NHS Faces Investment Warning Over Medicine Clawback Stability
Novo Nordisk's UK chief has issued a stark warning to the National Health Service, stating that maintaining a low and predictable medicines clawback tax is essential to prevent disruption in the rollout of weight-loss drugs across the United Kingdom. Sebnem Avsar Tuna, general manager of UK operations for the pharmaceutical giant behind Ozempic and Wegovy, emphasized that the government must preserve the current ceiling on rates charged to pharmaceutical companies.
The Critical Rebate Scheme
The voluntary scheme for branded medicines, pricing, access and growth (VPAG) requires drug manufacturers to pay the NHS a percentage of their revenue from branded medicine sales when usage exceeds agreed levels. This rebate system has faced intense criticism regarding the UK's commercial environment for pharmaceutical firms, leading major companies like Merck and AstraZeneca to abandon expansion plans.
In December, the government negotiated a reduction in the rebate rate from 22.5 percent to 14.5 percent for the current year, aiming to stem the flow of pharmaceutical giants choosing to expand in the United States instead of Britain. During these negotiations, Health Secretary Wes Streeting reportedly threatened to walk away from talks if pharmaceutical executives rejected what he described as a "generous offer."
Predictability for Long-Term Planning
Tuna, whose company pioneered the weight-loss drug boom but now faces increasing competition, stressed that this agreement is vital for Novo Nordisk's continued expansion in the UK market. She explained that establishing a stable ceiling provides pharmaceutical companies with the predictability needed for both short-term and long-term strategic planning.
"When you develop budgetary plans and strategies based on one rebate rate, only to wake up and discover a completely different rate, particularly on the higher side, it creates significant uncertainty," Tuna stated. "For companies like ours, predictability is absolutely crucial for public health planning and general rollout initiatives. Having clarity about what percentage we'll be dealing with next year or the year after represents a very positive development."
Competition in the Weight-Loss Market
Novo Nordisk, which achieved a $650 billion valuation two years ago to become Europe's largest company, has seen its share price decline recently as competitors like Eli Lilly, manufacturer of Mounjaro, have gained ground. The Danish firm announced 9,000 job cuts in September, followed by the departure of its chairman and six board members in October.
Investment manager Paul Major of Bellevue Asset Management revealed in December that he sold his Novo Nordisk shares due to concerns about the company's long-term prospects. Meanwhile, Dan Coatsworth, head of markets at AJ Bell, noted that the weight-loss drug market presents massive opportunities with room for multiple major players.
"Over time, we may see prices decrease, making treatments affordable to a much broader population," Coatsworth observed. "This could lead some consumers to try any weight-loss product, even less effective ones, if the price is right. Such developments might transform weight-loss drugs into a volume game for companies like Novo Nordisk, where selling as many units as possible becomes the priority, even if profit margins aren't as high as they currently are."
Future of NHS-Pharma Relations
Coatsworth cautioned that the recent rebate agreement might not represent the final chapter in the NHS's tense relationship with pharmaceutical giants. "We've already witnessed companies like AstraZeneca dropping UK investment plans because they felt the government didn't provide sufficient support," he noted. "This risk applies to all industry players."
Despite these challenges, Tuna expressed confidence that competition will drive Novo Nordisk to expand more rapidly and extensively. The company hopes to introduce its weight-loss pill in the UK this year. "There is fierce competition evident to everyone," she acknowledged. "But we welcome this competition because it stimulates more research and development, ultimately leading to better outcomes more quickly."
Tuna defended Novo Nordisk's ongoing investment in the UK market, which includes partnerships with the University of Oxford and an artificial intelligence research hub in King's Cross. "There remains significant unmet need worldwide, and certainly in the UK," she emphasized. "This represents a public health issue. We want to contribute to solutions rather than being perceived as part of the problem."
NHS England and the Department of Health and Social Care have been approached for comment regarding these developments.
