This ICAEW guidance aims to assist auditors in complying with the requirements when reporting under the 2024 Voluntary scheme for branded medicines, pricing, access and growth (VPAG), which runs until 31 December 2028.
Key takeaways
- Voluntary scheme for branded medicines (VPAG): The 2024 VPAG is effective until December 2028, with pharmaceutical companies making payments based on a percentage of eligible sales of branded medicines for each scheme year.
- An audited annual sales report: Scheme members with sales of scheme products of £6m or more must submit an audited annual sales report.
- Audit opinion requirements: An audit opinion is only required for part one of the annual sales report; part two should be treated as ‘other information’ under ISA (UK) 720. Agreed-upon procedures (AUPs) are required to be performed on presentation-level reports (PLRs).
What is the voluntary scheme for branded medicines?
The 2024 Voluntary scheme for branded medicines, pricing, access and growth (VPAG) is a voluntary agreement between the UK government, NHS and pharmaceutical industry. Its objectives are to:
- promote better patient outcomes and a healthier population;
- support UK economic growth; and
- contribute to a financially sustainable NHS.
It is the latest version of the UK’s branded medicines pricing agreement, replacing the 2019 Voluntary scheme for branded medicines pricing and access (VPAS), which in turn replaced the Pharmaceutical price regulation scheme (PPRS).
Effective from 1 January 2024 to 31 December 2028, the VPAG is designed to manage healthcare costs, support patient access and encourage innovation within the pharmaceutical sector. The scheme acts as a financial safeguard for the NHS.
Pharmaceutical companies make payments based on a percentage of eligible sales of branded medicines for each scheme year.
Which companies can apply to join VPAG?
Companies selling branded medicines in the UK may opt into the voluntary scheme.
Non-participating companies are automatically included in the statutory scheme established under the Branded Health Service Medicines (Costs) Regulations 2018, as amended from time to time.
What are the requirements for an annual sales report?
All scheme members with sales of scheme products of £6m or more must submit an audited annual sales report within nine months after their financial year end. The report reconciles the sales figures from the scheme member’s statutory accounts, applies scheme-specific adjustments, and calculates the eligible sales on which the amount due to or from the Department of Health and Social Care (DHSC) is based.
Companies with a financial year end different from the calendar year end must submit two audited sales reports covering a complete calendar year. If rate changes are made by the DHSC, additional reports may also be required.
What are the requirements for a presentation-level sales report?
Companies must also submit an annual presentation-level sales report (PLR) three months after the calendar year end. The PLR distinguishes sales between newer and older medicines. Part two of the annual sales report reflects the data from the PLR.
This part of the annual sales report is not covered by the audit opinion. PLRs do not need to be audited but are subject to agreed-upon procedures (AUPs) (2025 onwards; the requirement was waived for 2024).
Due to the timing differences between submission of the annual sales report and PLR, the PLR may need to be re-submitted following the audit.
Auditor responsibilities
Auditors are required to audit the annual sales report and provide an audit opinion under ISA (UK) 800 and ISA (UK) 805 for each calendar year. The opinion must state whether the annual sales report has been properly prepared, in all material respects, in accordance with the special purpose basis of preparation and the accounting policies detailed in the notes to the Scheme Member’s Declaration.
The annual sales report is split into parts one and two. The audit opinion is required solely for part one. Part two includes a table and lines 25 to 27, which are not populated by the company. Auditors should therefore clarify that their opinion is limited to lines 1 to 24 of part one of the annual sales report.
Part two containing the table and lines 25 to 27 are unaudited and should be treated as ‘other information’ under ISA (UK) 720. As mentioned above, part two incorporates figures from the PLR, which may not always align with part one due to timing differences and/or corrections noted between the PLR and the annual sales report.
If there is a material inconsistency between part one and part two, the PLR should be re-submitted by the company to match part one. Otherwise, auditors must evaluate the implications of these inconsistencies for their report. If the auditor determines that a material misstatement of other information exists, they should refer to the requirements of ISA (UK) 720 to determine the next steps required. The auditor should submit the AUP report at the same time as the audit report.
Unless agreed otherwise with the DHSC, the statutory auditor of the company should also audit the annual sales report.
