Written evidence submitted by the Association of the British Pharmaceutical Industry (ABPI) (LSI0016)

Submission: Science, Innovation and Technology Select Committee inquiry into the Competitiveness of the UK’s Life Sciences Sector

Executive Summary

• The UK has the potential to be a global hub for the life sciences, supported by a new ambitious Life Sciences Sector Plan (LSSP) from government, and several foundational strengths that are world-recognised.
• However, global competition in our sector is fiercer than ever. As the UK looks to restore faltering life sciences investment, it needs to take steps to strengthen the competitiveness of its offer, address systemic weaknesses and focus on areas where it has the real potential to distinguish itself as a world leader.
• When contrasted with other leading life sciences economies, the factor that is most affecting the UK is its unattractive commercial environment. Most recently, this has been caused by sharp and unpredictable rises in the payment rate levied on companies through the Voluntary Scheme for Pricing, Access and Growth (VPAG) and the parallel Statutory Scheme (SS) but is also driven by the UK’s long-standing disinvestment in medicines and the value that NICE ascribes to innovative medicines.
• These factors are currently having a negative impact on patient access, and thus on health outcomes as well as onwards R&D and investment into the UK. When compared to all EU4 Nations, except France, the UK’s medicines availability is in long-term decline.[1]
• This submission sets recommendations to address these challenges, including by adjusting the ways in which NICE assesses and values new medicines.
• The submission further considers the areas where it might be possible for the UK to capitalise in existing strengths, including through robust delivery and monitoring of the Life Sciences Sector Plan (LSSP), by strengthening our existing early-stage research base, and by taking leadership in new areas of innovation such as AI.
• We encourage the committee to read the ABPI’s newly published Competitiveness Framework which sets out the factors which influence investment location and compares the UK’s competitiveness across these factors with other leading life sciences locations.[2]

1. How far the UK life sciences sector is internationally competitive?

• The ABPI’s recently published Competitiveness Framework publication sets out the UK’s areas of strength, weakness and moderate performance across key investment indicators. This includes a series of visuals which compare the UK’s performance relative to other leading pharmaceutical investment locations[3]. This publication has been shared with the clerks and members of the committee.
• The UK has several foundational strengths in the life sciences. It offers a world-class science base, backed by globally respected research, talent and infrastructure.[4]
• However, this competitive edge cannot be taken for granted amid growing competition for industry investment from other countries. Furthermore, the UK’s strengths are being undermined by a set of systemic weaknesses, which we have explored in more detail below.
• As a result of this, we have seen a decline in several key indicators of investment. This includes a 58 per cent fall in life sciences Foreign Direct Investment (FDI) between 2021 and 2023,[5] a near £100 million fall in pharmaceutical R&D investment between 2022 and 2023,[6] and a fall in industry clinical trial placements from second in the world in 2017 to fifth in 2023.[7]

a)      What steps, if any, the UK government should take to increase the competitiveness of the life sciences sector?

• The government’s Life Sciences Sector Plan (LSSP) recognises how the industry’s investments drive economic growth and improvements in health outcomes. The ABPI welcomes its ambition to make the UK the top life sciences economy in Europe by 2030 and many of the commitments outlined. However, to achieve these ambitions, the UK must arrest and reverse a trend of declining industry investment.
• The ABPI’s Competitiveness Framework shows that these declines are the result of the UK’s operating environment and investor offer becoming less competitive than comparator countries.[8]
•      The opportunity costs of this weakening competitiveness are significant. In 2023 alone, the UK would have received an additional £1.3 billion of R&D investment had it kept pace with global growth trends, as it had done between 2017 and 2020.[9]
•      The most significant structural barriers to competitiveness, are 1) the UK’s long-standing underinvestment in medicines and high, and unpredictable clawback rates levied on companies through the Voluntary Scheme for Branded Medicines, Pricing, Access and Growth (the VPAG) and the parallel Statutory Scheme (SS) and 2) the low and outdated baseline threshold used by NICE to determine whether new medicines are value for money.
•      When contrasted with other leading life sciences economies, these factors are the most significant outliers in the UK’s operating environment, and most significant drags on UK competitiveness and inward investment. We have explored this issue in more detail below, but it is fundamental for the success of the wider LSSP that these barriers are urgently addressed.
•      However, it is also worth highlighting that in addition to increasing the value ascribed to medicines, addressing VPAG rates and improving overall investment in innovative medicines, the UK must also take steps to maintain its existing strengths in early-stage research and availability of skills, whilst identifying and developing new strengths in areas of unrealised potential, such as health data and utilisation of advanced therapies.

