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The VPAS agreement: the next supply chain threat?

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The VPAS agreement: the next supply chain threat?

VPAS is a five-year voluntary agreement struck by the Government – with input from NHS England and others - with the industry trade body, the ABPI (Association of the British Pharmaceutical Industry). 

The current VPAS began in 2019 and is due to end on 31 December 2023. It governs pricing and, to a degree, decisions that affect access to branded medicines. It covers branded generics and biosimilars, as long as they aren’t ‘cheap’ (NHS list price of less than £2), and has some other exemptions, such as sales from small companies. VPAS is a UK-wide scheme, although the access focus is on England. 


At the heart of the scheme is a payback mechanism, where companies selling branded medicines to the NHS pay back a variable percentage of their sales. The percentage is calculated by the Department of Health and Social Care (DHSC) for each year of the deal. It is set to ensure that what the NHS spends on branded medicines rises by no more than 2 per cent a year, keeping the NHS branded medicines bill affordable. 

The payment percentage was 9.6 per cent in 2019, 5.9 per cent in 2020, 5.1 per cent in 2021 and 15 per cent in 2022. The DHSC has predicted that it will be 26 per cent in 2023, but a figure of over 30 per cent has been mooted by others. Such a rise in payments is – naturally – unpopular with companies.

The payment percentage for 2023 will depend on actual spending on branded medicines in 2022 and a recouping of monies from 2022. The precise mechanics of the scheme were overridden in 2022 to get the 15 per cent payback; it would have been 19.1 per cent had the usual rules been applied. The Government wants that money – even if it has to wait for it. 

By the end of quarter two 2022, three and a half years into the current scheme, payback reached £2.8 billion – equivalent to around 7 per cent of the Government’s current £40bn black hole in public spending. 

Branded medicines in primary care 

The British Generic Manufacturers Association (BGMA) has suggested that branded medicines covered by VPAS account for around 30 per cent of all prescription medicines in England. A third of those are branded generics and biosimilars. Estimates suggest that primary care branded generics spend was £2,032 million in 2023.  

The BGMA has said that with a potential 30 per cent of the value of NHS sales needing to be paid back to the DHSC in 2023, the supply of some medicines will become economically unsustainable. Product withdrawals would be the logical result. 

That could compound current supply shortages. In November, treatments for menopause were subject to serious shortage protocols (SSPs) as was the anti-depressant fluoxetine. A shortage of HRT treatments is, in part, down to VPAS, according to the BGMA.

The PSNC is already concerned about pressures on medicines supply and even with increasing numbers of price concessions, the impact on community pharmacies is still being felt. Community pharmacies need to source treatments quickly and face financial risk with uncertainty in reimbursement prices. Supply shortages can even provoke abuse of community pharmacy staff.

New deal negotiations to take place in 2023

The DHSC has said that a new scheme will be negotiated during 2023. It’s hard to imagine a wholesale change from the current VPAS, given that it delivers billions for the Government and also because the alternative is a statutory scheme that broadly mirrors the current VPAS, at least when it comes to the money. 

Key for the future will be whether the branded medicines bill for the NHS will be ‘allowed’ to grow at a higher rate, as it’s the driver of paybacks. At the very least, the Government needs to consider the impact of any deal – not only on the members of the ABPI, but on everyone else, community pharmacy included.

VPAS in brief

  • The current VPAS deal is worth more than £2 billion to the Government as pharmaceutical companies – including those who sell branded generics – pay back a percentage of their sales to the Government to keep the total NHS bill affordable
  • Companies have had to pay back more over time as NHS spending on branded medicines has risen; they may have to pay back more than 30 per cent of the value of their branded medicines sales to the NHS in 2023 
  • The BGMA is warning that companies will withdraw branded generics and biosimilars from the UK market if paybacks continue, worsening supply shortages
  • Supply shortages have a knock-on impact on community pharmacy workload and bring the risk of abuse to staff and financial uncertainty over reimbursement rates
  • A new deal will be negotiated in 2023 and the Government needs to consider its impact on community pharmacies.

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