Access to new medicines in the English NHS

Introduction

Medicines are a vital part of modern health care. New innovations have transformed care in many conditions. However, in the face of constrained health budgets, many advanced health care systems are grappling with how to provide access to medicines in an affordable way. Few areas of health policy are as contentious as decisions to fund, or not fund, new medicines.

There are difficult choices to be made. For example, should the NHS increase new medicines spending to pay for the latest treatments for hepatitis or cancer, medicines that might prolong life for some patients but cost tens or even hundreds of thousands of pounds per course of treatment? Or should it spend the money in other areas – for example, ensuring that people can see a GP when they need one, ensuring that vulnerable people get basic treatment for long-term conditions, or tackling health inequalities?

These are difficult trade-offs for health systems to make. The choices determine the quality of people’s lives and, in some cases, who lives or dies.

This explainer describes the processes that decide whether NHS services in England will pay for patients to receive new medicines, from their initial development and testing, to the National Institute for Health and Care Excellence’s (NICE) appraisal of their cost-effectiveness, and negotiations between the NHS and pharmaceutical companies that can be required to agree prices. It also explores how much the NHS spends on new medicines, and how policy-makers seek to shape and control this spending, as well as what uptake of new medicines looks like in practice.

Key stages from medicine development to availability

A new medicine must go through several steps (see Figure 1) if it is to move from development to being available for people to use.

Figure 1

We explore what each of these stages involve in the following sections.

Development and approval

Discovery

When scientific research sheds new light on the nature of a disease, it typically stimulates research by research institutes and pharmaceutical companies to find substances that might have a positive therapeutic effect.

For example, when the AIDS epidemic began in the early 1980s, research institutes and pharmaceutical companies started searching for treatments that might inhibit the functioning of the virus that causes the disease. Burroughs Wellcome & Co discovered the first reverse transcriptase inhibitor, Azidothymidine (later renamed Zidovudine), in 1984 and a stream of new medicines followed. By the 2000s, life expectancy for people with HIV in high-income countries was close to that of the general population. Science had turned a devastating and incurable new disease into a chronic condition within two decades.

More recently, the Covid-19 pandemic saw pharmaceutical companies and academic centres developing vaccines and treatments at a record pace. The first large-scale population vaccinations began just under a year after the first case of the disease was reported to the World Health Organization (WHO), a process that would usually take 10 years or more. This rapid development was fuelled by unprecedented collaboration, huge investment from governments, and a willingness from regulators to fast-track their processes.

Clinical trials

The process from discovery to approval of a new medicine for use in humans involves a number of stages. The first is pre-clinical testing of a promising new therapy in a laboratory setting to determine whether a product is safe and targets the intended tissues. Based on positive findings from these pre-clinical tests, the next stage is to conduct clinical trials in humans to determine the safety and efficacy of a product. Clinical trials are generally categorised in three developmental phases that precede a product being approved by a medicines regulator for use in care, followed by a fourth phase once a product is on the market:

• Phase 1: To assess the safety of a product in a small number of healthy volunteers.

• Phase 2: To gather more information on dosage, side effects and efficacy of a new potential medicine in a small number of patients. These are typically randomised controlled trials where patients are selected at random to take the test product or an alternative treatment or placebo.

• Phase 3: To determine the safety and efficacy of a new medicine in a larger patient population that has been randomised to the test medicine or standard of care.

• Phase 4: Carried out once a product has been approved for use in clinical care to monitor long-term effects and performance in diverse patient populations in the real world.

Marketing authorisation

The medicines regulator in the UK is the Medicines and Healthcare products Regulatory Agency (MHRA). Since Brexit (see box below), it is responsible for assessing pre-clinical test findings and granting permission for each stage in the clinical trials development pathway, based on the results of the preceding step.

Once clinical trials are complete, pharmaceutical companies submit a marketing authorisation application to the MHRA, which decides whether the medicine can be marketed and sold in the UK. The MHRA reviews the data to assess the medicine’s quality, safety and efficacy, and whether the benefits of taking it outweigh the risks. If the medicine meets the MHRA’s standards, it grants a licence for it to be marketed in the UK.

