UK set to demand a third of pharmaceutical company revenue in second half of 2025

The government is proposing to raise the Statutory Scheme payment rate for newer branded medicines from 15.5% to 32.2% of subject companies' NHS sales in the second half of 2025 [1,2].

The ‘payment rate’ is the amount of revenue that companies are required to hand back to government on their sales of branded medicines to the NHS. It is an additional charge to the taxes paid by companies.

The Statutory Scheme rate of 32.2%, an average of 23.8% over the whole of 2025, sets a new record for any such medicines sales payment scheme in the UK, and shows that the UK medicines market is fundamentally broken.

The average Statutory Scheme payment rate between 2019 and 2022 was 10.6%, but in recent years, the payment rates required by the government have soared, hitting a historic peak in 2023 at 27.5%, before today's proposed record proposed rise [3].

While no other country has an identical scheme to the UK, comparable sales rebate schemes in Germany with 7% payment rates, Ireland with 9% payment rates, and France with an average 5.7% rate which is capped at 12%, show that the UK is far outside international norms [4].

The ABPI is warning that rocketing payment rates under both the Statutory Scheme and the associated Voluntary Scheme for Branded Medicines Pricing, Access and Growth (VPAG), are undermining government efforts to make life sciences a key pillar of its industrial strategy.

The UK invests a smaller share of overall healthcare costs on medicines than any comparable country. Just 9% of the UK’s overall healthcare spending is on medicines,  compared to 17% in Germany and Italy and 15% in France [5].

According to the King’s Fund, the UK tends to have much poorer health outcomes than its peers, coming 16th and 18th, respectively for preventable and treatable causes of mortality, those for which there tend to be medicines, in a basket of 19 comparable countries [6].

Over the past decade, growth in the UK branded medicine market has been capped at between 1.1% (2014-2018) and 2% (2019-2023) per year. After accounting for inflation, this growth has declined by over a tenth (11%). In the same period, the NHS budget grew by a third in real terms (33%). [7,8]

Richard Torbett, Chief Executive of the ABPI, said: “The government has rightly identified life sciences as a critical growth sector for the economy, but unless these excessive payment rates under both the VPAG and Statutory Scheme are addressed, the UK will not see the growth and investment we all want.”

“We need an urgent ministerial commitment to work with industry to get the UK back to an internationally competitive position.”

Currently, only a very small proportion (2%) of the total branded medicines market is subject to the Statutory Scheme, with the majority of companies opting into the Voluntary Scheme for Pricing, Access and Growth (VPAG), which tends to have enhanced terms and marginally lower rates.

The government's proposal to raise the Statutory Scheme payment rate is intended to align the scheme with the 22.9% payment rate required for 2025 under the VPAG [9].

The proposed Statutory Scheme rate for newer medicines is higher than the existing VPAG 2025 rate to make up the difference for having a lower rate for the first six months of 2025 with the aim of delivering a pro rata rate of 23.8% for 2025. However, the projected statutory scheme rates for 2026 at 24.7%, and 2027 at 26.4% indicate there is a real risk the rates continue to increase beyond record levels for years to come – unless ministers intervene to fix the broken system.

The very high rate now seen in both schemes has been driven by the decision in 2014 to introduce a limit on growth in the NHS branded medicines spend (a cap). If spending exceeds the cap, pharmaceutical companies must repay the difference to the government, calculated as a percentage of their UK sales (the payment rate).

The first growth cap was agreed in the 2014 Voluntary Scheme (then PPRS) as a one-off “austerity measure” at a time of acute pressure in the wake of the global financial crisis. The cap was then repeated in the 2019 VPAS, and again through the 2024 VPAG. As the Statutory Scheme intends to stay broadly aligned to the Voluntary Scheme, this has led to very high rates in both.

The result of limiting government expenditure on branded medicines at levels far below NHS need has led to long-term disinvestment in medicines, while the costs to industry has increased exponentially. Most recently, this has been exacerbated by a rapid expansion of NHS spending, without any corresponding increase to allowed spending on medicine.