Medicine levy makes the UK un-investable, say pharma leaders

Leaders from across a key growth sector for the government’s upcoming industrial strategy say future UK investment is unlikely unless an unsustainable levy on manufacturers is addressed.

• Companies warn the UK’s economic growth plan will falter unless the government takes action to return payment rates to international competitiveness.
• The ABPI calls for an urgent commitment from ministers to work with the industry to address its concerns and ensure the UK can realise the opportunity to grow the sector and deliver on the objectives of the NHS 10-year plan.
• UK pharmaceutical leaders from Amgen, AstraZeneca, Biogen, Boehringer Ingelheim, Bristol Myers Squibb, Daiichi Sankyo, Gilead, Johnson & Johnson, Merck, MSD, Novartis, Pfizer, Roche, Sanofi, Takeda and UCB point to the challenges to investing in the UK (see quotes below).

The government has identified life sciences as one of the sectors with the highest potential for growth in the UK and plans to make it a key pillar of its upcoming industry strategy.

The pharmaceutical industry already contributes over £17.6 billion in direct GVA to the UK economy, with £45 billion generated through R&D spillovers [1], but growth in the sector is far from reaching its full potential.

In a new report, ‘Delivering a Voluntary Scheme for Health and Growth’, life science leaders are warning that the government’s growth plan will not succeed unless ministers commit to fixing a scheme which now requires companies to make record payments up to a quarter to a third (23.5%-35.6%) of a company’s revenue from sales of branded medicines to the NHS [3].

While no other country has an identical scheme to the UK, the 2025 payment rate has left the UK significantly out of line with comparable countries, with France’s average payment rate at 5.7%, Italy at 6.8%, Germany at 7%, Spain at 7.5%, Belgium at 7.9%, and Ireland at 9% [4].

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%). [5/6] 

Unfortunately, the UK’s decade of disinvestment in medicines and vaccines has left the NHS lagging international peers in terms of access to and use of innovative treatments.

England has slipped from being the first for the availability of new medicines (compared to other countries in Europe) to ninth in under ten years. One year after launch, the use of medicines in England is only 52% of the average of comparator nations, rising to 62% five years post-launch [7].

The UK has also fallen from fourth to tenth place in the global rankings for the number of phase III trials it hosts, below similar European countries like Spain (3rd), Germany (6th) and Italy (7th).

The UK’s share of global R&D investment has fallen from 7.3% to 5.7% over three years. This represents the fastest decline of any European G7 nation but also highlights the significant growth in global investment and the opportunity for the UK to attract international mobile investment [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 are addressed, the UK will not see the growth and investment we all want, and the UK will continue to slip behind our peers. We need an urgent commitment from the government to work with industry to get the UK back to an internationally competitive position.”

Agreements between the government and the pharmaceutical industry to support NHS access to medicines have existed since the founding of the NHS, with the latest agreement signed in 2023 called Voluntary Scheme for Branded Medicines, Pricing, Access and Growth (VPAG).

The latest deal was explicitly intended to bring payment rates back to an internationally competitive level after rates had soared to 21.2% in 2023 from an average of 7 per cent between 2014-2021. VPAG payment rates for newer medicines did fall in 2024 to 15.1%, however, in 2025, they have again soured to 23.5% for newer medicines, with companies still paying 10.6%-36.6% for older products. 

At the heart of the issue is the fact that the spending and payment assumptions, carefully considered by both sides when the VPAG agreement was negotiated over a year ago, are now very different to the original predictions.

The NHS has received more funding from the government than was assumed to be the case in 2023 during VPAG negotiations. Greater funding has led to more NHS activity and, ultimately, a greater demand for medicines, which must be paid for by the industry.

To fix the problem, the ABPI is calling for the allowed growth agreed in the Scheme to be adjusted to reflect recent increases in NHS funding, and linked to future adjustments each year based on the latest planned NHS budget.

For the Voluntary Scheme to become sustainable, it needs to move away from a hard growth cap. Fairly sharing the costs and benefits of growth in medicine spending between government and industry will help restore the scheme in the long-term and return the UK to international competitiveness.

Quotes from industry leaders:

Russell Abberley, General Manager of Amgen UK & Ireland, said: “The VPAG Progress Report highlights the significant and acute challenges faced by the life sciences sector in the UK. In December 2024, the government announced that the VPAG payment rate for newer medicines would be set at 22.9% for 2025, well above expectations and putting sector growth and investment at risk. Global boardrooms are closely monitoring developments, concerned that the UK is further exacerbating its position as an international outlier. It is, therefore, crucial that government acts decisively to partner with industry to resolve this issue.

