Consultation outcome

Response to consultation on the proposed review of the 2025 scheme to control the cost of branded health service medicines

Updated 10 June 2025

Summary

The statutory scheme is set out in legislation in The Branded Health Service Medicines (Costs) Regulations 2018 (‘the statutory scheme’) and is regularly reviewed to ensure it is meeting its objectives. It is one of 2 schemes, alongside the 2024 voluntary scheme for branded medicines pricing, access and growth (VPAG), that control the costs of branded medicines to the NHS.

The Department of Health and Social Care (DHSC) administers the statutory scheme across the UK, and the payments that companies make under the scheme in respect of the UK are allocated to each part of the UK on an agreed basis each year.

The statutory scheme was last updated on 1 January 2025 following a consultation in 2024, and introduced the following changes through The Branded Health Service Medicines (Costs) (Amendment) Regulations 2024:

• introducing a differentiated approach to setting payment percentages for newer medicines and older medicines
• setting the headline payment percentage for newer medicines at 15.5% in 2025, 17.9% in 2026 and 20.1% in 2027
• setting the basic payment percentage for older medicines at 10.6% in 2025, 11% in 2026 and 10.9% in 2027, with a top-up payment percentage for older medicines of between 1% and 25%, if applicable, based on the level of observed price erosion from a reference price
• introducing exemptions to the top-up payment percentage for relevant plasma-derived medicinal products and company sales that total less than £1.5 million of a health service medicine in a particular virtual therapeutic moiety each year
• increasing the exemption threshold from scheme payments for small companies, from sales below £5 million to sales of less than £6 million

The methodology for calculating the payment percentages included adjusting baseline sales in the statutory scheme by £150 million in 2025, £330 million in 2026 and £380 million in 2027.

As set out in the department’s previous consultation response published in October 2024, we remain committed to the principle of broad commercial equivalence between the statutory scheme and voluntary scheme, as supported by responses to the previous consultation. Broad commercial equivalence means that DHSC aims to set payment percentages in the statutory scheme that are comparable (but not necessarily identical) to those in the voluntary scheme.

Since the publication of the last consultation response in October 2024, sales data up to quarter 4 (Q4) 2024 has subsequently become available showing higher than expected newer medicines sales growth. This has the effect of increasing the payment required from eligible (that is, non-exempt) newer medicines in 2025, requiring an increase in the payment percentage rate on newer medicines. As a result, the VPAG headline payment percentage for 2025 was set at 22.9%, and so the headline payment percentage we set in the statutory scheme during the process of the last consultation is no longer considered to deliver on the department’s longstanding policy of broad commercial equivalence.

It became necessary to consult again on an update to the statutory scheme to maintain broad commercial equivalence between the 2 schemes.

VPAG has been subject to a review, focusing on the terms by which payment percentages for newer medicines are set. The outcome of this review has implications for broad commercial equivalence between the statutory scheme and VPAG from 2026. However, given consultation and legislative timelines, and as statutory scheme payment percentages are updated from the first day of a new quarter, DHSC considers that it is nonetheless appropriate to proceed with publishing this consultation response. This is necessary to ensure certainty and stability between the voluntary and statutory schemes through broad commercial equivalence, while the implementation of the review outcome is ongoing. Rates set in the statutory scheme in 2026 and 2027 are not intended to be considered indicative as to the outcome of the VPAG review. Changes to the voluntary scheme arising from these discussions will be considered in future consultations on amendments to the statutory scheme.

This consultation ran between 14 March and 25 April 2025 and proposed to increase the statutory scheme headline payment percentage for 2025 to 23.8%. This rate results from recalculating the required payment needed from eligible newer medicines due to updating medicines sales data to Q3 2024, as well as amending the allowed sales baseline adjustments for 2025 and 2026.

The consultation proposed that payment percentages are then set at 24.7% for 2026 and 26.4% for 2027. To achieve this while maintaining the statutory scheme allowed growth rate of 2% each year, we proposed to amend baseline adjustments made in the 2024 consultation such that the total value of adjustments is unchanged, but the implementation of two-thirds of the adjustment originally planned for 2025 would be delayed to 2026.

