Pharma's confidence slumps as UK scraps drug pricing scheme

The UK pharmaceutical industry is expecting to cut jobs and investment in R&D following an alarming slump in confidence in the UK market, a survey by the Association of British Pharmaceutical Industry (ABPI) and the Confederation of British Industry (CBI) has revealed.

ABPI director general Richard Barker said industry has already announced at least 8000 UK job cuts over the last three years: more than 10 per cent of the country’s 70,000-strong pharmaceutical workforce. And the UK government’s recent decision to scrap the national strategy for controlling drug prices - the Pharmaceutical price regulation scheme (PPRS) - has led to what ABPI president Nigel Brooksby called ’a black cloud of uncertainty’ hanging over the industry.

Over a third of the 101 UK-based pharmaceutical companies questioned in the latest survey say they are expecting to reduce investment in R&D (currently nearly ?4 billion a year). A similar number expect to reduce investment in buildings and equipment, and 42 per cent predict a fall in manufacturing. Almost half expect to reduce the number of clinical trials they conducted in the UK.

Three-quarters of the companies surveyed have little confidence in the UK pharmaceutical market as a place to do business, and 83 per cent expect the situation to get worse.

’The industry’s lack of confidence in the UK business environment should be of deep concern to government,’ said John Cridland, deputy director-general of the CBI.

Brooksby said the industry is particularly concerned by the abrupt termination of the PPRS - a scheme, re-negotiated every 5 years, which allows drug companies to set their own prices for medicines, so long as they cap their UK-earned profits. The current deal was meant to run until 2010 but has been dumped and will be replaced by a newly negotiated agreement on 1 September 2008. Restoring the planning stability the PPRS gave the industry is crucial if R&D investment is to stay in the UK, Brooksby said. He added that the UK’s uptake of new medicines was also much slower than the rest of Europe and the US.

But long before the PPRS uncertainty, UK pharma - like other drug companies around the world - has been cutting jobs and looking to outsource manufacturing to emerging markets such as India and China. Whether most of the 8000 job cuts totted up by the ABPI were in manufacturing or R&D is not yet clear, as those figures were based on informal enquiries. But ’if you lose manufacturing in a country, it’s not long before R&D also exits,’ Brooksby cautioned.

The UK is still the second most important source of new medicines behind the US, and punches well above its weight in attracting R&D spending, Barker pointed out. But in future it may well lose out to the maturing economies - and increasingly well-trained workforces - of Brazil, Russia, Asia, and eastern Europe.  ’I don’t think the government is aware of the depth of the concern. Restoring stability for the UK’s leading science-based industry must be a priority,’ he added.

Richard Van Noorden