Government tax hikes on branded medicines ‘not sustainable’, warn manufacturers

The Department of Health and Social Care said the tax rate would increase to 14.3% in July 2022, and to 24.4% in 2023.
Richard Torbett, chief executive of the ABPI

Drug manufacturers will be required to give 24.4% of their net income from the sale of branded medicines to the government from 2023 — an increase of 14 percentage points on the current rate.

However, the Association of the British Pharmaceutical Industry (ABPI) — the representative body for manufacturers — has warned that this “unprecedented” tax rate is unsustainable.

The statutory scheme, along with the Voluntary Scheme for Branded Medicines Pricing and Access (VPAS), is intended to control the price of branded medicines by requiring companies to pay the government a proportion of their net sales income received for the supply of these medicines to the NHS.

The scheme applies to all manufacturers, unless they choose to join VPAS instead, which offers incentives to support innovation.

Payments under the statutory scheme are currently set at 10.9% of net income. Following a consultation held in March 2022, the Department of Health and Social Care said payments would increase to 14.3% in July 2022, and to 24.4% in 2023.

The government said the changes will “maintain broad commercial equivalence with VPAS”, and are “expected to result in savings to the NHS of between £1bn and £1.5bn by 2023 compared [with] leaving the payment percentage unchanged”.

Richard Torbett, chief executive of the ABPI, said: “We are concerned about the impact that these exceptionally high rates would have on pharmaceutical companies within the statutory scheme. 

“The payment rates are unprecedented, and far higher than those applied in comparable countries. 

“Demanding ever higher rebates according to an arbitrary limit on spending growth, set irrespective of inflation and the growing NHS need for the latest medical innovation, is not sustainable.”

A spokesperson for the Department of Health and Social Care said: “The decision to increase Statutory Scheme payment percentages — due to higher than expected growth in sales of branded medicines last year — was made following consultation with industry.

“This will maintain broad commercial equivalence between the Statutory Scheme and VPAS, and will ensure NHS spending on branded medicines remains affordable in a way that is consistent with supporting the life sciences sector.”

Last updated
The Pharmaceutical Journal, PJ, June 2022, Vol 308, No 7962;308(7962)::DOI:10.1211/PJ.2022.1.147595

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