In some cases, medicines can be accessed even if they have not yet received marketing authorisation via the Early Access to Medicines Scheme (EAMS), which provides access to promising new medicines or medicines used off label for patients with life-threatening or serious conditions. The MHRA evaluates these medicines through a two-step process, and companies then provide these medicines free of charge for patient access in the NHS.

Determining cost-effectiveness and availability on the NHS

After the licensing authorities assess a medicine’s safety, quality and efficacy, its price and its benefits must be considered in comparison with existing treatments and a decision made about whether it should be funded by the NHS.

The price of new medicines

Pharmaceutical companies set prices for new medicines at the level they think reflects the value that new medicines bring to patients, and the substantial costs of research and development, and which will allow them to support future product development and generate profits. These prices are not always the final price paid by the NHS; they must be evaluated by NICE and NHS England (NHSE), and pharmaceutical companies will often negotiate lower prices through confidential agreements (see section on ‘National price negotiations’). Prices for new medicines can sometimes appear high. Companies point to prices being driven by the development process being complex, costly and having a low probability of success, with only 3% of medicines estimated to make it all the way from identification through to approval.

To protect companies’ investments, governments grant patents, giving them the exclusive right to make and sell their new medicine, typically for 20 years (although often the medicine will still be going through research, development and regulatory approval for some of this period). If other companies launch effective new treatments while a medicine is in patent, a medicine’s price will usually fall as competitors with similar products compete for market share. Only when the patent expires and when the company no longer has market exclusivity can other companies sell generic versions of the medicine (medicines with the same active pharmaceutical ingredient as the originator) or a biosimilar version for biological medicines (a medicine that does not have any clinically meaningful differences from the originator). When generics or biosimilars enter the market, prices are usually driven down by competition, as shown in Figure 2.

Figure 2

Determining whether new medicines will be funded on the NHS

In the UK in the 1990s, significant variability in clinical practice, outcomes and efficiency from one service to another led to an emerging consensus about the need for another step in the new medicines assessment process. As a result, in 1999, NICE (originally the National Institute for Clinical Excellence and later renamed the National Institute for Health and Care Excellence) was established.

NICE was tasked with making rigorous, independent, national-level decisions on whether the NHS should pay for new medicines. It carries out independent assessments to ensure that new medicines are both clinically effective and cost-effective, and thus provide good value for money for the NHS.

When it was established, NICE offered recommendations that the NHS could choose to accept or ignore. However, since 2005, it has made statutory decisions, meaning that the NHS must generally make available medicines that NICE recommends within three months of its decision, as also reflected in patients’ rights under the NHS Constitution.

Pharmaceutical companies must provide advance information about medicines in their pipeline. NICE typically starts the assessment process before the pharmaceutical company has launched the medicine in the UK, with the aim of publishing its recommendations at around the same time it becomes available. NICE has sometimes been criticised for the time it takes to complete assessments and provide recommendations. To address this, NICE introduced a ‘light touch’ approach for low-risk treatments in 2022 and is taking steps to speed up its evaluations and increase the number of appraisals it conducts.

Determining cost-effectiveness

If cost was not a consideration, all clinically effective new medicines would ideally be approved for NHS use. However, the NHS has a limited budget that must be prioritised to provide greatest overall benefit to the whole population. Introducing a new, more expensive medicine means that other treatments or services may be displaced to accommodate it. Considering this ‘opportunity cost’ is why, when assessing new medicines, NICE seeks to determine if the new medicine provides better health benefits compared with other treatments, to justify its cost. This approach maximises health spending benefits by ensuring that the NHS delivers the greatest overall health improvement with its available budget and resources.

To identify which medicines offer the greatest benefits given their costs, NICE has developed a detailed methodology. Health benefits of a new treatment are measured in ‘quality-adjusted life years’ (QALYs), which reflect both the number of extra years of life that the medicine offers and improvements in quality of life, such as reduced pain or greater ability to perform basic activities of daily living. However, QALYs do not account for wider impacts such as reducing lost days of work and education, or the impact on caregivers.

