UK medicines tax forcing cheaper drugs off the market – POLITICO
LONDON — Medicines manufacturers are calling on the U.K. government to drop a new tax hike, warning it has rendered cheaper drugs loss-making and will lead to widespread market withdrawals.
One company is mulling closing all British operations after the tax rate for 2023 was set at 26.5 percent of branded medicines’ sales for companies signed up to the government contract. This is on top of existing corporation tax.
Manufacturers of copycat versions of expensive medicines with expired patents argue that without the large profit margins enjoyed by Big Pharma some of their U.K. operations are no longer viable.
Such medicines drive down the National Health Service medicines bill; data from July shows they provided £1.2 billion in savings over three years.
The warning comes as the U.K.’s NHS is on the brink of collapse from surging demand for winter care, huge pandemic backlogs and chronic understaffing.
As health workers demand more pay and care providers call for greater investment, manufacturers of generic and biosimilar medicines — cheaper copies of off-patent medicines — warn that the NHS will lose out on billions of pounds in savings from their products if the market is no longer viable for them.
A recent report commissioned by the British Generic Manufacturers Association (BGMA) found that the majority of generics and biosimilar companies affected by the tax rate would downsize or end supplies and possibly also operations in the U.K.
“We have the largest pipeline of biosimilar medicines globally,” said Matthew Eddleston, commercial and operations director at Celltrion Healthcare U.K., which has five pipelines already in the U.K. But its pipeline of 20 biosimilars won’t be launched if this tax rate continues, he warned.
“We are looking at reducing the portfolio, reducing the products that are available to the U.K. And the final piece would be withdrawal from the U.K.,” with the loss of 30 jobs, Eddleston told POLITICO.
Sandoz, the generics and biosimilars arm of Novartis that is being divested, is cutting U.K. allocations for “two major biosimilar products,” said Diane DiGangi Trench, country head and general manager of Sandoz U.K.
That’s down to a “perfect storm” of surging demand for medicines in Europe and elsewhere, and the loss-making scenario in the U.K. “There’s a limited supply overall of biosimilars,” she told POLITICO. “The industry has to make rational decisions to allocate supply to where we can make a reasonable level of profit.”
The current Voluntary Scheme for Branded Medicines Pricing and Access (VPAS) contract applies the tax to NHS spending over and above a capped medicines budget growth rate of 2 percent a year. The agreement between the U.K. government, NHS England, and the pharmaceutical industry is designed to control the NHS drugs bill and encourage uptake of innovation. This five-year deal finishes at the end of the year; a new contract will be negotiated this year.
From 2019 to 2022, the tax rate was 9.6 percent, 5.1 percent and 15 percent. The hike is due to increased spending on innovative branded medicines of 18 percent in 2022, compared with just 3 percent growth in spending on generics and biosimilars, said DiGangi Trench.
Meanwhile, manufacturers also fear that their concerns are also falling on deaf ears. Celltrion, Sandoz and the BGMA have written to the government asking for talks to resolve the issue.
Sandoz said letters to the Treasury, business and health departments requesting meetings had failed to deliver results. Business Secretary Grant Shapps’ office declined “due to ongoing diary commitments”; the Treasury said in October the request was still being considered; and the health department has not replied.
Only Michael Gove, Sandoz’s local MP in Surrey Heath, has agreed to meet the company at its Camberley office.
Meanwhile, Celltrion met with the Department of Health and Social Care in December, but it was clear that the tax rate would not be changed for this year, Eddleston said. Now, Celltrion’s focus is on ensuring a new drug pricing contract, to take over from next year, does not penalize competitive and lower-cost drugs, he said.
The company is pushing for the BGMA to be at the negotiating table for the next drug pricing contract, alongside the branded pharma lobby the Association of British Pharmaceutical Industry, which has historically represented all of the medicines industry.
A Department of Health and Social Care spokesperson said that companies are allowed to leave the scheme if they wish.
In addition, they said: “We are open to ideas about how the next scheme should operate, after the current agreement runs out at the end of 2023, and will continue to engage with industry to understand the impact on companies.”
Health Minister Will Quince will be holding a roundtable with industry to discuss the impact of VPAS on the U.K. industry.