The time taken for the consultation process, as well as the need to implement any amendments to the statutory scheme at the beginning of a quarter, mean that the earliest these changes can be implemented is 1 July 2025. Therefore, the consultation set out that any companies that made payments in the first half of 2025 (at the lower rate of 15.5%) would be required to pay an uplifted rate of 32.2% for the remainder of the year to account for this.

The consultation further proposed to introduce new data assurance requirements for presentation reports and asked respondents for their views on how this might look in practice.

The following response from DHSC provides an analysis of responses to the consultation and sets out the policies that the department intends to implement. Since the consultation was published, sales data from Q4 2024 has become available, and payment percentages have been recalculated to be slightly lower than those consulted on, although the policy intent of the changes remains the same.

Following detailed consideration of consultation responses, the department has decided to maintain broad commercial equivalence with the voluntary scheme by implementing the following changes:

• to increase the statutory scheme headline payment percentage for 2025 to 23.4% (proposed rate was 23.8%). As this amendment will not be in force until 1 July 2025, companies who made statutory scheme payments in the first half of 2025 at the lower rate of 15.5% will instead pay an uplifted rate of 31.3% (proposed rate was 32.2%) from 1 July 2025
• to increase the statutory scheme headline payment percentage to 24.3% in 2026 and 26.0% in 2027 (proposed rates were 24.7% in 2026 and 26.4% in 2027)
• to delay implementation of two-thirds of the adjustment previously proposed for 2025 to 2026, giving a total baseline adjustment of £50 million in 2025, £430 million in 2026 and £380 million in 2027
• to introduce new data assurance requirements for presentation reports

DHSC’s intention is that these changes will be made to the regulations to come into force from 1 July 2025.

Introduction

The voluntary and statutory schemes for medicines pricing limit the growth in costs of branded health service medicines. This safeguards the financial position of the NHS, while acknowledging that crucial medicines must be available for NHS use on reasonable terms (for example, taking account of the costs of research and development (R&D)). The schemes aim to deliver benefits for industry, life sciences, the economy and patients.

The statutory scheme was last amended on 1 January 2025 to align terms of that scheme with certain aspects of the 2024 VPAG. The statutory scheme headline payment percentage for newer medicines was set at 15.5% for 2025, using available sales data up to Q1 2024, to be broadly commercially equivalent with the forecast VPAG headline rate of 15.3%.

However, sales data for Q2 and Q3 in 2024 subsequently showed higher than expected growth in sales of newer medicines. The VPAG headline payment percentage for 2025 was therefore set at a higher rate of 22.9%, and the 2 schemes were no longer considered to have broad commercial equivalence.

The most recent consultation therefore asked for views on maintaining the level of allowed growth (the rate at which allowed sales increases at the start of each year) and adjustments to the baseline (the starting level of allowed sales in any given year) resulting in amended headline payment percentages for newer medicines in 2025, 2026 and 2027. The consultation also asked for views on introducing some form of additional assurance requirement on presentation reports. These proposals are designed to ensure broad commercial equivalence with the VPAG, a longstanding policy. 

The consultation closed on 25 April 2025. DHSC received 23 responses directly to the consultation, with one respondent submitting supplementary information by email. The majority (21 of 23, or 91%) of these responses were from pharmaceutical companies or trade bodies.

In the following consultation response, we cover each consultation question in turn. For each question, we summarise the consultation proposals, analyse the feedback received and summarise the policy decision reached. The final impact assessment (IA) is published alongside this document.

The department’s intention is that the amendments to the January 2025 regulations will be made by a statutory instrument that comes into force on 1 July 2025.

Rate of allowed growth

Do you agree or disagree with our proposal to maintain the level of allowed growth in the scheme to 2% each year, with baseline adjustments of £50 million in 2025, £430 million in 2026 and £380 million in 2027?

The consultation proposed to maintain both the allowed growth rate at 2% and the overall value of the baseline adjustment, but to delay implementation of two-thirds of the adjustment to 2026. This is intended to optimise broad commercial equivalence between the schemes.

