Wes Streeting, the health secretary, has accused pharmaceutical companies of being “shortsighted” and undermining their relationships with the government after the two sides failed to come to an agreement last week, but what is the row all about?
Why are the health secretary and the pharmaceutical industry at loggerheads?
The dispute is over the financial terms for drug companies to provide medicines to the NHS, including potentially life-saving cancer drugs. In 2023, the government, NHS England and the Association of the British Pharmaceutical Industry (ABPI) made a five-year deal that included drug companies paying a percentage of their income on sales to the NHS above a certain threshold. This was about 15%, but this year it rose unexpectedly to almost 23%.
What is the purpose of this system?
It has been called a “clawback tax” and was intended to “promote innovation and access to cost-effective medicines … while also supporting the sustainability of NHS finances”, the agreement states. It essentially prevented drug companies from making runaway profits. The idea was to use a voluntary pricing scheme to ensure a “partnership approach” between the drug companies and the health service. It was “designed to balance medicines’ costs for the NHS while encouraging growth and investment in the UK pharmaceutical industry”, said Doina Ionescu, Merck’s general manager for healthcare in the UK and Ireland.
Why has the clawback rate increased and what has been the consequence?
There have been rising sales of newer drugs to the health service, increasing from £6.9bn, when the percentage was originally set, to £8.4bn, according to the government’s figures. The government thinks this means there could be a £373m underpayment. It says the new rate is in line with the terms of the original agreement. However, some drug companies now say it is not worth their while to launch as many new medicines for use in the UK. They say the clawback rates are far lower in Ireland, Germany, Spain, France, Italy and Belgium.
What kind of drugs might this affect?
Peter Wickersham, the general manager for the UK and Ireland of Gilead Sciences, one of the world’s largest drug firms, said at the weekend that the UK government’s approach means its Trodelvy drug for a form of breast cancer will not now be made available to people in England for one form of the disease. The ABPI says it is directly affecting NHS patient access to new medicines in disease areas such as cancer and contributes to the UK’s poor performance in international comparisons of treatable and avoidable mortality.
But aren’t drug companies hugely profitable?
They are. The biggest firms make billions of dollars in profits every quarter. But they say that unless the terms are changed to bring them closer into line with other countries in which they can choose to operate, fewer medicines will be launched for use in the UK and patient outcomes could decline. Those that supply the US are also facing pressure from the US president, Donald Trump, to cut prices, which means they face falling revenues from a major market.
What is happening in the dispute now?
Talks over a review of the scheme – which was due to run to 2028 – broke down on Friday after the pharmaceutical industry rejected Streeting’s pricing offer as “unsustainable”. There is now a stalemate. The ABPI said: “We need to reach a solution that improves patient access to future innovation, allows the sector to fulfil its growth potential, and does not require industry to pay back nearly three times as much of its revenues as is required in other European countries.” The government said it was “regrettable” the ABPI did not want to take its proposals onboard.