VAT Dilemma: Bayer Halts Early Access Scheme Amid Tax Dispute
Pharmaceutical giant Bayer has suspended new patient enrolments in its early access programme due to a tax conflict with the UK government over VAT bills for supplying cost-free medicines. Another multinational company is reportedly mulling a similar move.
HMRC’s VAT Bills for Cost-Free Medicines
HMRC has drawn flak from pharma companies for levying VAT on drugs supplied free-of-charge through post-clinical trial continuity of care or compassionate use schemes. The purpose of these schemes is to offer early access to life-saving medications that have yet to secure either marketing approval or NHS funding.
Impact on UK’s Life Sciences Reputation
In a correspondence sighted by The Times, Julia Lopez, shadow science, innovation and technology secretary, expressed her concerns to Liz Kendall, the secretary of state, stating, “UK margins cannot absorb VAT bills on free-of-charge medicines.” She warned that the UK’s standing as a life sciences powerhouse and an attractive hub for clinical research is under threat due to this issue.
Cancer charities and the pharma industry are pushing the government to clarify these tax rules and confirm that VAT should not apply to “clinically justified” free supply of drugs. Some companies are even challenging the HMRC’s VAT bills.
This tax dispute arises at a delicate time as the government is working on a separate agreement concerning NHS drug pricing and a UK-US trade deal.
Bayer’s Response to the Tax Change
A Bayer spokesperson revealed that due to the tax change, they had “made the difficult decision to pause the addition of new patients … while continuing to serve patients already enrolled” in their scheme, which provides treatment to patients with “life-threatening, long-lasting, or severely debilitating conditions or diseases” that aren’t adequately addressed by any licensed and reimbursed drug in the UK.
Government’s Stance on VAT Application
When quizzed about the matter by Lopez, Kanishka Narayan, a minister at the Department for Science, Innovation and Technology, said that VAT application is determined case-by-case, including medicines supplied free under the early access to medicines scheme. He added that in some circumstances, goods given away free could be outside the VAT scope, or a relief might apply, making the supply VAT free.
However, Lopez expressed that this tax policy runs counter to the government’s national cancer plan, which aims to provide faster access to innovative treatments and increase the five-year survival rate among cancer patients to 75% by 2035.
Pharma Industry’s Concerns Over VAT Implementation
Pharmaceutical companies have raised concerns with ministers about the unfair financial burden created by VAT and the uncertainty surrounding its application. Industry insiders also suggest that the issue could jeopardize the UK’s appeal as a location for clinical trials, as firms may hesitate to run studies in the UK if they face added VAT costs post-trial.
The Association of the British Pharmaceutical Industry’s View
Richard Torbett, CEO of the Association of the British Pharmaceutical Industry, remarked that the change in HMRC VAT enforcement practices could deprive NHS patients of critical medicines as part of compassionate use programmes, early access schemes, or post-trial continuity of care.
Government’s Response to the Issue
A government spokesperson stated: “We are in active discussions with the sector. We fully recognize the importance of early access and compassionate use schemes and are committed to ensuring patients can continue to benefit from them.” It was also noted by Whitehall sources that there have been no recent changes to UK VAT policy.
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