Life sciences leaders unite to condemn radical plans to rewrite medicines scheme

Over twenty industry leaders from companies supplying the NHS with essential medicines warn that radical plans to change the Statutory Scheme for branded medicines are unworkable. If implemented, the industry believes the measures will be highly damaging to UK life sciences and NHS patients’ access to medicines.

Direct industry quotes follow from AbbVie, Amgen, Astellas, Bristol Myers Squibb, Daiichi Sankyo UK, Gilead Sciences, Ipsen, Janssen, Japan Pharmaceutical Manufacturers Association (JPMA) International Affairs Committee, Jazz Pharmaceuticals, Lilly UK, Organon, Merck UK, MSD, Novartis, Pfizer, Roche Products, Sanofi, Santen, Takeda and UCB.

A government consultation [1] proposing radical changes to the Statutory Scheme for branded medicines has led to unprecedented criticism from the pharmaceutical industry, which warns that elements of the proposals are likely to reduce patient access to medicines, harm UK clinical research, and undermine investment in UK life sciences.

At the heart of industry concerns is the proposed continuation of an arbitrary cap on growth in the UK branded medicines market. This cap mechanism has led to rocketing revenue clawbacks in the UK, up from around five per cent to 27 per cent in just three years, well beyond any historical or international comparison. A report by NERA [2] found the government to give no justification for setting such a cap at the current level, and a report by WPI Strategy [3] said that continuing to do so would negatively impact UK economic growth.

Also controversial among the proposals from the Department of Health and Social Care (DHSC), is a new mechanism called the Life Cycle Adjustment (LCA). This LCA aims to maintain the total revenue raised through sales clawbacks, but reduce rates paid by newer medicines, by imposing very high clawback rates of up to 40% on medicines older than 12 years. The higher rates would be paid on products judged by DHSC to be in ‘uncompetitive markets’ using a highly questionable measurement of ‘competition’ which deviates from existing UK and European Competition Law practice.

While the industry is open to measures that support innovation and competition, it believes the proposed Life Cycle Adjustment will introduce even more instability to the UK market and be too imprecise and open to challenge, placing a considerable additional regulatory burden on companies.

If implemented unchanged, the industry believes these changes would damage the UK economy and wider medicines launch, access and supply.

Richard Torbett, Chief Executive, Association of the British Pharmaceutical Industry (ABPI), said: “We urge the government to slow down and take another look at these proposals before they press ahead and do real and lasting damage to the UK’s reputation as a global leader for life sciences.

“What all businesses crave is predictability. This allows companies to manage risks and invest with confidence. Yet these unpredictable capped pricing schemes have done the opposite, running hard against the government’s ambition to make the UK a global life science leader and a key driver of UK economic growth.

“In just three years, we have seen revenue clawbacks go from low single digits to well over a quarter of sales revenue – with no allowance for rising inflation or other business taxes. We need a pragmatic solution where industry and government can properly share the risks and rewards of innovation.”

The Statutory Scheme is one of several pricing mechanisms that control NHS spending on branded medicines. It requires companies to pay back a percentage of their NHS-branded medicines sales to DHSC above an arbitrary budget growth cap. These clawback payments come on top of NICE’s assessment of value for money, separately negotiated discounts with the NHS and other business taxes. In 2023 the Statutory Scheme clawback rate stood at a record 27.5 per cent [4].

Currently, only a minority of companies are subject to the Statutory Scheme with most choosing to be part of a Voluntary Scheme (VPAS) [5] agreed between government and industry. However, the current Voluntary Scheme is due to end in December 2023, and without a new deal agreed, all branded medicines sales will, for the first time, be subject to the statutory scheme.

If, for the first time in 65 years, ongoing negotiations between government and industry fail to reach a Voluntary Scheme agreement before the end of 2023, some specific changes to the Statutory Scheme will be required to minimise, if not completely avoid, negative impacts on the pricing and supply of medicines in the UK. These include exemptions for the newest medicines, blood and plasma derived products, vaccines, and centrally procured medicines.

