UK Life Sciences shows resilience and opportunity despite concerns over recent big pharma announcements
It's been a challenging few weeks for the UK life sciences sector. Following the breakdown of the talks with the Government to provide a more competitive reimbursement scheme for pharma, there have been a number of high-profile decisions that have created big concerns for the future of the sector. However, there have been some good news stories too, including a resilient message from MedCity - the life sciences arm of London and Partners, with whom VWV is a partner.
What's been the challenge for pharma reimbursement?
In 2023, the UK pharma industry (represented by the ABPI) agreed a new five year pricing reimbursement scheme with the Department of Health and Social Care (DHSC) and NHS England called VPAG - the Voluntary Scheme for Branded Medicines Pricing, Access and Growth. This was to take effect from 2024 to 2028 and was aimed at ensuring that the average pricing rebate over that five years was 15%. However, it already reached 23 to 36% in 2024 and is growing. This is the amount that pharma suppliers have to return at the end of the year for medicines already purchased (on top of any discounts already given to get their products purchased), in order to stop the overall Government spending on medicines from getting too high. In other words, when the cake is already of a certain size, if more medicines are purchased in a given year, then pharma suppliers have to provide a subsequent reimbursement to ensure that the overall cake does not get bigger and is shared out amongst all of them.
Pharma complained that the spend on medicines was not being prioritised in the UK - compared to other countries. For example, in many western European countries, the rebate is in single figures (for example, France’s average payment rate is 6%, Italy and Germany are at 7%, Spain and Belgium are at 8%, and Ireland is at 9%). In addition, the spend on medicines as a proportion of total healthcare spending is in the range of 15-20% rather than 9% in the UK (having been 15% ten years ago).
There had been talks about updating VPAG to make the UK reimbursement of medicines more attractive to pharma. However, the talks broke down in August and some follow on statements in August were acrimonious. Pharma started voting with its feet, and there were some high profile announcements of walking away from planned projects - such as from AstraZeneca pausing plans to invest in a £200m research site in Cambridge, following on from a previous scrapping of a Liverpool project, as well as MSD scrapping a £1bn expansion near Kings Cross. Meanwhile, Eli Lilly has warned that the UK is probably the worst country in Europe for drug prices, and unless the UK changed the VPAG scheme, it would miss out on new drugs. Eli Lilly has also said it will pause investments in the UK for the time being. Novartis has also stated that NHS patients will miss out on access to new treatments due to increasing costs.
A thawing of relations - hope for progress on VPAG talks?
Meanwhile, there is hope. If there is a solution to the VPAG problem, the UK has a bright future. Lord Patrick Vallance, the UK's Science Minister, has recently stated that price increases for pharma are going to be necessary, and "where the additional money would come from to pay higher prices is a matter of the Department of Health and the Treasury to figure out". Wes Streeting, the Health Secretary, indicated that talks could yet continue - as he said there was a live conversation between Government departments and the pharma industry on drug pricing. As Lord Vallance recognised, we must end up with a deal of some sort, because it is in the interest of the economy and patients.
Other reasons to be optimistic about the UK
The constructive comments from Lord Vallance and Wes Streeting took place at the opening of the Moderna vaccine facility in Oxford. There have also been positive announcements such as the £1bn investment by BioNTech over 10 years - and a statement from MedCity has shown just how resilient and exciting London is, despite the MSD announcement. There is the announcement from Microsoft of a £30 billion commitment to the UK’s AI future, Google confirming a new data centre in Waltham Cross, and NVIDIA showcasing new partnerships to strengthen the UK’s digital and research infrastructure. London continues to be the leading health innovation outside the US, supported by a diverse population of more than nine million people, world-class universities, and eight research clusters from White City to Whitechapel.
VWV have recently attended openings of lab facilities from Victoria House in Bloomsbury to ARC in Hammersmith, with many more new facilities or repurposed buildings showcasing what a hotbed for life sciences there is. There was also a wonderful MedCity Lab Providers Forum at the modern new Apex building at the London Bioscience Innovation Centre near St Pancras. And we attended the inaugural West Midlands Life Sciences Week, and look forward to going to the London Life Sciences Week in November. There is plenty happening and lots of ambition for the sector in the UK.
So the opportunities are there. London and the rest of the UK has so much going for it and the ambitious 10 year Life Sciences Sector Plan announced in the summer targeted making the UK number one for life sciences in Europe by 2030 and number three in the world by 2035 - the thorny question of VPAG just needs sorting out and this can happen!