Business and Trade Committee
Oral evidence: Industrial strategy, HC 727
Tuesday 18 March 2025
Ordered by the House of Commons to be published on 18 March 2025.
Watch the meeting
Members present: Liam Byrne (Chair); Antonia Bance; John Cooper; Sarah Edwards; Alison Griffiths; Sonia Kumar; Charlie Maynard; Gregor Poynton; Mr Joshua Reynolds; Matt Western.
Defence Committee member present: Mr Calvin Bailey.
Northern Ireland Affairs Committee member present: Gavin Robinson.
Questions 297 - 354
Witnesses
III: Shaun Grady, Chair, AstraZeneca; and Tom Keith-Roach, UK Country President, AstraZeneca.
Witnesses: Shaun Grady and Tom Keith-Roach.
Q297 Chair: Welcome to the third panel in today’s inquiry session on industrial policy in the UK. We are absolutely delighted, Mr Grady, that you have been able to join us together with Tom from AstraZeneca to help us in our thinking and then our understanding of industrial policy, in particular in the life science sector. Mr Grady, let me kick off. Why did AstraZeneca ultimately decide not to invest in Speke?
Shaun Grady: Thank you for the welcome, Chair. We are pleased to be here.
If I can remind everybody, Speke was our intent and proposal to expand our manufacturing site in south Liverpool for the manufacture of a new vaccine, and also creating an end-to-end pandemic capability in Liverpool, which was welcome to us and to the Government. We agreed in principle to a risk share arrangement with the Government whereby the capital and R&D costs of the Speke project were £450 million and the Government indicated a willingness to contribute £90 million towards that overall cost. That was announced in March 2024 as part of the Budget.
Then, as everybody knows, the general election was called, there was a pause, things went on hold, and then we recommenced due diligence and detailed analysis of the project with the new Government over the summer. We had made clear to the Government that we needed confirmation of the availability of the grant and the amount by August because that was our deadline to commence the R&D we were doing.
Chair: That is August 2024.
Shaun Grady: That is correct, yes. We were doing the research and development in parallel with the planned construction of the building. Of course, influenza is a seasonal vaccine and because that confirmation was not forthcoming, we missed the season. The business case, which, to be honest, had been quite marginal in the first place, was significantly undermined because our launch dates were put back.
When the offer emerged in October of support to the tune of £75 million, that did not then support the revised business case with the new timelines sufficiently. Regrettably and unfortunately, we communicated to the Government that we would not be proceeding with the project.
Q298 Chair: Basically, did the Government fall about £15 million short of what I guess Jeremy Hunt had proposed and, for a lack of £15 million, lose out on a £450 million investment?
Shaun Grady: That is not entirely accurate because the amount that ultimately emerged was £15 million less than the Jeremy Hunt offer, but because of the delay and because we had missed the R&D programme and the season, we are not comparing like with like. It was a different, diminished business case as a result of the launch timelines being pushed out.
Q299 Chair: It was partly an issue of speed and partly an issue of money?
Shaun Grady: It was mostly an issue of speed. Had we received the confirmation of the grant in time and it was of the lower amount, we would have had a different discussion, but in the event, because it was not forthcoming until October, the justification for the business case was no longer viable. Even a company of the size and scale of AstraZeneca has limitations and restrictions around the amount of capital expenditure that that we can make. In many respects, these projects are all competing with each other because we could be doing lots of things in different therapy and disease areas around the world. As I have said, the Speke project was fairly marginal at the outset but we were keen to push ahead and then the delay, unfortunately, led to us making the regrettable decision that we would not proceed.
Q300 Chair: The £40 million was on the table in August 2024. That was upped to, you said, £75 million. I had £78 million, but it was mid-£70 million?
Shaun Grady: Yes, £90 million was the first offer. We have seen reference to £78 million in the media but, from our perspective, £75 million is the accurate number.
Q301 Chair: There was only a two-month delay in that offer going up, but that two-month delay was sufficiently damaging from AstraZeneca’s point of view to scupper the whole thing?
Shaun Grady: That is correct, Chair. There is a programme and a timing for the trials. It was all tightly programmed. We were ready to go at the beginning of August had the confirmation been received. That two months had a significant impact.
