Pharmaceutical giant MSD (known as Merck & Co in North America) has expressed concerns about the future of its $1.32 billion research facility in London. The company made this significant investment in 2017 to construct a 220,000 sq ft research facility located in King’s Cross, London’s “knowledge quarter.”
Dean Li, Head of Discovery Sciences and Translation Medicines at MSD, explained that the facility’s location near academic institutions in London was ideal for early-stage discovery research. However, he warned that the UK is facing challenges that could deter pharmaceutical companies from making large-scale investments in the country.
Among the issues highlighted are difficulties in conducting clinical trials and the imposition of rebate taxes, which limit the prices that pharmaceutical companies can charge for their medicines.
MSD is hopeful that the UK government and ecosystem can address these concerns and create an environment conducive to large-scale investments in the country. Reforms have begun to tackle clinical trial challenges, including reducing approval times for later-stage studies. However, the rebate rates imposed on branded medicine sales to the National Health Service (NHS) have become contentious. These rebate rates, currently standing at 26.5%, have increased significantly from an average of around 7% before the COVID-19 pandemic.
Negotiations are ongoing to determine rebate levels in a voluntary scheme that companies can join. The statutory rebate rate for companies not participating in the scheme has been set at 27.5%, a nearly three-fold increase in recent years. This has led some pharmaceutical companies to reconsider investments in the UK.
While MSD’s decision to invest in the London facility predated the pandemic, other companies have altered their plans due to pandemic-related challenges. AstraZeneca, for instance, decided to build a $360 million manufacturing facility in the Republic of Ireland rather than the UK, citing the tax burden imposed on companies.
The Association of the British Pharmaceutical Industry (ABPI) recently warned that without action to reduce the rebate rates on branded medicines sales, the UK could lose £1.9 billion of R&D investment in 2028, with a cumulative £5.7 billion of R&D investment lost between 2024 and 2028. The ABPI argues that the rebate system is a false economy, causing the UK to lose more than it saves regarding investment, jobs, and tax revenue.
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