The UK Government has cut its innovative medicine rebate rate by more than a third in a move likely to be welcomed by the pharma industry.
This means pharma companies providing new, next-generation therapies to the UK’s National Health Service (NHS) in 2026 will now pay 14.5% back through the Voluntary Scheme for Branded Medicines Pricing (VPAG). This is down significantly from the 2025 clawback rate, which sat at 22.9%.
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Meanwhile, payback rates for older, branded medicines will remain unchanged in 2026, standing at a rate of 10%-35%, depending on the therapy.
In addition to the proposed rates for both older and newer drugs, the NHS will receive 1% through a pre-seed investment funding component, meaning the newer medicines will see a clawback rate of 15.5%,
According to the UK’s Department of Health & Social Care, this scheme will boost the UK’s attractiveness as a hub for clinical trials and manufacturing, while positioning the nation as a favourable location for the early launch of new medicines.
This rebate change closely follows the UK Government’s landmark deal with the Trump administration. The agreement will see the UK pay no tariffs on pharmaceutical imports into the US, making it the first country to arrange such a deal.
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By GlobalDataIn exchange for this tariff exemption, the UK will increase its spending on innovative medicines through the NHS, as permitted by the nation’s drug spending watchdog, the National Institute for Health and Care Excellence (NICE). This marks the first increase in the NICE’s cost-effectiveness threshold in more than two decades.
As agreed in the UK-US deal, the UK has placed a 15% clawback cap throughout 2027 and 2028, which Richard Torbett, chief executive of the Association of the British Pharmaceutical Industry (ABPI), noted would “provide companies with greater certainty” until the cut-off period.
Despite this positive step forward, Torbett noted that more work would be necessary to get the UK back into a competitive global position: “Payment rates remain much higher than in similar countries, and there is work to do to accelerate the NHS’s adoption and use of cost-effective medicines.”
Meanwhile, Dr Scott Purdon, chair of the Charity Medicines Access Coalition, praised the government’s move, noting that the announcement will bring “significant benefit” if the clawback reduction results in greater investment and broader therapeutic access.
Janet Beal, managing analyst of health economics and market access, Europe/CIS at GlobalData noted: “The fact that the recently agreed VPAG headline payback cap of 15% did not need to be applied for 2026, and a lower figure of 14.5% has been calculated by the standard mechanism is likely to come as a considerable and welcome surprise to the UK’s pharma sector.”
Moving forward, Beal predicts that it is “highly likely” that a majority of member companies will opt to remain in the scheme for at least the next year, as the “currently set 24.3% payback rate for 2026 on the mandatory backup Statutory Scheme represents a considerably inferior option”.
UK looks to repair pharma relations
Through the change to rebates and its deal with the US, the UK is making strides to improve relations with the pharmaceutical industry, which have recently been souring due to a lack of investment in the sector.
This has prompted a range of big pharma companies to pull the plug on their UK R&D expansion efforts, including MSD, AstraZeneca and Sanofi.
It also led Eli Lilly CEO David Ricks to call the UK “probably the worst country in Europe” for drug prices before the signing of the US-UK deal, according to an interview with The Financial Times. The company recently told the publication that it is not yet ready to unfreeze its UK investments, despite Ricks’ optimism following the deal.
Life science foreign direct investment into the UK has also taken a hit, sinking 58% between 2021 and 2023, highlighting a potential drop in investor confidence.
The UK is now looking to turn its fate around by reviving its relationships with the industry.
In a research note, global law company Sidley Austin stated that if the UK was to have any chance of achieving this goal, the nation will need to “maintain its new commitment and investment in life sciences”.
“It will be necessary for the UK to … continue to take advantage of MHRA’s status as a sovereign regulator, and remove roadblocks that overcomplicate the establishment and scale up of pharma companies in the UK,” the Sidley team concluded.
