While headlines have been dominated in the run-up to this month's Autumn Budget by the final securing of an agreement between the DHSC and Treasury to pay the £1bn bill for NHS redundancies, Gainsbury told us what happens in terms of a drug deal with the US could have far greater long-term impact.

For months, the Government has been locked in trade negotiations with the US, a big portion of which concerns the prices the NHS pays for new branded medicines. 

With President Trump demanding the best prices for US companies under his ‘most favoured nation' policy, drug companies have begun to look at increasing their prices elsewhere, including the UK. 

‘There won't be a huge benefit overall for American healthcare users, but a huge disbenefit to people in the UK and to the UK health budget,' Gainsbury warned. 

‘It seems likely that the Government will be making some quite significant concessions to the pharmaceutical industry and the NHS will see some fairly significant increases in its pharmaceutical bill, particularly for branded new medicines, which is highly regrettable, because it will mean the NHS having to pay more for the same in terms of what drugs we're getting.' 

Gainsbury said the mood music from Government over recent weeks suggested the agreement would involve an increase in the current NICE £30,000 threshold. The NICE threshold sets an upper limit on the additional cost allowed for a new treatment expected to provide one extra year of good health compared with existing treatments. A higher NICE threshold is likely lead to a hike in the price pharma companies will ask for their drugs, Gainsbury indicated, so was unlikely to lead to a marked increase in patients being able to access drugs priced out by the current threshold. 

More worryingly, Gainsbury highlighted that by increasing expenditure on medicines, the NHS will be reducing its ability to raise spending on more cost-effective interventions such as increasing access to GPs, where patients receive around twice the benefit for the same spend compared to branded medicines priced at the current NICE threshold. 

‘Every penny that goes into higher branded medicine spend is a penny that's not spent doing other things that the Government really wants it to do and for which the evidence shows that they bring more patient benefits,' Gainsbury noted. 

She added: ‘What I'm expecting in the Budget is for the chancellor to announce that the Government has come to an agreement with President Trump and the pharmaceutical industry that they will be increasing the NICE threshold,' Gainsbury said. 

‘I know figures have been muted at around £1.5bn. I hope it's not as high as that, because every increase is a very significant opportunity cost for the NHS because the threshold is already too high.'

In addition, Gainsbury predicted the Budget will see some changes to the voluntary pricing agreement (VPAG). 

‘You would have to do the two things,' Gainsbury noted. ‘The pharmacy industry and President Trump will require them both to be made.' 

The VPAG, which caps the rate that NHS spending on branded medicines is allowed to increase by, was set at 2% in 2024 and 3.75% in 2025, and to grow by 4% by 2027. 

Under the existing agreement any sales above the cap are given back to the DHSC in terms of a rebate, which due to higher than expected sales - including of new obesity drugs - has been worth in the region of £3.5bn in the last two years. However, pharma companies have argued this is an ‘unfair tax' on them. 

Gainsbury commented: ‘The NHS rebate has also been something that President Trump and obviously the pharmaceutical industry are keen to effectively reduce. 

‘You could say the rebate acts as a risk share when sales have been higher than anticipated.' 

Gainsbury said a deal would likely be framed by the chancellor as good news for economic growth and trade but would lead to higher costs for the NHS. She predicted a deal would be funded by the chancellor and presented as a funding boost for the NHS in the Autumn Budget. 

The alternative unpalatable option would mean that extra costs were borne within the existing NHS budget, resulting in politically damaging cut to other services. 

‘In the short term, I would expect the chancellor to fund the cost while probably claiming that it is going to help create more growth,' Gainsbury noted, while arguing the move would represent a hit to ‘NHS productivity and efficiency and the ability to get the most health care and health benefit out of its budget'. 

‘I think the real danger is, how will it be funded over the long term?' she added. 

‘If we think of this in terms of a chunk of the NHS budget now being handed over to industrial and trade policy, it is, therefore, no longer being dictated by the priority of health policy, which is to maximise health benefit in the most equitable means possible, and is now beholden to the aims and the targets of industrial and trade policy.' 

The chief policy analyst argued there was a danger in the long term that the diversion of the funding to pharma companies gets lost in the NHS budget and it's forgotten that this was justified by reference to the aims of trade policy.

‘If you think of what the purpose of the NHS budget is, you would not be about to spend a £1bn or more extra on new branded medicines,' Gainsbury said. 

‘That is not where that extra money would be going. That extra money would be going towards very noble and important ambitions, included in the 10-Year Plan, such as improving access to primary care in poor areas.'

Gainsbury concluded: ‘Diverting the NHS budget to the pharmaceutical industry as a result of these negotiations cannot result in any additional benefit to the NHS and will represent a very significant opportunity cost, because more good, more patient benefit could have been got from that extra spend if it was spent on things that the Government really wants to do such as increasing the number of people who are being bought off the NHS waiting list.'