Exterior view of an office belonging to biopharmaceutical company Astrazeneca.
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The U.K. is under pressure to offer a better deal to global pharmaceutical firms, as a slew of pulled investments and stalled drug pricing talks loom over U.S. President Donald Trump’s state visit to Britain.
Drug companies have been urging U.K. authorities to pay more for drugs and improve the competitive landscape ahead of a fast-approaching deadline later this month under Trump’s most favored nation (MFN) drug pricing order.
But with little movement from the government so far, firms have been pulling the plug on proposed investments in Britain, in what some analysts suggest could be a negotiating tactic to boost U.K. support.
“We think that this is, at this point, a negotiating tactic and many of these companies will not walk away completely and will kind of redesign their investments,” Jimmy Muchechetere, global healthcare & industrials equity research analyst at Investec, told CNBC’s “Europe Early Edition” on Monday.
Since the new U.S. administration came to office, “production locations, innovation and price are all under discussion,” Diederik Stadig, healthcare economist at ING Research, told CNBC by email.
A spokesperson for the U.K.’s Department for Science, Technology and Innovation said the U.K. was “one of the most attractive places to invest in the world,” but acknowledged that there was “more to do” to attract funding and unlock innovation.
Pharma pulls the plug
Anglo-Swedish drug maker AstraZeneca on Friday said that it was pausing a planned £200 million ($271.37 million) investment in its Cambridge research site, in its latest retreat from Britain this year due to what it dubbed a cut in government support.
The move came two days after U.S. pharma firm Merck, known in Europe as MSD, scrapped a £1 billion research center in London, citing a lack of U.K. competitiveness and its “undervaluation” of innovative medicines.
Zepbound maker Eli Lilly also said it was pausing investment in a U.K. laboratory site while it awaits “more clarity around the U.K. life sciences environment.”
“They are working together to make sure they have maximum impact on the Trump administration … and working together against other governments as well,” Muchechetere said of drug companies and pharma lobby groups.
“We think this is something that we’ll see from all the companies. They are working together because they all benefit, or they all get hit at the same time,” he added.
AstraZeneca, Merck and Eli Lilly declined to provide comment on Muchechetere’s suggestions of coordinated action when contacted by CNBC.
ING’s Stadig said the U.K. appeared to be an early casualty of pharma firms repositioning their investment strategies in response to the Trump administration, but cautioned that may also follow suit in other countries.
“Pharma companies will allocate an increasing portion of their capital towards the U.S., at the cost of investment into competing geographies,” Stadig said.
“The UK is the first practical case of this … though we are also seeing various pharma companies reposition existing capacity towards the U.S., which may prove a further threat to U.K. and European economies, more generally,” he added.
Drug pricing deadline looms
Major pharma firms have been given until Sept. 29 to present the Trump administration with “binding commitments” to lower their drug prices stateside to levels paid by other advanced nations.
Trump has long lambasted European countries for not paying the same pricing for their drugs as the U.S. does and for failing to invest in innovation.
The U.S. president is due to arrive in Britain Tuesday for a three-day state visit, coming just months after the U.K. and the U.S. brokered the Trump administration’s flagship trade deal. Though the agreement outlines “preferential treatment” for pharmaceuticals, it hinges on Britain improving the “overall environment” for the sector.
The U.K. government flagged life sciences as one of its eight priority sectors when it announced its industrial strategy earlier this year. Nevertheless, the sector-specific plan has underwhelmed many in the industry, with Merck saying Wednesday that the U.K. had not made “meaningful progress towards addressing the lack of investment in the life science industry.”
Meanwhile, long-running discussions over drug pricing between pharma companies and the British government fell apart last month without a resolution.
Broader questions have arisen over the U.K.’s investment landscape. A report released Wednesday by the Association of the British Pharmaceutical Industry (ABPI) showed Britain’s ranking for foreign direct investment (FDI) in the pharma sector had fallen from second in 2017 to seventh in 2023.
“Without a more competitive environment for investment, we risk losing out to other countries making bold moves to attract internationally mobile investment,” ABPI CEO Richard Torbett said in a statement last week.
Alex Altmann, partner at chartered accountants and business advisors Lubbock Fine, urged the U.K. government to follow the U.S.’ lead in doubling down on efforts to attract overseas investment. The Trump administration has urged global drug makers to bolster U.S. manufacturing, prompting a slew of multibillion-dollar investments over recent months, including from pharma giants Novartis, Sanofi and Roche.
“The U.S. Government is visibly working very hard to win investment into their country. The UK must show some of the same drive,” he said in emailed comments.
Fresh figures from the U.K.’s Department for Business and Trade (DBT) show the number of FDI projects in the U.K. fell to 1,375 in the 2024/25 tax year, down from 1,555 in 2023/24.
Nevertheless, Investec’s Muchechetere noted the U.K. is still in a strong position to capitalize on its “world-class scientific base” and win over pharma investment, if it steps up its game in negotiations.
“The U.K. is in a fantastic position to … further research and to win some of this work. They just have to play ball,” Muchechetere said.
