Pharma's UK frustrations come to a head as Lilly, Sanofi, AZ pause investments

Merck & Co.'s decision this week to walk away from a £1-billion ($1.4 billion) R&D facility in London — and pull its research activities out of the UK altogether — may have triggered a domino effect across big pharma, as Eli Lilly, Sanofi and AstraZeneca now seem to be rethinking their own investments in the country.

Following Merck's announcement, John Bell, an immunologist who was a member of the UK government's vaccine task force during the COVID-19 pandemic, appeared on the BBC Radio 4's Today podcast to warn that big pharmas are "not going to do any more investing in the UK" given how much the country spends on pharmaceuticals has fallen in recent years. 

Merck's reasoning for moving its discovery efforts to mainly US-based sites was the UK's "overall undervaluation of innovative medicines and vaccines by successive UK Governments" — a sentiment that was echoed by a trio of pharmas on Friday.

An AstraZeneca spokesperson confirmed to FirstWord that it's pausing a planned £200-million ($271 million) investment in its Cambridge research site. It's the second UK project the pharma has backed out of, after it scrapped plans in January for a £450-million vaccine manufacturing facility in Liverpool — altogether, effectively cancelling a £650 million commitment to the UK's life sciences sector made in 2024. 

AstraZeneca CEO Pascal Soriot has been an outspoken critic this year of the pharmaceutical policies in the company's home country, particularly on how little the UK spends on drug products. During an investor call in April, he contrasted how the UK spends 7% of its total healthcare budget on innovative pharmaceutical products, versus roughly 10% in continental Europe, and between 13% and 15% in the US

He later floated the idea of moving AstraZeneca's stock listing to the US, and committed to investing $50 billion in the country

Gateway Labs on pause

Lilly is also considering abandoning a planned R&D project in London. Last year, it announced that it would invest £279 million ($365 million) to build a Gateway Labs facility in the UK to support early-stage life sciences therapeutic developers by providing lab space, mentorship and potential financial backing.

Now, however, "Lilly is not yet in a position to finalise our investment in a Lilly Gateway Labs site, as we are awaiting more clarity around the UK life sciences environment," a spokesperson told FirstWord.

'Tangible improvements' needed

While there is no specific UK project on the chopping block for Sanofi, the firm is still pausing potential investments in the country.

A Sanofi spokesperson told FirstWord that while "the UK is a world-class hub for science… we need to see tangible improvements in the current commercial environment and appropriate recognition of the value of innovation before we consider any substantial investment into UK R&D." 

A leader at the French drugmaker had even sharper words for what the UK's "commercial environment" is like. An article in the Guardian quoted Paul Naish, Sanofi's UK head of market access, as saying that the UK is "not a good place to do the development work for medicines. It’s an expensive place to operate, and it’s a terrible place to sell medicines."

Pricing schemes and Trump

Dissatisfaction with the UK's perceived lack of support for life sciences innovation has been brewing for years, but two recent issues seem to have brought big pharma to its boiling point. 

Under the country's voluntary pricing and access scheme, companies agree to pay back the NHS a certain percentage of sales from branded drugs. That figure has typically ranged from the single digits to the mid-teens, but early this year, the UK government proposed rates between 23.5% and 35.6%. 

Negotiations between drugmakers and the government to agree on a more palatable payment rate broke down last month, with the Association of the British Pharmaceutical Industry (ABPI) criticising "the UK's willingness to invest in new treatments" exemplified by its "uncompetitive and punitive rebates on company revenues." UK health officials are said to be looking to reopen talks with the sector amid fallout from Merck's exit.

The ABPI went further on Friday, issuing a report that found the UK is underperforming on a number of measures in comparison to other countries' pharma sectors, including how much it invests in medicines, access to innovative medicines, and the number of Phase III studies conducted in the country. 

Those issues are occurring against a backdrop of President Donald Trump trying to characterise European countries as 'free-loaders' benefitting from American life science innovations. 

Trump's calls for sweeping pharmaceutical tariffs and a most favoured nation (MFN) pricing policy have been framed as ways of getting other countries, particularly those in Europe, to pay their 'fair share' for drugs — and the CEOs of AstraZeneca and Lilly are echoing that refrain. 

Lilly characterised a recent price hike for its GLP-1/GIP agonist Mounjaro (tirzepatide) in the UK as a "rebalancing" in the name of "more fairly sharing the costs of breakthrough medical research," while Soriot has called on wealthier countries in Europe to "rebalance" their pharmaceutical investments given that "most innovation is funded by the US."

https://firstwordpharma.com/story/6062068