“Industry remains committed to working with government, at pace and with urgency, in the run-up to the scheme’s Autumn review. Together we must identify solutions that bring the Scheme back on track to meet its original objectives. Without government’s partnership, our shared vision of making the UK a global life sciences hub will remain unrealised: impacting industry sustainability, the delivery of NHS transformation plans, and ultimately the government’s plan for economic growth.”

Tom Keith Roach, President, AstraZeneca UK, said: "We are committed to working with the government to support UK science, boost investment, drive growth and deliver the productivity gains that are available through better health. However, the commercial environment needs to reflect the level of ambition the government has for the sector and we need to see a substantive and long term commitment to improvement as a key plank of the life sciences strategy.”

Kylie Bromley, Vice President and Managing Director of Biogen UK, said: “The size of the rebates and their unpredictability have had a major impact on our work in the UK and our investment here. We would love to celebrate the positive parts of the UK’s life sciences ecosystem, but they are often over-shadowed by the fact that we are a noticeable international outlier for the wrong reasons.”

Vani Manja, Country Managing Director and Head of Human Pharma Boehringer Ingelheim UK & Ireland, said: “The UK government needs to move away from considering innovative medicines as a cost to the economy and recognise them as a critical driver of better population health and improved productivity. Aligning government priorities for improving health and growing the economy could help ensure the pharmaceutical industry continues to invest in the UK.”

Guy Oliver, General Manager for Bristol Myers Squibb UK and Ireland, said: "The current VPAG rate for 2025 is leaving UK patients increasingly behind those in comparable countries. The UK life-sciences industry is in decline, with fewer clinical trials, a decrease in the launch of innovative medicines, cuts to partnerships supporting the NHS, and workforce reductions across the sector. At BMS, we have had to make these difficult decisions, which contradict the government's ambition to collaborate with industry and foster growth.

“The penalising and unpredictable nature of this revenue clawback makes it incredibly challenging to plan effectively and position the UK market attractively within global organisations. The UK lags far behind more dynamic markets in the competitive global race for investment. BMS is driven by our mission of bringing innovative medicines to the patients who need them, and it is deeply concerning that UK patients are missing out."

Laura McMullin, General Manager, Daiichi Sankyo UK, said: “Daiichi Sankyo is proud of our decades long commitment to the UK. It has been a privilege to collaborate with the NHS in supporting tens of thousands of patients across several disease areas. However, the stark reality is that it has been increasingly difficult for patients to get our medicines on the NHS and to conduct R&D here in recent years. Further clawbacks on medicine revenues will only impact the sector’s appetite for investment further. This is neither in the interest of patients nor economic growth.”

Peter Wickersham, Vice President and General Manager, Gilead Sciences UK & Ireland, said: “Life sciences companies are rapidly losing confidence in the UK as an attractive and predictable place to do business. A clear aim of the 2024 VPAG scheme is to drive access to medical innovation and growth of the UK life sciences sector. Yet this recent sharp and unexpected increase in the VPAG rate adds to the existing negative perception of the UK within global boardrooms and makes it harder to manage a successful UK business for many companies. The government must work with industry to address these commercial challenges as a priority, so that we can create a life sciences environment that fosters innovation and delivers better health outcomes for UK patients.”

Roz Bekker, Managing Director UK & Ireland, Johnson & Johnson Innovative Medicine, said: “At Johnson & Johnson we share the government’s ambition to drive growth and innovation in life sciences to benefit patients and the country. However, there is a clear disconnect between this vision and the reality, which is locking the UK medicines market into managed long-term decline.

“A thriving life sciences ecosystem relies on a balanced, predictable and sustainable commercial environment. One that fosters innovation and ensures patients benefit from the best available treatments.

“A steep rise in the VPAG rate to 22.9%, coupled with an already challenging access environment, does not point towards a country that values innovation. Instead, it compromises product launches, jobs, UK investment in R&D and manufacturing. This effective tax on revenue, stands in stark comparison with that of Germany at 7% and Ireland at 9%.

“We urgently need adjustments to bring rates back into line with international comparators. This will support the UK’s return to a position of international competitiveness and critically, safeguard equitable access to innovative medicines for patients in the UK. 

“As a large UK investor, Johnson & Johnson is committed to working together with the government to help the UK realise its full potential, delivering for patients today and in the future.”

