What is VPAS?
The Voluntary Scheme for Branded Medicines Pricing and Access (VPAS) is a voluntary agreement between the Department of Health and Social Care (“DHSC”), NHS England, the Association of the British Pharmaceutical Industry (“ABPI”) and manufacturers or suppliers of branded medicines who have signed up to the scheme. VPAS entered into force on 1 January 2019 and runs for five years, it replaced the Pharmaceutical Price Regulation Scheme 2014 (PPRS).
What products does VPAS apply to?
The scheme applies to branded medicines including branded generics, in vivo diagnostics, blood products, dialysis fluids, branded products supplied through tenders or central contracts and biological medicinal products (both branded and unbranded).
What is the purpose of VPAS?
VPAS has two key parts:
- measures to support innovation and better patient outcomes through improved access to the most transformative and cost-effective medicines (these measures apply in England only); and
- a UK-wide affordability mechanism under which VPAS members makes repayments to DHSC for sales of branded medicines above an agreed allowed growth rate.
In essence, the aim is to strike a balance between promoting innovation and ensuring patients have access to cutting-edge therapies while at the same time keeping NHS finances in line.
Allowed growth rate and the repayment mechanism
VPAS sets the allowed growth rate at 2%, seeking to guarantee that the NHS branded medicines bill does not grow more than 2% in any one year of the scheme. The repayment mechanism provides that VPAS members make payments to DHSC of a percentage of their net sales of certain medicines:
|VPAS repayment||=||Eligible sales||×||Payment percentage for calendar year|
The repayment percentage for each year of VPAS depends on the difference between the allowed growth and forecast growth in sales to the NHS of the branded medicines. In 2019, the first calendar year of VPAS, the repayment percentage was 9.6% and in total pharmaceutical companies repaid DHSC just under £850 million.
Companies that do not join VPAS are subject to the non-voluntary statutory scheme which offers fewer incentives and also requires rebates to be paid to DHSC, albeit on different terms.
Repayment percentage for 2022
Repayment rates are usually calculated in December, using (inevitably) complicated calculus based on the previous 12 months’ sales, which spits out a repayment percentage for the next calendar year.
However, there was exceptional growth in the sale of branded medicines in 2021, stemming in part from demand related to the COVID-19 pandemic, with the total measured sales growth jumping to over 9% significantly in excess of the allowed growth rate of 2% set out in the scheme. As a result the 2022 payment percentage was predicted to jump dramatically to 19.1%. This generated consternation as margins are very tight for many of these products, with some being supplied at cost to the NHS, and a hike in repayments would mean that companies tied to NHS tenders or long term agreements may even be supplying products at a net loss.
On 19 January, DHSC and ABPI announced a one-off amendment to VPAS to address the expected jump in the repayment percentage and the knock-on impact on scheme members. The repayment percentage for 2022 would be capped at 15% and the usual mechanism for calculating the percentage would be temporarily set aside.
The guidance published to accompany the announcement notes that the change is an exceptional one and will have the effect of phasing the impact of increased payments under VPAS over the remaining two years of the scheme. It states that the payment percentage will increase to capture the income forgone as a result of this change.
Industry members will be relieved that an agreement has been reached on changes to VPAS. The next voluntary scheme is set to come into effect in January 2024 and discussions are already in place on how the next scheme will be structured, and what effects this may have on the provision of branded medicines in the UK.