Where to now for UK life sciences?
Nick Stephens
RSA
These are challenging times for the UK life sciences industry as it copes with a host of issues. Some of these are impacting the industry worldwide and others, such as the reorganisation of the UK’s National Health Service (NHS) and the introduction of new commercial arrangements, are specific to the UK.
Recurring throughout the 2012 UK Life Science Industry Leaders Survey* report is a palpable concern that the UK could lose its position as a centre for global pharmaceutical research and development. There is a belief that government could be doing more to support the industry, as this extract from the ‘Wave a Magic Wand’ section of the survey suggests:
‘Put a big flag on the cliffs of Dover and say the UK is open for business and welcomes world-class clinical research back to our shores. Get all the NHS Trust CEOs in a room and tell them that their jobs are on the line unless they get fully square behind the NHS, supporting and embracing research. Make rates of corporate tax and tax credits the envy on research the envy of the world.’
"...2010 also highlighted four key issues: the cost of operating in the UK, reorganisation of the NHS, regulatory burdens, and fiscal and tax incentives to enable small companies to grow."
The survey is now an annual feature of the UK Life Sciences sector, so it is interesting to look back and see how, if at all, things have changed over the last 12 months. In 2010 the three key messages from life science leaders were:
• The UK is not competing effectively in the global marketplace
• Create the right environment for growing early phase, smaller companies
• Make the most of the NHS and a talent for innovation and discovery.
2010 also highlighted four key issues: the cost of operating in the UK, reorganisation of the NHS, regulatory burdens, and fiscal and tax incentives to enable small companies to grow.
The Government has made progress on this last point in terms of providing some targeted support for R&,D. Foremost amongst these is the Patent Box scheme, which applies a 10% corporation tax rate to profits derived from all active patents from April 2013. This does give an incentive for companies in the UK "to retain and commercialise existing patents and to develop new innovative patented products".
There have also been new tax credits for R&,D, whereby a company can set tax against National Insurance contributions and income tax. This is ideal for small biotechnology companies which tend not to make profits but instead innovate toward acquisition by larger companies. Another positive sign has been the £800m invested in the National Institute for Healthcare Research.
These rays of sunshine in an otherwise overcast economy have done little to raise the spirits of UK life science leaders. In 2010, 60% were optimistic about the Government’s engagement with and support for the industry, but in the space of 12 months, half of these lost faith. Now just one in three general managers has a positive outlook, and this amongst a group that tends to exude a positive attitude no matter what the challenge.
"In 2010, 60% were optimistic about the Government’s engagement with and support for the industry, but in the space of 12 months, half of these lost faith."
Further into the survey, the causes for concern become more concrete. Payer evidence mechanisms are a new feature of healthcare systems around the world and the UK is no exception. This year we polled leaders on the new UK value-based pricing system and the results were not positive. Three out of five felt that it would reduce market access (and therefore patient access to novel drugs). Over half felt that it would cause the UK to fall behind as an early launch market, 70% felt it would delay launches in the UK and 40%, that it would reduce return on investment.
The reorganisation of the NHS and the associated changes to the model of engagement is a major issue in the UK because during the periods of change everything grinds to a halt. It exacerbates an already difficult situation where multiple ‘hurdles’ limit patient access to novel and effective medicines. It’s a far cry from the days when a representative sat down and talked to a doctor who would then decide whether to prescribe a particular drug.
When it came to suggesting solutions for some of the current challenges, respondents highlighted the need for flexibility (organisations and process) and innovation. Central to this is the current enthusiasm for ‘open innovation’ with external partners - for example R&,D scientists in universities, small biotech companies, even competitors – to achieve new therapies and medicines.
In the UK’s preclinical R&,D, there were concerns about off-shoring (90%), the cost of pre-clinical research (74%) and increasing regulation (64%). In clinical research and regulatory affairs, concerns centre on the impact of NHS changes (90%), the cost and speed of clinical trials in the UK (81%), and increasing regulatory burden (68%).
"The real concern for the UK pharmaceutical business is that business will go offshore."
The real concern for the UK pharmaceutical business is that business will go offshore. Pfizer’s decision to move its anti-infectives business to Shanghai (though recent changes in China may indicate a silver lining) was proof that the alarm bells were for real. Moving to emerging markets may no longer give huge cost-savings but it remains a very real threat to the UK
The general message from the survey is that the UK is doing itself few favours when it comes to making itself an attractive place to undertake clinical trials.
The UK is still the biggest and most appropriate current set up for research and development but it is going to have to do a lot more if it is to retain this position. Central to this is the alignment of the healthcare sector, regulatory environments and educations systems, to deliver positive outcomes for both patients and the industry. If the UK doesn’t do this, there are others that will. And it will be their patients and economy that benefit.
* UK Life Science Industry Leader’s Survey 2011 was sponsored by RSA and supported by the Association of the British Pharmaceutical Industry (ABPI, www.abpi.org.uk), the BioIndustry Association (BIA, www.bioindustry.org), Association of British Healthcare Industries (ABHI, www.abhi.org.uk), The British In Vitro Diagnostics Associations (BIVDA, www.bivda.co.uk ) and the Ethical Medicines Industry Group (EMIG, www.emig.org.uk). Research was conducted amongst 249 senior executives currently working in the global life sciences industries. Data was collected during August 2011. For more information, please email sglanville@saycomms.co.uk.
About the author:
Nick Stephens is CEO at RSA and, together with the Board, is responsible for the strategic direction of the company. He leads the development of the RSA business, driving the creation of new subsidiaries across the world and supporting the development of new value added services. As the business has grown Nick’s personal search work has reduced to the point where he only conducts three to five “C Level” searches each year, though he contributes to RSA searches across the globe wherever he can.
He has been a Director of RSA since 1986 and joined the business full-time in 1995. Before committing fully to RSA, Nick gained broad commercial experience in various roles in metals trading, healthcare, pharmaceuticals and the British National Health Service. He studied Law at the University of East Anglia and Business at Cranfield.
To contact Nick you can either send an email to nick.stephens@theRSAgroup.com or you can telephone +44 (0)1707 280813 .
RSA is a global leader in Executive Search and Interim Management to the Life Sciences sectors with offices in China, Germany, Singapore, Switzerland, UK and USA. For more details please visit www.thersagroup.com.
Is the UK losing its position as a centre for global R&,D?
