VAT on Medication: Compassionate Access Schemes

I begin by welcoming the Government’s decision at the start of the summer to pause the application of VAT on medicines donated for free to patients through compassionate access, early access and related schemes. The health charities, patients and industry bodies that I have worked with are grateful to Ministers for recognising that this issue needs to be addressed, and in particular for the ministerial statement setting out the Government’s intention to introduce a new approach to VAT on free-of-charge donations of medicines. I know that my right hon. Friend the Financial Secretary to the Treasury, and previously my hon. Friend the Exchequer Secretary, have both worked a great deal on this issue. I thank them for their commitment to find a resolution. Without a permanent solution, however, pharmaceutical companies do not have the legal certainty to fully re-engage with early access programmes. Although, to date, only Bayer has withdrawn from these schemes outright, I have heard from a number of other companies that tell me that the uncertainty is causing them to reconsider, drug by drug, whether they can afford to continue offering free access, for fear of creating open-ended VAT liabilities. Tragically, the people who are paying the price for the delay are patients. I know that the Government recognise the consequences for patient outcomes, which is why they have committed to bringing forward a new approach, either through changes to VAT rules or through a reimbursement scheme. I welcome the fact that the new approach, once introduced, will apply to donations made on or after 23 June 2026. However, a pause is simply not good enough to resolve this issue fully. I called for this debate to ask the Government to reconfirm their commitment to find a permanent solution and to ask them to move forward as quickly as possible in determining that comprehensive solution.

My constituent Joseph was diagnosed with a brain tumour at just 28 years old. He was fortunate to receive early access to vorasidenib through compassionate access schemes. However, vorasidenib is only the second new NHS-approved brain cancer drug in 20 years. Does my hon. Friend agree that, given the painfully slow progress we have seen in developing treatment for brain tumours, we should be removing every possible avoidable barrier to patients receiving these promising new medicines?

I thank my hon. Friend for that. As chair of the all-party parliamentary group on access to medicines and medical devices, I have heard those stories far too often. I completely agree that we should be removing every single barrier.

I commend the hon. Gentleman on bringing forward the debate. He has hit the nail on the head on an issue that is a matter of life and death for families right across the United Kingdom. For His Majesty’s Revenue and Customs to sweep in and penalise that relief is a disgrace. Does he not agree that, although a temporary pause from the Treasury is welcome, it is simply not a solution when the clock is ticking for cancer patients and those with rare diseases, and that the Government should commit to working with the Treasury and devolved health executives—including those for my constituency of Strangford—to secure a permanent VAT exemption and ensure that tax bureaucracy never stands in the way of human empathy?

