Sharply increased payment rates under both the VPAG and statutory scheme

Medicines expenditure in the UK is tightly controlled, with detailed national arrangements in place to manage costs. Two parallel schemes are in currently in place for branded medicines – a voluntary scheme agreed between industry and government (Voluntary Scheme for Branded Medicines Pricing and Access, the VPAG), and a statutory scheme applicable to suppliers that do not adhere to the voluntary scheme. Both schemes require payments to be made to government calculated on the basis of medicines costs and affordability to the NHS.

Earlier this year, the trade body representing the UK’s branded medicines industry, the ABPI, expressed serious concern over the sharply increased 2025 payment rate under the VPAG. The rate had been expected to start at 15.3%, with an expectation that rates would trend back toward a more internationally competitive and sustainable level over the lifetime of the scheme. Instead, the 2025 payment rate for newer medicines was set at 22.9%, we understand its highest to date.  This means that pharma businesses which sign up to the VPAG will need to pay 22.9% of their eligible sales of branded medicines to the Department for Health and Social Care (DHSC).  

The ABPI expected this to put a strain on pharma businesses which are unlikely to have factored this higher rate into their 2025 business plans. It indicated that it would be ‘working urgently and collaboratively with government to understand this issue, with a view to supporting the government’s ambitions for sector growth.’

Pharma businesses which do not sign up to the voluntary scheme are subject to a separate “statutory scheme” for branded medicines. This is set out in legislation in contrast to the voluntary, negotiated VPAG. Commercially, the statutory scheme is broadly equivalent to the VPAG, but it is more susceptible to change and therefore less stable compared to the VPAG, whose terms are fixed for 5 years. 

The statutory scheme had been set at 15.5% to align with the forecast rate under the VPAG. However, this is clearly out of line with the greater rate set under the VAPG. As a result, government is proposing an increase of the statutory scheme rate to deliver on the longstanding policy objective of broad commercial equivalence between the schemes. The proposed statutory scheme headline payment percentage for 2025 would be 23.8%. For future years the rate would be set at 24.7% for 2026, and 26.4% for 2027; an increase from 17.9% and 20.1% respectively.

Together, these increased rates are likely to present real challenges for the sector, and underline difficulties for medicines suppliers in planning their UK business.

A consultation is open until 25 April 2025 on the statutory scheme proposals, alongside ABPI engagement with government on the VPAG.

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