Summary of responses

Of the respondents, 80% disagreed with this proposal, 10% agreed and the remainder either did not know or neither agreed nor disagreed.

Comments on model and hard cap

Several respondents stated that the hard cap on NHS medicines spending has led to large increases in the payment rate, which is not seen as acceptable by industry and suggested the only rationale for the proposals is to bring the statutory scheme in line with VPAG. Some respondents therefore proposed that the choice to pursue a 2% growth cap has no basis in evidence.

Some respondents also suggested that the current model undervalues innovation and suppresses medicines usage, therefore undermining improved health outcomes. Some respondents also argued that the 2% cap on growth does not take into account inflation nor the overall increase in NHS spend.

A total of 39% suggested that costs should be better shared between DHSC and industry. One respondent supported a more consistent increase in baseline adjustment rather than the more variable one proposed in the consultation.

Effect on UK life sciences

Over half (57%) of respondents suggested that the proposed statutory scheme update, coupled with VPAG, would be acutely harmful to the UK life sciences ecosystem, and would lead to company decisions on headcount, the scale of their operations in the UK and the viability of the UK as a destination for future pharmaceutical activity. They argue that this is not a stable regulatory environment for businesses to operate in.

Other methods of controlling spend

Several respondents (13%) pointed out the fact that National Institute for Health and Care Excellence (NICE) guidelines, budget impact tests and NHS England procurement activities already serve to control prices, making a cap in growth unnecessary. Deferred baseline adjustments were perceived by some as detracting from planned growth.

Timing of consultation

Several respondents asserted that they were not clear on the reason for consulting on amendments to the statutory scheme to align with the current VPAG when there was an ongoing VPAG review.

Government response

DHSC considers the proposed amendments to the statutory scheme to be necessary notwithstanding the ongoing VPAG review. Given the extended timeline required for implementation of these updates, these should be enacted as soon as possible to maintain broad commercial equivalence between the schemes within 2025, the rate for which in VPAG is not subject to change through the VPAG review. Rates set for the statutory scheme in 2026 and 2027 are therefore not to be considered indicative of the outcome of the VPAG review. Any change agreed to VPAG in these years would be considered in future consultations on statutory scheme amendments.

Accordingly, DHSC will maintain both the 2% allowed growth rate and the overall value of baseline adjustments in the statutory scheme, but delay implementation of two-thirds of the adjustment previously proposed for 2025 to 2026. This gives a total baseline adjustment of £50 million in 2025, £430 million in 2026 and £380 million in 2027.

This approach is necessary to achieve payment percentages that maintain broad commercial equivalence, while ensuring a clear methodology for the calculation of such rates that can act independently as a backstop to VPAG if needed. As set out in the consultation, the determination that broad commercial equivalence is achieved on this basis is carried out using the latest available data up to Q4 2024, having originally consulted on the basis of data available up to Q3 2024. Following analysis of Q4 data, the payment percentages have been adjusted to slightly lower figures, although the policy intent of the amendments remain the same.

DHSC’s consultation response of December 2023 outlined why we consider 2% to be appropriate as a long-term growth rate for the statutory scheme. We consider that there no case for increasing this outside of a negotiated voluntary agreement that can seek to identify opportunities for the mutual benefit of government, patients and industry, and in the context where it continues to achieve our aim of maintaining broad commercial equivalence between the schemes. 

The department appreciates that any price regulation will be a factor when deciding on viable investment locations while also appreciating that the importance of supply side factors (such as availability of a skilled workforce) is likely to be more significant when making globally mobile investments. If the NHS spends less on medicines, this allows greater NHS spending on projects that make the UK an attractive investment environment. This might include running clinical trials or employing more trained medical staff.

We consider the UK to be an attractive market for pharmaceutical companies as there is a national funding mandate for medicines: the NHS in England is legally obliged to fund medicines recommended by NICE as being both clinically effective and cost-effective within set timescales. Insofar as pricing scheme payment rates may impact on investment, this is most likely to occur through VPAG rather than through the statutory scheme, and so the evidence case has been considered through the accelerated mid-scheme VPAG review.

