Investment in Britain’s key life sciences sector is at risk as the commercial environment has gone “backwards” and become “unsustainable”, a senior executive at Johnson & Johnson has warned.
Kris Sterkens, chairman of innovative medicines for the US pharma giant in Europe, the Middle East and Africa, said it had invested less in UK research and development in the past ten years, compared with the prior decade, “at the benefit of other countries” who provide better market access to new medicines.
“From a commercial point of view the UK has become a very difficult market to recognise innovation. In fact, it’s a market compared with other major markets in Europe that seems to be going backwards,” he added.
Sterkens’s intervention comes amid fierce lobbying by the big pharma industry of the British government over an “excessive” NHS sales rebate that it says is damaging investment in an important sector of the economy.
The UK heads of more than a dozen multinationals, including AstraZeneca and GSK, Britain’s biggest pharma companies, as well as Johnson & Johnson, Pfizer, Novartis, Merck and Sanofi, last month called on ministers to work with the industry to return an NHS-branded medicines scheme to an “internationally competitive position”.
The bosses of some big pharma companies, including Dame Emma Walmsley, GSK chief executive, were meeting with ministers on Wednesday as part of periodic, scheduled discussions where both the UK’s drug pricing environment and US tariffs were expected to be discussed.
J&J marked its centenary in the UK last year, where it employs about 3,000 people and operates seven sites.
The group is focused on developing new medicines, including across oncology, haematology and immunology, as well as medical technology after spinning off and listing its consumer healthcare business, Kenvue, as a separate New York-listed company last year. Kenvue’s brands include Listerine, Johnson’s and Aveeno.
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The warnings come at a significant moment, with the Labour government having identified the life sciences as one of eight “growth-driving” sectors as part of its forthcoming industrial strategy, a centre-point of its attempts to kick-start a stagnating economy and encourage foreign investment.
Officials are in discussions with the industry over an industrial strategy sector plan amid a decline in clinical trials and the launch of innovative medicines.
Rachel Reeves, the chancellor, in January set out a government ambition to create “Europe’s Silicon Valley” through a super-cluster in the Oxford-Cambridge “corridor”.
Sterkens said the UK retained a “great” biotech industry and universities, and J&J wanted to “tap into that potential”, as it did in other global “hotbeds” such as Boston and San Diego in the US, and Shanghai.
However, he said the company was not being “rewarded” for innovating in the UK.
The industry’s grievance centres on a five-year Department of Health agreement, struck in 2023, called the voluntary scheme for branded medicines, pricing, access and growth (Vpag). It includes a cap on the total sales of branded medicines to the NHS, sales above which are subject to repayment.
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A report, issued by the Association of the British Pharmaceutical Industry in March, shows the rate for newer medicines is set to rise to a record 22.9 per cent, compared with 15.1 per cent last year and an average of 7 per cent between 2014 and 2021.
“If you compare it to other large countries in Europe, you see vastly different rates,” Sterkens said.
“From a commercial point of view, it makes the business basically unsustainable, to be honest.”
He added: “When it comes to making trade-offs on investments for the future it becomes more challenging to convince our headquarters that the UK continues to be that strategic market that it was 10, 15, 20 years ago.”
Responding to the industry’s report in March, a spokesman for the Department of Health and Social Care said: “Our voluntary scheme, negotiated with the pharmaceutical industry, helps to keep the medicines bill sustainable for the NHS and taxpayer. The growth in the rebate reflects significant improvements in patients accessing new medicines, helping more people get the treatments they need more quickly.
“Ministers have been engaging with the pharmaceutical sector to identify how we can work together to cement the UK’s position as a global hub for innovation and investment.”
