What has caused this stand-off and who will blink first?<\/p>\n
![\"AstraZeneca](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2025\/10\/\/31fd1578-5244-4cb4-905a-d8cffa852fb5.jpg\")
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AstraZeneca has put a \u00a3200 million investment in its Cambridge research site on hold<\/p>\n
ALAMY<\/p>\n
The life sciences industry, which is worth \u00a3100 billion to the UK economy, claims the crisis has been years in the making. It argues that successive governments have underinvested in life sciences, a sector that, historically, has been a British success story.<\/p>\n
Underinvestment \u2018is spoiling the UK\u2019s life sciences ambition\u2019<\/p>\n
The UK spends less on drugs as a proportion of its healthcare budget <\/a>than other developed countries. Nine per cent of the NHS budget goes on buying medicines. This is around half that of Spain and Italy (17 per cent) and less than Germany and France (14 and 13 per cent). The Association of the British Pharmaceutical Industry says Britain has also fallen from fourth to tenth place in the rankings for the number of final-stage drug trials being hosted.<\/p>\n David Watson, executive director of patient access at the association, said: \u201cIt\u2019s been a gradual government choice to essentially choose to not invest in medicines.<\/p>\n \u201cThe life sciences sector is something we\u2019re good at, we\u2019ve got all the fundamentals, such as the right graduates and universities and research centres, but because we don\u2019t spend much on medicines, it is spoiling that ambition.\u201d<\/p>\n Sir Keir Starmer and Peter Kyle, the innovation secretary, talk to AstraZeneca employees in Macclesfield, Cheshire<\/p>\n JASON ROBERTS\/GETTY IMAGES<\/p>\n Big Pharma\u2019s ire has coalesced around the system used to calculate how much the NHS pays for new drugs and medicines.<\/p>\n In 2023 the industry and the Conservative government struck a five-year agreement called Vpag, the voluntary scheme for branded medicines pricing. This was a continuation of earlier deals that cap the total amount the NHS pays for new drugs and medicines. If the NHS spends more, companies pay back some of the difference as a rebate. <\/p>\n But the forecast of how many drugs the NHS would buy<\/a> were wildly off. Whereas previously the industry paid back 6.8 per cent of its revenue via the rebate, the figure has shot up to 22.9 per cent. The forecast under Vpag was for it to hit 15 per cent in 2024 then go back down.<\/p>\n It is unclear why the rebate has soared but one theory is that more effective new medicines came onto the market than expected while the NHS also received more funding than anticipated when the deal was made in 2023, but with no corresponding rise allowed for medicine spending. Industry repayments soared to \u00a32.5 billion in 2024 and are on course to reach \u00a33.4 billion this year as NHS spending on medicines exceeds \u00a314 billion.<\/p>\n \u201cThe system has basically become a revenue raiser for the Treasury,\u201d an industry insider said. \u201cThe gap between what the government wants and how much it costs the industry<\/a> is ratcheting up alarmingly now.\u201d<\/p>\n The counterview, though, is that the NHS\u2019s collective bargaining means it has been extremely effective on behalf of the taxpayer in driving down prices.<\/p>\n The talks between Streeting and the drugmakers remain confidential but he has said the deal would have \u201creduced payment rates for pharma companies year on year, freeing approximately \u00a31 billion over three years for new, life-changing medicines\u201d. <\/p>\n The health department said: \u201cWe will always put patients and taxpayers first, encouraging investment and innovation while ensuring best value for money. Having made an unprecedented \u00a31 billion Vpag offer to industry, our door remains open to future engagement.\u201d<\/p>\n Astra Zeneca\u2019s move on to NYSE is worrying for the City<\/p>\n Companies are changing investment plans<\/a> because they believe the UK is becoming less of a viable market for new drugs.<\/p>\n AstraZeneca, Britain\u2019s most valuable public company, has paused a \u00a3200 million investment in its Cambridge research site. This came after it scrapped plans for a \u00a3450 million investment in its vaccines site in the Liverpool suburb of Speke, blaming cuts in government support. <\/p>\n The drugmaker last week it announced plans to list its shares directly on the New York stock exchange, while keeping its shares on the London market.