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Future branded medicine repayments from the pharmaceutical industry to the Department of Health and Social Care (DHSC) are set to reduce from forecasts, after DHSC’s announcement. DHSC is planning to reduce the statutory scheme’s payment percentage to an equivalent level of the voluntary scheme’s repayment percentage.

In December, DHSC announced that the UK voluntary scheme repayment percentage would drop from its original forecast for 2020 of 14.2% to a rate of 5.9%. The statutory scheme looks to be following suit, with DHSC consulting on changes that would make a similarly large reduction in its payment percentage.

Statutory Scheme rate for 2020 & 2021 

The payment percentage for the statutory scheme is to drop in 2020 from 14.7% to 7.4% (with an adjustment for companies who have already made higher payments in the first quarter of 2020).

The 2021 forecast has dropped from 20.5% to 10.9%.

Reasons for the changes 

In order for medicines to remain affordable on the NHS, DHSC aims to limit the overall growth in all branded medicines sales to 1.1% per annum.

Between 2018 and 2019 the growth in medicines sales was lower than DHSC had forecast. The knock-on effect of which meant that the original statutory scheme payment forecasts for 2020 and 2021 were higher than necessary to keep just within the 1.1% per annum target.

Therefore, DHSC has lowered the payments percentages for the statutory scheme and repayment percentage of the voluntary scheme. This is to provide greater profits for the life sciences sector and, therefore, incentivise research and development.

This move is also intended to bring the statutory scheme repayments to a level of “broad commercial equivalence” to the voluntary scheme. Therefore, DHSC is attempting to signal that companies have choice.

Reasons to be wary

Although industry will welcome the headline grabbing news that they will have to repay less money than expected under the statutory and voluntary schemes, this belies the fact that it is as a result of a lower growth than forecast in medicine spend for 2018 & 2019. This decline is indicative of a market access environment that is more challenged to secure uptake.

Therefore, industry should be pushing for proactive support from DHSC in supporting uptake of new medicines, rather than celebrating a reduction on their repayments.

Consultation

Industry can respond to the consultation on the planned changes to the statutory scheme. It runs until 17 February 2020.

For further insight and analysis into how the repayment announcements might affect your business, or if you would like to know more about Decideum, please feel free to contact us.

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