The UK Department of Health and Social Care (DHSC) has announced its anticipated 2025 headline payback rate for new medicines under the 2024–2028 Voluntary Scheme for Branded Medicines Pricing, Access and Growth (VPAG). VPAG operates as the current form of the UK’s clawback scheme for cost-containment on National Health Service (NHS) sales of branded prescription medicines. However, the innovative pharma sector will likely be disappointed as the headline payback rate on NHS sales will be set at an unexpectedly high level of 22.9% for newer medicines in 2025.
VPAG’s predecessor scheme was known as the Voluntary Scheme for Branded Medicines Pricing and Access (VPAS), and the previous five-year VPAS clawback scheme expired in December 2023. VPAS became deeply unpopular towards the end of its lifecycle due to imposing an unexpectedly high and punitive payback rate of 26.5%. This rate was a blow to the pharma sector in the UK, which then pushed for changes to be reflected in its replacement scheme to ensure more sustainable conditions. In the resulting VPAG scheme for 2024-28, some initial proposals such as a fixed payback rate did not come to fruition, but the DHSC opted instead for two differential payback rates, one for “newer” medicines and one for “older” medicines, under a framework described by the DHSC as its new “affordability mechanism”. Also, the new scheme included phased adjustments to the sales growth threshold, (previously fixed at the low level of 2%)—starting from 2% in 2024, rising to 3.75% in 2025–26, and reaching 4% in 2027–28.
Once VPAG was introduced in early 2024, the initial headline payback value was only 15.1% for newer medicines in Q2–Q4 (after an initial Q1 2024 transition rate of 19.5%), signalling a return to a more sustainable arrangement, though not yet the single-digit levels seen in many previous years. However, this precedent has not been matched for 2025, as the headline rate for newer medicines in the second year of the VPAG’s operation has now jumped to the higher-than-expected level of 22.9%. This high payback rate was linked to an unexpected year-on-year jump in the sales growth rate, and the resolution of an underpayment of GBP373 million ($473 million) from 2024.
The sales growth rate was based on sales measured during Q1–Q3 of 2023 and 2024. For newer medicines, the year-on-year growth rate sat at 14.34% for 2024. For older medicines, a smaller increase of 4.56% occurred alongside a drop in parallel imports (6.28%) for 2024. Total sales across all categories grew by 9.5% in 2024. These values were then taken into consideration as part of the calculations for the payback rate for 2025, in addition to the underpayment of £373m ($473m).
While 22.9% is still lower than the previous punitive rate of 26.5% in 2023, the fact that the payback rate will exceed 20% again will disappoint developers and the innovative pharma sector. The negotiated revisions that formed VPAG were intended to prevent a recurrence of high clawback rates. This spike may be short-lived, but will still raise questions over the success of VPAG, and could even cause VPAG members to advocate for revisions to the new scheme to ensure its sustainability while also achieving its initial goal to bring payback rates back down to modest levels.
Despite this worrying payback level for the UK innovative pharma sector, it appears that the older medicine sector has benefited. The split/differentiation in rates brought about by the new scheme means that these medicines have been protected from the high payback rate. This sector saw modest growth (4.64%) in 2024, and older drugs are not subject to the payback rate of 22.9%. Instead, an alternative basic rate of 10% will be applied for 2025 in addition to a “top-up” rate of 0–25% based on price erosion levels.
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Despite the unfavourable payback rate that innovative pharma VPAG members will face, non-participation in the scheme does not necessarily present a suitable alternative. If they are not part of VPAG, companies must join the Statutory Scheme, which operates with a similar strategy but is generally less favourable due to its traditionally higher set payback rates. While VPAG has not produced the desired rates that developers were hoping to see in 2025, some of the developers’ fears may be diluted by the other promising components of the scheme. For example, its novel investment component is already being used to boost the UK pharma R&D sector. Nonetheless, GlobalData expects that drug developers will seek further assurance that the VPAG scheme is sustainable, with preferential rates, and will hope that 2025’s high payback rate is merely a blip.
This article is produced as part of GlobalData’s Price Intelligence (POLI) service, the world’s leading resource for global pharmaceutical pricing, HTA and market access intelligence integrated with the broader epidemiology, disease, clinical trials and manufacturing expertise of GlobalData’s Pharmaceutical Intelligence Center. Our unparalleled team of in-house experts monitor P&R policy developments, outcomes and data analytics around the world every day to give our clients the edge by providing critical early warning signals and insights. For a demo or further information, please contact us here.