Global pharma giants AstraZeneca, Bristol Myers Squibb, Johnson & Johnson, Novartis, Pfizer and more are calling for the U.K. government to afford the industry more room for growth by revising a drug cost control program.

The pharma industry is taking issue with a limit that the British government first introduced in 2014 to cap the growth of branded drug spending by the National Health Service.

Per an earlier agreement between the pharma industry and the U.K. government, the annual allowable increase in NHS spending on branded medicines was set at 2% in 2024, with the figure increasing to 4% by 2028. 

Now, drugmakers want the allowable growth rate to match increases in overall NHS funding, with a mechanism to make adjustments each year—rather than being determined every five years—based on updates to annual NHS budgets.

Further, biopharma companies have proposed to introduce “risk-share mechanisms” that would put more responsibility on the U.K. government to shoulder increasing drug costs.

Thanks to the spending growth cap, the U.K. government in December 2024 announced that companies would need to pay a 22.9% rebate—plus an additional 0.6% contribution to an investment program—on sales from newer medicines in 2025 under a drug cost control policy known as the voluntary scheme, or VPAG.

The new rate came well above a previous prediction of 15.3%, which was calculated based on older sales numbers. The major increase is driving the voluntary scheme to “a real crisis point,” ABPI said in a report (PDF) released Thursday.

“[C]ompanies have made it clear that these rates make the UK un-investable from a global perspective and will, if unchanged, also damage new medicines launches,” ABPI said in the report. “This will jeopardize the ambitions of the government for the forthcoming NHS 10-Year Health Plan and Life Sciences Sector Plan.”

Under the previous scheme, biopharma companies paid 2.5 billion pounds sterling ($3.2 billion) in rebates, or 21.2% of total NHS spending on branded drug sales, in 2023, according to ABPI.

The ABPI report includes statements criticizing the VPAG rebate rate from the U.K. managers at several Big Pharmas, including Amgen, AstraZeneca, Biogen, Boehringer, Ingelheim, BMS, Daiichi Sankyo, Gilead Sciences, J&J, Merck KGaA, Merck & Co. (known as MSD outside the U.S.), Novartis, Pfizer, Roche, Sanofi, Takeda and UCB.

“A steep rise in the VPAG rate to 22.9%, coupled with an already challenging access environment, does not point towards a country that values innovation.,” Johnson & Johnson Innovative Medicines’ managing director of U.K. & Ireland, Roz Bekker, said in a statement. “Instead, it compromises product launches, jobs, U.K. investment in R&D and manufacturing.”

As the U.K. government dials up the rebate rate based on more recent sales figures, biopharma companies want the flexibility to revisit the overall cost growth cap figure in conjunction with annual NHS budgets. The industry is proposing that medicines “receive the same proportional increase in funding as the rest of the NHS already has.”

According to the ABPI, the industry agreed on the cap levels in the 2024-28 deal because of an “overall NHS budgetary constraint” under the previous U.K. administration. However, the U.K. health system has since received “substantially more funding” from the current government, which has in turn driven up uptake of medicines, ABPI said.

In addition, on top of a hard cap on drug spending growth, ABPI is proposing “risk-share options” that “could include equal sharing of growth increases above certain thresholds or introducing adjustments to allowed growth levels that increase as more growth is seen in the market.”

Because of the spending cap, the U.K.’s branded medicine market has actually shrunk by 11% over the past decade after accounting for inflation, ABPI noted. By comparison, the NHS budget has grown by 33% in the same period.

Medicines take up a roughly 9% share in the U.K.’s total health spend, lower than that of other developed countries, such as the U.S. (14%), Germany (17%) and Japan (17%), according to ABPI.

“The U.K. life sciences industry is in decline, with fewer clinical trials, a decrease in the launch of innovative medicines, cuts to partnerships supporting the NHS, and workforce reductions across the sector,” Guy Oliver, general manager for BMS in the U.K. and Ireland, said in a statement.

ABPI is now calling for detailed dialogues with the government ahead of the predetermined review point for the VPAG this coming fall. Otherwise, companies could withdraw from the scheme, leading to its collapse, which “would have wide-ranging implications for the perception of the U.K. by global stakeholders and would further jeopardize investor reception of the [Life Sciences Sector Plan],” ABPI warned.