Q302 Chair: Do you think that civil servants and Ministers knew that that would be the impact of a delayed decision?
Shaun Grady: We had made clear in correspondence and in discussions between AstraZeneca colleagues and officials the importance of that date. I am not sure I would put myself in the shoes of the officials as to what might happen if that date was not met.
Q303 Chair: You must have often asked yourself, “What is going on here? Surely these guys know that a two-month delay will imperil the whole project.” You must have been tearing your hair out.
Shaun Grady: Yes, we do not have any regrets that we repeatedly made clear the critical importance of that August deadline.
Q304 Chair: Do you have a gut feel for what was happening on the other side of the fence?
Shaun Grady: It was clear to us that the officials were working hard and tried hard to do their work quickly. It took time, as one would expect with these forensic due diligence exercises. It was detailed. Yes, despite our constant reminder that August was a key date, the confirmation did not come until the October timeframe.
Q305 Chair: Did you get a sense of where it got snagged? Was it in the Department for Business and Trade or in the Treasury or somewhere else?
Shaun Grady: We did not have a clear read on that, Chair.
Q306 Matt Western: You said there was a seasonality about this vaccine. What was the vaccine and have we missed the season? I assume it was a recent season given the time pressure. When will that season return?
Shaun Grady: Yes. It is an influenza vaccine and the project was to convert the manufacturing activity from an egg-based to a cell-based approach. It was entirely connected to the flu season. Having missed that particular season, it was not a case of pushing it back until the next season because the underlying economics in the business case were significantly affected. We will not now proceed with the project in Speke and we are looking at other ways to bring the cell-based manufacturing vaccine to the to the market, potentially in partnership with other industrial players.
Q307 Matt Western: That particular process that you are describing may be relative to future seasons but, for whatever reason, you just think that it is no longer relevant to Speke?
Shaun Grady: That is correct, yes. We put this risk share arrangement together. We were taking quite a bit of risk doing the R&D in parallel with the construction at the site. We were pleased to receive the offer of support from the Government, but when we missed the R&D programme and the number came down, the investment in Speke for that new facility was no longer viable.
Q308 Matt Western: Has the R&D programme continued?
Shaun Grady: No, it has not. No, it is on hold and we are investigating alternative options in exploratory, early discussions with other industrial partners.
Q309 Matt Western: Why did you think of Speke in the first instance? What was the opportunity presented by Speke?
Shaun Grady: Speke is our current influenza manufacturing site in Garston in south Liverpool. We have 400 vaccine manufacturing skilled employees in Liverpool.
Q310 Matt Western: Could you have gone to a vaccine site in Europe or do you not have any vaccine sites in Europe?
Shaun Grady: We do not have vaccine sites in Europe. Speke near Liverpool is our vaccine manufacturing site. We had space at Speke but, when we could not make the numbers work and we could not make the finances work, we put that project on hold. We will not go forward in Speke. We are investigating other alternatives for cell-based manufacture.
Q311 Matt Western: You had existing workforce there. It was just building or supplying into an existing facility, not necessarily additional employment?
Shaun Grady: There would have been additional employment. We had the existing leadership team at the vaccine plant. We could have redeployed people on the site, but there would have been additional employment as a result.
Matt Western: How many?
Shaun Grady: I do not have the figure at my fingertips, but we can send that.
Q312 Matt Western: Do you think that the Government fully appreciated the opportunity and the value that this investment would have brought in socioeconomic value to the region and the UK?
Shaun Grady: I believe they fully understood. We provided an enormous amount of information and data and explanation and that was all available to the Government. Of course, an offer of a grant was forthcoming at the end of the day, but unfortunately it came a little too late for this project at the lower amount.
Matt Western: The shortfall in money you are talking about is quite striking, given that a school in my constituency has gone massively overbudget by a not-dissimilar sum of money.
Q313 Chair: I want to double check. Was the Government’s initial contribution of £90 million within the £450 million or on top?
Shaun Grady: Yes, £450 million, of which the Government contributed £90 million.
Chair: It was an 80:20 split, basically?
Shaun Grady: Yes, 20%.
Q314 Mr Reynolds: Can you just confirm for me when you made and confirmed with the Government the final decision to not go ahead with the investment?
Shaun Grady: In January.
Mr Reynolds: It was January? You mentioned August and October.
