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Spiralling VPAS rebate starts to bite as record number of medicines face supply issues

• Branded generics make up half of record number of supply issues as Government tax makes products unviable

(Monday 6th) A record number of products are facing supply issues according to a monthly dashboard put together by the British Generic Manufacturers Association (BGMA), the representative trade body for November off-patent prescription medicines.

Using a range of data sources including those from NHS England and the Department of Health and Social Care (DHSC) covering both on-patent and off-patent medicines, 111 products are now facing supply issues which is the highest on record and more than double since the start of 2022. September’s figures were the first time more than a 100 (102) had been recorded.

Branded generics make up 55 of the 111 products areas facing supply issues. This is half the total despite them only representing 10% of prescription products used in the UK.

Branded generic treatment areas suffering issues in the latest dashboard include HRT, contraceptives, anaphylaxis, ADHD, Crohn’s disease, diabetes, lung conditions, epilepsy, acne, osteoporosis, mental health (anti-depression), heart disease, and immunosuppressants (used following transplants).

One of the key factors behind the significant rise in branded generic shortages, according to the BGMA, is the impact of the Government’s rising voluntary scheme for branded medicines pricing and access (VPAS) rebate rate.

VPAS aims to limit increases in spending on branded medicines to no more than 2% per year via a rebate system which is charged on companies’ sales revenues. Two years ago, the rate was 5.1% but for 2023 it has soared to 26.5%.

The rocketing rate is in large part due to the growth in spend in on-patent medicines since 2019. Looking at the four completed years of the current VPAS scheme, data shows that the average annual growth rate for on-patent medicine sales value from 2019-22 was 18% compared to just 2% for off-patent products.

Approaching half the products in the current scheme are a branded generic or biosimilar medicine and therefore already subject to cost controls via competition and NHS tenders but for reasons - often tied to regulatory compliance - they are required to have a brand name and pay the VPAS rebate rate as well.

Branded generics and biosimilars already create vast annual savings to the NHS by creating competition to originator products. For example, branded generics and biosimilars are commonly 80% less than what the originator price was on patent. However, with competition constraining their prices, margins for off-patent medicines are very low and therefore having to pay a rebate on revenues of 26.5% makes many products simply economically unviable. Manufacturers are having to make difficult decisions around continuing to supply or cancelling potential future launches and the association believes the rebate is a key factor in current supply issues.

Research by the London School of Economics and the Office of Health Economics showed that the NHS would pay £7.8bn in higher medicine prices, if the VPAS levy stays at the current rate for branded generics and biosimilars for the next five years. This is because of product withdrawals and a decline in new off-patent product launches which reduces competition.

Mark Samuels, Chief Executive of the BGMA, said: “Supply issues for generic medicines are on the rise and patients are sadly being impacted as they represent four out of five NHS prescriptions. Our supply dashboard is showing a record number of supply issues and half of those are branded generics which are subject to the spiralling VPAS rebate rate. It is impossible to ignore the correlation between the two issues.

“Generics operate on high volumes and razor thin margins, so by adding a tax on revenues which has increased five-fold in two years means manufacturers have little option but to reduce or remove supplies of some products. This is not about making less profit but actually making losses as a direct result of VPAS.

“There is finite supply of medicines and companies are being forced to allocate their supplies to other countries where tax regimes are less punitive. Supply issues connected to HRT are a good example of this in practice.

“Those involved in the negotiation of the next VPAS which will run from 2024 to 2028 cannot ignore the consequences of a high rate and the disproportionate impact it is having on off-patent products which already have their costs significantly constrained by competition. The Government must act otherwise the NHS will pay more for medicines and shortages will becoming increasingly common.”

ENDS

For further information about the BGMA please contact Jeremy Durrant on 07792918648 or email Jeremy.durrant@britishgenerics.co.uk

About the British Generic Manufacturers Association (BGMA)

The BGMA is made up of members of the generic manufacturing supply industry, who between them account for approximately 85% of the total UK generic market by volume. A key feature of the strong generics industry in the UK is that it introduces competition to the supply of prescription medicines making them more affordable to the NHS and enhancing their availability to patients.

According to NHS figures (NHS Digital), more than a billion items are prescribed generically every year. The competition provided by generic medicines saves the NHS around £15billion annually.