The U.K. government is proposing to raise the rebate rate under a national drug cost program, drawing complaints from the Association of the British Pharmaceutical Industry (ABPI).
As one of the two policy tools the U.K. uses to control drug costs, the government in some cases receives sales-based rebates from biopharma companies. On Friday, the U.K. government proposed to lift the payment rate for newer medicines under the program, called the statutory scheme, from 15.5% now to 32.2% in the second half of 2025.
The dramatic increase is meant to bring the annual average to 23.8% so that the levy is roughly in line with payments under the other program, called the voluntary scheme, or VPAG.
After a long consultation process, the U.K. government and the ABPI in late 2024 agreed on a 22.9% rebate rate for the voluntary scheme in 2025. While the voluntary scheme involves negotiations between the government and the industry, the statutory scheme doesn’t. Drugmakers pick one of the two programs to join, and the U.K. government has been trying to keep the two “broadly commercially equivalent.”
Spotlighting the 32.2% rate for the second half of 2025, the ABPI said the record number shows “that the UK medicines market is fundamentally broken.” On an annual basis, though, the 23.8% rate for 2025 would still be lower than the 27.5% set in 2023.
The industry group further pointed to the 24.7% rate the government is proposing for 2026 (and 26.4% for 2027), arguing that “there is a real risk the rates continue to increase beyond record levels for years to come.”
“The government has rightly identified life sciences as a critical growth sector for the economy, but unless these excessive payment rates under both the VPAG and Statutory Scheme are addressed, the U.K. will not see the growth and investment we all want,” Richard Torbett, CEO of the ABPI, said in a statement Friday.
According to the U.K. government, the prior 15.5% rate calculated for the statutory scheme was based on data up to the first quarter of 2024. However, sales later went above expectations, first prompting an increase of the voluntary scheme rate and now the statutory scheme rate since the two are meant to be largely similar.
Currently, only 2% of the total branded medicines market has chosen the statutory scheme, as the alternative tends to have slightly lower rates, according to the ABPI. The voluntary scheme currently runs from 2024 to 2028.
By ABPI’s estimate, the industry will need to pay around 3.4 billion pounds sterling ($4.4 billion) to the government under the voluntary scheme this year.
The rate change comes as the National Health Service works to limit spending on branded medicines. The statutory scheme caps the system’s annual drug spending growth rate at 2%.
“The result of limiting government expenditure on branded medicines at levels far below NHS need has led to long-term disinvestment in medicines, while the costs to industry [have] increased exponentially,” the ABPI said in its statement Friday.
The ABPI’s comment may not be an empty threat. In January, word came out that AstraZeneca scrapped a planned investment at its vaccine production site in Speke, Liverpool, due in part to limited financial contributions from the U.K. government. According to AZ CEO Pascal Soriot, the company increased its investment commitment from the original 450 million pound sterling to more than 500 million pound sterling, but the government’s final proposal didn’t match its needs.
“We need a certain level of support to make this economically viable,” AZ CEO Pascal Soriot told reporters at a press event in February. “And it was not possible for the government to justify it, which we totally understand, and on our side, we cannot justify it either.”
In contrast, the British pharma giant in November committed to an additional $2 billion investment in the U.S. to boost the company’s R&D and production footprint by the end of 2026.
“It’s not an AstraZeneca issue. It’s an industry issue,” Soriot said at the press conference. “The U.K. needs to continue working on improving the investment environment to attract investment and address issues of access.”
