The Government has confirmed it will raise the revenue clawback rate for branded drugs manufacturers subject to its statutory scheme from 24.4 per cent to 27.5 per cent.

Yesterday the Department of Health and Social Care published its decision alongside a summary of responses to a recent consultation on the planned change and an impact assessment prepared by officials.

The DHSC said the increased rate, which it proposes introducing from April, will help to limit growth in public spending on medicines to 1.1 per cent a year and allow money to be spent elsewhere in the health service.

The statutory scheme is one of two measures aimed at controlling medicines spend, the other being a voluntary scheme (VPAS), which automatically adjusts where sales growth is observed. The DHSC said the proposed increase to the statutory rate was aimed at reducing discrepancies with VPAS, which has undergone a revised projected growth rate for 2023 from 23.7 per cent to 26.5 per cent.

The DHSC noted that while most responses to the consultation agreed that the rate should be adjusted, several argued for reducing it rather than raising it. Almost all respondents (32 out of 33) said the proposed increased to 27.5 per cent was too high.

Respondents expressed concerns about the impact on life science companies’ incentive to engage in essential research and development activities, and noted that countries such as Germany, Spain and Ireland have much lower clawback rates.

In response, the Government said international comparisons are “fraught” and may not account for factors specific to each country such as the “extent of confidential discounting”. It added that few respondents had considered the “opportunity cost” to other parts of the NHS when spending on medicines rises.

It concluded: “While it is understandable that industry is concerned about the increase to the payment percentage, 27.5 per cent is within the range of reasonable expectations for scheme members.

“The changes are expected to result in savings to the NHS of between £17m and 19m by 2023 compared to leaving the payment percentage unchanged. Our impact assessment estimates a net present social value of these changes of between £79m and £88m.”

Manufacturers have been outspoken in their criticism of the rate hike. Earlier this week, the Association of the British Pharmaceutical Industry published its ‘vision’ for a new agreement between Government and industry in which it called for a “fixed rebate rate of 6.88 per cent levied across all eligible NHS medicine sales,” claiming this would deliver roughly £300m more to the NHS than the yearly average since the onset of the Covid pandemic.

Richard Torbett, Chief Executive at the ABPI said: “It is very disappointing that the Government has chosen to press ahead with plans to increase the Statutory Scheme payment rate. Research published this week shows that such rates impact company investment decisions and have a detrimental economic impact and it is critical that the Government understands this evidence.

“Yesterday we published our positive proposals for how to work with the government and the NHS to put our sciences sector back on the path to growth. Working together we can create the conditions for innovative medicines to deliver their true value as an investment in the nation’s future health, wealth, and productivity.”