Drug pricing talks between the U.K. government and pharmaceutical companies collapsed Friday, with industry leaders warning the standoff could deter investment. Health Secretary Wes Streeting described the government's offer as "unprecedented," but drugmakers argued that it still imposed excessive costs and requested to negotiate directly with Prime Minister Keir Starmer.
The Labour government has pledged to encourage investment to boost productivity. However, those goals clash with tight public finances and promises to overhaul the NHS.
The dispute has also unfolded against the backdrop of U.S. pressure on drugmakers. President Donald Trump is reportedly urging companies to align global prices more closely with higher U.S. levels.
Also Read: Pharmaceutical Firms Say UK Investment Is ‘Unlikely’ Unless Payment Levy Is Addressed
At the center of the disagreement is the UK's voluntary scheme for branded medicines pricing, access, and growth (VPAG).
In March, the U.K. government proposed raising the Statutory Scheme payment rate for newer branded medicines from 15.5% to 32.2% of subject companies' NHS sales in the second half of 2025.
The companies argue that growth is being stifled due to escalating mandatory payments. Under the current system, firms must pay between 23.5% and 35.6% of their branded medicine sales revenue to the NHS. That’s significantly higher than other European nations, where comparable rates range from 5.7% to 9%.
The system requires companies to rebate sales to the government once NHS spending on medicines exceeds a set threshold.
Currently, that clawback is roughly 23% of sales above the budget cap—far higher than in most European countries.
Ministers offered to lower it to about 18% to 19%. However, industry forums said the rate was still nearly three times higher than peers and called for a single-digit level.
Pharmaceutical executives also raised concerns that the government's plan to increase medicine spending from 0.3% to 0.6% of GDP over the next decade would not take effect until 2029, further delaying relief. Novartis AG (NYSE:NVS) executive, Johan Kahlström, warned that the country was becoming "deeply uncompetitive" and noted that companies were prioritizing investments in markets such as the U.S., China and Japan, which reward innovation more strongly.
The government has pushed back, saying its proposals represented a meaningful cut in rebate levels and more investment in medicines.
According to Bloomberg, AstraZeneca Plc (NASDAQ:AZN) CEO Pascal Soriot has shelved plans for a vaccine facility in Britain.
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