The first six months of the 2024 Voluntary Scheme

The newly agreed 2024 voluntary scheme for branded medicines pricing, access, and growth (VPAG) came into force at the beginning of January this year. Find out more about the 2024 VPAG.

As part of the new scheme, the ABPI, on behalf of the entire branded medicines industry, the Department of Health and Social Care (DHSC), and NHS England (NHSE), agreed to conduct operational reviews every six months to ensure it is delivering as intended.

The scheme has three objectives at its core: contributing to a financially sustainable NHS by maintaining ‘affordability’ of branded medicine spend, promoting better patient outcomes and a healthier population and supporting UK economic growth.

So, how well is the 2024 VPAG delivering against its goals in the first six months?

Affordability: Introduction of the new affordability mechanism has led to some delays and uncertainty

The 2024 VPAG marks a significant departure from the previous scheme with the introduction of a different level of payment for older and newer branded medicines.

Newer product payment rates are set in a similar way to the 2014 and 2019 schemes, meaning that NHS spend on newer medicines is fully capped, regardless of the amount prescribed, and payment rates are set according to growth.

Payment rates for older medicines are set by assessing price changes against a historic ‘reference price’, a price identified as close to loss of ‘UK market exclusivity’ as possible.

In the first six months of the scheme, identifying these reference prices has been a huge and complex exercise for the DHSC and NHSE. The ABPI has worked with DHSC to encourage flexibility in timelines and ongoing communication to scheme members. The flexible approach, open dialogue and willingness to respond to company feedback has been appreciated by industry.

However, we know the older product approach has also been challenging for companies, with ongoing delays making it harder to assess the payment rates across their portfolios. Some companies have had to deploy additional resource to check data and report back to DHSC.

The first six months of this scheme marks the most complex stage as we transition to the new VPAG and companies work through years of historical data. As we move forward, we anticipate this complexity will be reduced, and there are plenty of lessons that we must collectively reflect on and use to improve processes.

This underlines how the new scheme requires ongoing close monitoring and partnership from the government and industry to ensure it operates and achieves its objectives.

Once reference price data is confirmed, more about the scheme performance will be known

As of September, companies have received the bulk of reference price data, with some areas still under discussion with DHSC. They are beginning to assess the impact of this data: what their payment rates are and what the potential consequences of these rates might be.

Early reports from companies suggest that the viability of some medicines will be under review. After factoring in ‘older medicine’ payment rates, some medicines may no longer be viable to provide to the NHS at their current price. This could, in turn, lead to market withdrawals, less competition, risk supply issues, or lead to price increases to the NHS. The actual outcomes are not yet known.

The other area that companies report concerns about is potential negative impacts to upcoming launches for innovative treatments, especially if captured as ‘older’ due to scheme definitions. Such new product launches might be subject to ‘older medicine’ payment rates, even if they are still NICE reviewed (therefore, considered cost-effective before VPAG payments), meet a patient's unmet need, and represent genuine innovation to the NHS.

These types of unintended consequences take time to understand, and it’s clear that it is still too early to fully understand the impact.

The ABPI are actively monitoring for unintended consequences, and are encouraged by governments willingness to understand the data and review potential impacts as they arise.

Exceptional circumstances: a potential ‘release valve’ to prevent such unintended consequences

The VPAG includes an ‘exceptional circumstances’ clause (6.26), which gives scheme members the opportunity to seek a price rise or payment rate reduction where there are supply challenges or a product is at risk of being unviable. The provision has undergone minimal change since the last scheme, and we must ensure the process remains fit for purpose, given the novel nature and different challenges of this scheme.

The ABPI supports DHSC's plans to provide further process guidance on exceptional pricing treatment applications. As the scheme continues, these processes must continue to be improved and made to work more transparently and effectively.

This should include simplifying processes where possible, to support both companies and DHSC at a time of significant resource constraints and ensuring that payment rate reductions are utilised as a genuine option, as per the scheme agreement.

Promoting better patient outcomes: though access and adoption of innovative medicines

The industry has been pleased to see a much more proactive and active management of the delivery of the so-called ‘Chapter 3’ element of the new 2024 VPAG. These elements include those measures designed to improve the adoption and uptake of innovative medicines, leading to improved health outcomes for NHS patients.

While the general election has led to some delays, we have seen the launch of two essential consultations, committed to under the scheme, focused on NICE’s Commercial Framework and NHSE’s Budget Impact Test. The ABPI will be contributing to these consultations and monitoring their outcomes closely.

Although the scheme is still young, the first innovative payment model pilot was announced earlier this year, demonstrating how the scheme can support access to the cutting-edge innovation. The ABPI is keen to hear more about a ‘wrap-around’ programme for innovative payment model pilots, so more patients can benefit in the future, as there is significant interest from companies in this area.

Also in the first year of the scheme, NHS England will amend national and regional clinical leadership job descriptions to promote the use of approved cost-effective innovative medicines in the NHS - to overcome health inequalities and support equitable adoption. This commitment is scheduled to be implemented later this year, and we hope to have updates in place soon. When it is, it will be vital to measure the impact of these changes to ensure they are improving patients' ability to access the medicines they are entitled to.

Supporting UK economic growth: by ensuring the UK is a global centre for life sciences

A key aspect of the 2024 VPAG agreement was the industry's voluntary financial contribution to an investment fund co-designed to support faster patient access to cutting-edge treatments, strengthen clinical trials, and improve medicines manufacturing in the UK. This investment programme was successfully launched in August, and we look forward to advancing the different investment programme work streams in the coming months. It remains critical that we are ambitious in delivery and robust in measuring outcomes, to ensure we are truly maximising the opportunity this world-first partnership offers.

Understanding Scheme performance through metrics and data

Given this scheme's many new features, it remains critical to have a shared view of how it works, whether it is meeting its overarching objectives, and its intended and unintended impacts.

The APBI wants to ensure that all stakeholders, including scheme members and patients, can see how the scheme is performing. Here is a link to the latest set of operational metrics, which are under development.

To date, the DHSC has focused on reference price data, but as we move into the second half of this year, we must have a complete set of metrics. This is a joint venture, and we hope to see this in place by the following operational review.

Conclusion

The 2024 VPAG is still very new, and it is too early to tell how it may impact broader branded medicine market dynamics. Fully implementing the complex changes to the financial elements has taken longer than we would like, with work underway to resolve this as soon as possible.

The government and industry must continue to work together to fully assess the new scheme's impacts, and we welcome the government's commitment to do so at the next Operational Review meeting.

However, the scheme has made good progress on a number of important fronts. This progress has been underpinned by close cooperation and goodwill on all sides, and this gives the ABPI confidence that any delays can be overcome before the next review at the end of the year.