This is the third in CHASE's series of analyses on VPAG and the UK pharmaceutical pricing landscape. The first two articles: UK drug rebate rise and VPAG: a perfect storm for pharma and Beyond the VPAG breakdown: beyond VPAG to a NICE overhaul cover the background in detail. This piece assumes some familiarity with the topic but is written to stand alone for new readers.
On 1 April 2026, a new VPAG payment rate for new medicines takes effect. After a year that brought a shock spike to 22.9%, a breakdown in negotiations, a surprise intervention from Washington, and a December deal that reset the terms, the rate has been set at 14.5%.
CHASE has tracked this story since early 2025. This analysis sets out what the December deal delivers, what it leaves open, and what the current landscape means for pharmaceutical companies operating in or planning to enter the UK market.
The Voluntary Scheme for Branded Medicines Pricing, Access and Growth (VPAG) is the agreement between the UK government, NHS England, and the pharmaceutical industry, represented primarily by the ABPI, that governs how branded medicines are priced and how industry contributes to managing the NHS medicines bill. Its predecessor was VPAS; before that, VPRS. The scheme has existed in various forms for decades.
Its central mechanism is a rebate. When branded medicine sales to the NHS grow beyond an agreed cap, companies pay back a percentage of their sales revenue as a rebate to the government. That payment is calculated on sales, not on profit, a distinction that means companies bear a significant financial obligation regardless of whether a medicine is profitable in the UK.
Medicines under VPAG are categorised into three groups, each with a different rebate treatment.
Companies that choose not to participate in VPAG are automatically covered by the Statutory Scheme, which functions as a backstop. It operates at a slightly higher rate, currently around 16.5% when its investment facility is included, and carries fewer of the flexibility provisions available under the voluntary arrangement. For most larger pharmaceutical companies, VPAG remains the preferable commercial choice, though the gap has narrowed.
The rebates generated by VPAG are substantial. Over the current scheme period, industry payments to government are expected to approach £15 billion. There is, however, little transparency on how that money is deployed within the NHS.
The agreement reached in December 2025 was shaped by a combination of domestic pressure and international geopolitics. A detailed account of how talks broke down in August 2025 can be found in our earlier post, ‘Beyond the VPAG breakdown: Beyond VPAG to a NICE Overhaul.’ To summarise, a combination of domestic industry frustration, major companies halting UK investment, and direct engagement from the US administration created the conditions for a reset.
The deal’s headline elements include:
These are meaningful changes. The rate reduction from 22.9% to 14.5% represents a significant reduction in the financial burden on companies with newer medicine portfolios. The 15% cap, agreed as part of a bilateral trade framework rather than as a domestic policy concession, provides a level of protection against the kind of sudden upward swing that destabilised the previous period. The NICE threshold increase, modest as it may appear relative to the ABPI's preferred position, is a signal that the government accepts, at least in principle, that the UK's approach to valuing medicines has fallen behind.
The 14.5% figure: it’s not a ‘fixed’ number from the trade deal, but rather the output of the VPAG formula. An unexpected patent expiry following a major court ruling altered the spending profile of the newer medicines basket, pushing the calculated rate below the 15% trade-agreement ceiling. This means the rate remains dynamic and could drop further if spending growth slows, though it is now protected from exceeding the 15% cap.
An oversight committee has been established, comprising global pharmaceutical industry decision-makers alongside the UK Government, NHS England, and NICE. Four structured discussions or ‘sprints’ are planned between April and June to work through outstanding issues and lay the groundwork for the next scheme. One notable absence: the Treasury. Given that the government's commitment to increase medicine spend to 0.6% of GDP requires funding decisions that ultimately sit with the Chancellor, the Treasury's non-participation is a material gap in the governance structure.
The reduction from 22.9% to 14.5% with a 15% cap, reflects a genuine shift in government rhetoric; a movement, at least at the official level, from treating medicines as a cost to be minimised towards recognising them as an investment in the health and productivity of the population. That shift in framing matters, even where the numbers still fall short of what the industry would want.
However, 14.5% still puts the UK at approximately double the rate of new medicines in comparable European markets. Schemes in Germany, France, and Ireland operate at rates of 5–12%.
