Ignore the ‘superpower’ boasts – UK pharma looks superchallenged
Big pharma is unhappy about the prices it is being paid in the UK – a state of affairs the rest of us might instinctively regard as welcome, as it suggests the NHS is still world class when it comes to negotiating terms for branded medicines. The UK spends about 9% of its healthcare budget on such medicines; other large European countries report mid-teen percentages.
One response would be to tell the wealthy companies to count their blessings – or be quiet until NHS nurses have had a proper pay settlement and the patient backlog has been cleared. Hasn’t the pharma industry done well in the UK over many years from an arrangement that is broadly understood by both sides?
The NHS gets (relatively) low prices and companies enjoy access to services that ministers keep telling us make the UK a “life sciences superpower” – the research facilities, the universities and the NHS’s undoubted historical ability to run clinical trials on development drugs at scale.
There is a problem, however, with the “nothing to worry about” thesis. We’re already beyond the stage of corporate muttering. AbbVie and Eli Lilly, two big US firms, last week pulled out of the VPAS mechanism – the Voluntary Scheme for Branded Medicines Pricing – that caps the increase in the NHS’s budget for such treatments at 2% a year. German group Bayer hasn’t gone that far, but its comments about an “innovation unfriendly” environment (albeit across Europe, not just the UK) pointed to the reality that there is more going on than a quarrel about prices.
Dame Kate Bingham, UK vaccines tsar during the pandemic and now back in her day-job as managing partner at SV Health Investors, spelled out the tensions in the FT this week. Shortterm pressures are crowding out longterm solutions, she argued, and the UK risks missing the superpower opportunity.
There are still good pioneering projects happening, she acknowledged, but her list of things that are not working was long: research and development (R&D) tax credits were withdrawn for small companies and UKbased academics are now outside the EU’s Horizon research programme. The UK’s share of the global R&D market is falling and the industry is “the object of suspicion and incomprehension within parts of government”, argued Bingham.
On the pure pricing argument, the industry surely has a point. The VPAS scheme was agreed in 2019 and caps the growth of NHS branded medicine spending at a nominal rate of 2% a year, with the industry returning any sums beyond the cap. With the spree of prescribing triggered by Covid, the rebate percentage ballooned last year to 26.5% of revenues. AbbVie, when pulling out, argued that such numbers “are not seen in any comparable country”. Even the German rate of 12%-ish caused a row locally.
The medicines will keep coming, but the rest of the UK life sciences “ecosystem” looks exposed along the lines Bingham described. One pharma executive puts it this way: “If you are paying corporation tax at 25% and then 26.5% of your revenues are clawed back, the balance has gone too far. You’re not going to build up R&D here; over time, you are bound to look elsewhere, because this is an international business.”
A parallel worry is that the crisis in the NHS is now spilling into areas such as clinical trials. Statistics last year from the Association of the British Pharmaceutical Industry (ABPI) showed the UK had slipped from fourth in 2017 to 10th in 2021 by number of late-stage phase 3 trials – behind Canada, Italy and Poland.
The decline started pre-pandemic but the concern is that an overstretched NHS is failing to restore its research capacity at the pace other countries are doing. The problem, as the industry tells it, is one of reliability and consistency of delivery, despite the fact that clinical trials should be a revenue-earner for the NHS (an average of £9,000 per patient, according to the ABPI).
Companies tend to be loth to cite examples because anything involving access to cutting-edge treatments is ultra sensitive. But the ABPI’s report offered a no-names case study. In 2022, a pharma firm was planning a global phase 2 clinical trial for patients with small-cell lung cancer and three UK sites were chosen for inclusion; two experienced “significant delays in costing and contracting negotiations resulting from ongoing issues with the NHS’s research capacity”; the result is that UK patients won’t be able to access a trial for a potentially life-extending treatment.
This is not a picture of a life sciences superpower in action. The UK’s two homegrown pharma giants – AstraZeneca and GlaxoSmithKline – have so far done the patriotic thing and refrained from public comment. Both companies report their full-year results in the next fortnight. Pascal Soriot and Dame Emma Walmsley, the chief executives, could do us a favour and give an honest appraisal of the gap between government rhetoric and reality. From outside, it looks enormous.
This is not a picture of a life sciences superpower in action.