UK pharmaceutical sector at risk due to NHS medicine rebate scheme

Britain is poised to miss out on billions in pharmaceutical R&D investment and access to new medicines unless urgent reforms are made to the NHS medicine rebate system, according to industry experts. The agreement, which caps the total sales of branded medicines to the NHS by imposing repayments above a certain threshold, was designed to maintain predictable expenditure for the health service while fostering innovation. However, critics argue the current structure is stifling growth and threatening the UK’s position in the global life sciences industry.

A new report by WPI Economics, commissioned by the Association of the British Pharmaceutical Industry (ABPI), suggests that maintaining the rebate rate above 20 per cent of companies’ UK revenues could cost Britain around £11 billion in R&D investment by 2033. Conversely, a return to pre-2023 rates of under 10 per cent could prevent such losses. The modelling underlines concerns that the excessive burden of the rebate system risks making Britain less attractive to pharmaceutical companies compared to other countries.

Industry leaders from global pharma companies, including Abbvie, Gilead, and Novartis, have expressed their frustration over the current framework. Johan Kahlstrom, managing director for Novartis in the UK and Ireland, emphasised that without immediate reform, the UK could fall behind as other nations move swiftly to reward innovation. Similarly, a group of major pharmaceutical companies, including AstraZeneca and GSK, has warned that the elevated rate on newer branded medicines is jeopardising investment in one of the government’s key growth industries.

The voluntary scheme for branded medicines, pricing, access, and growth (VPAG), enacted in 2023, remains a focal point of tension. While the government asserts that the agreement ensures taxpayer value and sustains access to innovative treatments, the industry argues the repayment rates are strangling growth. Wes Streeting, Health Secretary, has pledged to accelerate a review of the scheme, offering hope to the sector, but significant action is still awaited.

According to Sir John Bell, a prominent voice in the UK’s life sciences sector and advisor to the government, the UK has experienced “spectacular” growth in life sciences. However, he warned that highly competitive global markets and protectionist policies in countries such as the United States could significantly hinder Britain’s progress if the current rebate system is not recalibrated.

The findings also highlight tangible consequences for patients. The ABPI survey revealed that 15 new active substances and 38 new indications have been withheld from NHS usage since 2023 due to the scheme’s financial impact. Current policies could perpetuate health inequalities across the UK, with poorer outcomes affecting NHS patients as companies redirect resources toward nations offering more favourable operating conditions.

The report estimates that by reducing the repayment rates below 10 per cent, the UK could see GDP growth of £61 billion and an additional £20 billion in tax revenues over the next 30 years. If action is not taken, the damaging financial strain on pharmaceutical companies may worsen, with broader implications for the nation’s health and economy.