UK pharma reimbursement scheme reform trailed

Gareth Morgan and Catherine Drew of Pinsent Masons were commenting after the Financial Times reported that the UK government is set to make concessions to pharmaceutical companies over drugs reimbursement – potentially as part of a wider agreement the government might strike with the US – at a time of significant economic uncertainty for the industry.

From 1 October 2025, a 100% tariff is due to begin applying in the US on the import of pharmaceutical products, except for companies building drug manufacturing plants in the US. A lower tariff rate of 15% will apply to products shipped to the US from Japan and the EU under the terms of trade agreements the US has reached with those trading partners. The US-UK ‘economic prosperity deal’ also provides for a more favourable tariffs arrangement to be agreed between the two countries in relation to pharmaceutical products, but no such agreement is in place yet.

The imposition of the tariffs is expected to add costs to the supply of medicines globally at the same time as US-based pharmaceutical companies are being expected to shave US profit margins under action being driven by US president Donald Trump.

Morgan said: “The US is by far the biggest pharmaceuticals market in the world, so the policies being pursued in the US will have ripple effects globally, with industry looking to policymakers and regulators around the world to apply measures that will help cushion the economic effects they are expecting from the action by the Trump administration.”

In UK terms, the US-UK economic prosperity deal commits the UK to “endeavour to improve the overall environment for pharmaceutical companies” operating in the UK, notwithstanding the considerable economic constraints on the government. Relevant factors in this regard include the UK’s tax, regulatory and planning frameworks, as well as the access to talent companies will have, all of which can influence whether companies decide to invest in research and development and manufacturing facilities.

Last week, as part of a long-term partnership agreement with the UK government, Moderna opened a new UK manufacturing plant outside Oxford where it intends to develop and produce mRNA vaccines. However, other major pharmaceutical companies have recently paused or withdrawn UK projects – with concern expressed about the current reimbursement model that applies to the supply of branded medicines to the NHS. According to the Financial Times, the government is set to alter the pricing structure under that scheme.

Morgan said: “The question for the government is how far it is willing to reshape the current voluntary scheme for branded medicines pricing, access and growth (VPAG) when loosening the purse strings to the extent industry wants to see would mean diverting billions of pounds of public funds away from other areas of need. In many respects, its commitment to providing priority support to the life sciences sector – confirmed recently in its modern industrial strategy – is being put to true test.”

“Minister comments and other government briefings to the media suggest that industry can expect a more generous reimbursement scheme for supplying treatments to the NHS to be put in place soon, but we expect some nuance to this given the UK’s financial straitjacket,” he said.

“Some of the industry’s concerns have been around the rebates they are required to provide under the VPAG, which they see as a penalty on the successful supply of medicines to NHS patients. One change the government could consider around this would be to place greater emphasis on linking the amount pharmaceutical companies are paid to the actual performance of their treatments in patients, using more generous metrics than those currently in place,” he added.

Morgan cited the agreement struck between NICE and CSL Behring over the supply of Hemgenix, a product for treating a form of blood disorder, last year – described by the company as an “innovative outcome-based agreement” – as an example of what is possible under the current VPAG. He said such deals can deliver value for both the UK taxpayer and industry.

Drew said the government could also decide to place increased value on innovation: “Innovation is apparent across all parts of the pharmaceuticals market. In the case of the branded medicines that the VPAG directly applies to, the level of investment needed to develop original products that serve a clear medical need is significant, while manufacturers of generic medicines and biosimilars are routinely responsible for innovating around delivery methods of off-patent medicines; whilst generating substantial savings to the healthcare budget and in so doing increasing access to medicines that are to the benefit of patients and medical practitioners.”

“One sub-set of companies that could benefit from any recalibration of the VPAG is manufacturers of advanced therapy medicinal products (ATMPs). As the recent news regarding the breakthrough in developing a new treatment for Huntington’s disease shows, there is a major role for developers of cell and gene therapies to lead a new age of medical discovery and enhance the lives of patients globally. These treatments, despite often only being relevant to a relatively small number of patients, are nevertheless hugely expensive to develop. It is vital that innovation in this area is supported by national reimbursement schemes that recognise this,” she said.