Hot topics in Life Sciences
In this article, I will explore some of the commercial issues presently impacting the life sciences sector, focusing on the UK while also addressing significant international events and trends.
Medicine pricing
The UK currently has a problem with the way in which it pays for its medicines. VPAG (Voluntary Scheme for Branded Medicines, Pricing, Access and Growth) was intended to help control NHS spending on branded medicines, but the effects have gone further than intended. There are concerns, most particularly from the Association of the British Pharmaceutical Industry, about the rate of the rebate which pharmaceutical businesses are having to pay to the NHS on sales of medicines to the NHS.
Whilst certain exemptions exist within the scheme (including for small and medium sized companies), there is a risk that the UK is becoming internationally uncompetitive in terms of what it is prepared to pay for medicines. This could make the UK a less attractive destination for investment in the sector, particularly at a time when it wants to be seen as open for business.
In response, the UK government has announced an urgent review of the scheme. The pharmaceutical and health care industries will be interested in the outcomes of this review.
The USA and tariffs
It’s impossible to look at the fortunes of almost any sector in any major economy without considering the impact of Donald Trump and US government policy.
The life sciences industry faces the significant threat of tariffs on imports into the USA. Regardless of any specific sector tariffs that may apply, blanket tariffs on jurisdictions such as China could affect the pharmaceuticals or biotech industries
To the extent that they are imposed, tariffs will make it more challenging and costly for UK businesses to export to the US. The unpredictable nature of the Trump administration’s policies further complicates the situation and potentially undermines market confidence, which is generally bad for business. However, this uncertainty could also present an opportunity for the UK and Europe to attract a greater slice of investment and talent.
Access to top talent
The UK should be in a strong position to attract world class talent in the life sciences sector. The UK’s university and higher education system has historically been regarded as one of the strongest across the globe. In addition, the UK has a strong track record with start-ups and spinouts from its universities.
However, the story has been changing recently – and for the worse. The Office for Strategic Coordination of Health Research (OSCHR) has reported a notable drop in the number of medically trained research staff in the UK, with fears that more may leave in the coming years. This poses a serious threat which needs to be addressed if the UK is going to continue to champion life sciences and promote growth in the sector.
Having said this, the situation in the US needs to be considered. Reports indicate that the US government is reducing public funding for science and higher education, which is likely to result in a decline in scientific research and an outflow of researchers. That potentially gives the UK (and Europe) the opportunity to attract a greater share of international talent which would otherwise be heading to the USA.
UK sector strategy
Whilst the UK has been historically good at fostering start-ups, it has struggled with scaling them up, certainly in comparison to its American counterparts. Continued access to funding is crucial for fledgling businesses as they progress from the initial spin-out through the clinical trial process. This need is heightened due to the challenging regulatory landscape in the UK. Anecdotally, some UK businesses have sought FDA approval in the US first and used that as a gateway to get approval in the UK more easily. This is also linked to being able to talent retentions issues as frustration with the clinical trial process has been cited as another reason behind the recent talent drain.
The UK government has recognised life sciences as a priority sector for growth in the Autumn 2024 budget. More recently, a £600 million investment was announced to boost medical research in the UK by establishing a new health data research service. In addition, the government has acknowledged the need to make the clinical trial process more efficient. They have committed to cut the time required for setting up trials to 150 days by March 2026 through reducing bureaucracy and increasing the use of standardised contracts.
It will also be interesting to see the concentration of growth in the sector. As you would expect, Oxford and Cambridge already have thriving life sciences communities and Manchester has also stepped up recently as a centre of activity in the North.
Early indications suggest that the government is keen on promoting regional clusters, particularly in the North and the Midlands. Four hubs (Merseyside, East Anglia, the Midlands, and Northeast England) are being awarded a total of £30 million with the aim of growing more university spinouts in these regions.
There are some encouraging signs, but the real test will be whether this investment is sustained if the UK’s economic position becomes more challenging over the next 12-24 months.
How we can help
Irwin Mitchell has experience advising businesses in the life sciences sector, providing comprehensive support throughout their development stages. For further information please get in touch.