• Early-stage research: The UK must enhance its science base with continued investment to remain competitive in pre-clinical research. It should also establish a pre-clinical translation models hub, representing a global centre of excellence based in the UK for developing, validating and scaling pre-clinical models, leading to inward investment and putting the UK at the forefront of pre-clinical model development. The current funds committed to this proposal in the LSSP will not be sufficient to set up the hub adequately to meet the government’s ambitions.
• Health data and AI: The UK has world-leading health data assets, but these assets are currently fragmented and hard for researchers to access. The government joint investment, with the Wellcome Trust, of up to £600 million in a Health Data Research Service is a positive step forward, provided it enables timely and secure access to relevant NHS data and health-related datasets to meet the research needs of industry, academia, regulators and government. The UK is also a leader in AI, ranking first in Europe for global share of AI clinical research publications.[10]
• Advanced therapies: The UK has developed a position of global leadership in advanced therapy clinical trials, with 9.5% of the world’s trials active in the UK[11] – far exceeding our 2.6% global share of industry trials more broadly.[12] Major benefits for patients and the economy could be unlocked if the UK was similarly world leading in the valuation and timely deployment of these advanced therapies in the NHS.

•      Fiscal incentives: Fiscal incentives remain a critical component for the attraction and retention of Life Sciences investment, whether through targeted tax incentives like R&D Tax Credits and Patent box, as well as capital grant programmes like the Life Sciences Innovative Manufacturing Fund, and pilot Life Sciences Transformational R&D Investment fund. It is essential that the UK continues to evaluate and evolve its package of fiscal incentives in the face of major competition from countries like Ireland, Singapore, Belgium, and the US (at both state and federal levels). Enhancements such as the inclusion of capital expenditure within R&D Tax Credits would be a welcome step which would align the UK with other markets such as Ireland and France.
•      Concierge service: A competitive operating environment must also be accompanied by a world class concierge (or ‘single front door’) service. The ABPI remains supportive of the recommendations outlined in the Harrington Review for Foreign Direct Investment. Organisations such as the Office for Investment and Office for Life Sciences have a key role in ensuring prospective investors have the support needed to access and navigate the UK’s offer for life sciences companies, and in coordinating the machinery of government to provide an internationally competitive offer in a timely manner. Countries like Ireland (via the IDA), Singapore, Belgium and the US have all demonstrated an ability to quickly compile compelling investment packages and have been successful in landing major investments as a result.
•      Finally, it is important that we have an aligned, shared framework to measure how we are performing on competitiveness. The ABPI recently published a Competitiveness Framework, which assesses around 50 international metrics, across dozens of investors considerations. We want to work with government on developing this further, so that it can be used as a tool to measure the progress of delivery of the LSSP, and the government’s wider ambitions.

b)     How effective the Life Sciences Sector Plan is?

•      Government and industry are aligned on their shared scale of ambition for the life sciences sector, and the ABPI welcomes several key initiatives outlined in the Plan. These include:

• A joint investment with the Wellcome Trust of up to £600 million to develop a Health Data Research Service, this will streamline researchers access to health data and develop a unique selling point in the UK’s offer;
• Up to £520 million in capital grants to attract investment in innovative manufacturing;
• Plans to establish a pre-clinical translational models hub to accelerate development, validation and scaling of in vitro models for medicines development, which will augment the UK’s comparative advantage in medical research where the UK ranks joint first in the world for most cited publications[13]

•      The Sector Plan also provides a more precise framework for overseeing its delivery than predecessors, with each policy attributed a Senior Responsible Owner and a metric to measure progress.
•      However, the plan did not make a real commitment to investment more in new medicines and to address long-standing barriers to investment, such as high and unpredictable payment rates on revenues and undervaluation of medicines by NICE. Without addressing these factors, it will fail in its core ambition of making the UK the top life sciences economy in Europe by 2030.
•      We recommend that government commits to a clear plan to return the UK to internationally competitive payment rates, as well as measures to update and improve the way the UK assesses the value of medical innovation. If that is achieved, the wider commitments in the strategy will have far greater impact.

c)      The biggest barriers to pharmaceutical, biotech and medtech companies increasing investment in the UK?