Regarding inflation, we consider that the branded pharmaceutical industry is subject to relatively low exposure, since medicine production and transportation costs are a small proportion of their price overall.

With regards to allowing growth below that of the NHS budget, the department does not consider that increased spending by the NHS in areas such as workforce should be a cause for a similar increase in medicines spend.

DHSC does not agree that maintaining the rate of allowed sales growth in the statutory scheme will significantly disincentivise the launch of new medicines in the UK. The NHS has maintained its position as a globally competitive launch market in recent years with a lower allowed sales growth rate in the statutory scheme than 2% and retains the unique selling point of allowing companies to access a market of 55 million people with a single commercial deal.

DHSC disagrees that the statutory scheme is not necessary when there are alternative mechanisms to control costs, as the scheme has distinct objectives. For example, NICE recommendations ensure that products are both clinically effective and cost-effective, whereas the statutory and voluntary schemes maintain the affordability of overall spending on branded medicines. The statutory scheme is a necessary part of the medicines pricing landscape in the UK in its role as a legal backstop to the negotiated voluntary scheme.

Headline payment percentage

Do you agree or disagree with the levels at which we propose to set the statutory scheme payment percentages, and the rationale provided for this?

The consultation proposed to raise the statutory scheme headline payment percentages to 23.8% in 2025, 24.7% in 2026 and 26.4% in 2027 (from the current values of 15.5%, 17.9% and 20.1%), and proposed these updates would come into force on 1 July 2025. Companies who made statutory scheme payments in the first half of 2025 at the lower rate of 15.5% will pay a rate of 32.2% from 1 July 2025 to account for this. These levels are broadly equivalent to the payment rates established under VPAG.

Summary of responses

Of the respondents, 80% disagreed with this proposal, 10% agreed and the remainder either did not know or neither agreed nor disagreed.

Ongoing VPAG review

Respondents highlighted the importance of the ongoing discussions with DHSC leading up to the accelerated mid-scheme review of VPAG. They were of the opinion that this consultation on the statutory scheme sends the incorrect signal to industry about DHSC’s willingness to explore options to resolve the problems respondents say the pharmaceutical industry is currently facing because of VPAG.

Unpredictability of rates

Respondents argued that the change of rate mid-year, and the increased rate for the second part of 2025, with only 3 months’ notice is a sign of acute fiscal and regulatory uncertainty. Respondents claimed that this leads to the UK being deprioritised as an early launch market.

Calculation of rates

A significant proportion of respondents (48%) cited lower rates in countries such as France and Germany leading to a lack of competitiveness of the UK in life sciences. One respondent also argued that the statutory scheme is not broadly commercially equivalent with VPAG. There was suggestion that the payment percentages have been calculated based on transient market trends rather than robust data. It was suggested that the lack of reconciliation means these rates cannot be corrected using 2024 Q4 data, even though that was published soon after the consultation (however, DHSC has been able to do this - see response below).

Government response

DHSC considers the proposed amendments to the statutory scheme to be necessary notwithstanding the accelerated mid-scheme VPAG review. Given the extended timeline required for implementation of these updates, these should be enacted as soon as possible to maintain broad commercial equivalence between the schemes within 2025, for which the VPAG rate is not expected to change through the VPAG review. Rates set for the statutory scheme in 2026 and 2027 are therefore not to be considered indicative of the outcome of the VPAG review. Changes agreed to VPAG in these years would be considered in future consultations on statutory scheme amendments.

Accordingly, DHSC intends to proceed with an update to the payment percentage for newer medicines in 2025, 2026 and 2027. In the period of time since we published the consultation, sales data up to Q4 has become available. We therefore consider it appropriate to make a minor amendment to the payment percentages consulted on to reflect the most up to date data. Integration of this data has resulted in a small decrease to the payment percentages across all 3 years.

The headline percentage rates will therefore be 23.4% for 2025, 24.3% for 2026 and 26.0% for 2027, and the elevated rate for those who made payments at the lower rate in 2025 before 1 July, will be 31.3%.

