5 ways the UK can stimulate the biopharma sector

Biopharma R&D and manufacturing is one of the UK’s leading sectors, responsible for around 140,000 jobs and contributing £20 billion per year to the economy. Over the past 15 years, though, the sector has faced significant challenges.

Biopharma gross value added peaked in 2008 and then declined for the next 10 years. Although it has picked up in recent years, it remains below 2008 levels, with the UK dropping behind competitor countries in international rankings and domestic companies often struggling to convert cutting-edge research into financial success.

Our research sets out steps to help bring the UK biopharma sector back to a globally competitive position in the years to come. This article highlights five of these steps.

1. Stimulate R&D productivity

The UK public sector spends little on pharmaceutical R&D, leaving it to the biopharma industry to pick up around £3.8 billion of the total £5 billion spend, with a further £1 billion from non-UK companies. Overall, the UK ranks fourth in total biopharma R&D spending and third for R&D activity if we measure it by the location of inventors of patentable innovations.

There are three challenges for biopharma R&D: flat or declining public and charitable sector funding for medical and health sciences since 2009; increasing costs for discovering, developing and commercialising new drugs; and the UK becoming unattractive for conducting drug trials.

To address this, we recommend R&D tax credits and funding for research, which can reduce the cost of innovation, boost investment, and stimulate patent registrations. We have two separate schemes, due to the previous government’s decision to cut R&D tax credits for SMEs and boost the rate for larger companies, which the current government is planning to evaluate sector by sector.

2. Ensure targeted support for early-stage biopharma companies

While UK biopharma companies outperform European peers in securing early-stage funding, they raise less late-stage growth financing. This means small UK companies with promising products are often acquired by foreign investors – there were 130 mergers and acquisitions in the UK pharmaceutical sector in 2023/24, valued at $15 billion.

To help mitigate this, we suggest industry and government explore ways to improve transparency and reporting on SME R&D investment, making more data and pipeline information available. Additionally, support – e.g. mentorship and small grants – would be useful to help companies articulate their value proposition, develop clear business models, and demonstrate how they will generate revenue.

3. Continue improvements in clinical trial capacity through enhancements to data infrastructure

The UK has the potential to be a global leader in terms of the breadth and depth of data available for life sciences research and innovation. To reach that point, we recommend that funding is made available to assess the feasibility of a centralised information resource on biopharma assets, ownership and patent status, listing potential collaborating organisations.

Start-ups and smaller companies, as well as drug researchers and developers, also often lack the required skills to navigate health data access processes and constraints. With this in mind, we also recommend strengthening support for navigating and analysing health and other data through the Medicines Discovery Catapult.

4. Ensure NHS integrated care systems work to promote and adopt innovations

The UK National Health Service (NHS) holds ‘cradle to grave’ records on more or less the entire UK population, providing a real opportunity for efficient, high-quality research that can be translated into mainstream healthcare practice. However, operational pressures and funding constraints limit NHS research and innovation capacity.

These pressures will not be alleviated in the short term, but positive steps have been taken through the introduction of NHS Integrated Care Systems (ICSs) in 2022. These offer the ability to spread and adopt best practice efficiently, helping to diminish the challenges in implementing and embedding innovations which result from siloed thinking.

To continue to serve this purpose, ICSs will need to communicate and collaborate to develop more consistent approaches to sharing experience and best practice and experience. This will require them to develop shared metrics, in order to best promote and support promising biopharma innovations.

5. Strengthen the biopharma manufacturing base

In recent years, there has been a move to reshore UK healthcare manufacturing. To best serve the sector, however, this needs to focus on strategic aims, not just on increasing domestic production.

In line with the British Generic Manufacturers Association, we recommend offering capital grants for flexible advanced manufacturing facilities, alongside establishing common international quality standards for manufacturing to ensure fair competition between countries. At the same time, we need better evidence on where support should be targeted, in order to maximise the investment efficiency.

These five steps will not instantly help government and industry to bring UK biopharma back to global leadership, but they offer a clear pathway to boosting competitiveness, robustness and modernisation throughout the sector. In support of this, Imperial’s Centre for Sectoral Economic Performance is currently working on research projects to explore changes in R&D productivity and business support for biopharma SMEs.