Shaun Grady: Yes, August was the deadline we had requested to have the confirmation so that the R&D programme could continue on time and not affect the business case. The award was confirmed to us in October and Tom and I and senior colleagues met officials in Whitehall in January where we shared the unfortunate information that we would not be proceeding.
Q315 Mr Reynolds: At the ministerial urgent question, the Minister at the time had said that it was disappointing, following “intensive work and collaboration” between the Government and the company. Would you agree that it was intensive collaboration?
Shaun Grady: Yes, I would.
Q316 Mr Reynolds: They obviously then decided at that point that the significant change meant they could not move ahead. What work would you say was done by the previous Government and what work would you say was done by the current Government?
Shaun Grady: The previous Government commenced their due diligence work. Work had started. It was preliminary because they were getting into the detail. Then the election was called and things went on pause. Then the work was resurrected following the election.
Q317 Mr Reynolds: You have mentioned Government Departments that you were speaking to and you were having these conversations with. How were the relationships within those Departments? If you said that your deadline was August and that did not get met, I imagine the relationships could not have been the most positive.
Shaun Grady: No, the relationships were professional and—
Q318 Mr Reynolds: Why was the decision so late, passed the deadline, if the relationships really were professional, they knew your deadline but they still missed it by a significant amount?
Shaun Grady: The interactions between the officials and AstraZeneca employees were professional and respectful. Clearly, there was growing frustration as we got closer to the deadline and, ultimately, it was missed.
Q319 Mr Reynolds: Where would you say the final problem or that blocker in effect sat with? Was it a Minister? Was it the Government? Was it civil servants? Where was the problem?
Shaun Grady: My personal view is it was a combination of events. The announcement was made and then pretty shortly thereafter the election was called. We lost a lot of time. It so happened that that was on a project that had this time-critical sensitivity, which we reminded the officials of repeatedly. That was not met. It is frustrating and it is disappointing, but it is business. We have discussions with lots of governments around the world and it does not always come to fruition, but it was a clear business decision based on the financial metrics of the particular project.
Q320 Mr Reynolds: Finally for me, what impact does this investment falling through make on your decisions to make future investments in the UK?
Shaun Grady: Again, I repeat that the Speke decision was on its merits around the business case in Speke but, for AstraZeneca and companies like AstraZeneca, the business environment more broadly is an important factor in making those decisions.
When we look at life science clusters and countries where we might invest, we tend to look through three pillars. The first is presence of strong science and R&D investment and, in the UK, we punch above our weight in that respect with world-leading universities and research institutions. The second tenet is there being a business environment that is conducive to making investments and recruiting talent. The third pillar is the appetite and the willingness of a particular country to adopt the innovation that will emerge from that research and development and manufacturing. That is the area where currently we feel the UK is falling down.
Chair: We will come back to this important point.
Q321 Sarah Edwards: I want to come back to part of the timeline that we were trying to construct with you a few moments ago. When you first had the offer under the previous Government, how did you hear about that? We have had reports that the Chancellor of the Exchequer notified the company through WhatsApp. Is that true?
Shaun Grady: We read, too, in the media that everything was done by WhatsApp. From our perspective, it was a conventional, normal interaction by emails and teleconferences being set up and what happened.
Q322 Sarah Edwards: Did you receive the first notification of an offer for the £90 million through a text message or through an official email?
Shaun Grady: I cannot speak to what WhatsApp messages may or may not have been sent but, from our perspective, this was a normal, businesslike interaction, rather than, as it was reported, all done rather haphazardly by WhatsApp. That is not what happened.
Q323 Sarah Edwards: When did you get that first confirmation of the initial idea that it would be £90 million that they would put in?
Shaun Grady: It would have been shortly before the announcement was made.
Q324 Sarah Edwards: It was close to the election, but I was trying to understand how much due diligence they might have done so that the civil servants working on it would then have known about this August deadline that was so critical to the project. I am interested. At what point did they say, “Yes, we will give you that”, versus looking at that option? Was it a matter of days before the election?
Shaun Grady: The in-principle offer was made before any due diligence was carried out. When we made agreement to that risk share partnership, then the more detailed due diligence started. Pretty shortly after that, the general election was called.
