Home » Landmark deal to boost nation’s health and save NHS £14 billion

Landmark deal to boost nation’s health and save NHS £14 billion

  • Deal agreed by government, NHS England and pharmaceutical industry will improve access to cutting-edge treatments for NHS patients, support financial sustainability of the health service and advance UK life sciences sector
  • Pro-innovation and pro-competition agreement will introduce a new mechanism to support lower industry payment rates for more innovative and pioneering branded medicines
  • Significant industry investment in UK clinical trials, manufacturing, and health technology assessments strengthens UK’s global competitiveness

A landmark deal has been agreed that is set to save the NHS £14 billion over 5 years in medicines costs, enable patients to access the latest lifesaving treatments more consistently, and boost the UK’s position as a global superpower in advanced healthcare, technology and clinical research.

The new deal secures savings for the taxpayer-funded health service that are double those under the current medicine pricing agreement, which expires at the end of this year.

The agreement will save billions more pounds that can be used to provide the best possible treatment and care for NHS patients, grow the workforce and cut waiting lists – one of the Prime Minister’s 5 priorities.

The voluntary scheme for branded medicines pricing, access and growth (VPAG) has been agreed by the government, NHS England, and the Association of the British Pharmaceutical Industry (ABPI) and will run for 5 years until 31 December 2028.

As well as helping to keep the price of vital branded medicines affordable for the NHS and fair for taxpayers, the deal will help to ensure the NHS can continue to improve the speed it secures and adopts the newest treatments.

An additional £400 million of life sciences investment by industry will accelerate work on clinical trials, manufacturing and in health technology assessments agencies, encouraging UK economic growth, collaboration and innovation in the sector.

Health and Social Care Secretary Victoria Atkins said:

Millions of NHS patients will benefit from this momentous, UK-wide agreement.

Not only will it save the health service billions of pounds every year, it will allow more patients to quickly access the latest life-saving medicines and treatments.

This deal will also ensure the UK remains a world leader in driving forward innovative healthcare while boosting our economy, with hundreds of millions of pounds invested in vital research, clinical trials and manufacturing.

Medicines represent the second highest proportion of NHS spend, worth £19.2 billion in England in the 2022 to 2023 financial year. Fourteen billion pounds of this was branded, with the industry paying the NHS back £2 billion in rebates that year. This agreement, however, sets a yearly cap on the total allowed sales value of branded medicines to the NHS each year. Sales above the cap are paid back to the government via a levy.

The level of annual allowed growth in sales of branded medicines will double from 2% in 2024 to 4% by 2027.

The agreement also introduces a new affordability mechanism for older medicines. Older medicines which have not seen price reductions, will have to pay a top-up rate of up to 25% in addition to the older medicines base rate of 10%. The top-up tapers down for older medicines that have already seen significant price reductions, ensuring we recognise when competition has worked effectively to makes savings for the NHS.

The income from this mechanism will support lower payment rates for more innovative medicines, making the agreement explicitly pro-innovation and pro-competition.

Chancellor of the Exchequer Jeremy Hunt said:

This landmark agreement will not only save the NHS money, but help patients get access to the very best medicines and treatments for years to come. With significant new industry investment in research, clinical trials and manufacturing, this deal will bolster Britain’s position as the largest life sciences hub in Europe, and support a sector so critical to our country’s health, wealth and resilience.

Under the agreement which comes into force in 2024, the pharmaceutical industry will also invest £400 million over 5 years through the Life Sciences Investment Programme to drive forward UK innovation, sustainability and growth. The programme will be ringfenced to support work in:

  1. Pioneering clinical trials – bolstering the NHS’s capacity to deliver commercial clinical research.
  2. Manufacturing – positioning the UK at the forefront of sustainable manufacturing by driving innovative advancements in environmental technologies and cultivating strategic partnerships.
  3. Innovative health technology assessments – supporting access to innovative medicines by developing novel approaches to health technology assessment challenges.

This comes as the government committed to £520 million for life sciences manufacturing to build resilience for future health emergencies and capitalise on the UK’s world-leading research and development.

The programme will be targeted on improving clinical research, manufacturing and the value assessment of new medicines across the 4 nations and will attract more investment to the UK – delivering a net benefit to the economy overall.

For over 65 years the government and the pharmaceutical industry have worked together to help manage the affordability of medicines for the NHS and ensure rapid access and uptake of new medicines for patients, while also supporting the UK’s life sciences sector so that it can continue to deliver new innovations and economic growth.

Robert Kettell, NHS England’s Director of Medicines Negotiation and Managed Access, who led day-to-day negotiations: 

This 5-year agreement will enable NHS England to build on our track record of securing innovative, life-changing treatments for millions of patients across the country at a fair price for taxpayers. 

In leading the negotiations, I was clear that any deal had to enable patients to have rapid access to cutting-edge medicines and incentivise the medical research that will provide the treatments of tomorrow. I am confident this agreement delivers these aims.

To ensure NHS patients across the country can continue to rapidly access innovative medicines, the new agreement highlights how the government, the NHS, and the pharmaceutical industry will commit to piloting new approaches for paying for ground-breaking advanced therapy medicinal products (ATMPs), such as personalised cancer therapies and life-saving ‘one shot’ gene therapies.

This new approach to ATMPs will build on the NHS track record of using its commercial capabilities to secure cutting-edge treatments for patients and deliver innovative medicines access and uptake programmes.

Earlier this month, NHS England announced that expanding and accelerating uptake of anticoagulant drugs had prevented 4,000 deaths and an estimated 17,000 strokes over the past 18 months.

During the period of the current VPAS (voluntary scheme for branded medicines pricing and access) agreement, the NHS has also led the world in the development of commercial incentives to tackle antimicrobial resistance and more recently the world-first rollout of a cancer jab that cuts patient treatment time by 75%, to as little as 7 minutes.

Richard Torbett, Chief Executive at the ABPI, said:

This is a tough deal which underlines the essential role innovative medicines and vaccines will play in addressing the health challenges of the future. The industry supports this agreement, despite its restrictions, as it provides important support for patients and the NHS and commits to giving them access to the transformative treatments they need.

Allowing the sector to grow faster than it has under the previous scheme should increase the UK’s international competitiveness over time. Importantly, it also recognises the pressing need to invest more in building NHS capacity to partner with industry on science and research to support innovation and economic growth.

The deal includes exciting commitments that will see NHS England establish a data driven approach to the use of medicines across the NHS, ensuring the latest medicines are reaching patients with the highest need as quickly as possible; supporting wider commitments to reduce health inequalities. The development of a local formulary national minimum dataset will provide a tool to address variation in the implementation of NICE guidance to improve equity in access to clinically and cost-effective treatments.

The agreement also details how NHS England will work with companies to create a new patient support programme (PSP) database to encourage local NHS services to partner with manufacturers and encourage the wider use of novel approaches to patient support post treatment.