Government tax hikes on branded drugs ‘are not sustainable’, manufacturers warn

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Drugmakers will be required to give the government 24.4% of their net revenue from the sale of branded drugs from 2023, an increase of 14 percentage points from the current rate.

However, the Association of the British Pharmaceutical Industry (ABPI) – the representative body for manufacturers – has warned that this “unprecedented” tax rate is unsustainable.

The statutory scheme, along with the Voluntary Scheme for Pricing and Access to Brand-Name Medicines (VPAS), aims to control the price of brand-name medicines by requiring companies to pay the government a portion of their net sales revenue collected. for the supply of these medicines to the NHS.

The scheme applies to all manufacturers unless they choose to join VPAS instead, which offers incentives to support innovation.

Payments under the statutory scheme are currently set at 10.9% of net income. Following a consultation held in March 2022, the Department of Health and Social Care said payments would increase to 14.3% in July 2022 and 24.4% in 2023.

The government said the changes ‘will maintain broad commercial equivalence with VPAS’ and ‘are expected to result in savings to the NHS of between £1 billion and £1.5 billion by 2023 compared to [with] leaving the payout percentage unchanged”.

Richard Torbett, chief executive of the ABPI, said: “We are concerned about the impact these exceptionally high rates would have on pharmaceutical companies under the statutory regime.

“Payout rates are unprecedented and well above those in comparable countries.

“Demanding ever-higher rebates based on an arbitrary limit on spending growth, set independently of inflation and the NHS’ growing need for the latest medical innovations, is unsustainable.”

A spokesman for the Department of Health and Social Care said: “The decision to increase the statutory Scheme payout percentages – due to higher than expected growth in sales of branded drugs last year – was taken after consultation with industry.

“This will maintain broad commercial equivalence between the statutory scheme and the VPAS, and ensure that NHS spending on branded medicines remains affordable in a way that is compatible with support from the life sciences sector.”

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