The UK pharmaceutical market will see some long-awaited relief next year as the government sets the 2026 payment rate for newer branded medicines at 14.5%, a sharp reduction from this year’s record 22.9%. The recalibration marks a meaningful shift in the Voluntary Scheme for Branded Medicines Pricing, Access and Growth (VPAG), whose high and unpredictable clawback levels have been a persistent friction point between industry and policymakers.
The newly announced figure reflects a notable cooling as demand for the innovative medicines throughout 2025 is skyrocketing. A report published by ABPI in early 2025 quoted that England declined 10% in access to innovative medicines. Under VPAG’s structure, companies must repay a portion of revenues when national spending on newer medicines exceeds the cap negotiated in the scheme. After two years of steep escalation, culminating in the highest modern-era payment rate in 2025, the combination of slower NHS uptake and adjustments in measured sales brought the 2026 percentage down significantly.
The reduced level aligns closely with the UK’s new commitment under the recently concluded U.S.–U.K. trade agreement, which set a forward-looking ceiling ensuring that newer medicine payment rates will not surpass 15% through 2028. Government officials clarified, however, that the cap itself did not need to be activated for 2026; the natural VPAG calculation landed just below it. Still, the optical alignment gives both sides a political win. The government demonstrates compliance with its transatlantic commitments, while industry gains a measure of predictability after years of volatility.
Supporting documentation released by the Department of Health and Social Care lays out the detailed arithmetic behind the adjustment. Measured sales of newer medicines dipped modestly year-on-year for the period, while older-medicine sales and parallel-import volumes edged upward. When those inputs were fed into the VPAG model, the resulting growth profile trimmed the forecast overspend for 2026, lowering the required clawback.
The technical annexe also shows the impact of reconciliations for previous under- and over-payments, which are folded into the annual rate under VPAG rules. For 2026, these adjustments further pushed the final percentage downward.
Even with the relief, companies will not see a clean 14.5% rate in practice. VPAG includes an additional 1% voluntary contribution toward an industry-funded investment program that supports UK life-sciences infrastructure, including the creation of 18 new clinical trial hubs nationwide. When that layer is added, the effective total rebate for newer medicines reaches 15.5%.
Meanwhile, the payment rates for older medicines remain unchanged, holding at 10% to 35% depending on existing contractual discounts and market-history factors.
The Association of the British Pharmaceutical Industry (ABPI) acknowledged the reduction as a welcome step, but cautioned that significant structural challenges remain unresolved. UK payment rates, even at next year’s reduced level, are still materially above those in comparable European systems, where clawbacks, if applied at all, tend to be narrower and more predictable.
The broader context reflects a decade of chronic underinvestment in UK medicines spending. Government data shows pharmaceuticals representing only 9% of total health expenditure over the last ten years. That figure lags sharply behind peer markets, with Italy and Spain at 17%, and Germany and France at 14% and 13% respectively. The UK now plans to lift its investment in new medicines from about 0.3% of GDP to 0.6% over the next decade, with as much as £1 billion in incremental outlays expected over the next three years.
ABPI Chief Executive Richard Torbett struck a balanced tone, acknowledging that the reduced rate offers companies “greater certainty” through 2028, while underscoring that the UK is still competing at a disadvantage. He reiterated the need for accelerated NHS adoption of cost-effective medicines, a persistent bottleneck that not only slows patient access but also depresses commercial returns relative to global norms.
With the current VPAG running through 2028, attention is now shifting to the next iteration of the framework. Rapid negotiations between the government and the ABPI will begin in early 2026 to design a more sustainable model for 2029 onward, with an emphasis on smoothing volatility, improving budget realism and creating a pathway that encourages clinical development and investment in the UK.
Companies have until 16 December to opt into the VPAG for the coming year. Those that elect not to participate will fall under the statutory scheme, whose payment rate for 2026 sits at a substantially higher 24.3%, a level that, for many manufacturers, may tip the balance back toward VPAG participation despite lingering concerns.
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