UK — AbbVie and Eli Lilly and Company (Lilly) have shocked the UK Government by withdrawing from the voluntary medicines pricing agreement in response to increasingly harsh revenue clawbacks.
The pair have left the UK’s Voluntary Scheme for Branded Medicines Pricing and Access (VPAS), a long-standing agreement between industry and government that dates back to the NHS’s inception.
As a result, the companies will operate under the alternative Statutory Scheme for Branded Medicines, which is imposed by law rather than through negotiation.
The latest episode appears to demonstrate the growing conviction that the current voluntary scheme is causing wider harm to the UK life sciences industry.
The announcement comes on the heels of a broader industry warning in December, when the government announced that manufacturers of branded medicines participating in the Voluntary Scheme will be required to return nearly £3.3 billion (US$4.04 billion) in sales revenue to the government.
This represents 26.5% of sales, up from around £0.6 billion (US$730 million) in 2021 and £1.8 billion (US$2.2 billion) in 2022, the Association of the British Pharmaceutical Industry (ABPI) cites.
Meanwhile, the statutory scheme has historically had a higher repayment rate, with a further increase currently being considered by the public.
The existing UK VPAS scheme is the most recent in a long line of agreements designed to help manage medicine affordability while also supporting the life sciences sector by allowing it to continue providing access to medicines.
Companies are increasingly arguing that the UK’s “voluntary scheme” can no longer be justified to global boardrooms and investors.
As a result of flaws in the existing scheme’s design, repayment rates in 2023 have risen to 26.5% of revenue, putting the UK completely out of step with its global competitors and outside historical norms.
The industry is clear that if the UK cannot address rapidly rising rates in the coming years and return repayment rates to historical norms, the government’s Life Sciences Vision will be unattainable, and investment, jobs, and research partnerships will increasingly flow to more supportive markets in the US, Europe, and Asia.
The United Kingdom is already losing ground in terms of innovative medical research, with the number of industry clinical trials initiated in the United Kingdom per year falling by 41% between 2017 and 2021, and cancer trials falling by the same margin.
Since 2010, the United Kingdom has dropped from fourth to 98th place in overall pharmaceutical trade balance.
At the same time, other comparable countries, such as Ireland, France, and Germany, have increased manufacturing productivity, output, and exports.
The current voluntary scheme is set to expire in December 2023, and the ABPI is seeking early discussions with the Government to outline a completely new future settlement that aims to capture the potential of the life sciences sector and drive improvements in the health and wealth of everyone across the UK.
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