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The payment rate for newer medicines under the Voluntary Scheme for Branded Medicines Pricing, Access and Growth (VPAG) scheme will fall to 14.5% in 2026, down from 22.5% in 2025.
The Department of Health and Social Care (DHSC) announced on 10 December 2025 that the lower rate had been driven, in part, by falling costs, such as drugs going off patent, which means that “lower revenues can be absorbed within existing budgets”.
Under the VPAG scheme, companies must make payments to the government based on a percentage of their sales of branded medicines to the NHS.
While the payment rate has been cut for newer medicines — generally defined as those in their first 12 years from receiving marketing authorisation — the rate for older medicines will remain between 10% and 35%, which depends on the price discount already offered to the NHS.
The fall in the newer medicines payment follows the UK–US trade deal, announced on 1 December 2025, which included a commitment that the rate would not exceed 15% for the next three years.
In its statement, the DHSC said: “This lower rate will make the UK a more attractive destination for clinical trials, manufacturing investment and the early launch of new medicines — helping NHS patients benefit sooner from cutting-edge treatments and boosting economic growth.”
Health minister Zubir Ahmed said: “This government has already delivered an agreement with the United States that will expand access to tens of thousands of patients and make us the only country in the world to have a deal that secures zero percent tariffs on branded pharmaceuticals to the United States.
“The fall in the rebate rate will cement this, answering the call from leaders in the pharmaceuticals and life sciences sector for a lower and more stable payment rate for branded medicines.”
Commenting on the announcement, Richard Torbett, chief executive of the Association of the British Pharmaceutical Industry (ABPI), said: “It’s good that the amount of revenue companies will need to pay to the UK government has come down in 2026. The newly proposed cap on future payment rates for newer medicines should also provide companies with greater certainty up to 2028.
“However, this is only the first step in returning the UK to a more competitive position. Payment rates remain much higher than in similar countries, and there is work to do to accelerate the NHS’s adoption and use of cost-effective medicines to improve patient care.
“The ABPI looks forward to working with the government to set out a sustainable alternative to the VPAG scheme, which will better support the NHS use of medicine, while also encouraging more UK-based research and larger investment into UK life sciences.”
In August 2025, the ABPI failed to reach an agreement with the government on the VPAG rate and argued that it exceeds the levy paid by other countries, such as as 9.0% in Ireland, 7.9% in Belgium, 7.0% in Germany and 5.7% in France.
