Losing the Competitive Edge
Several big players within the bio/pharma industry are pulling back their investments from the United Kingdom amid fears over the security of the country’s life sciences environment.
At just over halfway through, September is already proving to be a tough month for the United Kingdom’s government — with resignations, controversial appointments, and the rising popularity of the far right to name just a few of the issues facing the cabinet. A recent addition to these woes has been the breakdown of negotiations between the government and a crucial industry for the U.K.’s economy, the bio/pharmaceutical industry (1).
VPAG Talks Abandoned
In August 2025, a mid-scheme review of the controversial Voluntary Scheme for Branded Medicines Pricing, Access, and Growth (VPAG) ended without an agreement being reached by the U.K. government and industry. However, as the VPAG payment rates are increasing to unprecedented levels — bio/pharma companies are now expected to make record payments of between 23.5% and 35.6% from the sales of their branded medicines to the NHS, a much higher rate than in other European countries — the lack of a mutually acceptable resolution has left industry in a difficult position.
“While this review has concluded without reaching agreement, the issues it was set up to resolve remain unaddressed and continue to demand urgent action,” explained Richard Torbett, Chief Executive of the Association of the British Pharmaceutical Industry (ABPI), in a press release (1). “We need to reach a solution that improves patient access to future innovation, allows the sector to fulfil its growth potential, and does not require industry to pay back nearly three times as much of its revenues as is required in other European countries. Together with global industry leaders, we want to continue constructive dialogue with government to find that solution.”
Since the talks over the VPAG broke down, there have already been several announcements from large bio/pharmaceutical companies, revealing that they will be pausing or dropping their investment plans in the U.K. (2–4). Key decisions include Merck scrapping its planned GBP 1 billion (USD 1.4 billion) U.K. expansion and moving research to the U.S. (2); Eli Lilly pausing work on its U.K. biotech incubator (Gateway Labs) (3); and AstraZeneca stalling its GBP 200 million (USD 273 million) expansion of its Cambridge site (4).
No Longer Internationally Competitive
As a result of the drug pricing and market access issues facing bio/pharma companies in the U.K., the country is no longer considered to internationally competitive — something that majorly contributes to companies deciding to invest elsewhere. In fact, according to a recent ABPI report (5), despite the U.K. having an impressive scientific base and robust intellectual property protections, long-term underinvestment into medicines and high clawback rates on bio/pharma companies’ revenues are proving to be insurmountable challenges for future industry investment.
“While high clawback rates have acted as a drag on investment in the UK for several years, the unpredictability and scale of the 2025 rate increase has escalated this issue to a critical point. In many global boardrooms, the UK is now viewed as a contagion risk with practices that, if adopted by other markets, would threaten the sector’s ability to invest and innovate globally. As a result, the UK is increasingly being ruled out of consideration as a viable location for pharmaceutical investment,” specified ABPI in the report (5).
Increasingly Challenging Environment
In an emergency, one-off evidence session, the U.K. government’s Science, Innovation, and Technology Committee explored the decision of Merck (known as MSD in Europe) to halt its expansion plans and its impact on the wider life sciences investment landscape. During the session, Ben Lucas, VP Managing Director UK and Ireland, MSD, pointed to the fact that “the U.S. taxpayer has been funding the vast majority of revenues for pharmaceutical companies around the world for some period of time now, and essentially footing the bill for R&D on the whole,” which has been raised as a concern by the current U.S. administration (6).
However, Lucas also cautioned that the investment decisions being made by Merck, and other Big Pharma companies, should not just be “explained away as simply a function of what is going on in the U.S.” Moreover, he specified that there are critical issues facing the U.K. commercial operating environment, impacting the end-to-end development pathway all the way through to commercialization, that need to be addressed (6).
Tom Keith-Roach, U.K. President, AstraZeneca, also present during the session to discuss the pause of its Cambridge site expansion and other investment decisions, provided his perspective on the current hurdles to bio/pharma investment in the U.K. Despite accelerating investment into the bio/pharma industry and a strong scientific base in the U.K., the high risks taken by companies in drug development mean that they require health systems and governments to value innovation, he asserted. “One of the challenges that I think we’ve had as an industry, and it’s not a recent one this has been building and accumulating over the past 20 years, is that the U.K. is an increasingly challenging place to actually bring forward innovation to patients,” Keith-Roach stated.
“In the current global environment, what we are increasingly seeing is discretionary investment and new investment in R&D and capital manufacturing flowing into countries who are seen to value innovation and seem motivated to pull that through into patients,” Keith-Roach continued. “And I do think that is something that, in partnership with government and alongside the outstanding research environment that exists here, we need to address.”
What Changes Need to be Made
Answering the question about what needs to be done to ensure investment is not pulled from and can continue to flow into the U.K., Torbett emphasized the underlying factor that needs to be resolved. “At the root of this [issue] is that since 2014 the NHS budget has increased in real terms by 33%, what is less known is that the investment in branded innovative medicines has declined by 11% since 2014. So, that divergence between where the NHS budget is going and medicines is at the root of this problem, what we really need is a concerted effort to turn that around,” he said (6).
In addition to the VPAG issues and need for sustained commitment to invest in innovation, concerns were also raised around the antiquated cost threshold that is used, and has been in use since 1999, by the National Institute of Health and Care Excellence (NICE) in the U.K. These three areas were highlighted as being critical in ensuring the life sciences strategy for the U.K. is successful, helping reverse some of the decline in investment that the country has experienced over the past decade, and improving the competitiveness of the country in the future.
References
ABPI. Accelerated Review of VPAG Concludes Without Agreement. Press Release, Aug. 22, 2025.
Jack, S.; Masud, F.; Clun, R. Blow for UK Drugs Sector as Merck Scraps £1Bn Expansion. BBC, Business News, Sept. 10, 2025.
Robertson, J. Eli Lilly Pausing Investment in UK as Report Warns Against ‘Limited’ NHS Uptake of New Drugs. The Pharmaceutical Journal, Industry News, Sept. 11, 2025.
Goodley, S.; Kollewe, J. AstraZeneca Pauses £200M Investment in Cambridge Research Site. The Guardian, Business News, Sept. 12, 2025.
ABPI. Creating the Conditions for Investment and Growth. Report, Sept. 10, 2025.
UK Parliament. Science, Innovation, and Technology Committee: Life Sciences Investment. ParliamentLive.tv, Sept. 16, 2025.