Reviving pharma investment and the UK’s Life Sciences edge – An existential question for the UK

The UK’s ambition to be a global “life sciences superpower” is colliding with reality. In recent months, both Merck (MSD) and AstraZeneca have withdrawn or paused major UK investments – projects collectively worth over a billion pounds – citing an increasingly unattractive environment for pharmaceutical innovation.

Their announcements follow years of tension between government and industry over drug pricing, reimbursement, and predictability.

This is not a sudden rupture. The debate over how much the National Health Service (NHS) should pay for new medicines is as old as the National Institute for Health and Care Excellence (NICE) itself, from the Vertex cystic fibrosis dispute (2016-2019) to the 2023 spike in rebate rates under the Voluntary Scheme for Branded Medicines Pricing & Access (VPAS).

The current moment is more consequential. It sits at the intersection of domestic economic strain, Brexit-related frictions, and global pricing dynamics. US policies such as the Inflation Reduction Act and the Most Favored Nation Executive Order raise the risk for multinational biopharma companies when accepting lower prices in ex-US markets, including the UK.

The resulting picture is one of deep uncertainty. The UK’s renowned science base, regulator, and health data assets remain enviable. But without commercial viability, those strengths won’t translate into investment. The government’s challenge now is not only to repair trust, but to design a credible, globally aligned framework that makes innovation sustainable - for both the UK and pharmaceutical manufacturers.

The Underlying Questions: What’s Pharma Objecting To and What’s at Stake

Pharma’s objections are neither purely financial nor purely political. They are rooted in three interlinked problems: pricing volatility, slow uptake, and regulatory fragmentation.

First, pricing volatility.
The 2019–2023 Voluntary Scheme for Branded Medicines Pricing and Access (VPAS) scheme capped branded medicine spend growth at 2%, but as post-COVID NHS pressures mounted, the rebate rate soared to 26.5 per cent - effectively clawing back over a quarter of revenues. Even with the 2024 reset under the VPAG agreement, confidence has been shaken. Companies argue that frequent renegotiations, opaque rebate mechanics, and rigid NICE thresholds make it nearly impossible to model UK returns on new launches.

Second, time-to-revenue.
Even when a product clears NICE appraisal, fragmented commissioning, local budget constraints, and workforce shortages within the NHS often delay adoption and result in slow uptake. The result: the UK ranks among the slowest in Europe for post-approval patient access to new therapies, a gap that impacts global launch sequencing.

Third, international pricing pressure.
The MFN principle - where US prices are benchmarked to peer nations - raises the strategic cost of agreeing to low ex-US prices. When the UK receives deep discounts, the reference can ripple across larger markets. Companies increasingly see UK price negotiations not as a local issue, but as a global constraint on their margins.

For the UK government, this has broader consequences. The life sciences sector including biopharma represents one of the country’s few globally competitive industries, contributing nearly £100 billion a year in GVA and employing over 250,000 people. If the current standoff persists, the damage could cascade.

• Short term, the UK risks losing early-phase trials, R & D mandates, and manufacturing siting decisions – jobs and intellectual property that migrate elsewhere.

• Long term, the ecosystem could erode: fewer collaborations with academia, weaker supply chains, diminished export capacity, and declining attractiveness to global capital.

The concern that UK prices are too low and will need to increase was voiced by Science Minister Patrick Vallance: saying that: “Britain needs to reverse its declining spend on medicines”. Without restoring confidence that innovation will be rewarded, the country could slide from being a launch destination to a late adopte - and from a ‘superpower’ to a subcontractor in global life sciences.

Towards Solutions: Building on Strengths and Learning from What Works

Yet the UK still has the building blocks to reverse course. The key lies not in raising prices across the board, but in making pricing smarter, regulation faster, and partnerships deeper. The country’s own recent experiments – and international comparators – show what’s possible.

1. Smarter pricing and outcome-based models.
Examples already exist. The Novartis–NHS population agreement for Leqvio (inclisiran) tied reimbursement to real-world cardiovascular outcomes. The Shionogi and Pfizer AMR subscription pilots delinked payment from volume, paying for societal value rather than use – a world-first approach now being scaled. Similarly, CAR-T therapy managed access agreements have shown that outcome-based reimbursement can balance risk and access.

These models demonstrate that the NHS can be both prudent and progressive when structure replaces haggling. Codifying such frameworks – especially for high-cost or curative therapies – would give companies a clearer playbook and preserve affordability.

2. Leverage regulatory agility.
The Medicines and Healthcare products Regulatory Agency’s (MHRA) Innovative Licensing and Access Pathway (ILAP) and international recognition procedures are strong assets. Accelerating their use and linking them to NICE fast-tracks could make the UK a leader in rapid access for transformative medicines. A publicly tracked “time-to-decision” metric would reinforce credibility.

3. Integrate R & D and industrial strategy.
The Moderna 10-year partnership – combining a Harwell R & D hub, vaccine manufacturing, and preferential access to NHS data – is a model of industrial policy alignment. Linking R & D incentives to domestic capability-building (advanced manufacturing, clinical trials, workforce training) would turn policy from transactional to strategic.

4. Predictable thresholds and periodic review.
The UK’s £20,000–£30,000 per quality-adjusted life year (QALY) range has not been updated since 1999, unlike that of peers such as the Netherlands or Norway. Indexing it to inflation or GDP growth, and applying severity-weighted bands, would modernize NICE’s framework without abandoning cost discipline. A regular ‘threshold review’ could anchor trust and transparency.

5. Data as a national differentiator.
The NHS’s unified datasets are a unique asset. Embedding real-world evidence clauses into pricing agreements – using trusted research environments to generate outcomes data – could make the UK a preferred partner for iterative value assessment. It would also align incentives: companies gain label evidence, the NHS gains assurance of effectiveness.

Conclusion: A New Compact for Shared Value

The tension between fiscal prudence and innovation investment is not unique to the UK. But few countries have as much to lose – or as much to gain – from getting it right. The current pullbacks are not simply corporate bargaining tactics; they are a stress test of the UK’s innovation contract.

To pass that test, the Government must move beyond one-off negotiations toward a strategic compact – one that links price, performance, and partnership. Predictable frameworks, adaptive thresholds, and investment-linked industrial policy can re-anchor trust.

If the UK succeeds, it could set a new model for small-to-medium markets navigating US pricing pressure: proving that sustainability and competitiveness need not be opposites. But if it fails - if volatility and short-termism persist - the country risks turning its greatest asset, the NHS, from a magnet for innovation into a barrier to it.

The moment demands clarity of purpose: not to pay any price for drugs, but to ensure that the price of short-term savings is not long-term decline.