Drugmakers have warned that a recent rise in the UK’s medicine sales tax has left the country “uninvestable”, as the government prepares for a summit to try to repair relationships with large pharmaceutical companies.
The Association of the British Pharmaceutical Industry on Thursday said the voluntary scheme for branded medicines pricing, access and growth (Vpag) was leading companies to cut headcount and abandon partnerships with the NHS.
Some pharmaceutical companies were delaying launching some new medicines in Britain because of the clawback tax, the lobby group said, adding that the “levy makes the UK uninvestable”.
Designed to limit the NHS drugs bill, Vpag is based on a complex formula that calculates how many new drugs are bought by the health service each year and in what quantity. If drugmakers were to leave the voluntary agreement, they would have to pay a statutory tax, which is often higher.
The warning comes as the government has invited pharmaceutical industry leaders to a summit in early April, according to people familiar with the matter.
Ministers, who have named life sciences as one of the sectors in the government’s industrial strategy, want to tout the UK’s scientific expertise and the potential of the NHS to enrol millions of patients for clinical trials.
But pharmaceutical companies have previously criticised the UK for paying far less than many peer countries for products.
ABPI chief executive Richard Torbett called for an “urgent commitment” from ministers to restore the UK to an “internationally competitive position”.
“The government has rightly identified life sciences as a critical growth sector for the economy, but unless these excessive payment rates are addressed, the UK will not see the growth and investment we all want,” he added.
In January, the lobby group met health secretary Wes Streeting to complain about companies having to pay 22.9 per cent of UK sales back to the government this year. The tax rate, which changes each year, was far more than the 15 per cent predicted by an industry and government model.
NHS England — the body that runs the health service in England, which is to be axed — said the rise was because of a higher than expected increase in purchases of medicines for conditions including cancer, diabetes and eye diseases, as well as sales of potentially curative cell and gene therapies.
In 2024, the tax was levied at 15.1 per cent. In 2023, under the previous deal between the Department of Health and Social Care and industry, it was 26.5 per cent.
Pharmaceutical companies would like the tax to be closer to the rates in other European countries, which are roughly 6-9 per cent.
Guy Oliver, UK general manager at US drugmaker Bristol Myers Squibb, said the “penalising and unpredictable” nature of Vpag had led the company to take “difficult decisions” that went against the government’s ambition for economic growth.
“The UK life sciences industry is in decline, with fewer clinical trials, a decrease in the launch of innovative medicines, cuts to partnerships supporting the NHS, and workforce reductions across the sector,” he added.
The health department did not immediately comment.
