A series of statements and funding cuts suggest that the UK pharmaceutical industry and research sector is losing its competitive edge.
First, Merck said on 10 September that it was scrapping a plan to develop a £1-billion (US$1.4-billion) research facility in London and cancelling ongoing projects at the nearby Francis Crick Institute. Two days later, it emerged that AstraZeneca was rethinking a £200-million expansion of its research site in Cambridge — a decision that follows a similar U-turn from the company earlier this year on a promised £450-million expansion to its vaccine manufacturing facility in Liverpool. And statements from the US firm Lilly and French company Sanofi have raised doubts about their continued investment in the United Kingdom, too.
The pharmaceutical giants have blamed a reduction in government investment in the sector on their decisions to de-invest in pharmaceutical research and development (R&D). At an emergency parliamentary committee in the Houses of Parliament on 16 September, Ben Lucas, managing director of MSD (Merck) UK and Ireland said that “the UK commercial operating environment does need to be addressed”, adding that the UK government should “reflect on how we can avoid these things moving forward”.
But the real “crunch issue” is the amount of money the country’s National Health Service (NHS) spends on medicines, according to the UK minister for science, research and innovation Patrick Vallance, who has also been head of R&D at the drug company GlaxoSmithKline and is a former government chief scientific adviser.
Vallance told the committee that Britain would need to spend billions of pounds more on new drugs to convince the pharmaceutical industry to invest in its life-science sector. Britain’s spending on pharmaceuticals has declined from 15% a decade ago to 9% today — a decline that would cost about £12 billion more each year to reverse.
“I think industry has been clear that the ongoing investment in the UK is dependent on having a commercial environment which is conducive to them doing business,” said Vallance.
The recent announcements come as talks between the UK government and the pharmaceutical industry remain deadlocked over drug-price reform. Under the current scheme, pharma companies agree to repay a proportion of their revenues from drug sales to the NHS. But the industry was unhappy when the government increased the rebate last year from 15% to 24%.
Although many attending the committee meeting drew explicit links between the negotiations and the reversal of planned industry investment by pharmaceutical companies, independent specialists aremore sceptical, saying it’s really about underlying weaknesses in the global pharmaceutical sector.
Richard Sullivan, a cancer-policy researcher at King’s College London, says that the companies are using arguments over drug pricing as an excuse for cuts they needed to make anyway. “This is nothing to do with domestic policy towards our pharmaceutical industry,” he says. “This is smoke and mirrors.”
The ‘most favoured nation’ policy of US President Donald Trump, which aims to reduce the high prices the United States pays for medicines relative to other countries, combined with the rise in high-quality cheaper drugs from China and a reduction in health financing in emerging markets have left Merck and other pharmaceutical companies struggling with an obsolete business model and looking to save money, he says.
“They don’t want to say they are withdrawing because the competition in China’s too fierce and because they made an upfront strategic mistake of putting it here in the first place,” he adds.
Alexander Schuhmacher, a pharma R&D researcher at Technical University Ingolstadt in Germany says it’s not clear yet how the situation in the United Kingdom might influence or apply to other countries.
“Pharma companies operate under long research and production life cycles,” he points out. That means their strategic decisions are typically the result of long-term planning, not short-term reactions to political changes or even to major geopolitical shifts, he says.
“There’s a productivity challenge,” he says, “so companies need to reduce costs and to focus more on the US market”, which offers relatively higher profits, he says. “But this is nothing that is really brand new. We’ve seen this for years.”
Pharmaceutical companies have indicated that other countries could benefit from their de-investment in UK drug research. Tom Keith-Roach, president of AstraZeneca UK, said it was inevitable that the company’s investment in R&D would naturally flow “into countries who are seen to value innovation”.
That’s happened already, at the expense of the United Kingdom, says Richard Torbett, chief executive of the Association of the British Pharmaceutical Industry. “We’re still losing out to the US. We’re losing out to Belgium, Ireland, Singapore, Germany,” he said. “We’ve got lots of examples of decisions that have been in the balance, and those are the sorts of countries that we’ve lost out to.”
James Barlow, a health-care-policy researcher at Imperial College London, says that there are things the United Kingdom could do to appeal more to industry. “We need to continue to make improvements to the UK’s clinical-trial capacity, especially through enhancements to the data infrastructure,” he says. “Other countries make it easier to do trials.”
“There are real questions about our ability to remain competitive in the longer term,” he adds. “China and some other countries are catching up fast.”