With this measure of the health benefits and the price of the new medicine and associated treatment costs in comparison with existing therapies, NICE can evaluate an incremental cost-effectiveness ratio (ICER) for the new medicine. An ICER expresses how much the NHS would have to spend per QALY generated using the new medicine, as shown in Figure 4. In general, the lower the ICER, the more cost-effective the medicine is calculated to be.

Figure 4

This method allows NICE to make consistent decisions about whether to pay for interventions across different technologies, clinical areas and patient groups. NICE typically treats QALYs equally in its cost-benefit analysis, valuing an additional life year for any patient group the same. However, as explored below, there are some specific cases where NICE’s methodology makes adjustments to this for specific groups where that is deemed to be ethically justified (explained in NICE’s note on decision-making principles). Having made these calculations, the next challenge is where to draw the line between medicines that the NHS should pay for and those that are too expensive given the benefits they offer.

NICE’s cost–effectiveness threshold

NICE uses a cost-effectiveness threshold to guide its decisions about whether a new medicine should be funded by the NHS. Generally, NICE will approve new treatments with ICERs of less than £20,000 per QALY. In other words, if a new medicine costs less than £20,000 per QALY gained, NICE generally considers it to be cost-effective. There is flexibility for medicines with ICERs higher than £20,000 but below £30,000, but the case for supporting the technology on these factors has to be increasingly strong and would need to take account of the level of certainty in the evidence or whether there are benefits not captured in the analysis.

Over the years, there has been debate around where NICE’s threshold should lie. A recent study suggested that current thresholds may be too high and fail to reflect the wider opportunity costs of spending on new medicines – that is, that spending on higher-cost new medicines may displace more health than could be created if the same funds were allocated elsewhere in the NHS to other treatments and services. Conversely, others argue that the threshold should be increased – for example, to account for rising costs of developing new medicines and inflation, and to enable more medicines to be approved to ensure that patients can access new effective treatments.

Since NICE was established, many countries around the world have established independent bodies using similar methods to decide whether their health systems should pay for new medicines. Countries set their own ICER threshold and decision-making frameworks, which can lead to situations where NICE rejects a new medicine that another country has approved.

Special cases

Although NICE generally applies this threshold, there are situations where it may approve higher-cost medicines to recognise their critical importance for patients.

Medicines for severe conditions: In 2022, NICE introduced a ‘severity modifier’, which weights the health benefits for medicines that treat severe conditions by a factor of 1.2, or 1.7 for the most severe conditions. The severity modifier replaced the end-of-life criteria that valued medicines for patients at the end of life more highly.

Medicines for rare diseases: NICE has a separate evaluation programme and committee for highly specialised technologies (HST) for medicines treating very rare diseases and that meet several other criteria. For HST, the ICER threshold ranges from £100,000 to £300,000 per QALY. These are typically ‘ultra-orphan drugs’ (meaning there is no available alternative therapy) for diseases that affect fewer than 1 in 50,000 people. The prices of these medicines are often extremely high, reflecting the high development costs for companies, the relatively small volumes that the company is likely to be able to sell, and lack of competition to constrain prices once a medicine is developed. The approval of these high-cost treatments may also have a less significant financial impact for the NHS since only a small number of patients will receive them. The HST programme differs from NICE’s standard methods and policies because of the exceptional ethical considerations that are involved in evaluating these medicines – for example, in some cases, these are the only medicines for rare and fatal diseases in children. The HST programme has strict criteria as it needs to strike a balance between the need for treatments for very rare diseases and the opportunity costs for other areas of NHS care.

National price negotiations  

In instances where medicines are not able to satisfy cost-effectiveness requirements based on their list price, commercial arrangements made before the medicine has completed NICE’s appraisal process may enable a positive NICE recommendation. This may involve pharmaceutical companies offering a discount or some form of commercial agreement – known as a patient access scheme. These agreements take different forms: most involve simple price discounts, but some may include more complex reimbursement mechanisms and agreements. Prices agreed often remain confidential on the basis of commercial sensitivity.