DHSC does not consider the proposed changes to be a sign of uncertainty, as it is necessary for the very purpose of certainty that we provide statutory scheme companies with this information now to restore stability and broad commercial equivalence between the schemes. Companies were aware of the policy of broad commercial equivalence when they chose to join or not join the voluntary scheme for 2025, and therefore following through on that policy supports the predictability of the market.

DHSC believes that the UK remains a suitable early launch market for the reasons outlined above, in particular the NICE national funding mandate. However, the government remains committed to encouraging and facilitating a flourishing life sciences sector in the UK and recognises the impact that the voluntary scheme payment percentages have had on industry. This is why the Secretary of State has committed to expedite the mid-scheme review for VPAG (usually planned for autumn) to complete in June 2025, to understand the challenges industry is facing and scope options for a mutually beneficial amendment to the voluntary scheme. As already outlined, the department may consult again on a change to the statutory scheme if required to maintain broad commercial equivalence following the mid scheme review.

DHSC does not consider the comparison of UK payment rates with those abroad to be helpful. International comparisons of payment percentages are complex due to differences in healthcare systems, disease incidence, demographics, clinical practice, patient choice, the availability of alternative treatment options and wider health system factors. It is therefore difficult to make direct comparisons between payment rates.

Assurance of company data

Do you agree or disagree with the proposal to introduce some form of additional assurance requirement on presentation level sales reports?

The consultation sought respondent views on additional assurance requirements for presentation reports, given the additional importance of these reports to the price erosion mechanism introduced on 1 January 2025.

DHSC requested views on what these procedures could look like in practice, and proposed that timelines for the report would align with the existing annual sales report audit. The proposal suggests that an independent auditor would conduct any additional assurance procedures.

Summary of responses

The majority of respondents were generally in favour of this proposal, with 80% agreeing, 9% disagreeing and the remainder not knowing. More than two-thirds (70%) stated that the assurance was necessary in their responses. A minority (17%, 4 respondents) suggested that additional assurance requirements would negatively affect companies.

Importance of reliable data

Respondents recognised the importance of timely and reliable data from presentation reports and that The Association of the British Pharmaceutical Industry (ABPI) has engaged with the department on this through the finance directors’ forum. Some respondents stated that any assurance requirements should be consistent across statutory and voluntary schemes.

Complexity and clarity of regulations

Respondents warned against making requirements overly complex, which would require company resources to be diverted from innovation and supply chain efficiency without significant improvements in data quality. They also requested clear, standardised guidance. Some respondents (9%) suggested there should be a transition period for the implementation of new requirements.

Government response

DHSC intends to introduce new data assurance requirements for presentation level data returns, requiring a report of a qualified auditor, produced in accordance with the applicable related service standards.

DHSC is confident that regulations will be practical, clearly described and reasonable, and that a transition period will therefore not be necessary. DHSC will work closely with companies to ensure that any additional assurance requirements are communicated in good time.

Methodology to determine payment percentages

If you have any comments on the proposed methodology used in determining the payment percentages (as set out in the accompanying IA), please set them out here.

The IA published alongside the consultation set out that proposals will help to ensure the continued effectiveness of the statutory scheme and expands on the methodology used to calculate the proposed increase to payment percentages.

Summary of responses

Of the respondents, 78% considered the methodology to be flawed, with 4% saying it was sound.

Suggested shortcomings in the model

Most respondents disagreed with the proposed methodology used in determining the payment percentages as set out in the IA. Respondents commented that they feel the methodology used in the IA is flawed, as they argue that this would never result in a conclusion that a rate DHSC proposes is too high, other than if it is higher than proportionate to align with the voluntary scheme. They suggest this is an inadequate framework for assessing costs against DHSC’s core objectives for the 2 pricing schemes.

Some respondents disagreed with the use of the £15,000 per quality-adjusted life year (QALY) assessment, arguing that this figure is outdated and methodologically flawed. There was a suggestion that this figure should be adjusted in line with inflation.

