Branded Medicines Voluntary Scheme and the Life Sciences Vision

Martyn Day Excerpts

Wednesday 3rd May 2023 Westminster Hall

[Martyn Day (Linlithgow and East Falkirk) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Sharma. I am grateful to the hon. Member for Newton Abbot (Anne Marie Morris) for securing today’s debate on the voluntary scheme for branded medicines and the life sciences vision.

The UK Government’s current voluntary scheme for pharmaceutical companies has come under criticism for its unsustainable payment rates, which are well above both historical and international norms. As we have heard, companies are required to pay a revenue tax of 26.5% to the UK Government, in addition to all other taxes, which is significantly higher than that in other countries. That has led to two large US-based drug companies, AbbVie and Eli Lilly, exiting the VPAS, citing the punitive system of revenue clawbacks. Other companies, such as Bayer and Bristol-Myers Squibb, have also threatened to reduce their UK footprint in response to the increasing clawbacks.

The pharmaceutical trade body has called for the UK Government to scrap their plans to raise the repayment rates for drug makers, so as to avoid possible setbacks for the sector. The high payment rates are seen as a global outlier and are undermining the UK’s ability to attract investment and become a global leader post Brexit. I sincerely hope that the UK Government are successful in their efforts to address these concerns. Sir Hugh Taylor has been appointed as chief adviser for VPAS negotiations. He will oversee the negotiations for the Government and the NHS on a successor to the 2019 VPAS, which will expire at the end of 2023.

Medicines are crucial for healthcare and are the second largest expense for NHS Scotland. They prevent, control, palliate or cure many diseases. The Scottish Government are committed to improving patient access to safe and effective new medicines. The regulation of medicine pricing is the responsibility of the UK Government, but the Scottish Government are involved in the UK-wide voluntary VPAS agreement between the four UK nations and the pharmaceutical industry that caps NHS spending on branded medicines. Companies exceeding the VPAS revenue cap pay rebates to the Scottish Government and the three other UK Administrations. The cap grows by 2% annually and the sales above it are paid back to the Department of Health and Social Care via the levy. As we know, the scheme has been active since 2019 and will end later this year.

Scotland uses the VPAS receipts to fund the new medicines fund, which supports health boards with the cost of introducing new medicines, including orphan, ultra-orphan and end-of-life medicines. The fund covers medicines approved by the Scottish Medicines Consortium, and affordability should not prevent access to new medicines. Since 2014, £456.5 million has been made available to health boards. However, it is unclear if the new medicines fund will be sustained beyond December, as VPAS funding is not certain. Going forward, certainty is essential both for the NHS and for our life sciences sector.

Scotland’s life sciences community has distinctive capabilities, a strong business base and excellent research institutions that continue to create high-value jobs. We aim to make Scotland the preferred location for the life sciences community. Scotland’s life sciences sector provides economic benefits and improves healthcare. With over 700 businesses and institutions, it employs 41,700 people. It is identified as a growth sector and is part of Scotland’s national strategy for economic transformation. Scotland is known for drug discovery and advanced manufacturing, contributing to international exports and research and development investment. In 2018, £164 million was invested in pharmaceutical research and development. It is estimated that that will generate £1.5 billion in economic benefits over the next three decades. That puts its importance in scale.

In conclusion, there can be no doubt as to how important the sector is to Scotland’s economy, both now and in the future, nor is there any doubt as to the significance of the funding that VPAS provides to our NHS. Certainty of funding beyond the current scheme is now needed. We need to get the balance right, however, both to sustain the life sciences sector and to support our NHS.