The Payment Percentage in 2023, the final year of the current scheme, requires companies to pay 26.5% of sales revenue of branded medicines to the NHS. This rate is nearly three times what was originally anticipated and is outside historical norms. The rebate percentage is harming UK innovation by reducing the UKs desirability for investment in manufacturing and research. It is clear that the current VPAS has become unfit for purpose. The existing VPAS scheme will expire on the 31st December 2023 and the new VPAS scheme will commence on 1st January 2024 and cover 2024 -2028. The UK government began negotiations with the Association of the British Pharmaceutical Industry (ABPI) for a replacement scheme on the 4th May 2023.
The BGMA’s application to the Secretary of State (SoS) to be appointed as an additional “industry body” in addition to the ABPI demonstrates the frustration that the industry is facing. Despite the ABPI being awarded the status of industry representative. The BGMA’s application to be involved in the VPAS negotiations represents the members of the branded generic and biosimilar sectors concerns regarding the capability of the ABPI as a sole negotiating body with the SoS.
The ABPI Proposal
The ABPI, the long-standing industry representative for VPAS negotiations has proposed in its framework four key areas that it will prioritise in the negotiations for the new VPAS scheme. The ABPI’s new Voluntary Scheme for Pricing, Access and Growth (VPAG) 2024-2028 proposal can be accessed here: https://www.abpi.org.uk/publications/at-the-crossroads/
These four key themes include:
A “fixed payment rate” for delivering sustainable approach to medicines provision to unlock investment and growth
The ABPI proposes a fixed flat rate for rebate payments to be levied across all eligible NHS medicine sales to be paid by the industry proposed at around a 6.88% rate. This proposal is projected to deliver over £1bn annually to the NHS – around £300m more than the average delivered under the old scheme before 2023. Under these terms, the UK would return to a more internationally competitive position for attracting inward investment. Yet the UK’s expenditure on branded medicine would remain below 10% of NHS expenditure allowing the UK medicines per capita spend to remain well below any comparable country.
Maximising the potential of the UK life sciences industry as an engine for growth
The ABPI proposes a pharmaceutical industry offer to include an annual £1 bn boost to the NHS as well as a world-first additional industry funded “Investment Facility” worth over £1 billion for projects such as encouraging development in clinical research, genomics and real-world data. This new investment facility would maximise the potential of the UK’s health and life science ecosystem and would be funded by a 1.5% premium paid in addition to the VPAS rate.
A new “internationally competitive framework” to support rapid adoption of new medicines and enable patient access
Another key proposal is for companies to commit to prioritising the UK as an early launch market, seeking a GB licence on new medicines in their first wave of regulatory filings. This would include agreeing new terms to support rapid access to, and adoption of new medicines – with a particular focus on encouraging companies to prioritise the UK as an early launch market.
This would rely on a number of improvements to the UK’s regulatory approach to support rapid access to, and adoption of, new medicines and would enable the UK to regain and sustain its position as a ‘first wave’ country for new medicine launches.
A “Medicines Equity Partnership” operating across the four nations of the UK to improve NHS health outcomes and productivity
The Medicines Equity Partnership would be funded by the Investment facility. The ABPI proposes that the pharmaceutical industry will work directly with the NHS to improve health outcomes. This would include working directly with the NHS to support the UK government’s prevention agenda.
The BGMA Proposal
The British Generic Manufacturers Association (BGMA) represents the suppliers and manufacturers of generic and biosimilar medicines to the UK market. The BGMA have published its views on how the new voluntary scheme should be designed. The BGMA proposes three guiding principles. The BGMA submits a proposal that aims to deliver a financially suitable VPAS that supports widened medicine access to patients.
The BGMA’ position for the 2024-2028 VPAS negotiations can be found here: https://www.britishgenerics.co.uk/uploads/BGMA-VPAS-position-paper.pdf
The BGMA wanted to achieve this on the basis of three guiding principles:
Differentiability: recognition that off-patent, competitive markets, behave differently to on-patent, single-source supply.
