by Giuliana Miglierini

The amendment of the statutory schemeregulating the increase in pricing and consequent clawback payments of branded medicines proposed by the Department of Health and Social Care (DHSC) of UK’s government attracted the strong criticism of the pharmaceutical industry. The proposal aims to supersede the current scheme, established in 2018 by The Branded Health Service Medicines (Costs) Regulations. UK’s framework for pricing and clawback payments is completed by the 2019 voluntary scheme for branded medicines pricing and access (VPAS). Under the current framework, should a pharmaceutical company decide to opt out and not to join the voluntary scheme, then it becomes automatically subject to the statutory one. The current VPAS scheme, which in its original form dates to 1957, will end in December 2023. The DHSC is thus negotiating a new deal with the industrial counterparts to be effective starting 1 January 2024. Negotiations on the voluntary scheme are independent from the consultation on the statutory scheme, claims the DHSC.

The main features of the proposal

The statutory and voluntary schemes are administered by the DHSC on behalf of England, Wales, Scotland and Northern Ireland. The so received clawback payments from the pharmaceutical industry are then annually back allocated to each of the four countries on an agreed basis. According to the DHSC’s proposal, the ongoing negotiation should result in the two schemes – statutory and voluntary – continuing to operate in a complementary way. Should the negotiation on the voluntary scheme close without results, then the statutory scheme would continue to apply from 2024 onwards to all branded medicinal products. “With negotiations ongoing, there cannot currently be a default assumption of continuing alignment with any potential voluntary scheme provisions”, wrote the government. The proposed reform of the statutory scheme is comprehensive of an increase of the allowed annual growth rate, which is expected to impact on the back payment percentages. A revision of current exemptions from scheme payments should also occur.

A structure similar to that of the current statutory scheme should be used to manage these amendments, while a new lifecycle adjustment should be put in place to rebalance the payment percentages referred to medicines at different stages of their product lifecycle. As for unbranded biological products, which should be always prescribed by brand name according to MHRA’s guidance, the government aims to clarify that the statutory scheme should be applied to all biological medicines, irrespective to the fact they are marketed or not under a brand name. The government’s goal is to achieve a balance between these three objectives, “in a way that is consistent with supporting both the life sciences sector and broader economy”.

Comments from the ABPI

According to the Association of British Pharmaceutical Industries (ABPI), there is no equivalent in the world to UK’s voluntary scheme. The version agreed for the period 2018-2023 is based on a 2% per annum rise in pricing: pharmaceutical companies are called to pay back to the NHS rebates on their sales on all expenditure above the capped limit. On their side, the current voluntary scheme also requires the DHSC and NHS England to improve medicines access environment over the period 2019-2023.

ABPI mentions the dramatic rise in payments linked to the unforeseen circumstances of increased post pandemic NHS demand, which is posing major challenges for the UK life science sector. The members of the association more specifically criticise the cap growth mechanism, as well as the proposed lifecycle adjustment. The top management of leading pharma companies operating in the UK also expressed their views (read more, on the European Pharmaceutical Review).

More details on the proposals UK’s government confirmed its commitment to working with the pharmaceutical industry to facilitate the development of medicines in the UK and to support rapid NHS’s patients access to innovative medicines. The current form of the statutory scheme allows for a growth rate of 1.1% (nominal) per year for sales of branded medicines subject to the scheme. The payment percentage for 2023 and all subsequent years was set in April 2023 at 27.5%. The main exemptions refer to sales of pharmacy only and general sales list medicines, small companies with under £5 million sales to the NHS each year, sales of low-cost presentations costing less than £2, and parallel imports. The continuation of the policy of broad commercial equivalence between the statutory and voluntary schemes is the criterion chosen by the DHSC to protect the stability and efficacy of both: payment percentages in the statutory scheme would be thus comparable (but not necessarily identical) to those in the voluntary scheme. The new payment percentages in the statutory scheme proposed for 2024 would be based on a higher allowed growth rate of 2% (nominal). According to the DHSC, the maintenance of the current growth rate of 1.1% per year, in the absence of a newly agreed VPAS, would result in an effective decrease in allowed growth for most companies and might give rise to “a commercial environment for the life sciences sector that may not fully reflect the objective of supporting the sector and the broader economy”. On the other hand, an increase above 2% per year may lead to a unsustainable budget pressure on the NHS. As for the exemptions, the proposal aims to include in the statutory scheme some additional exemptions from payment which are currently part of the VPAS, namely referred to sales of medicines containing a new active substance (NAS) for 36 months from the date of their first marketing authorisation. According to the consultation document, this would incentivise companies to launch innovative medicines in the UK more rapidly than in other countries. An exemption from scheme payments for centrally procured vaccines (CPVs) is also part of the proposed package, and it would include vaccines for national immunisation programmes recommended by the Joint Committee on Vaccination and Immunisation (JCVI), procured by a central government body, or managed by the UK Health Security Agency (UKHSA) or a successor body. The third exemption to be included in the statutory scheme refers to payments for exceptional central procurements (ECPs). The measure would cover medicines related to purposes of emergency preparedness (i.e. national stockpiles) conducted by a central government body, or managed by UKHSA or a successor body. The lifecycle adjustment Innovative medicines are typically characterised by higher prices at launch, to then lower it while approaching the end of intellectual property protection. According to the DHSC’s proposal, initial prices are typically above the opportunity cost to the NHS, and older medicines would in general also benefit from greater price competition from generics and biosimilars. In some instances, states the document, this competition would be insufficient, thus resulting in prices not low enough to reflect the later stage in the product’s lifecycle. This especially applies to single supplier markets, where no competition at all is available. The proposal aims to overcome the current one-size-fits-all approach to the statutory scheme, and to introduce additional payments for older products with no competition, or a flat, lower payment for older products in more competitive markets. The so-generated additional income would then be used to reduce the headline payment percentage paid by newer products. According to the consultation document, these latter ones would refer to any product where the active substance has been marketed in the UK for less than 12 years.