A landmark deal has been agreed that is set to save the NHS £14 billion over 5 years in medicines costs, enable patients to access the latest lifesaving treatments more consistently and boost the UK’s position as a global superpower in advanced healthcare, technology and clinical research.
The new deal secures savings for the taxpayer-funded health service that are double those under the current medicine pricing agreement, which expires at the end of this year.
The agreement will save billions more pounds that can be used to provide the best possible treatment and care for NHS patients, grow the workforce and cut waiting lists - one of the Prime Minister’s 5 priorities.
The voluntary scheme for branded medicines pricing, access and growth (VPAG) has been agreed by the government, NHS England and the Association of the British Pharmaceutical Industry (ABPI) and will run for 5 years until 31 December 2028.
As well as helping to keep the price of vital branded medicines affordable for the NHS and fair for taxpayers, the deal will help to ensure the NHS can continue to improve the speed it secures and adopts the newest treatments.
An additional £400 million of life sciences investment by industry will accelerate work on clinical trials, manufacturing and in health technology assessments agencies, encouraging UK economic growth, collaboration and innovation in the sector.
Health and Social Care Secretary Victoria Atkins said: "Millions of NHS patients will benefit from this momentous, UK-wide agreement. Not only will it save the health service billions of pounds every year, it will allow more patients to quickly access the latest life-saving medicines and treatments. This deal will also ensure the UK remains a world leader in driving forward innovative healthcare while boosting our economy, with hundreds of millions of pounds invested in vital research, clinical trials and manufacturing."
Medicines represent the second highest proportion of NHS spend, worth £19.2 billion in England in the 2022 to 2023 financial year. Fourteen billion pounds of this was branded, with the industry paying the NHS back £2 billion in rebates that year. This agreement, however, sets a yearly cap on the total allowed sales value of branded medicines to the NHS each year. Sales above the cap are paid back to the government via a levy.
The level of annual allowed growth in sales of branded medicines will double from 2% in 2024 to 4% by 2027.
The agreement also introduces a new affordability mechanism for older medicines. Older medicines which 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%. The top-up tapers down for older medicines that have already seen significant price reductions, ensuring we recognise when competition has worked effectively to makes savings for the NHS.
The income from this mechanism will support lower payment rates for more innovative medicines, making the agreement explicitly pro-innovation and pro-competition.
Chancellor of the Exchequer Jeremy Hunt said: "This landmark agreement will not only save the NHS money, but help patients get access to the very best medicines and treatments for years to come. With significant new industry investment in research, clinical trials and manufacturing, this deal will bolster Britain’s position as the largest life sciences hub in Europe and support a sector so critical to our country’s health, wealth and resilience."
Date: 22 November