The BGMA proposes that the current VPAS scheme disproportionately affects the branded generic and biosimilar sectors. The proposal states that different VPAS provisions should apply to the branded on- and off – patent sectors. An exemption from VPAS should apply where the selling price of an off-patent medicine has been discounted by 30% or more compared with the originator product’s list price prior to loss of exclusivity, or where off-patent medicines have been supplied to the NHS through hospital tenders. Since off-patent medicines operate in more dynamic markets, price application decisions should also be made in a more expedited timeframe.
Equitability: designing a system that is based on progressive contributions among suppliers, depending on the products they market and the NHS savings they generate
The BGMA suggests increasing the NHS maximum price from £2 (NHS Maximum Price) to £10 to protect the supply and viability of the lowest-cost branded medicines. The BGMA proposal highlights the importance of the relationship between companies which supply UK-licensed branded medicines and make a VPAS contribution, and those which bring medicines into the UK under a Parallel Import (PI) licence. The BGMA proposes that these medicines should also make a VPAS contribution.
Predictability: for both the NHS’ and industry’s planning
The BGMA proposes a controlled expenditure scheme similar to the current VPAS but with an incorporated payment percentage review clause in case of official UK inflation that reaches a certain pre-agreed figure, or if required by a health emergency.
Comparison
Both the ABPI and the BGMA are in agreement that the current VPAS rebate rate is resulting in the UK to lose out on investments in manufacturing and research. The BGMA and ABPI are aligned in their demands for VPAS tax rebate stability. The BGMA requests predictability in the form of a payment percentage cap. The ABPI also demands predictability in their proposal by introducing a fixed flat rate for rebate payments at a proposed 6.88% rate. Predictability of the rebate rate is the only common ground between the ABPI and BGMA proposals.
The BGMA have argued that rebate payments under VPAS disproportionately affects the branded generic and biosimilar sectors. As a result, their proposals include the recognition that off-patent, competitive markets should be treated differently to patented medicine to the extent of being offered VPAS discounts. The ABPI, recognised by the courts as a negotiator capable of representing the branded pharmaceutical sector does not propose to treat patent and off-patent medicine differently. Instead, a blanket rebate rate will be applied to all NHS medicine regardless of their status as long as they are eligible NHS medicine sales.
Another key differentiator between the proposals is the ABPI’s strong interest in advancing the progression of the life science industry by increasing investment. The BGMA does not have this priority included in their proposal. The ABPI exhibits that 53 out of 67 out of its full members supply generic medicines, accounting for 38% of all VPAS sales by value. Therefore, the absence of any benefit to the progression of the life industry in the BGMA’s proposal is to their detriment. The ABPI aims to progress the UK as an innovator of life sciences despite having a portfolio of off-patent medicine.
Comparing the different proposals, it is understandable why the SoS had concerns regarding the incorporation of the BGMA as second appointed industry representative in addition to the ABPI. Affording the BGMA full participation and a power of veto in the VPAS negotiations might have resulted in disruptive delay in the conclusion of the new replacement agreement as a result of the different aims of the proposals. The BGMA retains a stronghold on their claims that the ABPI does not represent the suppliers and manufacturers of generic and biosimilar medicines in the UK market, and therefore their proposal is narrowed to negotiate the priorities of the generic and biosimilar sector only.
The ABPI proposes to benefit both industry as well as patient prognosis in the new VPAS negotiations, offering greater diversity in their aims compared to the BGMA. It is clear that the ABPI’s proposals will benefit the UK’s ambition and aspiration to be the world leader for testing, access, and uptake of new and innovative treatments. In addition, the ABPI does not aim just to benefit industry. The adoption of the Medicines Equity Partnership represents the ABPI’s recognition of the importance in improving NHS patient health outcomes.
Whilst both the BGMA and the ABPI highlight the need for stability of the VPAS rebate rates, it is undeniable that the ABPI is the appropriate industry body to be negotiate with the SoS in the current VPAS negotiations.