Quotes from UK Pharmaceutical industry leaders:

Todd Manning, Vice President and General Manager, United Kingdom, AbbVie, said, “AbbVie has always been a member of the Voluntary Scheme but left as a reflection of our view that the current scheme was broken. Unprecedented high payment rates in 2022 and 2023 have had a demonstrable impact on our ability to operate sustainably in the UK. It is therefore disappointing to see proposals for a Statutory Scheme which fail to deliver the sustainable, predictable, and internationally competitive foundation that companies need to rebuild commercial confidence.

“The current proposals will make it increasingly difficult for the UK to achieve its ambitions of maintaining strategic significance as a key market for the life sciences sector.”

Russell Abberley, General Manager, Amgen Limited, said: “We are proud of our track record of delivering innovative medicines to patients across the United Kingdom. Working with academia, the NHS and third sector, we have improved the prognosis for patients living with cancer, cardiovascular disease and inflammatory diseases.

“Political leaders of all parties agree on the need for the UK to have a strong life sciences sector to support economic growth. However, the reality is that we are already witnessing a collapse in foreign direct investment in the UK Life Sciences sector. The internationally unprecedented rebate rates now seen in the Voluntary and Statutory Schemes undermine Amgen’s ability to bring clinical research and innovative medicines and biosimilars into the United Kingdom. Government must act now to reverse a decline in investment and bolster its rapidly fading hope of being a life sciences power.”

Jackie Williams, General Manager, Astellas Pharma Ltd, said: “While Astellas agrees with the principles of driving competition and supporting innovation in the UK, the proposed changes to the Statutory Scheme would be counter to this ambition. The Lifecycle Adjustment principle, with seemingly arbitrary 12-year and 80% thresholds, and punitive payment percentages proposed for the supplementary rates, does not move towards an internationally competitive fixed rate that would provide certainty and stability for our business in the UK.

“There will also be a negative impact on new product launches, despite any initial exemption in the first three years. Compared with other countries, NICE explicitly states and works to a low cost-effectiveness threshold, therefore approving a price which reflects innovation is challenging. This, when coupled with uncertainty around payment rates for the voluntary and statutory schemes over the next five years, makes the UK increasingly unattractive as an early launch market.

“From a global perspective, the current high rebates make the UK a less attractive market for investment; the proposed rates with increased charges later in the product lifecycle would only reinforce this view further.”

Antonio Payano, CEO Bayer UK/Ireland and Country Division Head Pharmaceuticals UK/Ireland, Bayer UK, said: “The UK aspires to lead globally in life sciences, however industry cannot support this ambition when it forfeits over a quarter of sales revenue annually in addition to taxes.

“In 2022 and 2023 Bayer responded to the soaring clawback rates with reductions in jobs and investment in the UK hoping for a return to normalcy in 2024. If measures in the proposed Statutory Scheme with its high rates and likely market distortion are imposed on industry Bayer would be forced to reassess our presence in the UK and our pharmaceutical business model. Bayer has supplied Department of Health Officials with an initial list of products that are unviable to supply if we continue at 2023 rates.

“It is time for government to acknowledge the value of innovative medicines in treating individuals, addressing health inequalities and benefiting society and the economy, and present a scheme that is predictable, supports innovation and has internationally competitive rates.”

Scott Cooke, General Manager, Bristol Myers Squibb UK & Ireland, said: “As a significant inward investor, Bristol Myers Squibb is keen to see the UK unlock its full potential as a global life sciences hub in Europe, providing the foundations for future growth. Unfortunately, the Government’s proposals for the statutory scheme would maintain their current approach to taxing medicines manufacturers at an unprecedented and unsustainable rate greatly exceeding similar schemes in mainland Europe, putting the UK at a disadvantage for the sector. This approach has already damaged the international reputation of the UK and diverted high value investments in life sciences to other countries with more favourable policies. I urge Ministers to think again and work with industry to create the conditions for investment, growth and better healthcare.”