I agree that we do need to find a permanent and comprehensive solution. Hopefully we can air those issues fully today. Fundamentally, the principle underlying this issue is very straightforward: if a pharmaceutical company is willing to provide a lifesaving medicine to a patient free of charge because that patient has a serious or life-threatening condition and has exhausted the available standard treatment options, the tax system should not make access to those lifesaving drugs more difficult. That reflects the points raised by the hon. Member and my hon. Friend the Member for Morecambe and Lunesdale (Lizzi Collinge). Pharmaceutical companies already operate these schemes at a loss. For example, over the last four years, AstraZeneca alone has given more than 2,500 patients access to innovative, lifesaving medicines free of charge, costing millions of pounds. This is clearly not a commercial transaction. It is a moral, compassionately motivated decision and programme, and in my view that means it should be supported, championed and facilitated by Government, not blocked, disincentivised, or made administratively more burdensome—but unfortunately that is exactly what has been happening since HMRC started charging VAT on those donations. This is not just a line on a tax return, impacting on the bottom line; the impact is also having real-world consequences on patient groups. The consequences of this delay are gut-wrenching and deeply frustrating for clinicians, patients and their families. Every day, every week and every month that we wait for a permanent solution to move forward, more severely ill patients are denied access to drugs that could save or extend their lives, at no cost to the NHS. It is also important to note that patients with rarer cancers are disproportionately affected by this issue, as they generally have fewer treatment options. In August, I was contacted by Emma and her husband Ian. Ian and Emma are currently watching this debate online from Ian’s hospital room at University College hospital, as they could not be here in person. Ian has an advanced, rare and aggressive bile duct cancer. Following his latest chemotherapy, his consultant Professor Bridgewater recommended regorafenib as Ian’s next treatment. Regorafenib was previously supplied free of charge by Bayer through a compassionate use programme. However, since Bayer became liable for VAT on the medicines it was donating, it withdrew from the programme, meaning that Ian lost free access to this potentially life-extending treatment. Ian and Emma are now urgently trying to find the money to pay privately for Ian’s treatment, and the cost is thousands of pounds per month. It goes without saying that many families cannot afford to pay thousands of pounds, each and every month, for treatment. Working with Sarcoma UK, I have also heard from Dr Robin Young, a consultant medical oncologist at Weston Park cancer centre. He reported that a 62-year-old patient with metastatic leiomyosarcoma, whose disease had progressed through all the standard chemotherapy options, was also denied this drug in January 2026 because of Bayer’s withdrawal. That patient subsequently self-funded an alternative treatment at a cost of £3,500 for one month, before deciding that he could not afford to continue with that treatment. These are heartbreaking decisions for patients and their families. I have also heard from Dr Alex Lee, a consultant medical oncologist at the Christie NHS foundation trust, who has reported that two patients with advanced osteosarcoma were refused access to the drug earlier this year, with Bayer citing the VAT position. Tragically, one of those patients has since died. She was just 20 years old. I hope these stories make clear the urgency of resolving this issue as soon as possible. This would not only enable Bayer to re-engage, but ensure that existing participants could continue to access their drugs through the programme and enable potential new drugs to enter early access and compassionate access schemes in the future. On paper, this might be a niche and complex part of tax policy, but in real life it is a desperately ill patient, it is a family and it is a clinician having to explain why a medicine that had previously been made available can no longer be provided. I shall turn now to the position of the pharmaceutical industry. Patients, clinicians and the Minister will be pleased to hear that the pharma companies are keen and willing to re-engage with compassionate, early access and other similar schemes once a suitable solution has been finalised with Government. However, I have heard concerns from the industry about the pace and scope of negotiations since the Government announced the pause. The first issue is about the breadth of the definition of the products that will be exempted from VAT liabilities. The definition used to determine any VAT exemption should include the full range of schemes that pharma companies engage in to provide these medicines free of charge. These include: compassionate use, where a clinician requests a specific medicine as a last resort once other options are exhausted, usually off-licence; early use, for new patients immediately after a trial; post-trial provision, for patients who responded well during a trial and need to continue; and bridging prescriptions, for patients where a drug has been approved but is not yet funded on the NHS. However, I have been told that the definition initially suggested by HMRC during negotiations has been too narrow to cover all those uses. I encourage the Minister to look again at this, given that compassionate use of off-licence drugs accounts for a substantial proportion of the patients who benefit from donations to the programme. I understand that the Government may be now moving to a better position on this point, and I would welcome confirmation of that from the Minister. The second issue I have heard is that HMRC is considering attaching two conditions to any VAT exemption: first, that the patient must be treated on the NHS rather than by a private clinician; and secondly, that medicines must be supplied directly by the company to the NHS. I am sceptical of the merits of both those points. First, patients should not potentially lose access to a lifesaving free treatment, which is at the cost of industry, just because the clinician recommending the treatment is a private doctor. On the second point, I would be grateful if the Minister would explain how such an arrangement would work on a practical level. We know that the NHS can refer to private clinics and that clinicians can, particularly for specialist issues, work regularly between NHS practices and private clinics. The fundamental question must surely be whether the medicine is clinically needed and whether it is free at the point of use for the patient. The third issue raised by pharma pertains to the question of historical liabilities. My understanding is that many pharma companies have already paid VAT for historical liabilities, and it is important to say that we do not expect that they will be able to recover that in full. However, given the upcoming changes, it would be helpful if the Government provided some clarity on the legal position on historical liabilities before the pause. I urge that settlements should be negotiated constructively and with understanding based on the nature of these liabilities. Closely related to the issue of historical liabilities is that of co-ordination between Departments on this issue. AstraZeneca has told me that, despite ongoing negotiations with HMRC and the pause announced in July, it is currently being pursued by His Majesty’s Treasury for accounts by the end of September, which it has been indicated should include VAT liability on compassionate access—a position AstraZeneca is not confident is consistent with what it is hearing from HMRC. Business needs certainty to prepare accounts. I encourage the Minister to ensure that HMRC and the Treasury are working from the same hymn sheet. On the method and pace of resolution, my understanding is that the Government are looking at creating an exemption for the compassionate donation of medicines through a legislative change to the Value Added Tax Act 1994. However, have the Government considered issuing a business brief from HMRC to clarify the new position, given that this could be a faster and more effective route? I would be grateful for the Minister’s perspective on that. As well as the patient benefits, there is also a key strategic opportunity for us as a country to be a global industry leader in life sciences research. Many other countries have complex schemes in place, and sometimes charge VAT or the equivalent on such things. However, I understand that although liabilities technically exist in the Netherlands, they are not enforced in practice. If the UK were to fully resolve this issue and put it beyond doubt, this would be a genuine point of competitive advantage in attracting life sciences investment, research and clinical trials to this country, at a time when our overall competitiveness in the sector is under pressure from other directions and policies. It would also encourage the participation of innovative new drugs and potential wider patient applications of them, driving forward potential research opportunities and improving healthcare practice. To sum up, my questions to the Minister are as follows. First, can he confirm that a permanent solution will define eligible products as widely as possible, to include the full range of schemes that are currently used? Will he reconsider the proposal to restrict eligibility to NHS-treated patients only? Secondly, the Government have said that they will act as soon as possible, but for a patient with a life-threatening disease, that phrase can feel like a very long time. Will the Minister set out a clearer timetable about actions and next steps, and when the consultation with industry is likely to conclude? Will the Government decide to bring forward a reimbursement mechanism? Can the Minister explain why a business brief route has not been preferred, or whether one can be explored? When is detailed guidance likely to be published and operational? Finally, what is being done to repair the relationships with industry, which have been damaged as a result of this policy? Where a company such as Bayer has withdrawn, I hope that it will be strongly encouraged to re-engage as soon as possible, so that the patients we have heard about today can gain access quickly. Will the Treasury work with the Department of Health and Social Care to engage industry and be in direct communication with clinicians to help to identify which patient groups have been most affected, so they can be notified as soon as possible that the treatments may become available again? This is, on paper, a narrow, technical issue of tax policy—not always the thing that makes the front pages of newspapers or the most engaging social media videos—but in practice, a clear and quick resolution to this issue is a life-and-death issue for many thousands of people. It is the difference between a patient like Ian fighting to save thousands of pounds a month—just to be able to focus on his health and his loved ones— or not. It is the difference between a clinician having to explain why a medicine that was available last year is not available now, and being able to provide that innovative and lifesaving drug to them and many more patients besides. It is the difference between a pharmaceutical company that wants to do the right thing, providing drugs to patients for free or at a low cost, and it withdrawing its drugs completely because the costs become significant. Once again, I strongly welcome the ministerial statement and the pause from June. I thank the Minister and his predecessor considerably for their work to date, which has made a difference. I know that he is committed to engagement on this issue and to finding a way forward.

