Biosimilars are meant to offer savings to health systems like the UK’s National Health Service (NHS), but reimbursement systems can often thwart that effect. With a reimbursement regime change with VPAG this year, the UK biosimilar sector is now waiting to see if the change might be for the better.
The repercussions of the previous voluntary scheme for branded medicines and access (VPAS) continue to resonate through the UK pharmaceutical sector, with cases like withdrawal of the breast cancer biosimilar Herzuma (trastuzumab) from the market emphasising the challenges being faced by some companies.
Industry stakeholders have welcomed the successor scheme—the voluntary scheme for branded medicine, access and growth (VPAG)—that was implemented starting this month, but the sector is bracing for its impact on the future of biosimilars in the UK.
The fallout from VPAS
The previous VPAS scheme was implemented in January 2019 and ran until December 31, 2023. It was a collaborative agreement between the Department of Health and Social Care (DHSC), NHS England, and the Association of the British Pharmaceutical Industry (ABPI). It aimed to enhance patient outcomes, manage the NHS’s medicine expenditure, and support the UK’s life sciences sector.
VPAS set a cap on the total allowed sales value of branded medicines to the UK NHS each year. The cap grew at an agreed rate of 2% per annum, and any medicine sales above the cap were paid back to the DHSC via a levy. In 2023, members had to pay back 26.5% of their medicine sales in payments, calculated so that the NHS’s net branded medicines sales increased at only that 2% rate.
While the pharma industry as a whole criticised the hike, the British Generic Manufacturers Association (BGMA) and its sister organisation, the British Biosimilars Association (BBA), argued that the VPAS scheme disproportionately burdened biosimilars. The escalated rebate rate rendered the supply of some medicines economically unsustainable, prompting concerns about the scheme’s impact on biosimilar competition and NHS costs.
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VPAG enters the scene
The VPAS’s successor, the VPAG scheme, was announced in November 2023 and implemented from January 2024 onwards.
Instead of a single payback rate each year, there will now be two different types of payback rates for “new” and “old” medicines. Newer medicines, within the first 12 years or until the expiry of a supplementary protection certificate, have dynamic rebate rates tied to NHS spending. The allowed growth rate for these dynamic rebates is set to increase during the five-year term for VPAG. Older medicines have a flat 10% rebate with a sliding scale top-up based on price erosion. A fixed rebate of 19.5% will be applied for both old and new drugs in Q1 2024 during a transition period.
The allowed sales threshold for newer medicines, which was fixed at 2% from 2019–23 in the VPAS, will be gradually adjusted upwards. It will start at 2% in 2024, increase to 3.75% in 2025 and 2026, and reach 4% in 2027 and 2028.
GlobalData analyst Janet Beal says this threshold makes the scheme more sustainable, adding “The thing that is being welcomed by the industry, including biosimilars manufacturers, is the threshold.”
Where do biosimilars fit in the scheme?
Questions have been raised about whether biosimilars—copies of complex biologics—will be classified as either new or old under the VPAG. Craig Smith, consultant at Decisive Consulting, says most biosimilars are likely to fall under the older medicines category, adding “Because of that, the impact of the new scheme will largely not be as favorable for branded generics and biosimilars when compared to products in the newer medicines category.” Still, he says the 10% flat rate and a top-up percentage based on the level of observed price erosion under VPAG brings some clarity to the repayment percentage.
David Thorne, transformation director at Well Up North primary care network—a consortium of nine general practitioner practices—also says VPAG has been received favorably in general. “[But] there are companies within the APBI [Association of the British Pharmaceutical Industry] that are deeply disappointed with the way that the scheme has been constructed. Specifically, it tends to favour new drugs, rather than under-established drugs,” Thorne notes.
Considering the fact that one of the consequences of the last regime was Celltrion withdrawing Herzuma from the market, the full effects of VPAG remain to be seen. Smith says companies will likely wait to see the results of the new scheme before they make any drastic decisions. “I don’t think they’d necessarily not launch because of the new scheme starting,” says Smith.
Although the payback and threshold rates may be welcomed by most of the pharma industry, Beal says judging the impact on the biosimilar sector is difficult because of the differential rates. “The differential margins could be either a plus [positive] or a minus [negative] for biosimilars depending on how they fit the model,” says Beal.
What is the future trajectory of the UK biosimilars market?
Biosimilars hold an important role in the healthcare landscape in the UK, offering a more cost-effective alternative to existing biologics and ensuring broader patient access to biologic therapies.
Mark Samuels, chief executive of the BGMA and BBA, emphasised that biosimilars provide significant savings to the NHS. “Unfortunately, the previous VPAS didn’t fully recognise the opportunity. Moreover, a very high clawback rate of 26.5% [in 2023] made some products lossmaking, forcing manufacturers to make difficult decisions to stop marketing essential medicines such as cancer products or not even make them available to the UK in the first instance at all,” says Samuels.
Samuels says the government can do more to ensure a competitive market for biosimilars and to guarantee that agencies like the Medicines and Healthcare Products Regulatory Agency and National Institute for Health and Care Excellence prioritise biosimilars. “The government should commit to adopting best-value biologic medicines as quickly as possible. Alongside this, the Medicines and Healthcare Products Regulatory Agency and the National Institute for Health and Care Excellence must have the resources to prioritize and approve off-patent medicines more quickly and provide updated guidance on their use,” Samuels notes.
Moreover, the fluctuating rates during the last scheme made it hard for UK teams to make a business case for supply in a global context, and it is essential to provide manufacturers and suppliers with certainty over the rate, says Samuels.
As per the VPAG scheme, all rebate money will go back to the NHS for the development of innovative medicines. However, Thorne says there is a lack of transparency from the NHS about where specifically this money goes.
VPAG outlines the Life Sciences Investment Programme, a collaborative initiative between the UK government and industry that aims to enhance the UK’s global competitiveness in health and life sciences. “In terms of funding allocations, the VPAG Investment Programme is a UK-wide ringfenced fund, which is really promising for innovation,” says Smith.
While Smith supports the price erosion mechanism included in the new scheme, he said it will distort a competitive market. “Naturally, it follows that this may mean fewer new medicines being launched in the UK ahead of other countries, including Europe and the US. This will impact patients’ access to medicines” he says.
Smith says that overall the scheme is a good thing for industry. Biosimilars are hugely important to the NHS in terms of savings, and the new scheme will not make it less economical to manufacture and launch biosimilars in the UK. Still, only time will tell when it comes to the full impact of the VPAG. “I think we’ll have to wait and see,” adds Smith.