The UK must act to stem £11bn loss to health research

The UK could lose out on £11 billion in pharmaceuticals research and development (R&D) investment by 2033, and see fewer new medicine launches in the NHS, unless very high and unpredictable medicines sales clawbacks are addressed, according to WPI Economics.

Quotes from Abbvie, Amgen, Astellas, Biogen, Boehringer Ingelheim, Gilead, Lilly, Novartis, and Johnson & Johnson follow at the end of this release.

In the UK, a medicines pricing control mechanism, known as the Voluntary Scheme or VPAG, now requires companies to pay the Department of Health and Social Care (DHSC) up to a quarter to a third (23.5%-35.6%) of their UK revenue from sales of branded medicines to the NHS [1].

In a new report, ‘Opportunity Unlocked: How UK medicine spend policy can free the life sciences sector to drive growth,’ WPI Economics looked at a subset of R&D activity in the UK and modelled the impact of prolonged high medicines payment rates [2].

The report showed that if very high new medicine payment rates of above 20 per cent of companies' UK revenue continue, the UK could lose out on £11bn of R&D investment by 2033. However, if new medicine payment rates are returned to pre-2023 levels of below 10 per cent, such losses can still be avoided.

Lower rates under 10 per cent would also increase GDP by £61bn over the next 30 years, delivering increased tax revenue of around £20bn, according to WPI Economics’ calculations. The authors suggest that both these losses and gains could be even larger once the full range of life science investments in the UK is considered.

Richard Torbett, Chief Executive, the ABPI, said: “The UK will not realise its ambition and potential to be a global leader in health research if it continues to value the products of that research so poorly. This work sends a clear warning about the risk of doing nothing. However, it also shows the size of the prize if this government can address the policy failures of the past and work with industry to make the UK the home of life science innovation.”

Matthew Oakley, Founder and Director, WPI Economics, said: “The burden of such high repayment rates on company revenues has clearly become an obstacle to growth in life sciences. The system risks generating poorer outcomes for patients and making health inequalities worse. Addressing this issue is critical in supporting the government’s number one mission to deliver economic growth.”

In recent years, rocketing payment rates have resulted in industry payments to the government going from around £590 million in 2021 to £3.5 billion in 2025. This has been compared to an additional tax by some pharmaceutical companies, although it is applied to sales rather than profits.

While no other country has an identical scheme to the UK, the 2025 payment rate has left the UK significantly out of line with comparable countries, with France’s average payment rate at 5.7 per cent, Italy at 6.8 per cent, Germany at 7 per cent, Spain at 7.5 per cent [3].

In parallel, there is a growing evidence base of widely reported cases of investments in R&D and manufacturing going to other countries. At the same time, competition for global investment has escalated, and pharmaceutical companies are stepping up their investments in the US – Johnson &Johnson has announced $55bn worth of investment, Roche $50bn, Gilead $32bn, Lilly $27bn, and Novartis $23bn.

The very high UK repayment rates and challenging pricing rules are already impacting new medicines launches. NICE’s baseline threshold has remained static since the early 2000s, and the discount rate applied to health benefits realised over time is punitive, creating an increasingly difficult proposition for companies seeking to prioritise launching their medicines in the UK.

In the last five years (2019-2024), around a fifth of the NICE work programme has been terminated – a 100 per cent increase since the preceding five-year period [5] - meaning that NHS patients are not able to access those medicines for their condition.

Access to new, more effective medicines directly benefits patients and indicates competitiveness for investment, including partnerships with the NHS and future clinical trial placements, which provide revenue directly to the NHS. For example, R&D investment offers a range of benefits, including large economic spillovers.

Investment is also linked to growth in employment. The pharmaceutical sector is a key source of high-skill and high-pay employment, 60 per cent of which is outside London and the South East and West of the country.[6]

To understand the potential upsides to fixing these rates, the ABPI surveyed its members on how their plans for new medicines launches, new R&D, and headcount figures have changed since the announcement of the rates, and how they would change in a range of potential future scenarios.

One in five companies (19 per cent) anticipate a reduction in R&D investment as a direct result of the 2025 VPAG payment rate. In 2022, 30 per cent of respondents stated that the UK was in the top three countries globally to launch medicines; in 2025, only 13 per cent stated that this was the case.

