AbbVie (NYSE:ABBV) and Eli Lilly (NYSE:LLY) have left a voluntary drug pricing agreement between the pharma industry and the U.K. government, under which there were limits to the growth of branded medicine sales to the country’s National Health Service (NHS).
The Association of the British Pharmaceutical Industry, the representative of the 2019 deal, made the announcement on Monday, citing rigorous government requirements as reasons for U.S. pharma giants’ exit.
The U.K.’s Voluntary Scheme for Branded Medicines Pricing and Access (VPAS) limits the growth of NHS branded medicine expenditure at 2% per year, and the industry participants to the five-year deal returned any spending beyond the cap.
“Companies are increasingly arguing that it is no longer possible to justify the U.K.’s ‘voluntary scheme’ to global boardrooms and investors,” ABPI said.
The decision to revise 2023 repayment rates to 26.5% of revenue will require branded drugmakers to return £3.3B ($4.0B) sales revenue to the government this year, up from £0.6B and £1.8B in 2021 and 2022, respectively.
“Repayment rates in 2023 have surged to 26.5% of revenue as a consequence of failings in the existing scheme’s design, which places the U.K. completely out of step with its global competitors and outside historical norms,” ABPI added.
Following the exit from VPAS, AbbVie (ABBV) and Lilly (LLY) will be part of the alternative statutory drug pricing scheme, which requires the industry to meet even higher repayment rates than the voluntary agreement.
The news comes amid growing public scrutiny over soaring drug prices. In August, the U.S. enacted the Inflation Reduction Act permitting, among other measures, the Health and Human Services (HHS) Secretary to negotiate prices for Part B and Part D Medicare drugs for the first time.