Respondents also commented that the IA holds to general assumptions about the impacts to companies’ R&D investments and the UK’s place in global companies’ order of priority. Their concern is that these assumptions maintain that R&D expenditure is a static proportion of revenue in the UK, rather than a potentially sensitive element of companies’ financial plans that may respond disproportionately to revenue changes. Respondents also suggested that the IA did not account for the benefits to medicine launches and future R&D that could be lost under the headline payment percentages proposed in this consultation, and the overall impact on patient health of this. They stated that DHSC did not seek to quantify in its options appraisals the impact to patients of fewer medicines being available. Respondents therefore suggested that the department should in future conduct a full and detailed macroeconomic assessment of each of its proposed options and should also seek to quantify the impacts to patients. Respondents argued that this will be compounded over time by the loss of R&D and clinical trial activity.

Some respondents argued that the methodology is flawed as it uses the 2% growth cap to calculate the rate, which they suggested is too low and will restrict the growth of the UK life sciences sector and patient access to new medicines.

Government response

DHSC has calculated the proposed updates to the headline payment percentages based on the methodology set out in the IA.

While the department notes the feedback on the methodology, we consider that maintaining broad commercial equivalence is a central aim of the statutory scheme, and this by design ensures that the statutory scheme rate will be close to and above the voluntary scheme rate. Differences in the method for calculating the statutory scheme headline payment rate compared with the voluntary scheme headline payment rate (including raising the older medicines base rate to account for lack of the investment programme, the absence of the medium-sized company exemption, and the absence of under and over payments) have ensured that lower baseline adjustments to allowed sales are needed in the statutory scheme compared with the voluntary scheme to generate a similar headline payment rate.

In terms of the assessment of business impacts, through looking at the impacts to UK shareholders, the DHSC’s method is consistent with the Green Book (section 5.2), which states that “When considering proposals from a UK perspective the relevant values are viewed from the perspective of UK society as a whole… UK society generally includes UK residents and not potential residents or visitors”. By extension, we keep analysis of the impacts of this policy to UK based shareholders. 

DHSC remains confident that £15,000 per QALY is the best estimate of the opportunity cost per QALY in the NHS. The department will continue to use this figure as the most recent re-assessment continues to support its use.

DHSC has acknowledged in the IA that higher payment percentages could lead to lower industry profits and hence lower investment. The department considers that a) there is a risk that the sentiment associated with a rising payment percentage in both statutory scheme and voluntary scheme may affect investment, and b) there is a risk that the size of increase in payment percentages under the statutory scheme may affect the launches of new medicines, while acknowledging that the previous statutory scheme rates and the general commercial environment may have induced relatively low profit margins. It is not possible to quantify these effects in the absence of detailed commercial information about upcoming new medicine launches, which is not publicly available.

DHSC, along with ABPI, has been conducting an accelerated mid-scheme review (AMSR) for VPAG under which we consider evidence put forward by industry regarding their investment drivers and decisions. Moreover, it is worth noting that the statutory scheme only accounts for 1.7% of voluntary and statutory measured sales, and the impact of a change to this scheme is likely to be far outweighed by VPAG, which is the main focus of the AMSR.

As it currently stands, DHSC maintains that the investment decisions of companies under the statutory scheme are difficult to calculate under each option. We acknowledge the risks (stated above), but in the absence of detailed information about companies’ upcoming investment plans, the effects on investment cannot be quantified. The limitations of the methodology were acknowledged by removal of effects on investment from the net present values (NPVs) for each option. Annex C of the IA contains a detailed consideration of the many drivers which could affect investment location decisions.

Impact assessment

Do you agree or disagree with the analysis in the IA of our proposals, including impacts on those areas where the NHS Act 2006 requires that we consult?

The IA published alongside the consultation set out the modelling that supports proposals for the statutory scheme.

Summary of responses

Of the respondents, 80% disagreed with this statement. The remainder either did not know or neither agreed nor disagreed. No respondents agreed.

Effects on UK life sciences

Respondents argued that the IA systematically underestimates the costs of DHSC proposals and is biased towards transfers of funding from industry to the NHS. They state that the higher headline rates will inevitably result in cuts to life sciences companies’ UK operating plans. They also assert that there will be a likely reduction to the number of treatments available to patients, and possibly a reduction in NHS partnership programmes.