Q325 Charlie Maynard: Very roughly, what was the £450 million going to be spent on, in headlines?
Shaun Grady: That was a combination of R&D and capital. The project costs were £590 million. £390 million was for the capital construction of the facility and £90 million was for research and development conducted in the United Kingdom.
Q326 Charlie Maynard: Does the £390 million for construction include capex as well? It is not just the construction of the—
Shaun Grady: That is correct, yes.
Q327 Charlie Maynard: Okay. I am confused. The flu vaccination season starts in October or November. Is that right?
Shaun Grady: Yes.
Q328 Charlie Maynard: You are getting £450 million or £590 million in August. You are saying £390 million spent on construction, including building and fitting out a plant, and also some R&D out there, but then you are saying this was all about the flu season that was kicking off in October or November. You cannot spend that sort of money in that sort of time period and so it is weird to be talking about that season as being completely critical. That does not make sense. Can you explain?
Shaun Grady: It was carrying out the research and development from August that would have our launch preparedness for subsequent flu seasons.
Q329 Charlie Maynard: Fine. Part of it is R&D, but the £390 million, which is constructing and fitting out a facility, takes many months.
Shaun Grady: Yes. The £450 million would not have been paid in August. We were looking for an August confirmation that the grant would be forthcoming and the amount of the grant and because that did not happen, we were unable to initiate the research and development.
Charlie Maynard: Mr Grady, it has been said so far as if it was all about missing the season, as in the 2024-25 season. We are not going to have been producing—
Q330 Chair: Let us check that. Was it the 2024-25 season?
Shaun Grady: It was missing the ability to start the research and development so that we would be prepared for subsequent seasons.
Chair: Which may be 2025-26, for example?
Shaun Grady: Yes. Therefore, the launch timings of the business case were altered and the economics were different.
Q331 Charlie Maynard: Okay, but which season are we talking about? Frankly, stop me if I am wrong here, but if you have a sign-off in August, having £390 million operational by the next season will be a push. Which season are we talking about? It seems odd.
Tom Keith-Roach: Perhaps if I can clarify, the global business case for this investment was contingent on our ability to launch this new flu vaccine globally. It was a reasonably marginal business case to begin with.
Q332 Chair: What was the target date, Tom, for the launch?
Tom Keith-Roach: The target date was to launch in the 2029-30 flu season. The challenge is, if you lose your R&D programme at the beginning of August, you cannot initiate it until the following August, the next flu season. Therefore, you lose in MVP terms the global value of one first full global flu season. That is not just in the UK. That is in the US, China and other markets. The business case was contingent on that launch timeline.
Q333 Chair: Missing out a couple of months up front means you lose a year out of the programme, effectively?
Tom Keith-Roach: You lose a year.
Chair: Please pursue the point, Mr Maynard.
Q334 Charlie Maynard: That is helpful because that was not clear until this moment. It still strikes me as odd. We are talking 2029-30 and so we are talking 48 months, maybe. Back in 2024, that was more like 60 months. To be saying two months out of 60 feels odd. Am I being unfair when I say that those two months can be caught up over four or five years?
Shaun Grady: It is not that it is unfair, but it is and was the case that that two-month delay meant we could not launch as we had hoped and planned for.
Charlie Maynard: In autumn 2029?
Shaun Grady: That is correct.
Charlie Maynard: Okay. I will park that.
Q335 Sonia Kumar: You had a vaccine that was prepared and ready and the R&D was going to be then used to further see whether it was safe and was a viable option. Is that correct? I want to get the first point right. Is that right?
Shaun Grady: Yes. We have the influenza vaccine that is based on egg manufacture and that is the manufacturing work that is done at Speke currently. We were looking to convert the manufacture of the vaccine from egg to a cell-based approach, which is much more reliable, efficient and certain.
Q336 Sonia Kumar: Could some of this process have been done somewhere else in the UK in the interim while you were waiting for this funding package to be agreed?
Shaun Grady: We needed to be confident on the funding of the R&D and the funding of the construction of the plant to proceed with the project at all.
Q337 John Cooper: If I can take you back, you have been able to talk about your three pillars and how you assess where you will do business. You speak to governments, presumably, all over the world. What are the relative strengths and weaknesses of the UK’s business environment? Perhaps taking you back to your three pillars, you talked about science and R&D, the general environment and the appetite for innovation. With reference to that, how does Britain rate?
