Compassionate Use Medicine Schemes: VAT

Caroline Johnson Excerpts

Thursday 11th June 2026 Commons Chamber

[Dr Caroline Johnson (Sleaford and North Hykeham) (Con)]

(Urgent Question): To ask the Secretary of State for Health and Social Care if he will make a statement on the effect of VAT on the availability of medicines through compassionate use schemes.

[The Minister for Secondary Care (Karin Smyth)]

It is very important for patients to have access to innovative medicines as quickly as possible, especially where there is unmet clinical need or no alternative treatment. We are working to streamline the decisions of the National Institute for Health and Care Excellence and the Medicines and Healthcare products Regulatory Agency so that NHS patients benefit from the latest medicines as soon as they are proven to be safe and effective.

Early access and compassionate use programmes can play an important role in enabling patient access to medicines ahead of routine commissioning decisions. However, we should be clear that these programmes are commercial decisions taken by pharmaceutical companies: companies choose whether and how to provide medicines free of charge to patients and the NHS before the medicines go through licensing, post-trial access or a funding decision.

The tax system is, as Members know, a matter for the Chancellor, so I will not get into details about that at the Dispatch Box, but under long-standing VAT rules, supplies of goods free of charge can still be treated as taxable “deemed supplies” where input tax has been recovered. That means that VAT can apply even where no payment is made, reflecting established principles of the tax system. We recognise the concerns raised by industry and others about the potential impact of this treatment on the provision of free-of-charge medicines. We are working closely with the Treasury and His Majesty’s Revenue and Customs to explore options to address these issues, as witnessed by my hon. Friend the Exchequer Secretary to the Treasury, who is here with me on the Front Bench. We will carefully consider the legal, fiscal and operational implications of any potential changes. Until then, we will continue to engage constructively with industry, the NHS and all our partners to make sure that British patients, who we have in our thoughts at all times, have access to innovative medicines.

[Dr Johnson]

I declare an interest as a consultant paediatrician. One of the worst moments as a paediatrician is when all treatments have failed and there is no suitable clinical trial. At that point, in those dark moments, compassionate use schemes can be a glimmer of hope, and new unlicensed medicines with clinical potential have been provided free to the patient, and free to the NHS. Last year, however, the Government started charging VAT on the deemed value of those drugs, meaning that companies had to pay tax to give the drugs away. When hearing that “every meeting” with Labour MPs was about

“who can we tax in order to pay benefits to others?”

few would have imagined that that would include potentially lifesaving, charitably given drugs for sick adults and dying children.

Following lobbying by my hon. Friend the Member for Hornchurch and Upminster (Julia Lopez), the Government have paused enforcement while they review the situation, but they have said that liabilities remain, and they are taking too long. Bayer has now withdrawn from the scheme, and others could follow. Patients are at risk. Does the Minister recognise that that makes trials in the UK less attractive, and that HMRC’s pause is not enough? How much money do the Government expect to raise with this VAT? How did the Government find time to reduce VAT on fairground rides at Alton Towers, but not to sort out this problem? How many patients have missed out so far? Does the Minister recognise that this delay could cost lives, and who was the Minister who signed this off? Was it the Health Secretary when he was a Minister in the Treasury?

I understand that the Government say this situation is not new, and that it may apply to a law dating back over 30 years. I gently point out, however, that the application is new, and that the levers to change it—and change it quickly—lie in this Government’s hands. Patients need them to act swiftly.

[Karin Smyth]

I pay tribute to the hon. Lady’s service as a clinician, and she is right to say that, at times, for patients facing such situations, compassionate use schemes are a glimmer of hope, but I think the rest of her comments were ill deserved. I understand the desire of the Opposition to attack a new Secretary of State because he was in the Treasury, but I will move on to the actual issues, because patients care about this. The rules had been in place for a long time when this Government took office, and we have not changed them. We have inherited this system, and we are looking at how we can improve it.

The previous Government could have abolished VAT on such medicines, but they chose not to do so. What is more, since we have been in office, we have struck a deal with the USA that not only guarantees 0% on pharmaceutical tariffs, but changes the old formula that we use for medicines. For the first time in 20 years, the Government are spending more to ensure that our patients are first in the queue for innovative medicines. The previous Government could also have raised the threshold, but they chose not to do so. Now, for example, patients facing Duchenne muscular dystrophy, children as young as 12 who need a brain cancer drug, or those who have a type of rare and aggressive stomach cancer, are being treated.

We recognise the importance of the UK remaining a leading location for life sciences, investment and innovation. That is precisely why we are engaging with industry and partners across the Government to understand and address concerns, including the issue of VAT payable on donated medicines. In considering a way forward, it is important to safeguard the robust and fair system by which routine access to medicines commissioned by the NHS is determined. A range of options are being considered. No decisions have been made at this stage, and I will not pre-empt any.