UK says drugmakers’ call for fixed-rate medicines tax ‘unaffordable’

The UK government has rejected a proposal by drugmakers to introduce a fixed-rate tax on medicines used in the NHS as “completely unaffordable”, in a sign of strains between the two sides ahead of upcoming talks.

The Association of the British Pharmaceutical Industry, a trade body, on Wednesday called for a fixed rebate of 6.88 per cent on eligible UK drug sales. It claimed that the levy would give the health service more than £1bn a year, far more than it received before the Covid-19 pandemic.

But the Department of Health and Social Care dismissed the ABPI’s plan, published ahead of negotiations set to begin near Easter, saying it would limit patients’ access to medicines.

“These proposals are completely unaffordable, costing the taxpayer an extra £2.5bn per year. They will also drive up the cost of medicines for the public and reduce NHS patients’ access to new treatments,” it said.

NHS England said it would work collaboratively to develop “workable and affordable proposals, based on credible analysis”, but warned that the ABPI’s plan would cause a 25 per cent rise in the price of branded medicines.

It added that the increase would lead taxpayers to hand drugmakers an extra £2.5bn a year, equivalent to the cost of about 16mn hospital appointments.

Under the current voluntary scheme for branded medicines pricing and access signed in 2019, companies agreed to limit the total NHS drug bill to a 2 per cent increase each year, irrespective of how many medicines the NHS bought or their cost.

The levy, which was between 5 and 10 per cent of drug sales from 2019 until 2021, now stands at 26.5 per cent. Pharmaceutical company chiefs have said the rise has made it one of the most punitive “clawback” policies in the world and that it is deterring investment in research and development in the UK.

Ahead of talks to decide the next scheme, which will take effect next year, companies are pushing to model the next scheme on German clawbacks, where drugmakers pay a fixed percentage each year, according to people familiar with their thinking.

Germany has also been putting pressure on the prices of medicines, increasing the discount it demands to 12 per cent this year.

ABPI head Richard Torbett called for the levy to be reduced, saying the UK’s life sciences industry was “at a crossroads”.

“The current direction of travel is leading away from success and we must act urgently to turn this around,” he said.

In an effort to win the argument, the ABPI has proposed that pharmaceutical companies pay an extra 1.5 per cent of UK sales into an investment fund, totalling about £1bn over five years.

The body said the money could be used to boost NHS clinical trial capacity, improving the speed and diversity of studies and expanding the UK’s genomics capacity.

The fund would also pay for a medicines equity partnership to address barriers to the adoption of new drugs across different regions in the UK.

But the funding would not stretch very far in an industry where studies put the average cost of developing a single drug at between $1.3bn (GBP £1.1bn) and $2.6bn.