Shaun Grady: We think life sciences is a vital strategic area of strength for the UK, which is why we welcome the industrial strategy and the life science component of that. The life sciences both contribute directly to and broaden economic growth. For example, every AstraZeneca job, we believe, supports a further six jobs in the UK. We have 10,000 people in the United Kingdom and our calculation is that we support over 70,000 jobs here. We invest £3 billion a year annually in research and development in the UK. That makes us the single largest private investor in R&D in the UK. We calculate that we contribute £8 billion a year to the economy. It is a significant sector for the UK.
At the same time attracting investment in life sciences is an intense global competition. Lots of other countries are also seeking and pursuing that investment. It is important that the UK takes a holistic approach to make sure that we are attracting investment to come here. Of course, because of all the interdependencies, the life science sector touches and is touched by many limbs of the Government, whether it is science, technology, the NHS, education or environment, it makes it even more important that we all work together and create a co-ordinated, compelling offer to attract companies to invest in life sciences in the UK.
Q338 John Cooper: You are heavily invested in the UK and there is something about Britain you like. You hinted at the appetite for innovation, though. You thought that we might have fallen down somewhat on that. What is the difficulty there?
Shaun Grady: Maybe I will pass to Tom at this point as Tom leads all our commercial activities in the United Kingdom.
Tom Keith-Roach: It is a great privilege to be here. I have led AstraZeneca in the UK since 2020 and so through the Covid pandemic, when we saw our industry in life sciences performing at its best. However, if you look at the data for the long-term trends in the UK’s international competitiveness, it has accelerated since Covid. You can see that investment in R&D, investment in manufacturing, exports and clinical trial investment is growing far faster in other countries than it is in the UK.
Q339 Chair: Do you want to name a couple of countries where we are being outpaced?
Tom Keith-Roach: Yes, for sure.
Shaun Grady: Let me do that, Tom. In foreign investment terms, I have four points. The growth between 2013 and 2023 in the UK was 37%. In Australia it was 400%. In France it was 377% and 350% in Germany. Then growth in pharmaceutical exports from the UK in that 10-year time period was 16%, 294% in Belgium, and 222% in Canada. The number of people employed in medicine manufacturing in the UK grew by 3%. It was up 70% in Ireland, 33% in Spain and 14% in Germany. Then the final point, Tom, is that the number of people recruited to clinical trials in the UK over that timeframe has dropped by a third and increased by 49% in the US and 20% in Spain. There is a real danger that the UK, without us working together to address this, is falling behind.
Chair: Tom, you are burning to get in.
Tom Keith-Roach: I was going to respond to Mr Cooper. It is true that the UK remains an attractive place for investment. Within AstraZeneca since 2020 our R&D investment in the UK has moved up. It has trickled up from £2.5 billion a year to £3 billion a year. Meanwhile, and over the same period, we have put multibillion-pound new investments into Boston, China, Canada, Spain and other countries. The UK is not currently capturing a huge opportunity.
Chair, back to your question about where the UK is competitive and why we see that for R&D the UK remains a powerhouse, but the closer you get to the NHS, clinical trials and bringing innovation to patients, the less competitive the UK environment becomes. I have been a long-standing advocate for UK life sciences and it pains me to say this, but at the end our industry’s mission is to bring new medicines all the way through to patients, to change patients’ lives and to improve public health. The UK is an outlier now as one of the most difficult places in the world to do that. As a matter of policy, it gets more difficult every year.
Although that is not the direct reason for the failure of us getting some of these investments across the line—and I have been involved in trying to bring a number of global investments to the UK over the last five years—it is difficult to do that when the broader mood music says the UK is a country that does not value innovation.
Q340 John Cooper: What are other governments doing that is right, apart from throwing the kitchen sink at this? The growth you are talking about there presumably means a lot of money is getting put in. Yesterday, we were a stone’s throw away from the medicines manufacturing and innovation centre just outside Glasgow airport. Is that a drop in the ocean? Is that simply not enough?
Shaun Grady: Different countries take different approaches. In some cases it is tax incentives. In others it is capital contributions. They can be significant, as we experienced in Singapore with the construction of an antibody drug conjugate plant that we decided to establish there.
