NHS medicines expenditure grew 51.9% between 2019/20 and 2024/25, and the policy environment shaping that spend is now shifting in ways that matter significantly for pharmaceutical manufacturers. A combination of VPAG levy reductions, a revised NICE cost-effectiveness threshold, and the commitments set out in the NHS 10-Year Health Plan represents the most substantive shift in the UK’s pharmaceutical policy environment in over two decades. This article examines what these changes mean for manufacturers with innovative pipelines and why the opportunity they represent needs to be considered alongside a structural tension introduced by US Most Favoured Nation pricing policy.
In 2024/25, total NHS spending on medicines and medical devices in England reached £20.9 billion, representing a 5.3% year-on-year increase and a cumulative rise of 51.9% since 2019/201. As the second largest category of NHS expenditure after workforce costs, medicines spending is not merely a fiscal indicator, it reflects a fundamental reorientation of the health system toward specialist care, high-cost therapies, and long-term innovation investment.
A Changing Expenditure Profile
What is driving NHS medicines expenditure growth and what does it mean for manufacturers?
Hospital medicines now constitute 50% of total NHS drug expenditure, with primary care spend remaining comparatively stable2. Growth is concentrated in oncology, rare diseases, and advanced biologics, areas where commissioning decisions are governed by hospital formularies, Integrated Care System (ICS) frameworks, and Cancer Drugs Fund agreements. For pharmaceutical manufacturers, this structural shift demands a corresponding recalibration of market access strategy.
Notably, the United Kingdom allocates approximately 9% of total healthcare expenditure to medicines, compared to a peer-country average of 15%3, a disparity that has consistently constrained patient access to innovative treatments and shaped the terms of industry-government negotiations.
For manufacturers, the practical implication of this structural shift is that NHS access decisions are increasingly made at the system and formulary level rather than through a single national pathway. Integrated Care Systems now play a significant role in determining which medicines are adopted locally, how quickly they are commissioned following NICE approval, and whether uptake translates into meaningful patient volumes. Building an effective UK market access strategy therefore requires engagement with commissioning structures that vary considerably in their capacity, priorities, and willingness to adopt new therapies, not just a well-constructed HTA submission.
A Policy Environment in Transition
How have VPAG reform and the NICE threshold change altered the UK access landscape?
The pricing and access landscape has undergone substantive reform. The Voluntary Scheme for Branded Medicines Pricing, Access and Growth (VPAG) levy on newer medicines reached 22.9% in 2025, well above industry expectations, prompting manufacturers to reassess UK launch commitments4. Following sustained industry concern, the government reduced the 2026 levy rate to 14.5%5. Simultaneously, NICE raised its cost-effectiveness threshold by 25% to £25,000–£35,000 per QALY, the first revision in over two decades, projected to increase medicines spending by £1.5 billion over three years6.
The NHS 10-Year Health Plan (July 2025) further reinforces this trajectory, committing to a joint MHRA–NICE approval process by April 2026 and setting an ambition for the UK to rank among the top three fastest countries in Europe for patient access to medicines by 20307.
The revised NICE threshold is particularly significant for therapy areas where previous cost-effectiveness modelling produced borderline outcomes. Oncology, rare disease, and advanced therapies are most likely to benefit, as NICE’s revised threshold range of £25,000 to £35,000 per QALY represents a meaningful increase on the previous £20,000 to £30,000 range, changing the economics of submissions that previously failed or required complex commercial agreements to achieve approval. Manufacturers with assets in these areas should review pipeline valuations and submission strategies in light of the change, as the landscape for previously marginal products has materially shifted.
Reassessing pipeline assets in light of the revised NICE threshold.
GPI’s Horizon framework provides pre-launch asset valuations that account for current HTA criteria, cost-effectiveness thresholds, and market-specific access conditions. If the NICE threshold change has altered the commercial case for assets you had previously set aside or modelled conservatively, it is worth revisiting those valuations with updated parameters.
Strategic Implications
What do NHS policy reforms mean for pharmaceutical market access strategy in the UK?