It is a pleasure to respond to this debate. I thank my hon. Friend the Member for Uxbridge and South Ruislip (Danny Beales) for securing it, and for all his engagement and campaigning on this important issue. I know from my conversations with my hon. Friend that he cares deeply, as do I, about ensuring that patients can access innovative medicines, particularly when there is unmet clinical need. Free-of-charge arrangements play an important role in giving patients early access to medicines, as my hon. Friend so powerfully illustrated when he spoke about the patients and families who have shared their stories with him. I was moved to hear the experiences of those patients, and am grateful to my hon. Friend for sharing them this evening. My thoughts, as I am sure every Member’s thoughts will be, are with those patients and families, including the family of the young woman who my hon. Friend told us had tragically passed away. I am sure that everyone in this House agrees that we must find a solution that means that those patients, and others like them, can continue to access lifesaving medicines. Before responding to the points made, I will first set out some of the context for the existing VAT treatment of donated medicines. This evening’s debate concerns the application of long-standing VAT rules to some medicines supplied free of charge. Under UK VAT law, some transactions where no money changes hands are treated as though a supply has been made, and these are known as deemed supplies. These rules help to keep the VAT system fair where a business has reclaimed VAT on its costs. These are not new rules introduced by this Government; they are long-standing features of the VAT system dating back to the early days of VAT, before the VAT Act 1994. His Majesty’s Revenue and Customs wrote to the sector in 2023 as part of the process of ensuring that businesses pay the correct tax. However, the Government recognise concerns raised by pharmaceutical companies and patient groups about the potential impact of this treatment on free-of-charge access and, ultimately, on patients. That is why, as my hon. Friend mentioned, on 23 June, my predecessor announced that the Government would bring forward a new approach as soon as possible. As set out in the written ministerial statement on 2 July, the Government are considering either changes to the VAT rules or a reimbursement scheme. The new approach will be effective for donations made on or after 23 June 2026. Officials in the Treasury, HMRC and the Department of Health and Social Care have been working closely together and engaging constructively with the pharmaceutical sector to develop the detail of both options. That work must ensure that any approach supports patients while being legally robust, operationally workable and sustainable. We recognise that free-of-charge medicines are supplied through a variety of arrangements. Those include early and expanded access, post-trial access and arrangements that operate after Medicines and Healthcare products Regulatory Agency authorisation. My hon. Friend raised the question of which medicines would be in scope of the new approach, and the Government are considering this question carefully in collaboration with the sector. The solution must capture genuine patient access arrangements without creating unintended consequences elsewhere in the VAT or supply systems. It is important that we complete that work quickly, so that patients across the UK can benefit from innovative medicines as quickly and safely as possible. It is equally important that we get this right to avoid inadvertently omitting important avenues by which medicines are donated, or opening the door to abuse. That is why we are working closely with industry to craft the scope appropriately. My hon. Friend asked which forms of donation would be in scope, and whether the solution would apply only to donations to the NHS. He will appreciate that I am not in a position to announce any final decisions today, while work remains ongoing with the firms. However, I can reassure him that I have no desire to artificially circumscribe the scope of the new approach and unduly leave out genuine donation practices. My hon. Friend asked about timelines. I regret that as we are talking about a potential tax change, I cannot give further detail, beyond reassuring him that I have reiterated the urgency that we both feel, and the need to reach a swift resolution, and I have imparted that urgency to my officials. On historical liabilities, the new approach will apply to donations made on or after 23 June 2026, but I am happy to hear input from firms on that point as we go through the process. On co-ordination in the case of AstraZeneca, it would not be appropriate for me to comment on the tax affairs of an individual taxpayer, but I would certainly encourage firms in the round to share the detail of any specific concerns they have with my officials. On whether HMRC could publish a business brief to fix this issue, as a matter of existing law, firms must account for VAT on donated medicines. An HMRC brief can communicate a change in policy only when the law itself has changed, or following a judicial decision requiring a change in law. A Revenue and Customs brief cannot itself make the change in law. Finally, I share my hon. Friend’s desire to see Bayer return to the early access scheme, so that patients can regain access to innovative medicines. We have committed to applying the new approach retrospectively to donations made on or after 23 June 2026, and I hope that Bayer takes confidence from that and rejoins the early access scheme as soon as possible.