It is important that we are not saying the UK needs to replicate all those things that are happening around the world, but the UK needs to adopt the innovation that is emerging from the UK and elsewhere. If you are on a global board of a pharmaceutical company and you are deciding where you will build a new R&D plant or a factory, if pharmaceutical products actually are not being adopted here, it makes it difficult to see the UK as your first choice.
Chair: Let us zero in on this because this may centre on an issue around NICE and drug licensing.
Q341 Sonia Kumar: NICE rejected two of your trials for a new advanced breast cancer drug in the NHS. What are your thoughts on the NHS and the NICE decision on this? Has it affected your thoughts about investing in the UK?
Tom Keith-Roach: Let me give you a bit of an overall framing of this issue and then come to the question of Enhertu.
The UK does not have, in our view, a healthcare funding problem. In England, we invest £180 billion a year in the NHS. If you compare that to other countries, 11.3% of GDP, we are behind some. Canada, France and the US invest more. However, relative to many countries in Europe, the UK is ahead.
Where the UK stands out—and this came through in Lord Darzi’s report and also in the Government’s own data—is that NHS spending is disproportionately focused on hospital and acute care, which is the vast majority, and also increasingly over the last 10 years on manpower. Those two things are crowding out other types of healthcare expenditure. Capital expenditure, as Lord Darzi focused on, is increasingly squeezed out, data and technology infrastructure, primary care diagnostics and also medicines. The UK invests only 9% of the entire healthcare budget in the UK in medicines. That, for instance, compares with 18% in Spain and 16% and 17% in France and Germany. We see a health system that prioritises emergency care in hospitals when patients become extremely sick.
Q342 Chair: Pause for a second, for parenthesis, almost. Is what has happened here basically a consequence of the rationing that we have seen as cost pressures have grown more acute over the last decade and a bit?
Tom Keith-Roach: It is a great question, Chair, and essentially I have to say it is a matter of cost management policy. If we are to achieve a shift left in healthcare toward prevention in line with the Secretary of State’s strategy, it will have to change. Those are the conversations we are now having as part of the sector strategy.
When I say it is a matter of policy, the UK’s willingness to pay thresholds as defined by NICE were established in 1999 and they have not moved. Over the last 25 years, we have seen a 54% real-terms reduction in the willingness to pay for innovation. That means—and we will come back to the Enhertu example—we see more innovative medicines withdrawing from the NICE process because they simply cannot meet that standard and those that do make it through we see making it through with increasingly restricted patient populations versus the patient populations in which those medicines have proven effective. UK patients have access to only 28% of fully reimbursed medicines, whereas patients in Germany have access to 87% of those. That long-term race to the bottom is continuing to mean that patients in the UK are not receiving access to innovation. In the long term we will have to address that. Otherwise, this issue will continue to accelerate.
Q343 Chair: As we sit here this afternoon, do you see that curve still in decline over the foreseeable years to come?
Tom Keith-Roach: As long as those thresholds do not move, by definition, in real terms, they are declining. If I use the Enhertu example, Enhertu is an antibody drug conjugate for a particularly aggressive form of metastatic breast cancer called HER2-low breast cancer. Some 1,000 women in England and Wales are suffering from that and, without treatment, they have 18 months to live. Enhertu is approved in 23 healthcare systems across Europe, of course, including Scotland and countries like Romania. Notwithstanding the fact that we offered patients in England and Wales—we do not reveal prices—what was the lowest price out of those 23 nations, it was still considered to be not low enough by NICE.
At some level, it takes two to tango. Of course, it is a sovereign choice in the UK about how it chooses to value innovation, but we see over the long term a depleting access to innovation for patients. As a life science investor, as I said, it is hard for me to champion the UK as a destination for new R&D or manufacturing or clinical trials if it is impossible for me to bring that innovation to patients.
Chair, may I add one other point? It is particularly topical. The adoption of innovation is also slow in the UK. NHS England is not one organisation; it is an archipelago of about 20,000 organisations in England alone. Median adoption of innovation is slow relative to other countries. Also—and this is completely unique to the UK healthcare system—the Government extracts a clawback tax from the life sciences industry by legislation each year, which prevents the total market from growing. Even if you get through all those barriers and do have access, growth is taken back by the Department of Health through a clawback. In the second half of this year, the Department of Health will take back 32% of all revenues of sales generated in the NHS.