The position of older medicines has not materially changed. A branded product that has been through NICE, typically with a price reduction of 70–80% from the list price to achieve cost-effectiveness, then through NHS England's affordability assessment, with a 35% VPAG rate as an older medicine, faces a cumulative financial pressure that is difficult to sustain. In response, companies are increasingly debranding products ahead of exclusivity expiry, specifically to exit the VPAG mechanism. This is a rational commercial decision, but it also reduces the visibility of branded medicines and, in some cases, removes products from the NHS market entirely.
One further dynamic is worth consideration. The 14.5% rate has been welcomed, but projections suggest that getting from the current trajectory to the government's 0.6% GDP commitment by 2035 would require medicine spending to grow from roughly 3% of the scheme's target value to 3.5% by 2028. With general elections on the cards before 2035, there is some scepticism about the durability of a 10-year commitment.
Several questions are still open.
The rebate mechanism is meant to be a partnership: industry manages the NHS medicines bill in exchange for a predictable and supportive access environment. The rebate side of that bargain is clearly functioning as industry payments will approach £15 billion across the current scheme period.
However, the "access and growth" side remains harder to measure. Beyond the standard rebates, companies also pay a mandatory 1% levy into a dedicated VPAG Investment Programme. According to the ABPI, this fund supports over 20 active projects, including:
While these central investments are a step forward, a significant transparency gap remains at the local level. Clinicians and Integrated Care Boards (ICBs) making prescribing decisions still have no visibility of the true "net cost" of medicines after these multi-billion-pound payments are processed. This lack of "flow-through" transparency means it remains largely unanswered whether the broader rebate income is being reinvested into frontline patient access or simply used to offset general NHS deficits.
There is a live debate within NICE and the oversight committee regarding whether the Health Technology Assessment (HTA) framework is too narrow. The current QALY-based model struggles to capture value beyond the medicine, such as reducing hospital admissions or keeping patients in the workforce.
The system still lacks a mechanism to ‘bridge’ budgets. A medicine that increases costs in primary care but saves money in emergency surgery often fails to get funded because the savings sit in a different NHS ‘silo’.
The UK’s current exclusion from the US Section 301 pharmaceutical tariffs is a negotiated asset, not a guarantee. The Most Favoured Nation pricing commitment, if pursued, would require disclosure of confidential pricing agreements across markets in ways that most companies would find operationally very difficult.
For companies working through the practical implications of the post-deal environment, a few observations:
A lower VPAG rate reduces the financial cost of operating in the UK, but patient access challenges remain. The NICE recommendation is the beginning of the access journey in the UK, not the end. NHS-industry partnerships, structured programmes that support pathway development and clinical engagement, can enable the health service to be 'launch ready.' By addressing system barriers, these collaborations can help to ensure that patients can access new medicines equitably across the UK.
The direction of travel is that evidence generated in routine NHS clinical practice carries more weight than it did five years ago, and that weighting is increasing. Companies building real-world evidence now, through collaborative working programmes, registry data, and structured NHS–Industry Partnerships, will be better positioned not just for the current VPAG period but for the next negotiation, where that evidence base will provide a robust foundation for demonstrating long-term clinical value and patient outcomes.
A national strategy is only as good as its delivery in the field and a market access plan is only as effective as the people who deliver it. Navigating the governance of ICBs and Medicines Optimisation Committees requires local insight, often delivered most effectively through specialised, outsourced commercial teams with existing NHS relationships and insight.
The ABPI is running surveys and webinars to gather industry views on what reforms would genuinely improve UK competitiveness and patient access ahead of the next scheme negotiation.
The new rate comes into force next week, and after the turbulence of the last 12 months, it’s a milestone worth marking. The December deal is a genuine step forward, the rate reduction is real, the cap provides meaningful protection, and the NICE threshold increase signals a shift in thinking.
But the UK pharmaceutical market in 2026 remains a landscape that requires careful navigation. The rate is still high by European standards. The older medicines cliff is unchanged. The access infrastructure between NICE approval and patient reach still requires effort to bridge. And the geopolitical context that drove so much of the December settlement continues to evolve.
CHASE works at precisely this intersection; the space between the NHS and the pharmaceutical industry, where commercial strategy meets clinical reality. Whether you are working through the implications of the new rate for your UK portfolio, designing a compliant NHS partnership focused on improving patient pathways and outcomes, or building the commercial team to execute in this environment, the CHASE team would welcome a conversation.
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