The Minister is being very generous in giving way, as ever, and I appreciate his response about the limitations of the business brief process. If amending the VAT Act 1994 is the right route, does the Minister know roughly how long that would take to find a resolution? I fully his support his point about Bayer re-engaging. The Government have moved in good faith, and I hope Bayer will, too.

As the changes we are discussing concern a potential tax change, I am afraid I cannot give my hon. Friend further detail about any timeline, but I reiterate that I have imparted to my officials in the Treasury and HMRC the urgency that I feel about this, and that my hon. Friend and others will share. I am glad he joins me in calling on Bayer to take confidence from what we have announced and to rejoin the early access scheme as soon as possible. I again thank my hon. Friend for securing this debate, and for the constructive way in which he has raised this issue, both this evening and in the past. In concluding, I would like to pause to reflect on the impact of continued access to medicines for patients. Individual Members have raised with me the importance that early access to medicines can have, especially for those in the most tragic of circumstances, who sadly have few other options. I have been moved in hearing those cases, and it is vital that we keep those medicines accessible. I am grateful to Members from across the House for bringing this issue the attention it deserves. I am also grateful for the constructive engagement that my officials have had with the pharmaceutical sector, and I know we have a common goal of resolving the issue swiftly. I look forward to setting out further detail once that work has concluded and when final decisions have been taken. Question put and agreed to.