On 29 January 2025, NHS England (“NHSE”) published an updated Commercial Framework for New Medicines (the “Commercial Framework”). The Commercial Framework, first published in 2021, sets out NHSE’s approach to commercial activity in relation to new branded medicines and is a key document in the UK’s pricing and reimbursement landscape.

The Commercial Framework clarifies and consolidates a number of points, as well as introducing new changes. 

One of the most interesting changes is a structured approach to introduce indication-specific pricing for drugs in certain circumstances.  Historically, the UK’s pricing and reimbursement systems for medicines assumed there is a single, overarching price that the UK National Health Service (“NHS”) pays for a product.  That applies even where a product is approved for multiple indications.

The changes to the Commercial Framework follow two public consultations committed to in the 2024 Voluntary Scheme for Branded Medicines Pricing, Access and Growth (“2024 VPAG”).

We discuss some of the key points from the updated Commercial Framework below.

Indication-Specific Pricing for Medicines

In principle, indication-specific pricing enables companies to negotiate different prices for a multi-indication medicine based on differences in clinical and cost-effectiveness across indications. This is becoming increasingly relevant, with a rise in the number of multi-indication drugs coming to market.

The medicines reimbursement framework in the UK had struggled to accommodate charging different prices for the same product used in different indications.  As a result, many commentators identified difficulties in cases where a cost-effective price had been set in relation to “Indication A” but had subsequently been approved in “Indication B.”  If the clinical and cost-effectiveness of the medicine could support a higher price in Indication B, companies may not have been able to realise full value in the second indication, as the product’s NHS price had already been set. 

The inclusion of guidance in the new Commercial Framework on indication-specific pricing may therefore result in increased access to new indications.

It is important to note, however, that this is not a universal option.  Under the Commercial Framework, indication-specific pricing will only be considered in certain cases, when each of the following criteria are met:

  • The medicine for the indication under consideration meets an “unmet clinical need” by providing a therapeutic benefit over existing treatment options or improving health system productivity by enabling more patients to be treated;
  • The company can demonstrate with a high degree of confidence that uniform pricing would reduce its total revenue for a medicine across all indications;
  • Sufficient data is available to the NHS to make indication-specific pricing operationally feasible (i.e., high quality and complete patient population data for each indication) – this includes data from the NHSE prior approval system and also alternative data sources that are of comparable quality and completeness; and
  • There is a high level of difference between the cost-effective price of each indication.

Respondents to the consultation noted that the criteria are too “restrictive and medicines should not have to meet every stated criterion.”  In response, NHSE did not change the criteria, but did include further explanatory guidance to help clarify the position.

The Commercial Framework does offer some flexibility: “There may be specific circumstances beyond those considered here that may justify bespoke commercial flexibilities, and these will be looked at on a case-by-case basis.”

It remains to be seen how many new medicines may be able to meet the criteria and therefore benefit from a stratified approach.

Combination Therapy Pricing

Combination therapies combine two or more medicines into a single treatment.  Competition law issues can arise if the medicines are provided by different companies and pricing discussions between the companies are required.

In November 2023, the Competition and Markets Authority (“CMA”) published a ‘Prioritisation statement on combination therapies’ that stated the CMA will not prioritise the investigation of pricing discussions between companies that are carried out according to a specific negotiation framework set out in the CMA statement (see ‘The Negotiation Framework’ on pages 12 to 14 of the CMA’s statement).

The Commercial Framework has now confirmed NHSE’s support for the CMA’s statement, such that companies may be able to have certain discussions relating to the pricing of combination therapies within a defined safe-harbour.

Budget Impact Test Threshold

A cost-effective medicine may still have a high budget impact on the NHS if it is high cost or likely to be commissioned at scale.  If a company  develops a medicine that is likely to exceed the “Budget Impact Test” threshold of £20 million per annum, it must be subject to further commercial negotiations with payers to bring the overall cost down, before it receives a positive recommendation.  If these negotiations are unsuccessful, the NHS may delay funding the product by up to three years, or longer in exceptional cases.

The Budget Impact Test has been controversial, since its first introduction in 2017.  The £20 million threshold has remained unchanged for many years.

The 2024 VPAG committed to consulting on an increase of the threshold from £20 million to £40 million. The Commercial Framework confirms the increased threshold.

Next Steps

A further “Phase 2” consultation, which will propose additional updates to the Commercial Framework, is expected by the end of June 2026. If you would like to discuss the latest developments and what they may mean for your company’s operations, please contact our UK market access specialists: Grant Castle, Brian Kelly, Raj Gathani and Dan Spivey.

Tags: Medicinal Products, Pricing, UK
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Photo of Grant Castle Grant Castle

Grant Castle is a partner in London, Brussels, and Dublin practicing in the areas of EU, UK, and Irish life sciences regulatory law. He supports innovative pharmaceutical, biotech, medical device and diagnostics manufacturers on regulatory, compliance, legislative, policy, market access and public law…

Grant Castle is a partner in London, Brussels, and Dublin practicing in the areas of EU, UK, and Irish life sciences regulatory law. He supports innovative pharmaceutical, biotech, medical device and diagnostics manufacturers on regulatory, compliance, legislative, policy, market access and public law litigation matters in the EU, UK, and Irish Courts.

