Take AstraZeneca’s warning seriously. The UK is missing out in life sciences
Another day, another warning from the pharmaceutical sector that ministers’ ambitions to make the UK “a life sciences superpower” are in danger of falling flat. The comments from Sir Pascal Soriot, chief executive of AstraZeneca, were different in one important respect, however. He offered a concrete example of how the UK is already losing out as an investment venue.
AstraZeneca had wanted to build a new $360m “state-of-the-art” manufacturing plant in the north-west of England near its existing facilities in Warrington and Speke. Instead, said Soriot, Ireland got the nod on account of the “discouraging” tax rate in the UK.
The gist of his remarks, though, indicated there was more to the decision than just the rise in the rate of corporation tax from 19% to 25%. Like the rest of the pharma industry, he’s unhappy with the pricing agreement known as VPAS that caps the increase in the NHS’s budget for such treatments at 2% a year. The formula was designed in pre-Covid days, but the surge in prescriptions that arrived with the pandemic has seen the industry pay a heftier percentage of its UK revenues to the government as a rebate. The ratio for 2022 was 26.5%. In the recent past, 8% was considered a par figure.
One could take the view that AstraZeneca, reporting annual revenues of $44.4bn on Thursday and with a booming pipeline of drugs that will sell around the world, is rich enough to take it one the chin. A deal’s a deal, after all, and the current VPAS formula expires anyway at the end of this year. Equally, though, one can’t blame Soriot for feeling sore about picking up an unexpected pandemic bill: his company, after all, led the development of a vaccine in Britain on a profit-free basis.
Soriot also mentioned access to green energy as a factor in Ireland’s favour. And, like others, he referenced how an overstretched NHS isn’t delivering on its traditional strength in running clinical trials. The UK has slumped in international league tables, as mentioned here a couple of weeks ago. There is an accumulation of negatives, in other words, in the loosely defined pharma “ecosystem”.
The good news is that the quality of UK science still seems superb. There was no hint that AstraZeneca regrets building its £1bn research and development centre in Cambridge. The point, though, is that big pharma has choices about where to make new investments and, increasingly it seems, it is not choosing Britain like it used to.
“It’s all very nice to discover something in the lab,” said Soriot. “At some point you need other types of people to progress the project.” Dame Emma Walmsley, Soriot’s counterpart at GlaxoSmithKline, argued along the same lines last week in warning of “a tipping point” for UK life sciences. A more scathing version came from Dame Kate Bingham, former vaccines tsar, who in a FT piece recently said the short-term pressures in the UK are crowding out long-term solutions and the life sciences sector is “still the object of suspicion and incomprehension within parts of government”.
Do ministers get it? One assumes they do because the chief executives have been making their case directly to Downing Street. The government may have good reasons not to negotiate in public on the terms of the next VPAS deal: being more generous (possibly) to big pharma is not a good look while there is an unresolved pay dispute in the NHS. Meanwhile, cogs may be turning to fix day-to-day challenges; it is understood that Lord (James) O’Shaughnessy, a former health minister, has quietly been recruited to work on improving clinical trials.
All the same, one cannot recall an equivalent period in which the entire pharma industry, more or less, has openly criticised the gap between the government’s rhetoric and the reality of policymaking. This has now been going on for six months, with the volume rising steadily. AstraZeneca has a fair claim to being the UK’s most successful major company of the last decade, as well as being one of its biggest domestic spenders thanks to the Cambridge facility. If it can’t sound enthusiastic about investing in the UK, there is a serious problem.