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Life Science Expectancy

The 2011 UK Life Science Industry Leaders Survey highlights disappointment at Government support for the industry and a concern that the UK is losing its position as a centre for global R&D, as well as exploring the areas where the industry is looking for greater support.

These are challenging times for the UK life sciences industry, as it copes with a host of national issues, not least the reorganisation of the NHS and the introduction of new commercial arrangements; and all of this against the backdrop of increasing international competition to be a major centre of R&D.

Since last year, industry leaders’ optimism has plummeted. Echoing throughout the report is a palpable concern that the UK could lose its position as a centre for global pharmaceutical R&D. There is a belief that Government could be doing more to support the industry, as this wish from one of the respondents 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 on research the envy of the world.”

Look Back to Optimism

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. These are still major issues, but on the last point there have been some significant developments over the previous 12 months that have been welcomed by the industry.

The Government has made progress in providing some targeted support for R&D. Foremost amongst these is the Patent Box scheme, which applies a 10 per cent 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 development has been the £800 million invested in the National Institute for Healthcare Research.

Value-Based Pricing

However, these rays of sunshine in an otherwise overcast economy have done little to raise the spirits of UK life science leaders. In 2010, 60 per cent were optimistic about the Government’s engagement with and support for the industry, but over the last 12 months, half of these have lost faith. Now just one in three general managers has a positive outlook. This is extremely worrying when one considers that this group, by their very nature, tends to exude a positive attitude no matter what the challenge.

Further into the report the causes for concern become more concrete. This year leaders were polled on the new UK’s valuebased 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 per cent felt it would delay launches in the UK and 40 per cent calculated that it would reduce return on investment.

The reorganisation of the NHS and the associated changes to the model of engagement is an absolutely critical issue. During these periods of change, everything essentially grinds to a halt. This exacerbates an already difficult situation, characterised by a system 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. Today, nobody quite knows who out of the doctors, the trusts, the formularies, and so on will make the decision. This leads to enormous frustration, which is captured in the desire expressed by one of the survey respondents: “if I could wave a magic wand, I would have stronger enforcement of mandatory funding of NICE approved medicines; end the silo budgeting mentality of NHS procurement; scrap the value-based pricing idea and stick with PPRS [pharmaceutical price regulation scheme]”.

Open Innovation

Life science leaders also took in the big picture and offered up their solutions. Respondents highlighted the need for flexibility (in both 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 sector, there were concerns about off-shoring (90 per cent), the cost of pre-clinical research (74 per cent), and increasing regulation (64 per cent). In clinical research and regulatory affairs, concerns centre on the impact of NHS changes (90 per cent), the cost and speed of clinical trials in the UK (81 per cent), and increasing regulatory burden (68 per cent).

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 justified. 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.

UK Trials and Tribulations

 Meanwhile, back in the UK, companies still cannot recruit for clinical trials in the NHS, but there are signs that this could change. In early December the Prime Minister announced some major initiatives and foremost amongst these was a drive to make it easier for drug companies to run clinical trials in hospitals and to benefit from the NHS’s vast collection of patient data.

The UK is still the biggest and most appropriate current set up for R&D, but those taking part in the survey suggested that it was going to have to do a lot more if it was to retain this position. Central to this is the alignment of the healthcare sector, regulatory environments and education systems to deliver positive outcomes for both patients and the industry.

Another wish amongst our respondents concerned the education of doctors and a return to the founding principles of the profession; namely the duties to treat and never do harm to patients, to support the teaching of the next generation, and to undertake research and development. One survey respondent put it so: ‘reconfigure doctor’s training to pre-2000 conditions where aspiring consultants had to follow a researchorientated career. This would create more opportunities for clinical research and more training opportunities for doctors.’

Alongside calls for better aligning the UK to meet the needs of the life sciences industries, there were also a couple of niche issues that deserve mention. One of these was a call for the NHS to stop outsourcing pathology and diagnostics under 15- 20 years managed services contracts. The belief is that these commercial arrangements are not in the best interests of the NHS because they lock out competition and ultimately compromise the development of new diagnostics.

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Nick Stephens is CEO at RSA and 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. 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.
Nick Stephens
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