The high repayment rate under the current Voluntary Pricing and Access Scheme (VPAS) for branded medicines means the UK could lose its European leadership position in biosimilars.

A record number of biological medicines are due to come off patent in the next five years, but the high VPAS repayment rate threatens to reduce potential savings to the NHS drugs bill, according to a report from the British Generic Manufacturer’s Association.

VPAS is agreed between the Department of Health, NHS England and the Association of the British Pharmaceutical Industry. The scheme aims to limit increases in spending on branded medicines to no more than 2 per cent a year via a rebate system which is charged on companies’ sales revenue.

Two years ago, the rate was 5.1 per cent, but in 2023 it has gone up to 26.5 per cent. Several large manufacturers such as AbbVie and Eli Lilly pulled out of the scheme earlier this year in protest at the rate increase.

The MHRA requires all biosimilars to be branded and therefore they fall under the VPAS scheme even when they come off patent.

The BGMA report looks into the state of off-patent biologics and their potential to drive further savings to the NHS. It analyses the impact of reduced biosimilar competition on the 85 biologics which are due to lose patent exclusivity in the next five years.

According to the NHS, biological medicines are currently the largest cost, and cost growth, areas in the medicines budget. Over the past five years, the growth of biosimilars has, in volume terms, increased by nearly six times.

Once competitor products can launch, off-patent biosimilars typically reduce in price by 72 per cent on average compared to the originator product, says the BGMA.

Among the 85 biological medicines due to lose their exclusivity by 2028 are ‘blockbuster’ products such as the cancer medicine Keytruda and wet macular product Eylea. Other disease areas covered by the molecules coming off-patent include oncology, diabetes, arthritis and asthmas.

However, the rapidly rising VPAS rate is threatening the launch of new biosimilars, with many manufacturers not able to absorb the cost of competition as well as the soaring VPAS rebate rate, the BGMA says. With the economics unviable, companies will prioritise other markets over the UK or fail to launch here altogether.

Analysis in the report from Europe Economics and RFW Associates shows the potential cost impact of the lessening in competition for biological molecules.

It shows that if one company is deterred from entering a biosimilar market where exclusivity has been lost between 2023 and 2028, then the NHS is projected to lose out on around £100 million in savings per year by 2028. If two entrants are lost, then this figure rises to £250m.

This data follows recent research by Professor Alistair McGuire of the London School of Economics, and the Office of Health Economics which showed that the NHS will pay £7.8 billion in higher medicine prices if the VPAS levy stays at the current rate for branded generics and biosimilars for the next five years across existing and new branded generics and biosimilar portfolios.

Mark Samuels, chief executive of the BGMA, said: “The current VPAS negotiations present a very serious risk to a competitive market thriving and delivering ongoing benefits to patients. Without reform of the current VPAS arrangements, biosimilar companies will simply not choose to launch new products in the UK.

“Our analysis shows that on a conservative scenario basis, the NHS will miss out on more than a billion pounds of savings from the new pipeline of 85 biologics which are due to come off-patent in the next five years. We need the government to negotiate a VPAS scheme which recognises the key differences between how the on- and off-patent sectors operate, understanding the benefits competition brings.”