Unpredictability

Other respondents stated that these changes increase unpredictability in the UK life sciences market and hence the attractiveness of the UK as a priority market.

Government response

DHSC does not agree with these criticisms of the IA. 

In terms of investment, the department considers that the availability of a skilled workforce and favourable tax conditions remain the most important factors in decision-making for R&D.

As pharmaceutical investments are globally mobile, DHSC considers that investment decisions are made based on assessment of anticipated global returns rather than UK sales. Therefore, we do not consider there to be a close correlation between the price paid for medicines and the level of investment. However, we understand the importance of sentiment towards the UK commercial environment among industry when making investment decisions and are pleased that industry has engaged in discussions through the accelerated mid-scheme review. VPAG, not the statutory scheme, is the most important driver of industry sentiment towards the UK.

In terms of analysing the benefits of higher medicine spending, we use the same formulaic approach to estimate the potential impact of the proposals versus the counterfactual on UK investment, as in previous IAs. This reflects the methodology set out for central government appraisal and evaluation in the Green Book. For more information, see annex C of the IA.

DHSC does not agree that the proposals result in an increase in unpredictability in the UK life sciences market and believes that the UK remains a suitable early launch market for the reasons outlined previously, in particular the NICE national funding mandate.

Other statutory duties

Do you agree or disagree with our initial conclusions about the impact that the proposed updates to the statutory scheme will have when taking into account the statutory duties of the Secretary of State?

The consultation considered specific duties when proposing updates to the statutory scheme. These include consideration of the Secretary of State’s duties under the NHS Act 2006, the public sector equality duty under the Equality Act 2010, the Family Test and the Environment Act 2021.

Summary of responses

Of the respondents, 70% disagreed with the statement, 10% agreed and the remaining 20% either did not know or neither agreed nor disagreed. The majority therefore considered that the consultation proposals would not meet the requirements of the Secretary of State’s duties under the NHS Act 2006.

Evidence

Respondents argued that the evidence provided in the IA is outdated but that it suggests that payment rates are a factor in determining companies investment and medicines launch decisions.

NHS Constitution for England

Respondents also asserted that the proposals raised in the consultation affect principles of the NHS Constitution for England: that the NHS should provide a service available to all, that the access to services is based on clinical need and that the patient should be at the heart of everything the NHS does. Respondents suggested that higher rates have led companies to limit the launch of certain medicines to the private market and that this has led to a 2-tier system, not in line with the duty to reduce health inequalities, with 70% saying it would have a negative impact on patient care. They also argued that higher rates are a false economy, affecting the NHS Constitution for England principle to provide best value for taxpayers’ money.

Research

Some respondents suggested that proposals would fail to fulfil the duty to promote research, or to secure continuous improvement in the quality of services, or would put medicine supply at risk.

Government response

DHSC is confident that the consultation proposals advance the Secretary of State’s statutory duties, including the duties to promote a comprehensive health service, to have regard to the need to reduce health inequalities and to promote research.

Most respondents who anticipated negative impacts on the duties of the Secretary of State did so on the basis that they expect the proposals to result in reduced supply and a less favourable launch market in the UK.

DHSC has not seen convincing evidence that higher payment percentages for branded medicines in the statutory scheme lead to supply issues. However, in the exceptional circumstance that a product would otherwise be uneconomic to supply and there is a risk of supply disruption and a negative impact on patients, the department considers that the existing price increase provisions within the scheme are sufficient to mitigate the risk. Moreover, under the statutory scheme, the Secretary of State is able to make a temporary exemption to a maximum price. Under these provisions, companies may make an application for an exemption and the department monitors the numbers of applications received.

The role of these proposals in ensuring continued sustainability of NHS medicines spending is aligned with equality duties. The proposals aim to ensure the continued availability of medicines while protecting NHS spending in the best interests of patients, including those with protected characteristics.

DHSC remains of the view that supply side factors, such as availability of scientific labour, are of greatest significance in the decision to locate R&D activity. We therefore do not agree that the updates are likely to result in significant impact to R&D activity in the UK, noting that the impact of industry sentiment on industry R&D activity is primarily determined by sentiment towards VPAG rather than the statutory scheme.