•      As mentioned above, the barrier that poses the greatest risk to investment retention and growth for pharmaceuticals is the UK’s long-standing underinvestment in innovative medicines:

• The UK invests just 9 per cent of its healthcare spending in medicines, far behind similar European economies such as France (13 per cent), Germany (14 per cent), and Italy (17 per cent).[14]
• At the same time, the Voluntary Scheme for Branded Medicines Pricing Access and Growth (VPAG) requires companies to pay back 22.9 per cent of revenues on newer medicines sales and 31.3 per cent for newer medicines under. This is more than three and a half times the EU4 average.

• As a result, patients in the UK are increasingly struggling to access innovative medicines, which we explore further in our response to question 3.
• The reason this effects investment is because, as the literature shows, when there are choices for the location of investment, and where supply-side factors are similar, pricing policy influences investment decisions. [15] This has been shown by reports from Charles River Associates (CRA) in 2022 and NERA Economic Consulting in 2007 (both of which are quoted by DHSC in Impact Assessments). [16]
• For example, companies may not locate clinical trials in countries that they perceive as unsupportive of innovation, either because they do not expect that the country will be a core market for the medicine in future or because the prevailing standard of care is not up to date enough to serve as a robust control.[17]
• WPI Economics estimate that the UK will lose out on £11 billion of R&D investment by 2033 if its clawback rates remain above 20 per cent.[18] This foregone R&D would include industry clinical trials, which in 2022 contributed £7.4 billion of GVA to the UK economy, supported 65,000 jobs, and raised £1.2 billion of revenue for the NHS.[19] A key reason why underinvestment in medicines reduces the UK’s ability to attract and retain this investment is that industry clinical trials, which operate across many countries, must use global standards of care as comparator arms. By underinvesting in medicines and erecting barriers to patient access and uptake, the UK’s standard of care risks diverging from these global standards, making it less suitable as a location for pharmaceutical companies to place clinical trials.
• In addition to catalysing growth and raising revenues to fund vital public services, investing in innovative medicines would advance the government’s ambitions for the UK population’s health, which currently has the second-highest rate of treatable mortality in the G7.[20] For example, modelling conducted for the ABPI in 2022 suggests that appropriate UK investment in medicines would deliver a 40 per cent reduction in the burden of disease.[21] Likewise, a study from the Tony Blair Institute estimated that existing treatments could reduce rates of cardiovascular disease by 20 per cent, resulting in £2.2 billion of additional GDP by 2030.[22]
• Increased investment in innovative medicines can help the UK’s standard of care remain aligned with the global standards needed to attract investment in industry clinical trials. A report by Frontier Economics and commissioned by the ABPI found that restoring industry trial activity to levels last seen in 2017 would generate an additional £3 billion of GVA for the UK economy, including £485 million of additional revenue for the NHS and 25,000 new jobs.[23]

2. How recent shifts in US policy – including potential tariffs and most-favoured-nation pricing – impact this sector in the UK.

• The US has been considering reforms to its domestic market for a long-time, recognising that a rebalancing in the global distribution of the cost of innovation needs to take place.

• On tariffs, the Economic Prosperity Deal (EPD) between the UK and the US provides a framework for the rapid negotiation of preferential treatment outcomes on tariffs on pharmaceuticals and pharmaceutical ingredients following the conclusion of the ongoing US Government Section 232 investigation.
• The commitment to negotiate preferential outcomes on tariffs is welcome; free trade is critical to supply chain resilience, ensuring patients have access to the medicines and vaccines they need. Tariffs are a cost that must be borne somewhere, for example reducing resources that could be allocated to further research and development, or manufacturing, and should therefore be avoided.
• The outcome of the Section 232 investigation, such as what import tariff rate the US will impose on pharmaceutical products, or how the UK and US implement the EPD commitment for ‘preferential outcomes’ on UK-originating exports, remains to be seen.

