UK Report: Keep Calm and Carry On ... Differently - Pharmaceutical Executive


UK Report: Keep Calm and Carry On ... Differently

Pharmaceutical Executive


Nigel Gaymond, Chief Executive, BioIndustry Association (BIA)
As an eminent figure of the UK's life sciences sector, Sir Richard Sykes is arguably the man responsible for consolidating what is today GlaxoSmithKline, up until 2002 when he stepped down as chairman of the flagship British pharmaceutical company. He reminisces about the times when in the UK "companies could make as much profit on a product as they wanted as long as it was relevant to the amount the company had spent on R&D in the country. This is why many companies came and set up their facilities here, because you had a great pool of people to do the research and also had the government that provided incentives for it. You also had a great test bed in the NHS. Today most of these factors have changed so the positive environment no longer exits." Eisai's Nick Burgin drives this point home with the example of Japanese pharmaceutical companies that "are currently in an investment phase in which they are looking to spread their wings and invest in new markets outside of Japan. As with any investment decisions there are limited resources available to these companies, and therefore they will choose the most attractive opportunities for them. Emerging markets such as the BRIC countries are very interesting options for these companies and therefore markets in Europe must compete for these investments by sustaining an appealing environment through investment-friendly policies."

Gary Hendler, President and CEO, Eisai Europe
When compared to some of its regional neighbors the UK has one of the lowest medicine expenditures as a percentage of its GDP, standing at 0.91% in 2010 compared to 1.53% in France and 1.22% in Germany. Furthermore, the NHS has gradually been spending less on medicines every year, from 12.5% of its total budget in 1999 to 9.8% in 2008, even though the institution's total budget has been increasing to more than 120 billion ($192 billion) in 2011. This is in contrast to the fact that, following the financial services sector, the life sciences provide the greatest contribution to the UK economy, having generated a trade surplus of over 7 billion ($11 billion) in 2009.

Why then would the country become complacent about the attractiveness of its commercial environment for pharmaceutical companies? The answer is: It is not. Rather, the cost-cutting and restrictive spending is reflective of the overall economic malaise around the world and a greater need for governments to stabilize their budgets. Picture the UK government walking on a tightrope trying to balance a pole with a sluggish economy and public debt on one end, and the demands of pharmaceutical companies to improve commercial conditions on the other. The point of equilibrium is far from evident. Despite his nostalgia for better times, Sir Richard Sykes advises pharmaceutical companies "to hold their nerve. Yes, they are going through a bad period at the moment, but this is only a period after all. The industry is not in terminal decline by any stretch of the imagination."

Quite the contrary, the government seems to have taken stock of the warning signs and has reacted by implementing a number of incentives to ensure that the UK remains a stronghold for the global pharmaceutical industry. One such initiative is the Cancer Drug Fund, whose role is to fund the use of innovative cancer treatments that have not been approved for reimbursement by NICE for not meeting cost-effective parameters. Another notable example is the Patent Box Law, currently under discussion, which would provide a preferential tax rate to companies who develop and register their intellectual property in the UK. Similarly, the government has implemented an R&D tax credit system that allows companies to obtain a tax deduction in return for R&D investments made in the country. In January 2009, the Department for Business, Innovation, and Skills (DBIS) also created the Office for Life Sciences (OLS) that dedicates itself entirely to shape a positive business environment for this strategic sector. The OLS is a collaborative effort with DBIS to align business priorities with those of the country's healthcare.


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