Big Pharma fleeing London: UK loses ground, Europe risks domino effect

The already tense political climate was described by David Grainger, venture capitalist in the biotech sector, as 'anti-business': 'Solving the price stalemate would help restore confidence, but the worst may yet come if the political agenda does not change'.

Words are translated into deeds. Merck cancelled a £1 billion research and development centre in London, also closing laboratories at the Francis Crick Institute. Eli Lilly froze the opening of a £279 million biotech incubator and suspended distribution of the anti-obesity drug tirzepatide (Mounjaro), simultaneously announcing a 170% price increase.

Even home-grown champions are not immune: AstraZeneca has blocked a £200 million expansion of its Cambridge site, while France's Sanofi has made it clear that it will not consider 'any substantial investment' until there are 'tangible improvements in the current business environment'.

A few exceptions hold out: BioNTech confirms a ten-year, $1.3 billion plan for two new research centres and a London office, while Roche maintains its facilities but warns that the UK's position 'as a destination for global investment is precarious'.

If domestic politics weighs, the geopolitical variable is likely to have a disruptive effect. For months, the Trump administration has been threatening tariffs of up to 200% on imported drugs, with the argument that "the United States pays more for innovation while other countries benefit from lower prices".

The announcement alone has already oriented corporate strategies: AstraZeneca, for example, announced a $50 billion maxi-investment in the US by 2030, also motivated by uncertainty over tariffs. Gsk did the same with a 30 billion plan.

As an analysis by Cambridge Economic Policy Associates observes, pharmaceutical companies are 'recalibrating' the geography of their investments: reducing their presence in markets perceived as less profitable and relaunching in the United States, which remains the world's largest market in terms of volume and margins. In other words, US tariffs are a real and powerful lever: they have pushed multinationals to rethink investments and localisations and accelerated trends already underway. However, they are not the only reason: domestic issues (prices, refunds, taxation, political climate) have done the rest.

The question is inevitable: is the British crisis an isolated case or a foretaste of what may happen elsewhere in Europe?

The conditions that led to the investment freeze in the UK are not unique. In many European countries, the industry denounces rigid pricing policies, long approval times, and high taxation. Efpia (European federation of pharmaceutical industries and associations) has repeatedly pointed out that Europe 'is losing attractiveness' compared to the US and Asia, and that without concrete incentives, investments could move elsewhere. And the vulnerability of each country will depend on how attractive the domestic market is (net prices), local incentives for R&D/manufacturing, the presence of clusters of excellence, and the speed/effectiveness of the policy response (incentives, regulatory reforms). Some multinationals demand 'price' increases or more favourable European schemes to remain competitive. More in detail, what is the situation in France, Germany and Italy? Sanofi has reaffirmed its desire to maintain close ties with universities and national research centres, but at the same time it is strengthening its investments in the United States. The Elysée Palace insists that Paris remain a European hub, but the risk of relocation exists. The powerful German chemical-pharmaceutical industry has raised the alarm about the effects of tariffs and the decline in competitiveness. However, Berlin has a system of tax incentives and clusters of excellence that make a massive exodus less likely, at least in the short term.

Italy, with a strong manufacturing vocation (first EU pharmaceutical exporter in 2023), has repeatedly warned that US tariffs would be 'devastating' for the industry. Rome is pushing for a coordinated European response, but Italian companies - often subcontractors or integrated into global supply chains - are particularly vulnerable to relocation.

From here, there are two scenarios looming for Europe. In the first, Great Britain remains an emblematic but isolated case: the EU intervenes with incentives, a harmonised regulatory framework and strategies to attract clinical trials and R&D, stemming the flight of multinationals.

In the second, the domino effect propagates: companies progressively reduce investments in markets with low prices and strict regulations, concentrating on the US. Europe thus risks becoming a consumer, rather than a producer, of innovation.

Analysts agree that the answer will be political before industrial. "The UK is missing opportunities because it underestimates the economic and social benefits of investing in the production of innovative medicines," says a study commissioned from Cambridge Economic Policy Associates. The same could be true for Europe if Brussels and national governments do not correct course.

In short, the crisis between Big Pharma and London is the result of an explosive combination: pricing policies perceived as penalising and the attraction of the US market, reinforced by the threat of tariffs. But it is also a wake-up call for the rest of Europe.

The choice is between reacting with more innovation-friendly policies - fiscal, regulatory, industrial - or witnessing a slow but inexorable downsizing of the European role in global pharmaceuticals. A sector that is not only economic, but also strategic: just remember the lesson of the pandemic, when the ability to produce vaccines at home made the difference between vulnerability and resilience.