2024 voluntary scheme for branded medicines pricing, access and growth: summary of the heads of agreement
Published 20 November 2023
© Crown copyright 2023
This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence, visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew, London TW9 4DU, or email: psi@nationalarchives.gov.uk.
Where we have identified any third party copyright information you will need to obtain permission from the copyright holders concerned.
This publication is available at https://www.gov.uk/government/publications/2024-voluntary-scheme-for-branded-medicines-pricing-access-and-growth-summary-of-the-heads-of-agreement/2024-voluntary-scheme-for-branded-medicines-pricing-access-and-growth-summary-of-the-heads-of-agreement
This publication summarises the key heads of the agreement reached between the Department of Health and Social Care (DHSC), NHS England and the Association of the British Pharmaceutical Industry (ABPI) on the 2024 voluntary scheme for branded medicines pricing, access and growth (voluntary scheme).
The 2024 voluntary scheme will be a non-contractual voluntary agreement between DHSC (representing the UK government, the governments of Scotland and Wales and the Northern Ireland Department of Health) and ABPI (representing the UK pharmaceutical industry). The voluntary scheme will run for 5 years from 1 January 2024.
The objectives of the voluntary scheme will be to:
- promote better patient outcomes and a healthier population
- support UK economic growth
- contribute to a financially sustainable NHS
The parties commit to continuing to work together to agree a full scheme document in accordance with the heads of agreement.
Affordability mechanism
Industry agree to contribute to NHS financial sustainability through an allowed growth rate on sales of branded health service medicines, with payments to be made by scheme members under 2 affordability mechanisms, one covering sales of newer medicines and one covering sales of older medicines. This aims to balance both the level of risk held by industry and government, and the level of scheme payments associated with different stages of the lifecycle of a given medicine.
The government will make a series of adjustments to the allowed sales baseline in each year of the 2024 voluntary scheme, after which allowed sales will be grown by an allowed growth rate which increases over the course of the 2024 voluntary scheme.
The adjustments to the allowed sales baseline are detailed below:
| Year | 2024 | 2025 | 2026 | 2027 | 2028 |
|---|---|---|---|---|---|
| Baseline adjustments | £150 million | £150 million | £330 million | £380 million | £50 million |
Allowed sales will be determined by the allowed growth rates detailed below:
| Year | 2024 | 2025 | 2026 | 2027 | 2028 |
|---|---|---|---|---|---|
| Allowed growth rate | 2% | 3.75% | 3.75% | 4% | 4% |
The 2024 voluntary scheme introduces differentiated payment mechanisms between newer and older medicines. The payment percentage for newer medicines will be dynamic (being amended for the start of each scheme year) and will be set to keep sales growth within allowed sales. The payment for older medicines will be set at a basic level of 10%. Additionally, older medicines that have seen a reduction in their average selling price of less than 35% on their relevant reference price will pay a top-up payment percentage of between 1% and 25% determined on a sliding scale with respect to the amount of price reduction observed.
The reference price of a product will be determined on an actual medicinal product (AMP) level as set out below:
- originator products becoming an older medicine on 1 January 2015 or later: the observed average selling price of the product in the full calendar year ahead of becoming an older product
- originator products which became an older medicine before 1 January 2015 - and branded generics and biosimilars: the list price of the originator as of 1 January the calendar year before becoming an older medicine with a 12.5% downward adjustment
- new formulations: DHSC will identify comparators of the same molecule and determine an equivalent reference price
‘Newer medicines’ are branded health service medicines (except parallel imports) defined at virtual therapeutic moiety (VTM) level where:
- the supplementary protection certificate (SPC) applying to the active ingredient of the medicine is yet to expire
- no SPC was granted applying to any active ingredient of the medicine and the first licensed presentation for the active ingredient is less than 12 years from marketing authorisation
‘Older medicines’ are all other branded health service medicines (except parallel imports) which do not meet the definition of newer medicines.
Small and medium sized companies will benefit from an exemption taper of up to £30 million. Scheme members with sales of less than £6 million in the previous year will have all sales exempt from industry measured sales, eligible sales through newer medicines and eligible sales through older medicines. Scheme members with sales between £6 million and £30 million in the previous year will have up to £6 million of non-new active substances sales exempt from eligible sales through newer medicines and eligible sales through older medicines only.
The first quarter of the 2024 voluntary scheme, the period from 1 January 2024 to 31 March 2024, will be a transitional period in respect of which a fixed payment rate of 19.5% will apply to all eligible sales. From 1 April onwards, the differentiated payment mechanisms between newer and older medicines will apply. On the basis of the mechanism set out above, the headline payment rate for newer medicines on the basis of the government’s forecast will be 15.1% for 2024 (following the transitional period). For subsequent years, the headline payment rate for newer medicines will be determined by the affordability mechanism set out above.
