The government has officially announced that the payment rate for newer medicines will decrease in 2026. Under the Voluntary Scheme for Branded Medicines Pricing and Access, also known as VPAG, pharmaceutical companies will be required to pay back 14.5 percent of their sales revenue to the government. This is a major reduction from the record high rate of 22.9 percent seen in 2025.
This change comes shortly after a new trade agreement between the United Kingdom and the United States. That deal included a specific promise to keep payment rates for newer medicines below 15 percent for the next three years. While the actual calculated rate for 2026 came in naturally lower at 14.5 percent due to market trends, the trade deal offers companies assurance that costs will remain stable in the near future.
Table of Contents
Understanding Why the Rate Went Down
The payment rate for newer medicines is not a random number. It is calculated based on how much the NHS spends on new drugs versus its agreed budget cap. When the NHS spends more than the limit, the pharmaceutical industry must pay back the difference.
For 2026, the rate dropped because the growth in NHS usage of newer medicines slowed down during 2025. Because the demand did not exceed the budget as aggressively as before, the calculated repayment rate fell to 14.5 percent. This figure is actually lower than the 15 percent limit set by the recent US trade deal, meaning the safety cap was not even needed for this year.
Additional Costs for Future Investment
While the headline rate is 14.5 percent, companies will actually pay slightly more. There is an additional charge of one percent added to both newer and older medicine sales. This extra money is a voluntary contribution designed to fund an investment program for the industry.
The funds raised from this one percent surcharge will go toward improving the health and life sciences infrastructure in the UK. This includes projects like the creation of 18 new clinical trials hubs which are intended to speed up medical research. Therefore, the total effective rebate rate for newer medicines in 2026 will be 15.5 percent when this investment charge is included.
Comparing UK Spending to Other Nations
High payment rates in the past have made the UK a less attractive place for life science companies compared to other countries. Over the last decade, the UK has spent about 9 percent of its total health budget on medicines. In comparison, countries like Italy and Spain spend around 17 percent, while Germany and France spend between 13 and 14 percent.
The government plans to change this over the next ten years. The goal is to increase investment in new medicines from roughly 0.3 percent of GDP to 0.6 percent. This would push spending on medicines up to 12 percent of the total health budget. The government expects this shift to cost up to 1 billion pounds in extra spending over the next three years.
What Companies Must Do Next
Pharmaceutical companies have a strict deadline to make a decision. They must choose whether to participate in the VPAG scheme by December 16. It is a critical choice because the alternative is much more expensive.
If a company decides not to join the voluntary VPAG scheme, they are automatically placed into the Statutory Scheme. The payment rate for the Statutory Scheme is currently set at a punishing 24.3 percent for 2026. This huge price difference makes the voluntary scheme a much more attractive option for most businesses.
Breakdown of 2026 Medicine Payment Rates
The table below shows the costs companies face under the different schemes for the upcoming year.
| Scheme Type | 2025 Payment Rate | 2026 Base Payment Rate | Total 2026 Rate (Inc. Investment Fee) |
| VPAG (New Medicines) | 22.9% | 14.5% | 15.5% |
| VPAG (Older Medicines) | Variable | 10% to 35% | 11% to 36% |
| Statutory Scheme | Variable | 24.3% | 24.3% |
Key Points for the Industry
- The payment rate for newer medicines has dropped from nearly 23 percent to 14.5 percent.
- A new trade deal with the US guarantees rates will not exceed 15 percent for three years.
- Companies pay an extra one percent fee to fund UK research infrastructure.
- The UK aims to increase medicine spending to 12 percent of the health budget over the next decade.
