Pharma fears for investment as government acts tough

Britain's drugs industry, which has already shed hundreds of jobs in the past year, could lose more investment if the government fails to ensure a fair pricing environment, according to the head of its trade association.

Richard Barker, director general of the Association of the British Pharmaceutical Industry (ABPI), said the Department of Health and the industry needed to agree a realistic new long-term pact as quickly as possible.

The government announced plans in August to renegotiate the Pharmaceutical Price Regulation Scheme (PPRS), covering the price paid by the state health service for branded medicines. It hopes for a deal with the ABPI by mid-year and health minister Alan Johnson has said he is looking for substantial savings.

Barker declined to comment on the scale of any price cuts being discussed but said he was worried officials were "not as realistic as they need to be", given the industry's slowing growth due to generic competition and a lack of new drugs.

That has already led to big job cuts at several companies, such as British-based AstraZeneca Plc.

"These discussions are taking place at a time when the industry globally is under pressure and our role here in the UK is under unprecedented scrutiny from managements of global companies," Barker said in an interview.

"Whether those managements sit in New Jersey or Tokyo or London, they have the same calculations to make, which is where will they put what will be fewer investments in future?"

The last PPRS scheme, which included an average 7 percent price cut, had been due to run until 2010 and the government's decision to break it early had fuelled uncertainty, he said.

Multinational companies would not quit Britain outright if there was not a satisfactory deal, but it would influence their decisions about future investments.

"The new investments will be even more likely to go to sites in Asia," Barker said. "There are a number of cases where companies are waiting to see what happens."

Britain currently accounts for 9 percent of worldwide research and development into new drugs, despite making up less than 3.5 percent of the world market.

Yet its R&D expenditure has stalled since 2002, amid a wider downturn across Europe. In the five years between 2001 and 2006, only two drug research sites were established in Europe, while 18 closed, according to industry figures. During the same time, 14 were set up in Asia.

The government says its aim is to ensure taxpayers get value for money and both sides in the PPRS talks have agreed any deal must be based on four principles - value, reward for innovation, rapid uptake for new drugs and sustainability.