U.K.’s Voluntary Scheme For Branded Medicines, Pricing, And Access (VPAS) Faces A Potential Crisis
U.K.’s voluntary drug price agreement possibly in peril
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The U.K. has a “voluntary scheme for branded medicines, pricing, and access” or VPAS, which sets a limit on annual spending on single source prescription drugs by the National Health Service (NHS). Companies who participate in the VPAS must refund any excess sales revenue over this limit.
Two large U.S.-based drug companies – AbbVie and Eli Lilly – have now exited the VPAS, citing the “punitive” system of revenue clawbacks, which has risen to 26.5% of branded sales in 2022. AbbVie and Lilly aren’t the only companies complaining about the levies. Bayer and Bristol Myers Squibb have said that they will “reduce their U.K. “footprint” in response to the increasing clawbacks.
Last month, the British government stated that companies with branded medicines under the VPAS must return approximately £3.3 billion in sales revenue to the NHS. This represents a substantial increase from £0.6 billion in 2021 and £1.8 billion in 2022.
In 2019, as part of the VPAS, 172 member companies agreed to a cap that ensured the NHS would not have to pay more than a 2% growth rate annually for branded drugs. The scheme does exclude levies from companies for what are deemed the “most innovative drugs” and some sales from small- and medium-sized firms.
In the U.K., single source prescription drug prices are currently regulated using multiple entities and levers. The VPAS is one such entity. It is a tripartite agreement between the Department of Health and Social Care, the NHS, and the ABPI, which aims to stabilize branded drug cost growth while improving patient access to new medicines.
The decision this week by AbbVie and Lilly to leave the VPAS poses a serious challenge to the arrangement, moving forward. The current voluntary agreement expires in December 2023. In order to avert a crisis, the Association of the British Pharmaceutical Industry (ABPI) announced it will soon release proposals for a restructured new agreement. ABPI says it wants the new agreement to advance the interests of the British life sciences sector as a whole, and be conducive to making the British industry internationally competitive.
According to ABPI, the arrangement as originally conceived strikes a balance between supporting innovation in the life sciences sector, assisting with getting the most cost-effective treatments to patients as quickly as possible, and ensuring predictability with respect to NHS expenditures on branded medicines.
The National Institute for Health and Care Excellence (NICE) is key to the VPAS’s successful operation. For each drug with a new active ingredient, NICE conducts a health technology assessment, which compares the cost-effectiveness of the drug to existing treatment alternatives to determine whether the NHS should cover the product. NICE impacts a drug’s negotiated price through its health technology assessments and the use of cost-effectiveness thresholds. Generally, the price must be at or under what NICE considers to be acceptable in terms of cost-effectiveness.
In describing the role NICE plays in the VPAS scheme, the ABPI praises the work NICE does, saying that following its health technology assessments the “NHS can have total confidence that every medicine that is approved is both clinically and cost-effective and should be rapidly made available to all eligible patients, without delay.”
The two dozen or so drug makers who are not members of the voluntary agreement are legally required to make payments under the statutory scheme. At present, the statutory rate is 24.4% of revenue. The government has proposed an increase to 27.5%, beginning in April of this year.
The statutory scheme has historically imposed an even higher repayment rate than the voluntary arrangement. AbbVie’s and Eli Lilly’s products will now fall under the statutory scheme for branded medicines, This does raise the question, why would AbbVie and Lilly want to opt for even higher rebates? Or, are the firms hereby threatening to pull out of Britain, at least in terms of launching their new products? Alternatively, is all of this posturing?
Certainly, the moves by the drug manufacturers signal to the British government that they want reduced financial burdens and a change in the status quo. It’s grabbed the attention of the influential trade group, the ABPI, and could lead to an overhaul of VPAS at some point this year.
In the recent past, the U.K.’s life sciences industry has been a thriving sector. However, observers suggest it is slipping behind some of its global competitors. Underfunding of the NHS has been cited as a perennial and worsening issue, as has the turmoil surrounding Brexit, and now some of the pricing and revenue problems for both domestic and international makers of branded drugs.