Doina Ionescu, Merck’s General Manager for Healthcare in the UK and Ireland, said: “The new VPAG scheme was designed to balance medicines’ costs for the NHS whilst encouraging growth and investment in the UK pharmaceutical industry. However, with a 2025 VPAG rate of 22.9%, this scheme, like its predecessor, continues to deter investment and prevent growth. The new scheme’s rates remain unaffordable and will have an enormous impact on the resilience and outlook of medium sized companies such as Merck Serono, hampering our ability to discover innovative medicines and deliver them to patients. The new government has committed to improving healthcare and driving industry growth, but to do this they must address these VPAG rates and return the pharmaceutical industry to an internationally competitive position that will unlock investment and truly improve patient outcomes.”

Ben Lucas, Managing Director for MSD in the UK and Ireland, said: “The Voluntary Scheme for Branded Medicines Pricing, Access and Growth (VPAG) is a mutual challenge for the life sciences sector and government at a time when we have a shared ambition to drive better health outcomes and economic growth. We believe there is a real opportunity to drive transformational change in partnership with the Department of Health and Social Care (DHSC) as we seek to meet this ambition and it transforms to a department that enables workforce productivity and economic growth. By working together to find a solution to the current challenges with the voluntary scheme, we believe that we can realise the ambitions of the Life Sciences Sector Plan and 10-Year Plan for the NHS, so that we maximise the benefits of medicines and vaccines to the NHS and population health, and ultimately restore the original intentions of the VPAG for the benefit of patients, the NHS, and the economy."

Johan Kahlström, Country President and Managing Director, UK & Ireland, Novartis, said: “The UK has rightly recognised the potential of life sciences as a key driver of economic growth. Making the UK a more attractive destination for life sciences requires a strong ecosystem where the value of innovation is adequately recognised. However, long-term underinvestment in medicines leading to unexpectedly high VPAG rebate rates, together with a challenging access and uptake environment, are making the UK increasingly uncompetitive in the race for global investment. The UK is lagging when compared to global competitors like the US, China, and Japan including lower investment in R&D, a smaller share of global clinical trials, and longer approval times for new medicines. Considering the value and growth stimulated by the industry and Novartis, we expect to see health and life sciences genuinely prioritised by the government. Urgent action is required to reverse this decline and provide the foundations needed for investment, growth and improved health of the UK population.”

John McGinley, Pfizer UK Country President and Managing Director, said: “The unexpected escalation in the VPAG rate to 22.9% is incompatible with the UK government’s ambitions to be a global life sciences leader and accelerate innovation for UK patients. To secure investment, innovation, and improved health outcomes, we need an internationally competitive environment. We urge the government to work with industry to find a sustainable, long-term solution that supports both the NHS and the UK’s future as a life sciences powerhouse.”

Karen Lightning-Jones, Market Access Director at Roche, said: "At present, the VPAG scheme is not working in a way that is consistent with the government's ambition to encourage growth and investment from the UK life sciences sector. We hope that the upcoming review point later this year is an opportunity to consider this, especially the impact on international competitiveness and the ambition to reduce the rate over the course of the scheme."

Rippon Ubhi, Sanofi UK & Ireland Country Lead & General Manager, Specialty Care, said: “The UK is a significant outlier when it comes to low investment in medicines innovation and this needs to change if we want UK patients to access the best treatments, to be economically active and to present less demand on the NHS. Companies also won’t invest when signals are negative.

“We’ve committed to a deal that gives the UK time to return to international competitiveness, but this year’s rate is a backward step following unprecedented growth in medicines usage and against a backdrop of increased investment in the NHS that included no investment in medicines. We need to work together to get back on a path to growth.”

Şeyda Atadan Memiş, General Manager of Takeda in the UK & Ireland, said: “The UK’s clawback rate is now significantly higher than similar schemes in other countries, which sends a negative message to global boardrooms and is directly contradictory to the government’s economic growth mission. This tax is compounded by the challenging environment for business, which has made the UK an outlier for Takeda.

“If the UK is to realise the vision that will be set out in the upcoming Industrial Strategy and Life Science Sector Plan, we call on the government to urgently collaborate with industry to bring the UK’s rebate back in line with international comparators. Taking action to avoid a similar situation for industry in future years is a pivotal step to enabling the full potential of the life sciences sector as a key partner to supporting the NHS, improving patient outcomes and driving economic growth.”

Nico Reynders, General Manager, UCB UK & Ireland, said: “The VPAG has been put in place to help advance innovation in the UK healthcare system. We look forward to achieving a system where this innovation is rewarded and stimulated enabling patients in the UK to have access to the best treatments possible for their condition, in line with other European countries.”