This convergence of reduced levies, elevated cost-effectiveness thresholds, and accelerated regulatory pathways represents a materially improved operating environment for manufacturers with innovative pipelines. Pharmaceutical companies are well-positioned to reassess previously marginal pipeline assets and deepen engagement with NHS commissioning structures. Those that prioritise robust real-world evidence and outcomes-based commercial models will be best placed to navigate access pathways effectively and contribute substantively to the NHS’s long-term ambitions.
However, the domestic policy improvements must be considered within a broader geopolitical context. The United States Most Favoured Nation (MFN) executive order, which ties US drug reimbursement to the lowest price paid in comparable international markets, introduces a structural tension for manufacturers. Accepting lower NHS list prices, even within a more favourable VPAG and NICE framework, carries the risk of compressing revenues in the world’s largest pharmaceutical market. Until the implications of MFN pricing are resolved, meaningful acceleration in UK investment decisions and new product launches may remain constrained, irrespective of the domestic reforms underway.
Navigating this environment requires pharmaceutical teams to hold two analytical frames simultaneously: the improved domestic UK access conditions, and the cross-border pricing exposure that the MFN executive order introduces. These are not independent questions. The price a manufacturer accepts in the UK, even at a more favourable VPAG and NICE framework, may become a reference point that affects US revenue under MFN rules. Getting the UK access strategy right means understanding both dimensions together.
FAQs
A: The Voluntary Scheme for Branded Medicines Pricing, Access and Growth (VPAG) is the framework governing branded medicines pricing in the UK. Manufacturers operating under the scheme pay a levy on sales of newer branded medicines, with the rate adjusted annually. In 2025 the levy reached 22.9%, well above industry expectations, prompting concerns about the UK’s attractiveness as a launch market. Following sustained industry engagement, the government reduced the rate to 14.5% for 2026. The VPAG rate directly affects the commercial viability of UK launches and the net returns manufacturers receive on reimbursed sales.
A: NICE raised its cost-effectiveness threshold by 25% to a range of £25,000 to £35,000 per QALY, the first revision in over two decades. This change increases the amount of NHS spend that can be justified per unit of health gained, which is expected to make a broader range of therapies eligible for positive NICE recommendations. The revision is projected to increase medicines spending by £1.5 billion over three years and is particularly significant for therapy areas such as oncology and rare disease, where cost-effectiveness modelling had previously produced borderline outcomes.
A: The US MFN executive order links US drug reimbursement to the lowest price paid in comparable international markets. The UK, which spends approximately 9% of total healthcare expenditure on medicines against a peer-country average of 15%, is a market with structurally lower prices that could be used as a reference point under MFN rules. This creates a tension for manufacturers: accepting lower UK prices, even within a more favourable domestic policy framework, carries the risk of triggering downward pressure on US revenues. Until the full implications of MFN implementation are clear, some manufacturers may remain cautious about UK launch commitments.
Understanding how UK policy reforms interact with your global pricing exposure.
GPI helps pharmaceutical teams analyse the UK access landscape alongside the cross-border pricing implications of MFN and international reference pricing, so you can make UK launch and pricing decisions with a full view of the commercial consequences.
Talk to GPI about UK market access strategy.
References
- HFMA. Getting Better Value from Spending on Medicines, 2025. https://www.hfma.org.uk/publications/getting-better-value-spending-medicines
- Global Legal Insights. Pricing & Reimbursement Laws 2025: United Kingdom. https://www.globallegalinsights.com/practice-areas/pricing-reimbursement-laws-and-regulations/united-kingdom/
- ABPI. Understanding NHS Medicines Spending in England, March 2025. https://www.abpi.org.uk/media/blogs/2025/march/understanding-nhs-medicines-spending-in-england/
- Pharmaphorum. Pharma Urges NHS to Put Medicines at Heart of 10-Year Plan, 2025. https://pharmaphorum.com/news/pharma-urges-nhs-put-medicines-heart-10-year-plan
- House of Commons Library. How Are Medicines Prices Set in the UK?, December 2025. https://commonslibrary.parliament.uk/how-are-medicines-prices-set-in-the-uk/
- NHS Confederation. Changes to Medicines Policy: What You Need to Know, December 2025. https://www.nhsconfed.org/publications/changes-medicines-policy-what-you-need-know
- House of Commons Library. Deciding Which Medicines Are Used in the NHS, May 2026. https://commonslibrary.parliament.uk/research-briefings/cbp-10326/