Laura McMullin, General Manager, Daiichi Sankyo UK, said “Daiichi Sankyo UK welcomes the government’s intentions to take a more pioneering approach to a heterogenous sector, where a one-size-fits-all approach is no longer fit for purpose.

“As a company focussed on bringing innovative medicines to patients in the UK, we believe any future statutory or voluntary scheme must seek to incentivise and inspire that future innovation, and offer a transparent, predictable, and fair settlement that supports the shared objectives of the life sciences industry and government. It is unclear whether the government’s proposals will meet that goal, as significant questions still remain unanswered.”

Dr Véronique Walsh, General Manager & VP, UK & Ireland, Gilead Sciences, said: “The Statutory Scheme proposals are deeply concerning and if implemented will be highly damaging to the UK’s ambition in life sciences.  They will also put the UK out of step with Europe and further entrench the global perception that it is not a place to invest.  With the UK already spending less money on medicine with some of the worse health outcomes,[6] these measures will deter the launching of new treatments and British patients will lose out again.”

Guy Oliver, General Manager at Ipsen UK & Ireland, Ipsen, said: “Ipsen is a significant investor in the UK with a strong manufacturing and commercial footprint. We have major concerns over the proposals in the Statutory Scheme consultation which clearly demonstrate a lack of understanding of how our industry works, serving to disincentivise innovation rather than driving it.

“There is a worrying trend towards segmenting our industry and creating one rule for one and one for another, along with a failure to recognise that innovation comes in many forms. As they stand, the proposals only serve to discourage companies from investing in the UK and, by penalizing older medicines, risk the supply of established medicines to patients that rely on them.

“The Government must ensure rates for both Statutory and Voluntary Schemes return to single figures immediately in order for UK to be internationally competitive again and signal that the UK is a place in which to invest and launch medicines.”

Rozlyn Bekker, Managing Director of Janssen UK & Ireland said: “The Janssen Pharmaceutical Companies of Johnson & Johnson have a long-standing and deep commitment to the UK, including as a leading centre for clinical trials. We work in partnership with the UK life sciences ecosystem with the ambition to maintain and grow investment in the country and ensure that patients can benefit from leading research and innovative medicine.

“This ecosystem is currently at real risk of being destabilised by unsustainable pre-tax levies that are internationally divergent, and a proposed statutory scheme that undermines key attributes that have historically made the UK a safe and predictable country for investment.

“We are at a watershed moment. However, I remain confident that if the government and industry work closely together we can arrive at a competitive, sustainable updated scheme and prevent the UK risking its position as one of the greatest places in the world for life sciences.”

Nobuo Murakami, Chairman of the JPMA International Affairs Committee, said: “The international committee of the Japanese Pharmaceutical Manufacturers Association, endorses the concerns about the proposals for the Statutory Scheme as expressed in this JPG response.

“JPMA seeks solutions of common issues in the global pharmaceutical industry, undertakes activities to deepen understanding of pharmaceuticals and promotes sound development of policy, strengthening recommendations and facilitating internationalisation of the industry. The international committee of JPMA follows VPAS developments closely and is highly concerned by the payment rates that have been introduced recently. Our view is that these are exceptionally high compared with other developed economies and is affecting the reputation of the UK in life sciences and diminishing opportunities for investment in the UK. We urge the UK Government to adopt a more balanced approach and support for a thriving life sciences industry through the VPAS negotiations, as well as the Statutory Scheme.”

Simon Newton, General Manager, UK & Ireland, Jazz Pharmaceuticals, said: “Jazz has been a significant investor in UK-based R&D and manufacturing over the past decade. As a UK affiliate of a global company, we share the Government’s ambition to bring more R&D to this country. This is why, at Jazz, we are deeply concerned by the proposals set out in the Government’s consultation on the 2024 statutory scheme. The level of the rates and the proposed lifecycle adjustment (LCA) mechanism are unworkable and would compromise the industry’s ability to invest in the UK and create highly skilled jobs in the UK economy. It is vital that Government work with industry to create a new VPAS scheme that restores rates to international competitive levels, supports economic growth and improves patient outcomes.”

