The UK’s life sciences sector, long regarded as one of the country’s most globally competitive industries, is entering its most turbulent period in more than a decade. Since the start of the year, major pharmaceutical companies have withdrawn or frozen almost $2.6 billion of planned investment — an exodus that has thrown government strategy into disarray and raised profound questions about the country’s competitiveness.
The most dramatic blow came in early September, when US drugmaker Merck/MSD abruptly cancelled its proposed £1 billion London research centre. Within 48 hours, AstraZeneca halted a £200 million expansion in Cambridge and Eli Lilly paused plans to create a biotech incubator called Gateway Labs in London. A week later, British pharmaceutical firm GSK committed $30 billion in research and manufacturing spending in the US, where the Trump administration has threatened punitive tariffs on pharmaceutical imports and offered strong industrial incentives for domestic production.
What exactly is driving this sudden tension?
There are several factors at play, including a long-running dispute over how the National Health Service (NHS) pays for innovative drugs, the revived threat of high US tariffs on pharmaceutical imports, and the impact of American pricing reforms — most notably the Inflation Reduction Act — which increases the strategic risk of offering deep discounts in smaller markets such as the UK.
A renewed push toward “Most Favored Nation” style pricing in Washington has heightened those concerns. Executives argue that if UK prices fall too low, those figures could be used to justify lower prices in the far more valuable US market, reshaping global launch strategies.
Companies argue that the UK’s pricing framework — centered on the Voluntary Scheme for Branded Medicines Pricing, Access and Growth (VPAG) — has become increasingly unpredictable, with rebate rates and cost-effectiveness thresholds shifting in ways that make long-term planning difficult. Although VPAG was designed to stabilize spending after the post-pandemic surge in NHS drug costs, many manufacturers say the system now extracts too much revenue from the sector. Industry payments back to government under VPAG are set to reach £3.5 billion in 2025, with rebate rates ranging from 23.5 percent to over 35 percent of branded medicine revenues. These figures are far above levels in other European countries, such as France, Germany and Italy, which typically impose single-digit rebate rates.
William Soliman, the founder of White Manna Capital Partners, told DDN, "Many big pharmaceutical companies are worried that the UK's pricing and access structures don't value innovative medicines the way they should. That ultimately makes big pharma companies hesitant to put money into the UK market."
Even when medicines are approved for use, their journey to patients can be slow. Fragmented commissioning, local budget constraints, and workforce pressures often delay uptake, leaving the UK lagging behind other European countries in access to innovative therapies. For example, England’s ranking for the availability of new medicines among European countries has slipped from first to ninth in under ten years, and five years after marketing authorization, UK patient uptake of new medicines averages just 62 percent of the level seen in comparator countries. These delays not only limit patient access but also reduce the commercial incentive for pharmaceutical companies to launch new treatments in the UK first, or to invest in early-stage research domestically.
The US is reshaping global drug prices
Global dynamics are intensifying the pressures on the UK pharmaceutical sector.
President Donald Trump has been actively pushing pharmaceutical companies to lower US prices, which can be as much as three times higher than those in the UK and much of Europe. In the US, drug prices are largely determined through complex negotiations involving middlemen, including pharmacy benefit managers and insurers — a system criticized for inflating costs. In contrast, countries like the UK operate single-payer health systems, which negotiate directly with manufacturers and maintain lower costs.
The new executive order (EO) on most-favored-nation prescription drug prices is aimed at reallocating the burden of high US drug costs, ensuring that American patients pay lower prices while other developed countries contribute more fairly to global pharmaceutical innovation. The EO signals that US policymakers may also use tariffs, trade measures, and manufacturing incentives to enforce compliance, creating a new layer of strategic pressure on international pharmaceutical companies.
In response, Bristol Myers Squibb has announced plans to launch Cobenfy, a schizophrenia drug, in the UK at a list price equal to the US launch price — a move that reflects the growing strategic influence of American pricing policies.
What could happen next?
As tensions over drug pricing persist, Science Minister Patrick Vallance has attempted to defuse the standoff between the government and the pharmaceutical industry. Ministers are reported to have drawn up proposals to raise the amount the NHS pays firms for medicines by up to 25 percent. This would include increasing the National Institute for Health and Care Excellence (NICE) cost-effectiveness threshold, which has remained unchanged since 1999. Currently, NICE considers a medicine costing between £20,000 and £30,000 per additional year of good-quality life to represent good value for money.
What really matters to producers is having a strong investment climate, such as an educated workforce, funding for science, good universities, and the ability to operate production units at a reasonable cost.
- Nick Dearden, Global Justice Now
The Association of the British Pharmaceutical Industry (ABPI) has urged urgent reform, arguing the threshold should be increased immediately to between £40,000 and £50,000 and then indexed to inflation. Such a change would gradually allocate a larger share of NHS budgets to medicines.
However, an editorial in The Lancet in October argued that higher drug prices are not a guaranteed route to more innovation. Instead, the piece suggested that the government would be better served by investing in research infrastructure, attracting world-leading scientists, and supporting clinical trials, rather than simply raising drug prices.
Nick Dearden, Director of Global Justice Now, echoed this view. He told DDN, “I don’t think there’s really any connection between higher [drug] prices and investment. Medicines exist in a highly globalised market – it’s not about selling here what’s produced here. What really matters to producers is having a strong investment climate, such as an educated workforce, funding for science, good universities, and the ability to operate production units at a reasonable cost.”
Another approach is to focus on structured, outcome-focused agreements. For instance, the Novartis-NHS agreement for Leqvio (inclisiran), an siRNA therapy that lowers cholesterol, ties reimbursement to real-world cardiovascular outcomes, while Shionogi and Pfizer’s antimicrobial resistance subscription pilots separate payment from volume, rewarding societal value rather than unit sales. Managed access agreements for chimeric antigen receptor (CAR)T cell therapies have similarly shown how outcome-based reimbursement can balance commercial risk with patient access, demonstrating a model in which payments are tied to the real-world value delivered to society.
By combining outcome-based reimbursement, streamlined regulatory processes, and deeper industry partnerships, the UK has an opportunity not just to resolve the current standoff but to reaffirm its position as a global hub for pharmaceutical innovation. In a sector where the stakes are measured in patient lives, scientific breakthroughs, and billions of pounds in economic value, the choices made today could determine whether the UK remains a leader in life sciences — or falls behind its international peers.
