Hooked on rebates?: CNBC UK Exchange newsletter

This report is from the UK exchange newsletter for this week. Every Wednesday, Ian King brings you experts about the most important working stories from the United Kingdom and other major developments that you will not want to miss. Like what you see? You can subscribe here.

in Astrazeneca and GSKThe country is proud of thirty pharmaceutical companies in the world – only the United States and Switzerland that can only match that – and in Cambridge, Oxford and Imperial College London, three of the 10 best universities in the world for lifelong science. It is also one of the five best global investment destinations for life science research.

Below the surface, though, everything is not fine. Relations between the government and the UK’s pharmaceutical industry-which include the Trade Authority, as well as AZ and GSK, include local weapons of multinationals such as Pfizer, Sanofi, Merck, Eli Lilly and Bristol-Myers Squibb- on the issue of drug pricing.

Most branded drugs are bought in the UK by the state -run national health service (NHS). Thanks to its size – approximately 85 % of health care spending – NHS has a huge purchase capacity.

This has been supported for decades through volunteer-pricing agreements, meaning that the irreversible terms were worse-between industry and NHS. The latest of these, the volunteer plan to pricing and reaching branded drugs and growth (VPAG), began to take place in January last year.

Under this plan, agreed between the government, NHS England and the Industry Authority, the British Pharmaceutical Industry Association (ABPI), the maximum amount on the amount NHS spend annually on branded drugs is determined. This cover is currently allowed to increase by 2 % annually, increasing to 4 % annually by 2027. To enforce the maximum, pharmaceutical companies agree to pay a percentage of medicine sales to NHS via deduction or “Clawback”. Over the past 11 years, this average discount has a little more than 10 %, but in December last year, WES Streeting, the current Foreign Minister of Health, shocked the industry by determining a rate of 23 % – before it was 15 % expected.

ABPI immediately warned that this would put “very real pressure on companies” and put a growth in the UK and its investment.

He pointed out that in 9 % of spending on health care in the United Kingdom, NHS publishes a smaller share of total health care costs on medicines from any similar country, with France spending 15 %, Germany and Italy 17 %.

Since then, negotiations have declined, but 12 days ago, abandoned conversations were rejuvenated after ABI rejected its offer, which included fewer discount rates in all years of the plan, the high price of new medicines and net spending on them.

“I will not allow Big Pharma to tear our patients or taxpayers,” he told the newspapers.

In July, she has already tired of relations between the government and AZ, which the CEO, Pascal Soriot, announced in July, plans to invest about $ 50 billion in the United States (which last year constituted 43 % of the company’s global sales) by 2030, which followed this to summon profits by calling AZ “a very American company.” The importance of this was, according to reports in the Times, Soreriot I was discussed from the private sector Transfer the main menu of Anz, the largest company in FTSE-100, to New York.

While it is the largest name in the UK Pharma, Soriot is not the only pioneer in the industry unhappy at the discount level.

” Published In March, the unexpected rise in the opponent was “incompatible with the aspirations of the UK government to be the leader of global life sciences.”

In the same report, Dina Ainsko, Merck General Manager of the United Kingdom and Ireland, described the new average “cannot be tolerated”, adding that he would hinder “our ability to discover innovative medications and hand them over to patients.”

The most recent critic is Johan Kahlsum, Managing Director of Novartis in the United Kingdom, who was told last week that the BBC became “largely invested” for drug makers.

Inherent in the background is US President Donald Trump. The President called on pharmaceutical companies to reduce the prices of medicines in the United States to bring them with those in Europe and Canada. This price difference greatly reflects how to organize the health care system in the United States, however, Trump allowed to argue that American patients support their counterparts elsewhere.

Companies such as Eli Lilly said that in order to drop the prices of drugs in the United States, the price paid for drugs by health care systems may need to rise. Monjaro’s charges were temporarily suspended in the UK in the United Kingdom, which is a weight loss drug, before increasing a large price this month.

Therefore, Trump’s demands intensify the need for drug makers to extract better conditions from the UK government. What doubles the problem, they may not want to agree on these conditions until they know more about the proposed tariff for the drug imports, which may have an inflationary effect on selling prices, and thus increasing pressure on them to raise prices elsewhere.

The row above the opponent may have other unwanted side effects. It gives drug makers like AZ an excuse to transfer research and development to the United States as Trump requires.

It is also less likely to launch new drugs in the United Kingdom – which is already happening due to another ulcers in this industry, which are the criteria used by the National Institute for Excellence in the field of health and care (NICE), which is the body responsible to the Ministry of Health that decides whether the new drugs represent good value for money to NHS.

All this leaves the UK government, which has pledged to make the country a “great life force”, in a link.

In recent days, UK’s assets have been suffering with concerns about the financial expectations of the country and the sustainability of debts that have returned to the fore. The British pound fell more than 1 % against the US dollar on Tuesday, with borrowing costs in all fields, with A 30 -year doctrine Access to its highest level since 1998.

the FTSE 100 Meanwhile, he continued to get rid of record levels in August. The blue chip index decreased by 1.44 % last week and another 0.44 % lost since the beginning of September. This is amid wider risk in global stocks, with severe declines in European stocks as well as in Wall Street.