Even when a medicine is deemed cost-effective and recommended for use, an additional hurdle can arise in cases where the overall impact for the NHS budget is significant. For example, in early 2015, NICE approved NHS provision of the hepatitis C treatment Sovaldi. But in the following months, NHSE delayed consistent provision of Sovaldi given the impact this would have had for the NHS budget. Instead, it prioritised prescription of Sovaldi to patients with the most severe need, while it attempted to renegotiate prices with Gilead Sciences, the manufacturer. NHSE eventually reached a deal with Gilead and other companies to bring down the price of hepatitis C treatments and provide access to a larger group of patients.

The Budget Impact Test  

Following these and other examples, in 2017 NICE agreed to introduce a new step in its appraisal of new medicines, the Budget Impact Test (BIT). This is where NICE assesses the financial impact for the NHS of providing the medicine in its first three years. If the financial impact is projected to exceed £20 million in any of its first three years (including the cost of the medicine plus any additional services needed to provide it), this can trigger NHSE to engage in commercial negotiations with the company on the price of the medicine or other commercial issues before it is made available. As of January 2025, the BIT threshold was raised to £40 million. If an agreement is not reached, NHSE may request a ‘funding variation’, asking NICE to vary the standard 90-day funding mandate and recommend how the treatment should be phased in to reduce the budget impact. A recent example can be found in the case of the weight loss treatment Mounjaro. It was approved and recommended for use by NICE, which subsequently agreed a funding variation with NHSE to allow for a staged implementation period of up to 12 years given the anticipated budget impact and service changes required. 

Managing use of and spending on new medicines in the NHS

Advances in medical research mean that new medicines are always being developed. However, the NHS (like all health systems) has a limited budget; it must control costs and ensure that its resources are used efficiently and fairly. Alongside the processes described in the previous section, there are a range of other ways in which the NHS manages use of and spending on new medicines.

It is worth noting that both NHSE and the Department of Health and Social Care (DHSC) play significant roles in relation to some of these mechanisms, and at the time of writing (May 2025) it is not yet clear what the abolition of NHSE will mean for whether and how these roles will be performed in the future.

Cap on growth in spending on medicines

The Voluntary Scheme for Branded Medicines Pricing, Access and Growth (VPAG) is a five-year agreement between NHSE, DHSC and the Association of the British Pharmaceutical Industry (ABPI) (which sponsored this independent explainer, as per the note in the ‘Introduction’).

The VPAG works to keep the cost of new medicines predictable and affordable for the NHS by placing a cap on overall NHS spending on branded medicines, with industry committing to repay the excess if growth in spending causes the NHS to exceed that cap (see box below). The scheme is designed to balance three competing objectives:

• ensuring patients’ access to the latest clinically proven and cost-effective medicines

• contributing to NHS financial sustainability by controlling the level of overall spending on branded medicines

• supporting economic growth by incentivising investment in UK life science innovations.

Voluntary schemes for medicines pricing have existed in one form or another since the mid-1950s and are usually negotiated every five or six years. The current scheme (VPAG) came into force in January 2024 and is planned to run until the end of 2028. The most recent previous versions were the Voluntary Scheme for Branded Medicines Pricing and Access (VPAS, 2019–2024) and before that the Pharmaceutical Price Regulation Scheme (PPRS, 2014–2019). Companies that choose not to sign up to the voluntary scheme are automatically subject to the statutory scheme, which has similar terms¹.

Although VPAG is only in its second year, some within the industry have raised concerns around how it is operating in practice. In the second year of the scheme, payment rates for the industry have been set at a level that is far higher than anticipated. The ABPI, DHSC and NHSE are currently working to analyse the drivers of the increase in sales and assess what this means for the remainder of the scheme. Companies and the industry body have called for the terms of the scheme to be amended, while the government and ABPI have since announced that the planned scheme review will be brought forward from autumn 2025 to June 2025.

Local factors influencing the use of new medicines

Even after NICE recommends a new medicine, and after any national price negotiations and agreements are completed, there may still be additional steps before patients can receive it. These include local systems making the medicine available and clinicians choosing to prescribe it.

