NHS, Pharma Deal Doubles Annual Growth and Earmarks £400M for R&D

Pictured: NHS sign on a building/iStock, TkKurikaw

Pictured: NHS sign on a building/iStock, TkKurikaw

TkKurikawa/Getty Images

The new five-year deal will save the U.K.’s National Health Service an estimated £14 billion ($17.4 billion) and double the annual allowed growth in sales of branded medicines from 2% to 4% per year by 2027.

Pictured: NHS sign on a building/iStock, TkKurikawa

England’s National Health Service and the Association of the British Pharmaceutical Industry have inked a new five-year deal that will save the NHS an estimated £14 billion, or $17.4 billion, and earmark funds for R&D.

The Voluntary Scheme for Branded Medicines Pricing, Access and Growth (VPAG) will double the annual allowed growth of sales of branded medicines from 2% per year in 2024 to 4% per year by 2027. This represents a significant change for the industry, as the NHS sets annual caps on the dollar amount in branded medicines that can be sold to it per year. Sales above that figure are paid back via levy to the government. In 2022 and 2023, the NHS purchased £19.2 billion of medicines, £14 billion of which was branded, requiring the industry to pay back £2 billion to the government via the levy.

The new deal also earmarks £400 million ($499 million) from the pharmaceutical industry for R&D through the Life Sciences Investment Programme, focused on three areas:

  • Clinical trials to boost the NHS’s commercial clinical research capacity
  • Investment in sustainable drug manufacturing
  • The development of novel approaches to health technology assessment challenges

This news comes on the heels of a similar investment from the U.K. government side after it committed £520 million to life sciences manufacturing as part of a £4.5 billion investment in overall manufacturing.

But the new deal also comes after Eli Lilly and AbbVie quit the previous VPAG in January, citing unjustifiable revenue clawbacks. In 2023, revenue repayments have exceeded 25% of total revenue for pharmaceutical companies.

Laura Steele, president and GM of Eli Lilly in Northern Europe, said in a statement at the time that the company “simply cannot stay signed up to a scheme which has such a punishing impact on innovation,” adding that the Lilly wanted “to see action on a new settlement.”

The Association of the British Pharmaceutical Industry (ABPI) said in a statement that the agreement also includes a “new affordability mechanism” for older medicines, namely that older medicines that have not seen price reductions will “have to pay a top up rate of up to 25%, in addition to the older medicines base rate of 10%,” though the release did note that the top up “tapers down” for such medicines that have seen significant price reductions already.

Robert Kettell, NHS England’s director of Medicines Negotiation and Managed Access, said the deal “will enable NHS England to build on our track record of securing innovative, life-changing treatments for millions of patients across the country at a fair price for taxpayers.”

ABPI Chief Executive Richard Torbett said the industry “supports this agreement, despite its restrictions, as it provides important support for patients and the NHS and commits to giving them access to the transformative treatments they need.” Torbett added that allowing the sector to grow more quickly should increase the U.K.’s international competitiveness over time. “Importantly, it also recognizes the pressing need to invest more in building NHS capacity to partner with industry on science and research to support innovation and economic growth,” he said.

Connor Lynch is a freelance writer based in Ottawa, Canada. Reach him at lynchjourno@gmail.com.