<\/p>\n Some in the City believe this move is related to Astra\u2019s desire to seek a higher valuation in America, while giving it the option to pursue deals that use shares as part-payment. However any further move away from London would be devastating for the City.<\/p>\n Meanwhile, the US drugs group Merck has pulled a \u00a31 billion investment in a new London research centre, while Eli Lilly, one of the world\u2019s biggest drugs companies, paused part of a planned investment in a biotech innovation accelerator hub in the capital. <\/p>\n Johan Kahlstr\u00f6m, the president of Novartis UK, said it was \u201cvery difficult for global boardrooms to justify investments in the UK\u201d, while Guy Oliver, the UK head of the global pharmaceutical giant Bristol Myers Squibb (BMS), said \u201cchronic underinvestment\u201d in medicines meant his company had no choice but to cut hundreds of UK jobs and end drug trials and partnerships with the NHS.<\/p>\n Trump says the world \u2018must stop freeloading\u2019 on American innovation<\/p>\n Big Pharma\u2019s unhappiness with the UK comes as the sector is under intense pressure from America. In May, President Trump accused drugmakers of deeply discounting their products in foreign markets while subsidising that through very high prices in the US. <\/p>\n He has demanded Britain and other countries pay more for medicines<\/a> to end \u201cfreeloading on US innovation\u201d. He has held the threat of tariffs over companies if they do not boost manufacturing in the US.<\/p>\n President Trump is demanding that the pharmaceutical industry switch more manufacturing to the US<\/p>\n KEVIN LAMARQUE\/REUTERS<\/p>\n Since then several drugmakers have prioritised funding in the US. They include AstraZeneca, which announced a $50 billion investment in the US by 2030, and GSK, which last month declared it would put $30 billion into American manufacturing. <\/p>\n Dame Emma Walmsley, the chief executive of GSK, who announced last week that she would be stepping down, hailed the investment as \u201cfurther bolstering the already strong R&D and supply chain we have in the [US]\u201d.<\/p>\n Trump wants pharma groups to offer the same low prices they agree in other countries to American consumers. In this context the NHS success at driving down prices poses a problem for Big Pharma. It cannot afford to offer such low prices in America so it is under pressure to renegotiate them upwards in Britain. There is pressure on the UK government too, which is desperate to keep Trump on side.<\/p>\n Some believe we need a review of NHS prices sooner not later<\/p>\n Whitehall seems to believe that something has to give and that the government will have to concede ground on pricing.<\/p>\n Last week Varun Chandra, Starmer\u2019s chief business adviser, flew to Washington for talks with senior US officials on drugs pricing.<\/p>\n This followed comments from Lord Vallance of Balham, the science minister who was the government\u2019s chief scientific adviser during the pandemic. He warned last month that the NHS would have to spend more<\/a> on medicines to maintain Britain\u2019s place as a world leader in life sciences \u2014 even at the cost of other areas of care.<\/p>\n \u201cThese are all trade-offs and the trade-off that\u2019s been made for the past decade is a lower percentage on medicines. We\u2019re reaping the consequences of that now in a very urgent way. And that\u2019s what we need to now address,\u201d Vallance told the House of Lords last month.<\/p>\n Lord Vallance of Balham says the NHS will have to spend more of its budget on medicines to maintain Britain\u2019s place as a world leader in life sciences<\/p>\n CHRISTOPHER L PROCTOR FOR THE TIMES<\/p>\n Some in government seem to acknowledge that a broad renegotiation of NHS prices is needed sooner rather than later. Such is the pressure from the US, this could come before a revised agreement on Vpag. One Whitehall source suggested Vpag was merely \u201can annoying symbol of a broader problem\u201d. <\/p>\n They said: \u201cVpag was the straw that broke the camel\u2019s back \u2026 but we need to fix problems in the round.\u201d Any move on NHS pricing would need to be \u201cmeaningful\u201d, they added. \u201cThe industry won\u2019t accept anything too piecemeal.\u201d<\/p>\n![\"Keir](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2025\/10\/\/97197ab3-4898-4d62-bdbc-cda487608bc9.jpg\")
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<\/p>\n![\"Lord](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2025\/10\/\/24d0926b-3118-4645-b1d8-1a74eb6fd620.jpg\")
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