The NHS Constitution states that patients have the right to access medicines recommended by NICE if clinically appropriate. In addition, NICE guidance requires that approved medicines should be automatically adopted onto local formularies (lists of medicines approved for use in a local area) and included in relevant clinical pathways within three months of approval. In theory, this means that decisions around access to medicines are made once at national level and people should have equitable access regardless of where they live. In practice, the picture is more complex.

In each integrated care board (ICB) area, there is usually an integrated medicines optimisation committee (IMOC) or equivalent arrangement to oversee medicines’ use locally. These committees determine which medicines to include on local formularies based on factors such as the specific needs of their local population, and the cost-benefit of the new medicines compared with other treatments available locally. The committees allocate individual medicines a ‘traffic light’ status specifying by whom and in what settings they can be prescribed. This means that the availability and uptake of NICE-approved medicines can vary across local areas. To better understand this variation, NHSE has committed to developing a ‘local formulary national minimum dataset’ to monitor whether NICE-recommended treatments are being made available on local formularies, increase visibility of local variation in implementing NICE guidance, and identify where there may be unwarranted variation. NHSE is also taking steps to address variation through clinical leadership.

An additional consideration in some cases is that NICE guidelines may require specific services to be in place to support safe and effective use of a new medicine. For example, the medicine Wegovy was approved to support weight management for people meeting certain criteria, but only for use within specialised weight-management services. This means that eligible individuals living in areas without such services may not be able to access it. It has been estimated that 30–70% of people do not have access to a specialist weight-management service in their area. Even where relevant services are in place, they are likely to only have capacity to see and treat a small proportion of the total number of people eligible to receive Wegovy.

The final step is for a medicine to move from becoming available on a local formulary to being prescribed appropriately in clinical practice. As part of this, clinicians may need to learn about the medicine, incorporate new clinical guidelines in their practice or, in some cases, require additional training or assurance to be confident in prescribing it safely.

What happens in practice: spending, availability and uptake

In this section, we explore what the available data can tell us about what happens in practice in terms of spending on, access to and uptake of new medicines in England.

What does the NHS spend on medicines?

In 2023/24, the cost of prescribing (which covers medicines, devices, and medical appliances) in the NHS in England was £20.6 billion. This includes the cost of purchasing items from suppliers, the operational cost of dispensing items in some care settings and VAT on some items. This spending is the equivalent of 12% of the DHSC’s day-to-day spending (although this does not account for rebates paid back via the voluntary and statutory schemes, detailed below).

This topline figure does not capture the full complexity of spending and funding flows. The total spend is partially offset by rebates from industry paid under the voluntary and statutory schemes (see the ‘Cap on growth in spending’ section) (estimated to be £3.2 billion in 2023/24 for the whole of the UK), and central rebates from other commissioning arrangements with pharmaceutical companies (totalling £631 million in 2023/24 for England). The NHS in England also charges a flat fee of £9.90 for prescriptions, but this rarely covers the true cost of the items prescribed, and there are a number of exemptions and schemes to reduce the cost to patients, meaning the total income from prescriptions was only £693 million in 2023/24.

The figure of £20.6 billion is also wider than spending on medicines alone. Spending on prescribing also includes other prescribed items such as medical devices, appliances and wound dressings. This breakdown is not available for all areas of spending on prescribing, but for prescriptions dispensed in the community, where the breakdown is available, medicines account for the vast majority of the spend. Of the £10.9 billion spent on prescriptions dispensed in the community in England, only £1.5 billion was spent on dressings and devices and the rest was spent on medicines.

Spending on new medicines is difficult to disaggregate from the total medicines spend. The overall spending on branded medicines offers an indication of the scale of the spend on new medicines, as all new medicines are branded, and older medicines are often prescribed in a generic form. Most of this spend flows through the voluntary scheme (currently the VPAG) and a small proportion flows through the statutory scheme. For the financial year 2023/24 (which crossed over the final year of the previous scheme, VPAS, and the first few months of the VPAG), spending on branded medicines via the schemes was £14.2 billion. This figure is only reported for the UK as a whole, but England makes up the majority of sales – for example, in primary care, where the most comprehensive data is available, England accounts for roughly 80% of sales. This figure also does not account for rebates paid back by industry to DHSC under the schemes, which for the same year amounted to £3.2 billion.

