NHS Medicines Rebate Rate Set to Decrease After UK US Trade Deal

The pharmaceutical sector has welcomed the announcement by the Department of Health that the NHS rebate rate for newer medicines will fall to 14.5 per cent next year, down from the current record rate of 22.9 per cent. This adjustment follows the recent trade agreement with the United States, in which the UK committed to increasing its expenditure on new drugs. In exchange, Washington will continue to offer tariff-free access to its pharmaceutical market, the largest in the world.

The new payment rate, part of the voluntary scheme for branded medicines pricing access and growth known as Vpag, will be capped below 15 per cent for the next three years. The agreement is intended to offer greater certainty to pharmaceutical companies after a period of sharp criticism of the UK commercial environment and recent instances of multinational investors withdrawing or pausing investment. The government has pledged to consult the industry on wider reforms to the pricing scheme starting in 2029.

Under the current system, the payment rate is calculated according to how much the NHS demand for new medicines exceeds a capped spending budget, with the industry covering the surplus. This approach aims to safeguard NHS resources while incentivising innovation in drug development; the Department of Health states that next year’s lower rate also reflects a decline in costs, such as those resulting from drugs going off patent.

Over the past decade, the proportion of UK health spending allocated to medicines has dropped from 14 per cent to 9 per cent. Comparable figures are 17 per cent in Italy and Spain, 14 per cent in Germany, and 13 per cent in France, as reported by the Association of the British Pharmaceutical Industry. Plans are in place to increase investment in new medicines from approximately 0.3 per cent to 0.6 per cent of GDP over the coming decade. As a result, medicines will account for 12 per cent of total health spending, representing up to £1 billion in additional public investment over three years.

The changes have been acknowledged across the industry. Richard Torbett, Chief Executive of the Association of the British Pharmaceutical Industry, described the newly proposed cap as a step towards restoring the UK’s competitiveness, although he emphasised payment rates are still high relative to similar economies. Paul Hudson, Chief Executive of Sanofi, welcomed the UK government’s recognition of the need to improve patient access to innovative treatments, but cautioned that the new measures represent only an initial phase in addressing the sector’s long-term decline.

The government has also started a consultation on its methods of evaluating the cost-effectiveness of medicines. The National Institute for Health and Care Excellence is expected to increase the threshold for the quality adjusted life year metric from £20,000 to £25,000 at the low end, and from £30,000 to £35,000 at the high end. The goal is to ensure better alignment between cost and the health benefits provided by new treatments, as well as to encourage the faster adoption of effective drugs.

Companies affected by the changes have until Tuesday to choose between the voluntary scheme or the more punitive statutory alternative.