He is one of the Co-chairs of Covington’s Life Sciences Industry Group and is Head of Covington’s European Life Sciences Regulatory Practice.

Grant regularly advises on:

EU and UK regulatory pathways to market for pharmaceuticals and medical devices, including in vitro diagnostics and on associated product life cycle management;
Pharmaceutical GxPs, including those governing pharmacovigilance, manufacturing, the supply chain and both clinical and non-clinical research;
Medical device CE and UKCA marking, quality systems, device vigilance and rules governing clinical investigations and performance evaluations of medical devices and in vitro diagnostics;
Advertising and promotion of both pharmaceuticals and medical devices; and
Pricing, reimbursement and market access for both pharmaceuticals and medical devices.

Grant also handles procedural matters before EU, UK and Irish regulators and UK and Irish market access bodies, where necessary bringing judicial reviews for his life sciences clients before the EU, UK and Irish Courts.

Chambers UK has ranked Grant in Band 1 for Life Sciences Regulatory for the last 21 years. He is recognized by Chambers UK, Life Sciences as “excellent,” “a knowledgeable lawyer with a strong presence in the industry,” who provides “absolutely first-rate regulatory advice,” according to sources, who also describe him as “one of the key players in that area,” whilst Chambers Global sources report that “he worked in the sector for many years, and has a thorough understanding of how the industry ticks.” He is praised by clients for his “absolutely first-rate” European regulatory practice. Legal 500 UK notes that he is “highly competent in understanding legal and technical biological issues.”

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Photo of Brian Kelly Brian Kelly

Brian Kelly is a partner in the European Life Sciences group and also co-chair of Covington’s Global Food Industry Group. Brian’s practice focuses on EU food and drug regulatory law, public and administrative proceedings, EU procurement advice and challenges, internal investigations, European Union…

Brian Kelly is a partner in the European Life Sciences group and also co-chair of Covington’s Global Food Industry Group. Brian’s practice focuses on EU food and drug regulatory law, public and administrative proceedings, EU procurement advice and challenges, internal investigations, European Union law, and product liability and safety. The Chambers Europe Guide to the legal profession lists Brian as part of our “world-class [regulatory and public affairs] team and describes him as a notable practitioner who is “very ambitious, thorough with a sharp intellect”. The Chambers UK Guide quotes clients saying: “his communication and work ethic stand out, he is very hard-working and dedicated when it comes to his cases.”

Brian’s advice on general regulatory matters across all sectors includes borderline determinations, food classifications, tissue and stem cell regulation, adverse event and other reporting obligations, manufacturing controls, labeling and promotion, pricing and reimbursement/procurement, procurement/tenders (including emergency use tenders, EU-wide tenders, Covid-19-related tenders), product life cycle management (foods and medicines), nanotechnology, and anti-bribery and corruption advice. Brian has also been advising on UK and European “Brexit” related issues including tariffs. 

Brian has also advised and co-ordinated international projects on advertising/promotion, clinical research, data protection, the regulatory status of borderline products, food/cosmetic ingredient reviews and advises on regulatory aspects of corporate/commercial deals, particularly regulatory due diligence.

Brian is also experienced in representing clients in administrative and enforcement proceedings before regulatory authorities and in the UK and EU courts. 

Brian is an honorary lecturer at University College London.

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Photo of Raj Gathani Raj Gathani

Supporting clients in the pharmaceutical, healthcare, medical device and consumer products sectors, Raj Gathani’s practice is built around EU and UK regulatory and strategic advice.

Increasingly, Raj concentrates on post market-launch projects, such as advising on advertising compliance, communications, interactions with healthcare professionals…

Supporting clients in the pharmaceutical, healthcare, medical device and consumer products sectors, Raj Gathani’s practice is built around EU and UK regulatory and strategic advice.

Increasingly, Raj concentrates on post market-launch projects, such as advising on advertising compliance, communications, interactions with healthcare professionals and patients, pricing controls and reimbursement strategies particularly in the UK and the Republic of Ireland.

Healthcare, its structure and delivery are specialist practice areas for Raj, particularly having operated healthcare and pharmacy businesses for eight years prior to joining the firm. This experience enables Raj to provide in-depth advice to healthcare clients –particularly those in the digital health space – as well as other life sciences companies whose work engages medical practice, dispensing and health-services rules.

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Photo of Dan Spivey Dan Spivey

Dan Spivey is an associate in the Life Sciences Regulatory team. Dan advises clients in the pharmaceutical, healthcare, medical device, and food and beverage sectors on a range of regulatory matters.

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Mark Mitchell

Mark Mitchell is a Trainee Solicitor who attended BPP University Law School.

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