Together, these available data sources give us a sense of the scale of spending but cannot tell us the true spend on new medicines in England. This reflects the complex and often confidential nature of arrangements between national bodies and pharmaceutical companies.

How has spending on medicines changed over time?

The real-terms cost of prescribing across medicines, medical devices and appliances in England has increased slightly between 2016/17 and 2023/24 (Figure 5).

Figure 5

This does not account for changes over time to levels of central, voluntary and statutory rebates, and changes to other arrangements with industry partners.

Figure 6

Total rebates have increased in real terms over time – from £417 million in 2014 to a peak of £2,788 million in 2023, before falling slightly in 2024 to £1,997 million (Figure 6). Caps on growth have also changed over time. At the start of the PPRS scheme in 2014 there was no growth planned (0%); under VPAS, growth was capped at 2%; and under the new VPAG, growth is again capped at 2%, increasing gradually over the five-year period of the scheme to 4% by 2028.

When voluntary and statutory rebates are accounted for, net spending by the NHS on branded medicines via industry schemes (PPRS, VPAS and VPAG) is lower than the total reported sales figures (Figure 7).

Figure 7

How does spending compare to other countries?

Comparing spending on medicines across different countries is difficult as countries measure spending in different ways and often under-report total spending (for example, some only measure medicines covered by public insurance and others exclude medicines dispensed in hospitals). The most recent data available from IQVIA, from 2018, shows that the UK spent relatively less of its health budget on medicines compared to other higher-income industrialised countries like France, Italy and Spain (Figure 8). A 2017 study showed that the UK had higher rates of spending on generic medicines compared to other high-income countries, which may partially explain lower spending in the UK.

Figure 8

More recent data from IQVIA suggests that countries in developed markets (including the UK, Australia, Canada, France, Germany, Italy, Japan, South Korea, Spain and the US) are predicted to increase their spending on original branded medicines between 2023 and 2028, whereas spending in other countries (eg, China, India and Mexico) is expected to flatline. However, it is unclear from the data how the predicted increase in spending in the UK will compare to that in other developed markets.

How do availability and uptake rates compare to other countries?

The proportion of new medicines that receive marketing authorisation varies across different countries, ranging from 88% in Germany to 28% in Ireland from 2019 to 2022. Of the 167 new medicines on the market during that period, England made 93 (56%) available, similar to the average rate of comparator countries (Figure 9). This percentage has gradually fallen from 69% in the period 2015 to 2018.

Figure 9

As described earlier, even if medicines receive marketing authorisation, their availability on the NHS also depends on being approved by NICE (which may include restrictions to the use of the medicine in the case of optimised recommendations) and there are also local factors that can influence availability and use. Compared to similar countries such as France, Germany, Italy, Spain and the US, the UK has lower than average uptake of new medicines (Figure 10). As well as variation between the UK and comparator countries, there is evidence that uptake of different medications can vary significantly between local areas within England.

Figure 10

Final reflections

This explainer has outlined the long journey from the discovery of a new medicine to it becoming available on the NHS. In doing so, it has attempted to shed some light on why governments, regulatory authorities, pharmaceutical companies and others take the decisions they do on the pricing and funding of new medicines, and to highlight some of the tensions and challenges involved in making those decisions.

Medicines policy in England must balance the competing goals of giving patients prompt access to effective treatments, incentivising the pharmaceutical sector to develop and bring new products to market, and ensuring that expenditure on medicines is affordable for the taxpayer. Pressures on NHS budgets and the wider public finances make it increasingly difficult to balance these objectives.

The challenge is how to deliver affordability within a tough financial environment without patients’ access to treatments being eroded. It is also important to consider the appropriate balance of spending on new medicines with other areas of health-related spending, and what this means for overall population health. There is also a need to consider long-term capacity for medicines innovation and the UK’s position as a leading destination for innovation and investment in the life sciences, particularly given the government’s agenda around economic growth and the position of the life sciences sector within this.

The extraordinary opportunities presented by new and innovative (but sometimes costly) medicines alongside the pressures facing health systems everywhere mean this balancing act looks set to become ever more complex.