If proposed changes to the UK’s Statutory Scheme for branded medicines is implemented, there will be “a negative impact on new product launches, despite any initial exemption in the first three years,” says Astellas.
According to the Association of the British Pharmaceutical Industry (ABPI), a consultation by the UK Government proposing radical changes to the Statutory Scheme for branded medicines has been heavily criticised by the pharmaceutical industry.
The fundamental concern, ABPI highlighted, is the proposed continuation of an arbitrary cap on growth for branded medicines in the UK, which has led to soaring revenue clawbacks in the country. Back in March, several key players in the industry responded to the government confirming its plans to raise the revenue clawback rate for these drugs.
Yet this week, the ABPI noted that the proposed Life Cycle Adjustment (LCA) mechanism aims to maintain the total revenue raised through sales clawbacks, but reduce rates paid by newer medicines.
This is done by “imposing very high clawback rates of up to 40 percent on medicines older than 12 years. The higher rates would be paid on products judged by [the UK] Department of Health and Social Care (DHSC) to be in ‘uncompetitive markets’ using a highly questionable measurement of ‘competition’ which deviates from existing UK and European Competition Law practice”.
ABPI stated that while the industry is open innovation and competition-supporting measures, the pharmaceutical industry believes the LCA “will introduce even more instability to the UK market and be too imprecise and open to challenge, placing a considerable additional regulatory burden on companies”.
Consequently, the ABPI’s Chief Executive, Richard Torbett, urged the government to review the proposals on the Statutory Scheme. “In just three years, [the unpredictable capped pricing schemes have led to] revenue clawbacks go from low single digits to well over a quarter of sales revenue [from around five percent to 27 percent] – with no allowance for rising inflation or other business taxes. We need a pragmatic solution where industry and government can properly share the risks and rewards of innovation.”
ABPI warns against revenue clawback rate rises
The UK’s Statutory Scheme for branded medicines
Currently, only a minority of companies are subject to the Statutory Scheme, with most choosing to be part of a Voluntary Scheme (VPAS) agreed between government and industry. The current Voluntary Scheme is due to end in December 2023. Without a new deal agreed, all branded medicines sales will, for the first time, be subject to the statutory scheme, ABPI warned.
Without a new deal agreed, all [UK] branded medicines sales will, for the first time, be subject to the statutory scheme”
This will result in certain changes to the Statutory Scheme being required to minimise, if not completely avoid, negative impacts on the drug supply and pricing in the UK, ABPI continued. These include exemptions for the newest medicines, blood and plasma derived products and vaccines.
Jackie Williams, General Manager of Astellas Pharma Ltd emphasised that if implemented, the proposals would place “a negative impact on new product launches, despite any initial exemption in the first three years.”
“AbbVie has always been a member of the Voluntary Scheme but left as a reflection of our view that the current scheme was broken. Unprecedented high payment rates in 2022 and 2023 have had a demonstrable impact on our ability to operate sustainably in the UK. It is therefore disappointing to see proposals for a Statutory Scheme which fail to deliver the sustainable, predictable, and internationally competitive foundation that companies need to rebuild commercial confidence. The current proposals will make it increasingly difficult for the UK to achieve its ambitions of maintaining strategic significance as a key market for the life sciences sector,” shared Todd Manning, Vice President and General Manager, United Kingdom for AbbVie.
Balancing innovation, competitiveness and securing the UK’s medicine supply
“Daiichi Sankyo UK welcomes the government’s intentions to take a more pioneering approach to a heterogenous sector, where a one-size-fits-all approach is no longer fit for purpose. [However] any future statutory or voluntary scheme must seek to incentivise and inspire that future innovation,” noted Laura McMullin, General Manager for Daiichi Sankyo UK.
The UK Country President of Pfizer, Susan Rienow, advocated that the next step for the industry to “agree a new voluntary scheme which makes the UK internationally competitive, so the country can be home to tomorrow’s medical breakthroughs”.
Rozlyn Bekker, Managing Director of Janssen UK & Ireland assured that if “the government and industry work closely together we can arrive at a competitive, sustainable updated scheme and prevent the UK risking its position as one of the greatest places in the world for life sciences.”
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