Laura Steele, President and General Manager, Lilly UK & Northern Europe, said: "The life sciences industry of patient care, medicines research and medical discovery cannot be the jewel in the UK's economic crown without urgent government action.

“At Lilly, we are passionate about improving outcomes for patients in the UK. Our pipeline of medicines represents a huge opportunity to help tackle long-term conditions that place a significant burden on patients and the NHS.

“We urge government to recognise and act on our real concerns about the impact of the proposed statutory scheme on future investments and access to innovative medicines, so the best possible environment can be created for a true partnership with industry, which could help ensure patients in the UK continue to have the same access to breakthrough therapies as people in other countries."

Simon Nicholson, Managing Director, UK, Ireland, Nordics, Baltics & Israel, Organon, said: “As a newly established women's health organisation, created only two years ago, our launch phase has coincided with rapid and excessive increases in VPAS payment rates. This combined with inflation has created a destructive and almost impossible commercial environment for us to operate in.

“As the MD of a cluster of markets across the UK, Nordics, Baltics and Israel, this is something both I – and our global leaders – are considering very seriously. The level and unpredictability of the rates the UK Government has imposed on industry means we are unable to plan. In addition, this is impacting decisions around investment in the UK which is now rapidly being deprioritised as a top tier market for innovation.

“Ultimately patients are at the heart of all we do. But the reality is these unsustainable rates will mean that many of our products across range of disease areas will very quickly become completely unviable and this is something we desperately want to avoid.”

Doina Ionescu, General Manager, Merck UK and Ireland: “We are concerned with the changes proposed in the government’s latest Statutory Scheme consultation. While we understand the principle of keeping the Statutory Scheme broadly in line with Voluntary Scheme, we are currently in the middle of negotiating a new Voluntary Scheme and any alignment to VPAS which ends on 31 December 2023 would be obsolete. Whether a successor Voluntary Scheme is negotiated or if the Statutory Scheme becomes a standalone scheme, we need to return to an internationally competitive environment that protects small and mid-size companies and fosters investment and growth in the UK Life Sciences sector.”

Ben Lucas, Managing Director, MSD, said: “The Statutory Scheme proposals need a rethink. If implemented, they would continue the uncertain, unsustainable and punitive commercial environment, that puts the UK at a competitive disadvantage.

“Central to the proposals is the Life Cycle Adjustment (LCA) mechanism, which though defined as innovative, undermines innovation in its current form. This would risk confidence in the UK’s commitment to fairly reward innovation that is IP protected.

“Innovation should be supported by creating a policy environment conducive to the kind of sustained inward investment that leads to new treatments for patients and drives better patient outcomes.

“The Government must consider seriously industry’s responses, and the implications of the proposals as they stand.”

Marie-Andree Gamache, Country President and Managing Director, UK and Ireland, Novartis, said: “The UK is at risk of falling even further behind, without government action to ensure we can be a global centre for life sciences by attracting investment and protecting patient access to advanced treatments. At Novartis, delivering our innovative medicines to UK patients is our priority, however this is becoming increasingly challenging without a competitive environment that encourages innovation and invest sufficiently in medicines. We urge this Government to take the action required to overcome the uncertainty that hangs over the future health of UK patients, the economy and society.”

Susan Rienow, UK Country President of Pfizer, said: “A thriving UK life sciences sector is good for patients, good for the NHS, and good for jobs and growth.

“For decades, agreements between industry and Government aimed to support this by keeping the medicines bill affordable whilst enabling industry to be sustainable. But the current scheme has failed, with the industry levy skyrocketing to historical and globally unprecedented highs.