• On Most Favoured Nation policy, the United States is considering reforms to its domestic market which remains a live and evolving situation.

• Given the leading role that the United States plays in global biopharmaceutical innovation, implementing MFN pricing in the US alone, without other countries picking up their share of the cost of innovation, could threaten jobs worldwide and industry’s capacity to discover, develop and deliver new medicines for patients.

• The UK also confirmed within the EPD that it will endeavour to improve the overall environment for pharmaceutical companies operating in the UK. It remains to be seen how this will be delivered.

3. How UK consumer pricing and uptake measures impact the life sciences sector’s attractiveness for innovation.

• Access processes in the UK (including NICE) determine the prices of most new medicines, that and subsequent uptake of new medicines both have a direct influence on a company’s decisions around UK investments, whether to place clinical trials in the NHS or even whether to launch new medicines and indications at all in the UK.
• The existing low level that the UK is willing to pay for medicines, and often low and slow adoption across the NHS, is undermining the UK’s competitiveness because these send a global signal that the UK market prioritises cost containment and undervalues innovation.
• In addition, as outlined above, no or restricted access decisions and patchy adoption can impact on investment and clinical trials because companies cannot make a sustainable business case for launching new medicines in future and because the prevailing standard of care is not up to date enough to serve as the required control in clinical trials.[24]

a)      How effective the NICE quality-adjusted life years (QALY) assessment is, and how it could be improved.

• While NICE does an important job in evaluating the clinical and cost effectiveness of new medicines, the parameters it is set to do this within urgently need to change to ensure patients can be treated with the medicines they need.
• This is because the existing process is having a detrimental effect on patient access to medicines, health outcomes and investment. N.B., We have explored domestic indicators below, but in the next section we cover international comparisons where the UK is also falling short.

• In the last five years (2019-2024), around a fifth of the NICE work programme has been terminated – a 100 per cent increase since the preceding five-year period.[25] Companies cite challenges meeting NICE’s stringent cost-effectiveness requirements and lack of commercial flexibilities as key factors behind increased terminations.[26] This data does not include medicines that are not brought to the UK at all, neither seeking a licence from the MHRA or access decision from NICE.
• Between January 2023 and December 2024, 47 per cent of NICE's positive decisions were restricted and when data was available to explore access restrictions, on average less than a third of eligible patients had access on the NHS.[27]
• Adoption of medicines in the UK suffers from regional inequities. For example, when comparing the use of three types of medicines related to diabetes, there is more than 51 per cent variance between trusts.[1]

• The government needs to invest more and improve how it values medicines to ensure better access and improve the health of the population. NICE’s assessment process is key to this, and we have explored two ways below it should be improved as a priority.

NICE’s baseline threshold needs to increase

• NICE’s baseline cost effectiveness threshold that is used to determine value for money has remained unchanged for over 20 years, meaning what the UK is willing to pay for new medicines has declined in real terms given inflation and increases in the NHS’s budget.[2]
• If the upper end of NICE’s threshold had increased in line with inflation since 1999, it would now be around £56,794.[3] If it had increased in line with the NHS budget growth since just 2014, it would now be £59,150.[4]
• Recent analysis shows there has also been a consistent downward trend in where companies are required to price their medicines within the threshold range to be positively recommended by NICE.[5]

The Discount Rate

• The benefits medicines provide over time are discounted in their evaluation at a rate far higher than the government’s own guidance in the Treasury Green book (3.5 per cent versus 1.5 per cent), creating inequity and devaluing patient’s lives compared to other areas of government spending.
• A thorough review of the evidence, with input from several stakeholder groups, was conducted and reported on during the NICE Methods Review which concluded in 2022 that there is an evidence-based case for change.
• Retaining a 3.5 per cent discount rate is driving inequity in valuing medicines which treat chronic conditions, including those for children, compared with those treating acute conditions.

b)     How the UK compares to other European countries for pricing and uptake.