Investment facility
The 2024 voluntary scheme for branded medicines pricing, access, and growth (VPAG) Life Sciences Investment Programme is a new joint government-industry programme to strengthen the UK’s global competitiveness in health and life sciences and drive innovation-led growth. Scheme members will provide additional funding on top of the core 2024 voluntary scheme payments to support implementation of the programme. The estimated £400 million payment will be split across the 5 years of the 2024 voluntary scheme, as set out below, based on a premium on eligible sales (meaning non-exempt sales of both newer and older medicines).
| Year | 2024 | 2025 | 2026 | 2027 | 2028 |
|---|---|---|---|---|---|
| Premium payment rate | 0.03% | 0.6% | 1.0% | 0.9% | 0.3% |
The programme will target investment in 3 focus areas:
- clinical trials (around 75% of the funding allocation)
- health technology assessment (around 5%)
- manufacturing (around 20%)
Horizon scanning, system readiness and system architecture
Investment facility funding will be allocated to re-develop UK PharmaScan to better support the Medicines and Healthcare products Regulatory Agency (MHRA), UK health technology assessment (HTA) agencies and the NHS in their horizon scanning efforts. A new UK PharmaScan platform will be delivered within the first 3 years of the 2024 voluntary scheme. Scheme members commit to providing timely, accurate and comprehensive information in UK PharmaScan for all their medicines in development.
A UK-wide cross-government working group with industry representation will be established within the first year of the 2024 voluntary scheme to ensure HTA and payer processes remain interconnected with emerging regulatory pathways. This will create opportunities for companies to bring their products to the UK market more quickly.
An end-to-end pathway guide will be developed within the first year of the 2024 voluntary scheme, outlining the routes to market, how regulatory, HTA and commercial pathways align, and what the mechanisms are for company engagement.
NICE value assessments
The standard cost effectiveness threshold used by the National Institute for Health and Care Excellence (NICE) will be retained at the current range (£20,000 to £30,000 per Quality Adjusted Life Year (QALY)) and will not be changed for the duration of the 2024 voluntary scheme.
Funding will be allocated from the investment facility to boost investment into technology assessment methods and processes used in the UK’s HTA agencies.
Commercial arrangements
NHS England will consult on an update to the commercial framework for new medicines within the first 18 months of the 2024 voluntary scheme, to align with updated regulatory and access pathways, be more explicit about enhanced commercial flexibilities and when they can be offered, and reflect NHS England’s support for the Competition and Markets Authority statement on pricing arrangements for combination therapies.
NHS England recognises there will be some cases where additional support is needed for introducing advanced therapy medicinal products (ATMPs) into the NHS, including innovative payment models. NHS England commits to delivering 2 innovative payment model pilots to explore the practicalities of outcomes-based agreements for ATMPs.
NHS England and NICE commit to reviewing the budget impact test (BIT) threshold and consulting on increasing the threshold to £40 million, for the duration of 2024 voluntary scheme.
Equitable adoption of clinically and cost-effective medicines
NICE commits to increasing its efforts for timely update of clinical guidelines to incorporate technology guidance recommendations within the care pathway, in line with the guidance wording. Funding will be allocated from the investment facility to support this and to address the backlog of recommendations awaiting incorporation.
Funding will also be allocated from the investment facility to enhance NHS England and NICE’s adoption and support guidance to better support planning and implementation of NICE recommendations in local NHS systems. Funding for similar activities in Scotland, Wales and Northern Ireland will also be made available from the investment facility.
NHS England commits to the continued development of uptake measurement tools, including the innovation scorecard and estimates reports, to track variation in uptake of NICE recommended medicines between integrated care boards. The innovation scorecard and estimates report will be updated and published bi-annually.
NHS England will amend the national and regional clinical leadership job descriptions to embed their role in championing and advocating the use of NICE recommended medicines in relevant clinical communities.
NHS England commits to the development of a local formulary national minimum dataset to increase visibility of local variation in the implementation of NICE guidance and to confirm to NHS England that a NICE recommended treatment has been placed on a local formulary.
NHS England commits to creating a new patient support programmes (PSP) database to increase the visibility and wider use of existing PSPs across the NHS.
Operational matters
The 2024 voluntary scheme will be reviewed by ABPI and DHSC representatives twice: once in autumn 2025 and again in spring 2027.