“The Statutory Scheme proposals signal that industry repayments to Government would be kept at unsustainably high levels into the future. This does not send a signal which would encourage the investment needed to be a global science superpower.

“We must now agree a new voluntary scheme which makes the UK internationally competitive, so the country can be home to tomorrow’s medical breakthroughs.”

Richard Erwin, General Manager, Roche Products Ltd: “Any future scheme for branded medicines is a critical opportunity to support the availability of innovative medicines, a sustainable NHS and life sciences sector, and grow the UK economy.

“We, alongside other organisations, are concerned that the unprecedented high rates proposed in this consultation do the opposite. This could set back the government’s ambition to make the UK the best place in the world for clinical research and innovation.

“We remain committed to working with the government and the NHS to ensure we help improve the lives of patients and their families, especially in gaining access to innovative medicines.”

Jessamy Baird, General Manager UK, Sanofi, said: “The consultation on the Statutory Scheme for branded medicines offers a bleak prospect for the future of the UK life sciences industry. This single-minded approach to taxing the pharmaceutical industry well above levels seen in any other European country will have a disastrous impact on patients, furthering disinvestment in life sciences, threatening the supply of essential medicines and driving down patient outcomes.

“As the UK country lead for Sanofi, it has become increasingly difficult to make the case for launching new medicines and investing in the UK. The UK, in particular England, is already a challenging country in which to secure access to new medicines for patients. Excessive rates under the voluntary and statutory schemes only worsen this and have already placed significant pressure on medicines supply, reducing the diversity of suppliers in the market and driving up overall medicines prices for the NHS.”

Craig Wallace, GM UK/Ireland/SA/ Canada & Head EMEA Commercial Operations, Santen, said: “Unless the government reverses course, it will be bad news for the pharmaceutical industry, the government and UK patients. There are no winners here.”

Şeyda Atadan Memiş, General Manager UK & Ireland, Takeda, said: “The proposals for the next Statutory Scheme are at odds with the Government’s ambition for the UK to become a global science superpower.

“We have a huge opportunity in the UK to create a thriving sector, attract inward investment and improve health outcomes. However, this can only be achieved through a sustainable approach to medicines provision, which seeks to unlock investment and restore an internationally competitive environment for life sciences.

“While we are pleased the proposals acknowledge the strategic importance of plasma derived therapies, it's vital the unprecedented and unsustainable rates endured by the industry in 2023 are discontinued and the value of innovation is recognised.

“As negotiations to agree a future Voluntary Scheme are ongoing, we urge the Government to continue to work with industry so that a sustainable solution can be found that supports innovation and secures the long-term supply of medicines for patients.”

Claire Brading, UK general Manager, UCB, said: “We are very concerned about the proposals in the statutory scheme consultation, and the risk this poses to UK competitiveness for life sciences investment, and ultimately our ability to rapidly bring the latest innovations to UK patients. To deliver innovation, we need a favourable environment from research to development to the marketplace, and we cannot look at these in isolation. Currently, the balance isn’t right and these proposals would see pharma companies pay much more in rebates than in other countries around the world, disincentivising investment here from research to trials to new launches. We are concerned there is a complacency within the UK that is missing this very real risk of disinvestment in the UK by global companies.”

ENDS

Notes to Editors
[1] Department of Health and Social Care, ‘Proposed review of the 2023 scheme to control the cost of branded health service medicines’, 21 August 2023
[2] NERA Economic Consulting, ‘Review of DHSC’s Proposal for the Statutory Scheme from 2024’, 22 September 2023
[3] WPI Strategy, ‘False Economy: How NHS medicine procurement threatens the UK’s life sciences growth engine’, 23 February 2023
[4] ABPI, ‘ABPI response to government Statutory Scheme rise’, 02 March 2023
[5] ABPI, ‘Voluntary Scheme on branded medicines’, 20 September 2023
[6] The Kings Fund, ‘How does the NHS compare to the health care systems of other countries?’, pg. 57 figure 18, and pg. 81 figure 28.