• In part due to the uncompetitive rebate rates in the VPAG, the UK has the lowest net spend in medicines relative to other comparable countries, at just 9 per cent of healthcare spending compared to 20 per cent in Japan, 17 per cent in Spain and Italy and 16 per cent in Germany.[6]
• At the same time, compared with other EU countries, the UK has some of the lowest cost-effectiveness thresholds; with real terms willingness to pay in decline over the last decade.[7]

• The prices required for access in the UK are amongst the lowest in developed countries, with the standard cost effectiveness threshold here at US $ 26,676. This is in contrast to $80,549 in Sweden, $61,464 in Norway, $50,000 in the US and $45,274 in Japan.[8][9]

• As a result, amongst high-income European countries, the UK has some of the highest proportions of ‘restricted’ reimbursements, with the number of medicines being made available to NHS patients trending downwards over the last 10 years.
• The UK’s medicines availability is in long term decline, in contrast to all EU4 nations except France. 28 per cent of total European Medicines Agency (EMA) approved medicines have limited availability in England, and 35 per cent are not available at all. In Germany, 90 per cent have full availability and only 10 per cent are unavailable.[28] England has slipped from being the first for granting access to new medicines in Europe to sixth in less than 10 years (2018 vs 2024 data).[29]
• Similarly, an analysis by PhRMA highlighted the greater access restrictions faced by patients in the UK vs US, Germany and France: only 39 per cent of new medicines launched globally (2017-2021) were recommended by NICE, and only 13 per cent of new medicines recommended provide full coverage for UK patients.[30]

• When it comes to uptake, we are also falling behind comparator countries.
• Three years after launch in the UK is just 70 per cent of the average level seen in comparator countries, and significant variations in uptake between UK regions contribute to health inequalities.

4. What steps the NHS could take to improve implementation of innovations.
1. How MHRA and NICE processes account for personalised medicines, prevention, and medtech.

Personalised Medicines

• Personalised approaches are defined as treatments designed in response to the unique features of a patient of their condition, typically specific molecular or genetics characteristics.
• MHRA proposes to develop a more proportionate, risk-based approach to the regulation of medicines for small or highly specific patient groups (i.e. personalised medicines). Some flexibilities have already been put in place such as decentralised or point-of-care (PoC) manufacturing models that are integral to some personalised therapies. For example, in July 2025, new legislation established a legal and regulatory framework for PoC manufacturing. To ensure these models are scalable and can extend across other areas of personalised medicine development – including advanced therapy medicinal products (ATMPs), genomic-based medicines, and RNA-based platforms – ABPI recommends continued investment in MHRA’s regulatory science capability and expert workforce. Other work is ongoing in the rare diseases space, and ABPI welcomes the opportunity to engage in this area of regulatory evolution.
• MHRA’s newly refreshed Innovative Licensing and Access Pathway (ILAP) is designed to accelerate development and patient access to a small number of highly innovative medicines. This pathway could be useful for supporting access to complex medicines such as preventive interventions – including those that target early stage or asymptomatic disease. However, in line with ABPI’s “Enhancing the role of UK medicine regulation” report, clarity is needed from the MHRA on the focus and the types of products. This will be crucial alongside success metrics – co-created with industry – which would strengthen transparency and predictability.
• For NICE, the barriers and recommendations raised in response to question 3 are highly applicable for personalised medicines, which are incredibly challenging to develop and commercialise. In particular, adjusting the cost-effectiveness threshold and changing the discount rate will be needed to better recognise the benefits they offer to patients. Many personalised medicines are cell or gene therapies. As these therapies have high upfront costs and benefits that accrue in the future, these are penalised by the current 3.5% discount rate.
• In addition, greater commercial flexibility is needed for personalised medicines. Some of the challenges around affordability of personalised medicines could be addressed by using innovative payment models, such as outcome-based pricing. There are limited examples of these models being used in practice and further exploration of the practical challenges around their delivery are needed.
• There are also additional challenges related to:

• Evidence generation and assessment of uncertainty. Personalised medicines can have higher levels of uncertainty in the evidence base, compared to other medicines, because of the smaller number/patient population of clinical trials that can be conducted. This creates inherent uncertainty in the evidence base. NICE’s methods manual gives committees flexibility to accept greater levels of uncertainty for rare diseases, paediatric populations and innovative technologies. Further clarity and predictability in the methods used and approach taken to assess uncertainty for personalised therapies would be valuable.
• Service readiness and genomic testing: Personalised therapies may require genomic testing or the introduction of new services to deliver to patients. The costs of these are currently included in HTAs. It is not always clear which costs are appropriate to include or how these are calculated. Additionally, some companies may work in partnership with the NHS on service implementation and improvement projects, the value of which are not captured in HTAs. NICE should further develop its methods to clarify the costs included in appraisals and to capture the value of service delivery and improvement projects.

