The announcement follows the landmark UK-US pharmaceutical deal announced on December 1, making Britain the only country to have a deal with the US, securing zero percent tariffs on branded pharmaceuticals.
The move would benefit tens of thousands of patients from Britain and strengthen the country's position as a global hub for life sciences.
Greater investment in medicines and innovation will improve treatment outcomes and help ease pressure on the NHS.
The VPAG scheme helps to keep the NHS medicines bill sustainable for taxpayers.
For newer medicines, rebates are made through the headline payment percentage, set each December for the year ahead.
Health Innovation Minister Dr Zubir Ahmed said, “This government has already delivered an agreement with the US that will expand access to tens of thousands of patients and make us the only country in the world to have a deal that secures zero percent tariffs on branded pharmaceuticals to the US.
“The fall in the rebate rate will cement this, answering the call from leaders in the pharmaceuticals and life sciences sector for a lower and more stable payment rate for branded medicines."
Science Minister Lord Vallance said, "Innovative medicines have turned HIV, heart disease, certain cancers and many other diseases into preventable, manageable, and sometimes even curable conditions.
"We need our brilliant life sciences companies to discover and get important new medicines to patients right across the NHS and to create jobs in the UK. This new rate helps achieve that, and will be part of helping countless people live healthier, longer lives."
More steps needed: ABPI
The Association of the British Pharmaceutical Industry (ABPI), however, cautiously welcomed the move.
Chief executive Richard Torbett said, “It’s good that the amount of revenue companies will need to pay to the UK government has come down in 2026. The newly-proposed cap on future payment rates for newer medicines should also provide companies with greater certainty up to 2028.
“However, this is only the first step in returning the UK to a more competitive position. Payment rates remain much higher than in similar countries, and there is work to do to accelerate the NHS's adoption and use of cost-effective medicines to improve patient care.
“The ABPI looks forward to working with the government to set out a sustainable alternative to the VPAG scheme, which will better support the NHS use of medicine, while also encouraging more UK-based research, and larger investment into UK life sciences.”
ABPI noted that the payment rates for older branded medicines remain unchanged in 2026, with companies continuing to pay between 10 percent and 35 percent on their sales of each older medicine to the NHS, depending on the levels of price discount already offered to the NHS.
The trade association also pointed out that companies pay an additional one per cent on top of the newer and older payment rates in 2026 as a pre-agreed voluntary contribution to support an industry-funded investment programme aimed at improving the UK’s health and life sciences sector infrastructure.
Hence, the total rebate for newer medicines to be paid in 2026 is 15.5 percent of revenues, once the investment programme payment is included, it added.