The survey sample of 33 companies found that 15 new active substances and 38 new indications have not been launched in the NHS in the UK since the start of 2023, the same year that the payment rate soared to 26.5 per cent (the highest in UK history). Furthermore, 27 medicines, including new indications, were made available only on the private market, further risking the creation of a two-tier health system.

Steve Hopkinson, Vice President & General Manager, AbbVie UK, said: “In the last decade, it is clear the UK has become less competitive and less attractive for life sciences investment due to high medicines rebate rates, low access and uptake of innovative medicines, and declining activity in clinical trials. AbbVie UK has welcomed the government’s willingness to engage in this issue and believes it now has the opportunity to readdress this balance, making the UK more attractive and a top five destination for the life sciences sector, benefiting patients, the NHS and the wider UK economy.”

Russell Abberley, Vice President & General Manager, Amgen UK&I, said: “The findings of this report highlight that we have reached a critical juncture. Government must therefore act decisively on VPAG, taking immediate and positive steps to prevent looming disinvestment and deliver on its ambition to grow the life sciences sector. Failure to do so will further exacerbate the UK’s position as an international outlier with profound and long-lasting consequences for patients, our nation’s health and the UK economy. Now is the time to change course and take a confident step back in the right direction.”

Jackie Davis, UK General Manager, Astellas, said: “Unpredictable and excessive medicines payment rates are putting UK innovation at risk. If the UK wants to remain a leader in life sciences, we must properly value and invest in innovative medicines – because ultimately, it’s about delivering the very best treatments to patients.”

Vani Manja, Country General Manager and Head of Human Pharma, Boehringer Ingelheim UK and Ireland, said: “The UK cannot afford to treat innovative medicines just as a cost to the NHS. A long-term, joined-up strategy is needed – one that sees access to innovative medicines as a vital part of reversing poor health outcomes, boosting workforce productivity, and restoring the UK’s standing as a global leader in life sciences. A stable and internationally competitive commercial environment is essential to achieving this.”

Kylie Bromley, Vice President and Managing Director of Biogen UK and Ireland, said: “The size and unpredictability of the rebates have had a major impact on our work in the UK and our investment here. The positive parts of the UK’s life sciences ecosystem are over-shadowed by the fact that we are a noticeable international outlier for the wrong reasons.

“If the UK can get this right, as well as addressing the well-documented challenges with getting new medicines approved for use on the NHS, we can strengthen our position as a world-leading hub for the life sciences, potentially delivering billions in increased tax revenue and R&D investment over the coming years.”

Peter Wickersham, Vice President and General Manager, Gilead Sciences UK & Ireland, said: “The UK has the potential to be a global leader in life sciences; however, the excessive and unpredictable VPAG rates, coupled with the challenging operating environment are undermining that ambition. We are at a crucial moment for the government to set a more positive trajectory. We must now all work together to create a fairer model that fosters, rather than stifles, access to innovative medicines for patients who need them."

Chrisopher Stokes, President and General Manager, Lilly Northern Europe: “The UK has the potential to be a life science leader. But a combination of unacceptably high and unpredictable repayment rates and the slow NHS rollout of innovative medicines must be fixed, otherwise global pharmaceutical investment and innovation will go elsewhere.”

Johan Kahlström, President & Managing Director UK & Ireland, Novartis Pharmaceuticals, said: “The current VPAG rebate levels are simply unsustainable. A 23.5% claw back on revenues sends the wrong signal to global investors and puts future UK R&D investment and medicines launches at risk. When combined with a cost-effectiveness threshold that hasn’t changed in over 20 years, the UK is becoming an outlier in how it values innovation. Without urgent reform, the UK risks falling behind further as other countries move faster to reward innovation and attract life sciences investment. A globally competitive environment requires innovation-friendly policies that adequately reward value and accelerate access for patients.”

Roz Bekker, Managing Director UK & Ireland, Johnson & Johnson Innovative Medicine, said: “At Johnson & Johnson, we believe everyone should have access to the best health and care.  We have long shared our concerns that the UK's challenging commercial access environment and unstable VPAG payment rates are denying patients the latest treatments, while also impacting the country’s longstanding reputation as a leader in life sciences. An urgent update is needed to the current VPAG scheme to bring rates more in line with international comparators to deliver for the economy and for UK patients.

“Johnson & Johnson remains committed to working constructively with all relevant stakeholders to identify a suitable path forward, however immediate government intervention is now absolutely vital to unlock our country's potential, and ensure our patients are not left behind.”