UK Drug Pricing Regime Risks Billions in Lost Investment Warns Novartis Boss

Britain faces a growing crisis in its life sciences sector as a senior executive at Novartis has declared the UK “uninvestable” owing to stringent and outdated drug pricing policies. Johan Kahlström, the UK managing director at the Swiss pharmaceutical giant, has criticised the government’s approach, which he claims is stifling innovation and driving vital investment overseas.

Kahlström told BBC Radio 4’s Today programme that the existing regulatory environment makes it increasingly difficult to introduce new medicines to NHS patients in a financially viable manner. He contends these policies also deter international life sciences firms from committing capital to the UK market—an industry frequently lauded by ministers as fundamental to Britain’s economic growth.

Recent failures to secure a new pricing agreement between the government and major pharmaceutical firms have heightened tensions. Health Secretary Wes Streeting abruptly withdrew from negotiations, stressing his determination not to allow pharmaceutical companies to “rip off” taxpayers. The current framework puts a cap on NHS expenditure for branded medicines, allowing for only a limited annual increase. Amounts spent above this cap are subject to steep rebates, with the government unexpectedly raising the rate to almost 23 percent for newer medicines in 2025.

Industry leaders argue that this approach is out of step with other international markets, particularly in Europe, where rebate rates are typically in single digits. Many warn that this policy creates a hostile investment climate and threatens the launch of cutting-edge therapies in the UK. Kahlström highlighted that investments are increasingly being redirected to regions such as the US, China, and Japan, which offer more supportive environments for pharmaceutical innovation. Earlier this year, Novartis announced a $23 billion (£17.1 billion) investment in the United States, pointing out that the UK could have been a contender for such capital with more attractive policies.

The government has embarked on a review of NHS drug rebates under external pressure for reform, most notably from former US President Donald Trump, who has called for pharmaceutical companies to lower drug prices in the United States. Despite this, there remains significant divergence between UK policy and international best practices, raising concerns that the UK will continue to miss out on crucial life sciences investments in the years ahead.

The future of the UK’s pharmaceutical sector depends on establishing a pricing regime that not only protects NHS resources but also fosters an environment where innovation is rewarded and major investments can flourish.