Q344 Chair: Revenues, not profits?
Tom Keith-Roach: Revenues, yes. Of course, we are also subject to corporation tax. That is up from 15% last year. Firstly, it is highly unpredictable, but it is a piece of legislation that prevents—
Q345 Chair: Sorry, the clawback is up from 15%?
Shaun Grady: Yes.
Q346 Sonia Kumar: Back to NICE, is it just payment or are there any other reasons in terms of the rigour that goes on in the clinical trials that they are looking into that they have rejected this drug in particular? Is payment the only reason?
Tom Keith-Roach: Yes, this trial met all of NICE’s evidence standards in terms of clinical efficacy. As I said, these women on average have 18 months to live and it improved life expectancy by just over six months on average. Yes, at the end, it came down to the UK attaching a lower value to innovation and extension of these women’s lives than 23 other countries in Europe.
Chair: Yes. We will move towards a conclusion on industrial policy in a moment, but quickly Joshua Reynolds.
Q347 Mr Reynolds: Quickly, you were talking about the clawback that the NHS has, which is understandable in one respect, but then, in other respects, last month it was confirmed that underlying profits for AstraZeneca rose by 58% to $4.2 billion. One could put an argument together that your complaint does not have a lot of merit when you made a profit of $4.2 billion last year.
Tom Keith-Roach: We do not provide breakdowns of profit or revenue by individual country. Shaun may have covered it earlier, but the UK represents about 2% of AstraZeneca’s global sales. We invest 25% of our global R&D budget in the UK and we generate £8 billion worth of gross value added in the UK economy. I can tell you our topline sales here is a small fraction of that. Of course we can talk about whether the NHS can squeeze even further cost saving out of these pennies?
However, the two big opportunities that we need to address through the life sciences strategy, firstly, is how we take this £8 billion of investment and grow it. This is a fast growing global industry and we want to bring more to the UK. Also, how do we switch from thinking about medicines as only a cost and partner with the NHS to get evidence-based care to patients to keep them well, to keep them out of hospital, to make them productive, to keep them in the workforce? These two opportunities should be absolute engines of life sciences strategy and economic growth. We should be doing that, as we did through Covid, in partnership. Otherwise, we are locked in a race to the bottom and that is in no one’s interests.
Shaun Grady: The policies are depriving patients of breakthrough medicines and also disincentivising pharmaceutical companies from making further investment.
Chair: You have been very generous with your time. The clock is slightly against us and I will ask Mr Western to help us wrap up. We would love your conclusions about the priorities that you would set out for the Government’s industrial strategy for life science. I am also quite interested in your observations on the Office for Life Sciences and how effective you find that as a place for bringing the public and the private sector together.
Q348 Matt Western: The comments you have been making are interesting. I am interested to know, in the light of Theresa May’s life science sector deal, what happened from that? It was not that many years ago that that was introduced by Greg Clark, I believe, alongside Theresa May. What happened in the success or not of that? What is the current status of the relations between the Government and the sector?
Mr Reynolds: Be honest. Be straight.
Chair: We are trying to learn the lessons. You have taken us to an interesting place. We started with trying to understand what happened with Speke, but we have gone in an interesting direction that we need to understand.
Tom Keith-Roach: The Office for Life Sciences does great work and we also have a Life Sciences Council on which our chief executive sits with a number of members of the Cabinet. Those are extremely productive forums for cross-departmental discussion.
Anybody who has followed life sciences strategy and new deals over the course of the last 20 years will be aware of the myriad policy documents that have talked about the need for change along the lines that I have articulated, but if you look at the data in Lord Darzi’s report, those trends have not shifted at all. None of those lines have been bent. We continue to invest more in manpower and acute care and less in other aspects of healthcare.
The opportunity that we now have as part of this life sciences strategy once and for all is to move these forums from being forums of discussion to being forums of action, to unlock the opportunity that we have to increase investment in the UK and to partner together to improve public health.
Shaun Grady: If I could echo that, the contact and interactions that we have with the OLS are good. They are approachable. We meet with them frequently. Thus far, that has not resulted in any meaningful change or improvement from our perspective, certainly from the adoption of innovation.
