NICE, VPAG and the UK’s new signal to pharma: Progress at last
Crucially, the catalyst for this has been the trade deal agreed with the US, which has resulted in 0% tariffs on pharmaceuticals imported to the US from the UK, in exchange for more investment by the UK in pharmaceuticals. This marks a tick in the US box of getting other countries to contribute more to R&D investment, as well as a tick in the UK box of holding on to important pharma business. Might this also suggest that Donald Trump’s Most Favoured Nation policy is starting to bear fruit? … Maybe so.
A step forward on cost-effectiveness … but still playing catch-up
The new NICE thresholds will rise from £20,000–£30,000 per Quality-Adjusted Life Year (QALY) to £25,000–£35,000. It’s a long overdue update given that the previous levels were set in 1999 and have remained unchanged until this announcement. The Association of the British Pharmaceutical Industry (ABPI) points out however, that had the thresholds kept pace with inflation, they would now stand at £48,300 per QALY. So, while this is progress, it’s also clear there’s more catching up to do. [1,2,3,4]
In international terms, the UK now sits in the “average” tier for health technology assessment (HTA) pricing thresholds, no longer lagging, but not leading either. For companies weighing launch strategies, that distinction matters.
Still, the shift sends a strong political signal. The UK government recognises that innovation needs to be valued more appropriately, and that stagnant thresholds were contributing to declining attractiveness of the UK market. While we shouldn’t overstate the immediate impact, it’s a constructive move that opens the door to fairer appraisals and more viable launches.
Correcting the “temporal injustice” of static thresholds
It’s also worth acknowledging something that often goes unsaid: until now, pharmaceutical companies submitting to NICE in recent years have been at a disadvantage compared to those in earlier decades. The real-terms value of the QALY threshold had eroded over time, effectively making it harder and more costly to meet the same cost-effectiveness bar.
This has created what could be described as a kind of temporal inequity in UK access policy. By adjusting the threshold upwards, NICE and the government are starting to level that playing field.
VPAG reform: restoring predictability and aligning incentives
The updated VPAG scheme, capping repayment rates at 15% for newer medicines over the next three years is another positive step. Previously, companies were facing payback rates as high as 24%, eroding net revenues and disincentivising launches in the UK.
This is a very welcome move as, arguably, the VPAG measures were an even greater disincentive to continued investment by life science companies in the UK than the NICE thresholds. It also takes steps to ensure a more consistent ‘net-price policy’ across the system. This is because the NICE thresholds affect both list and net prices before sale through confidential discounts, whilst the VPAG affects revenues after sales have occurred in the form of rebates. [5]
Will more drugs be approved?
A common assumption is that raising the threshold will open the floodgates for more approvals. But NICE estimates this may result in only 3–5 additional medicines being recommended each year, representing an increase of approximately 6% in the current volume of products approved. In the grand scheme of things, this represents modest rather than radical growth.
Nevertheless, this change may shift the balance for certain high-impact, borderline-value therapies particularly those in oncology, rare diseases, and cell and gene therapy. By creating an evaluation window at a slightly higher range, NICE may be able to support access to treatments that previously struggled to justify value on paper, despite delivering meaningful patient benefit.
Adoption of a new measure of quality of life
Perhaps the most forward-looking part of the reforms is NICE’s move to introduce a new, peer-reviewed instrument for measuring health-related quality of life (HRQoL) alongside the EQ-5D-5L. Over time, this change could influence which types of treatments are seen as offering sufficient value and lead to changes in how resources are allocated. The instrument that will ultimately be used has yet to be announced, but once in place may have a transformative impact in the long run. [6]
So, will patients be better off?
Notwithstanding the positive changes mentioned above, some commentators are skeptical that the changes will have a material impact on increasing the number of drugs approved. They argue that most drug manufacturers adjust their prices through confidential discounts in order to meet the cost effectiveness thresholds and consequently obtain reimbursement. It is only the outlier drugs they say, whose prices offered by the manufacturers are so far above the cost effectiveness thresholds, that they do not secure reimbursement. Assuming this behaviour continues, in roughly the same proportion as before, we are therefore not likely to see an increase in the number of new therapies approved. Rather, the NHS will pay more for the same volume of drugs.
In addition, it is unclear how the policy will be funded. Will this come from the existing health budget? Will cuts have to be made to other public services? Or will borrowing have to increase? Without seeing the full picture here, we don’t know ultimately how patients will be affected. [6]
International context: early signs of trade policy shaping pricing reform?
The UK/US agreement also opens an interesting geopolitical dimension. By securing a zero-tariff deal on pharmaceuticals and aligning pricing policy more closely with US expectations, the UK may be showing the first signs of the US “Most Favoured Nation” (MFN) policy having real-world consequences outside its borders.
Whether this reflects strategic alignment to the US or recognition that the UK needs to fend off the exodus of large pharma’s investment in the UK, is unclear. But it raises the prospect that other countries, particularly those with rigid pricing frameworks, may begin updating their policies to avoid trade frictions with the US as well as maintain competitiveness in attracting investment into the life sciences sector. If so, the global pricing landscape may begin to shift, toward more balanced contribution from ex-US markets, as originally intended through the MFN Executive Order signed this year. [7, 8]
So, what does this mean for pharma?
The changes in the UK represent a positive change that aligns interests, positioning the UK as a more credible and cooperative partner for innovative medicines, as well as indicative signs that the MFN policy is starting to have real impact. Questions remain over the actual funding of the policy and introduction of new HRQoL instruments by NICE, and ultimately will patients be better off.
However, the message is starting to get through: industry needs predictable frameworks, appropriate valuation of innovation, and a degree of reward for risk-taking.
Contact
If you are interested in discussing any of the issues above for your company/drug development program, please contact me through my email address dniven@nivenbiopharma.com. Feel free to also visit my website at www.nivenbiopharma.com for more information. I have no conflicts of interest in the production of this article.
Sources:
[1] Landmark UK-US pharmaceuticals deal to safeguard medicines access and drive vital investment for UK patients and businesses, GOV.UK, 1 December 2025
[2] Changes to NICE’s cost-effectiveness thresholds confirmed, NICE Website, 1 December 2025
[3] UK-US deal is good news for NHS patients and will help to support UK life sciences competitiveness, says ABPI, ABPI Website, 1 December 2025
[4] NICE cost-effectiveness thresholds increased as UK strikes trade deal with United States, Robertson, The Pharmaceutical Journal, 2 December 2025
[5] Drugmakers renew concerns over UK's attractiveness for investment, Dennis, FirstWord Pharma, March 2025
[6] Expert reaction to announcement on UK-US pharmaceuticals deal and changes to NICE’s cost-effectiveness thresholds, Science Media Center, 1 December 2025
[7] Big pharma firms have paused nearly £2bn in UK investments this year, The Guardian, 16 September 2025
[8] Most-Favored-Nation Drug Pricing: Policy Shift or Pressure Tactic?, Niven, Biopharma Over Coffee, May 2025