Prevention

• Further specific reform and development of the MHRA’s regulatory system and frameworks are needed to fully enable access to preventative medicines at scale.[31]). In order to do this, it is essential that these pathways are sufficiently resourced with expert scientific capability, are flexible and adaptive to evolving technologies, and leverage expert networks (e.g. CERSIs).
• The UK’s current regulatory model is largely designed for products that treat existing illness – where it’s easier to measure whether a treatment works, what dose is needed, and what side effects occur over relatively short time periods. Preventative medicines are often used before disease develops or in people without symptoms. This raises challenges and uncertainties such as practical questions about when to intervene, how long to treat and how to measure effectiveness of the product. As the benefits of preventative treatments can take years to present, regulators often rely on indirect indicators (i.e. surrogate markers – for example, cholesterol levels), that require careful validation to demonstrate they truly predict long-term outcomes. In addition, as preventative medicines may be used by large populations, regulators need to balance the long-term benefits with potential risks, which requires monitoring through the use of real-world evidence (RWE) and long-term data collection. Addressing these challenges requires flexible, risk-based regulatory approaches, and clear guidance expectations.
• MHRA is exploring incorporating the use of real-world evidence (RWE) and adaptive post-market monitoring, drawing on the use of electronic health records and wearable devices to assess the long-term effectiveness and safety of preventative treatments into its processes. However, more needs to be done to recognise the difficulties in collecting long-term data outside of clinical trials for post-authorisation regulatory commitments. ABPI encourages the development of a coordinated data strategy between MHRA and other system partners to improve access, governance, and use of real-world data sources, such as patient-reported outcomes. The use of breakthrough technologies, such as AI, in silico modelling and novel non-clinical models to generate data and reduce uncertainty during product development should be encouraged where possible.
• The role of medicines and diagnostics and the interplay between the two regulatory frameworks needs to be considered to avoid fragmentation, duplication and delays. Digital tools – for example Software and AI as medical devices – are becoming more prevalent in prevention and early intervention and clear and timely regulatory guidance and expertise is needed
• ABPI also recommends aligning evidential standards between regulatory approval and NICE’s Health Technology Assessment (HTA) decisions. This is critical to ensure post-authorisation evidence generation is feasible and proportionate and enables patient access to preventative innovations.
• A visible, innovation-friendly regulatory and access pathway that is tailored to prevention and personalised medicines (small population research) is needed. It must acknowledge the challenges of each and ensure that there is risk-based proportionality across evidence, data collection and review. Whilst MHRA carries out some horizon scanning activities to track and assess upcoming innovations and their potential regulatory implications (for example through the Innovation Office, ILAP and UK PharmaScan), it is not systemically embedded into MHRA’s frameworks. Embedding a structured horizon scanning function within MHRA’s innovation framework would allow MHRA to systematically identify emerging technologies and anticipate the scientific and regulatory capabilities needed to support them. This proactive approach would help to support agility and preparedness in the regulatory system. A regulatory environment that is predictable, transparent, and responsive, will not only support better health outcomes, but will also strengthen the UK’s appeal as a global leader in life sciences innovation.
• Preventative medicines have great potential to keep people out of hospital and remaining in work, which is associated with productivity gains. The inclusion of productivity benefits is currently outside of the NICE reference case. Including productivity benefits as a consideration in NICE appraisals of preventative medicines would more accurately represent the value of a preventative approach to society.

About the Association of the British Pharmaceutical Industry (ABPI)

The ABPI exists to make the UK the best place in the world to research, develop and access medicines and vaccines to improve patient care.

We represent companies of all sizes which invest in making and discovering medicines and vaccines to enhance and save the lives of millions of people around the world.

In England, Scotland, Wales and Northern Ireland, we work in partnership with governments and the NHS so that patients can get new treatments faster and the NHS can plan how much it spends on medicines. Every day, our members partner with healthcare professionals, academics and patient organisations to find new solutions to unmet health needs. www.abpi.org.uk

13 October 2025