To echo Tom, other sectors look at the Life Sciences Council with some envy. It is where Ministers and CEOs can get together. That needs to move into more of a decision-making and policy-driving body rather than everybody showing up and talking about how difficult everything is.
Q349 Matt Western: On that, we have always been told that one of the benefits of the NHS is that we have a huge data pool and that is a massive advantage to the pharma healthcare sector. We should have a massive advantage here. You said 25% research and development in the UK. What would it have been, say, 10 years ago? You must know.
Shaun Grady: For the UK for AstraZeneca?
Matt Western: For the UK. It is 25% currently in the UK.
Shaun Grady: Sorry. My sense is that that has been fairly consistent in the proportion of AstraZeneca’s R&D in the UK.
Tom Keith-Roach: I do not have that data at the top of my mind, but we can provide it. Over the last decade we have moved from three global R&D centres in the UK, of which one was in Cambridge, to having five. I imagine that number has slowly come down to 25% as we have invested elsewhere, but I do not have the number on the tip of my tongue.
Q350 Matt Western: Could you confirm that to us?
Tom Keith-Roach: Will do.
Q351 Matt Western: On the relationship across Government and how DHSC is working as a customer alongside the NHS with, say, DBT, how is that relationship working in your eyes?
Tom Keith-Roach: For me, it is a little bit early with the new Government to comment on interaction between those two Departments.
Q352 Matt Western: How was it working a year ago?
Tom Keith-Roach: Historically, life sciences policy has been a little bit cakeist. What I mean by that is medicines and innovation policy in the NHS has been completely independent from a strategy to attract industry investments into the UK. Those two arms of Government and those two policy agendas have acted independently and the Government have assumed that there is no link between the two.
Covid changed that. The step up in the rebate rates that I have discussed and the race to the bottom in the willingness to pay is now starting to deny patients access to innovation in the UK. It has become urgent. The feedback that we have been given to all Departments across Government through this life sciences process is that we now need to join the dots and come up with a strategy to generate growth in partnership on both of those dimensions.
Q353 Matt Western: Will the industrial strategy council succeed? Will it work in your eyes for the sector?
Tom Keith-Roach: I do not have any personal experience of the industrial council. As I said, our chief executive sits on the Life Sciences Council, which works under the auspices of the industrial council. Shaun, you have been sitting on that on behalf of Pascal.
Shaun Grady: Yes. As British citizens and as representatives of a valuable British company, our deep hope is that it will succeed and AstraZeneca will do whatever it can to support that because we are at a period of risk and we need to work together to effect some of these changes.
Q354 Chair: Thank you very much indeed. If you gave us your top three asks for industrial strategy in life sciences, adoption of innovation feels like it is at the top. Give me a couple of other points for the list.
Tom Keith-Roach: From my perspective, the most urgent is we have to address this extraordinary clawback tax. If we do not find a shared solution to that, the life sciences strategy does not pass go. It is unique to this industry. It is the only one of the eight growth industries where this type of legislation is applied and it is not sustainable. We have to address that.
We have to address the long-term willingness to pay. I said it is a race to the bottom. If you do not fix it in the next 12 months, we may be able to survive, but it is absolutely unsustainable for the next 10 years. Of course, the Secretary of State for Health has talked about shift left, the desire to partner with the industry to accelerate the adoption of equitable access to innovation for patients. Let us hope that the changes that we have seen announced last week are a first step in that direction.
Shaun Grady: Chair, beyond adoption of innovation, we will share with you two or three things. We have suggested in the spending review that the Government consider increasing public expenditure in R&D. We said earlier that we do pretty well in the UK, but there is an opportunity to differentiate the United Kingdom. We have expressed support for prioritising the Ox-Cam growth corridor. Being based in Cambridge, that is perhaps not surprising, but we think the Oxford-Cambridge linkage should be prioritised. The supercluster board estimated £78 billion worth of additional value add by 2035. We have flagged that area to the Government as being hugely important for growth creation from the life sciences sector.
Chair: Perfect. That takes us to the end of our panel. That has been extremely useful evidence. Thank you both for sparing us time to come in this afternoon. It has helped us with some of the conclusions that we have to draw. That concludes this panel and this session.