UK drugmakers, government agree renewed revenue clawback scheme

[November 21, 2023]  By Ludwig Burger

(Reuters) -Britain's pharmaceutical industry and the government have agreed terms to renew a medicines access scheme that requires the companies to pay back part of their drug revenue generated from the national health service, they said on Monday.

The Association of the British Pharmaceutical Industry (ABPI) said in a joint statement that the scheme agreed with the government and National Health Service (NHS) England, will run for five years until end-2028.

The Department of Health and ABPI said that the clawback deal would save the NHS 14 billion pounds ($17.5 billion) over the five years in medicines costs, while giving patients access to "the latest lifesaving treatments more consistently".

ABPI has said that in 2021, the Voluntary Scheme for Branded Medicines Pricing, Access and Growth (VPAG) rebates - or clawback - meant companies paid around 5% of their revenue back to the NHS, but in 2022 it rose to 15% and in 2023 to 26.5% due to increased NHS demand related to the COVID-19 pandemic.

As a result, U.S. pharmaceutical majors AbbVie and Eli Lilly in January withdrew from the scheme. Trade body ABPI in February called for the government to overhaul the program.

Under the old scheme, overall company revenues from NHS expenditure on branded drugs, some of which included off-patent generic drugs, that exceeded 2% annual growth from a 2014 base year were subject to a clawback by the government.

Pharmaceutical tablets and capsules are arranged on a table in this picture illustration taken in Ljubljana August 20, 2014. Picture taken August 20. REUTERS/Srdjan Zivulovic

Based on complex deal terms, the annual growth rate above which clawbacks kick in will rise to about 6.1% through 2028, according to ABPI.

More terms were introduced in the scheme to favour younger drugs, to encourage new drug development, and have a higher burden on older drugs that still command high margins for the manufacturers.

The estimated 14 billion pounds in future multi-year clawbacks would be larger than what was paid over the previous five years but the industry would still participate in an expected faster overall drug market growth in Britain, said ABPI.

($1 = 0.8025 pounds)

(Reporting by Ludwig Burger;Editing by Bernadette Baum and Emelia Sithole-Matarise)

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