Wedoany.com Report-Dec.12, The UK Government has reduced the rebate rate for innovative medicines by more than a third under the Voluntary Scheme for Branded Medicines Pricing (VPAG). From 2026, pharmaceutical companies supplying new-generation therapies to the National Health Service (NHS) will return 14.5% of eligible sales, a notable decrease from the 22.9% rate applied in 2025. After adding a 1% pre-seed investment contribution, the effective rate for these newer products will be 15.5%.

The UK has reduced the innovative medicines rebate rate for 2026 through the VPAG scheme down to 14.5%.

Rebate rates for established branded medicines will stay between 10% and 35%, depending on the product. The Department of Health & Social Care stated that the adjustment aims to enhance the UK's appeal for clinical research, manufacturing investment, and early market access for advanced treatments.

The change follows a bilateral agreement with the United States that eliminates tariffs on UK pharmaceutical exports to the US—the first such arrangement for any country. In return, the UK has committed to increase NHS spending on innovative medicines, supported by the first upward adjustment in more than twenty years to the cost-effectiveness threshold used by the National Institute for Health and Care Excellence (NICE). As part of the agreement, a 15% repayment cap will apply through 2027 and 2028.

Richard Torbett, chief executive of the Association of the British Pharmaceutical Industry (ABPI), welcomed the certainty provided by the cap but observed: "Payment rates remain much higher than in similar countries, and there is work to do to accelerate the NHS's adoption and use of cost-effective medicines."

Dr Scott Purdon, chair of the Charity Medicines Access Coalition, described the rebate reduction as offering "significant benefit" if it leads to increased industry investment and improved patient access to therapies.

Janet Beal, managing analyst at GlobalData, commented: "The fact that the recently agreed VPAG headline payback cap of 15% did not need to be applied for 2026, and a lower figure of 14.5% has been calculated by the standard mechanism is likely to come as a considerable and welcome surprise to the UK’s pharma sector." She added that most companies are expected to remain in the voluntary scheme rather than face the 24.3% rate under the alternative Statutory Scheme.

These measures form part of broader efforts to strengthen ties with the pharmaceutical sector after a period of reduced investment. Several major companies had previously scaled back or paused UK research and manufacturing plans, contributing to a 58% decline in life-science foreign direct investment between 2021 and 2023.

Analysts note that sustained policy support, streamlined regulatory pathways through the Medicines and Healthcare products Regulatory Agency (MHRA), and continued commitment to competitive market conditions will be essential for restoring the UK's position as a leading destination for pharmaceutical innovation and production.