Pharmaceuticals in the UK: industry profile

The UK pharmaceutical industry remains one of the most advanced and research-intensive sectors of the national economy, and a lynchpin of the broader life sciences ecosystem. It is supported by an exceptional academic base that includes four of the world’s top ten universities for life sciences and medicine — Oxford, Cambridge, Imperial College London, and University College London — as well as collaborative research institutions such as the Catapult Network and MedCity.

According to the ONS, pharmaceutical manufacturing contributed £19 billion in gross value added (GVA) in 2023, up from £16.8 billion in 2022. The same year, the sector spent £8.68 billion on R&D — 17.4% of all UK R&D expenditure (the highest of any product area). Data compiled by the Association of the British Pharmaceutical Industry (ABPI) show that in 2022, industry-sponsored clinical trials generated £7.4 billion for the economy and supported 65,000 jobs.

That said, some aspects of the industry's recent performance have given rise to concern. For one, the UK's pharmaceutical manufacturing output has declined — down 29% since 2009 — as cost pressures, regulatory burdens, and plant closures have led many companies to outsource production. In addition, as is explored in more detail below, investment in the UK pharmaceutical industry has slowed in recent years, with the country facing mounting competition from faster-growing markets such as China. Export performance tells a similar story: although the total value of UK pharmaceutical exports sat at £25.6 billion in 2023 (up on the £22.3 billion recorded in 2021), this remains below the 2017 peak of £27.6 billion, and well behind competitor nations such as Ireland.

Government policy aims to reverse these negative trends. The July 2025 Life Sciences Sector Plan commits to making the UK Europe’s leading life sciences economy by 2030, with initiatives including a new national Health Data Research Service, £520 million in manufacturing investment grants, and a new pre-clinical translational models hub to accelerate medicines development.

At a high level, the UK pharmaceutical sector may be divided up into three primary segments. These are outlined below.

It should be noted, however, that many large pharmaceutical companies operate across more than one segment – some produce both patent-protected prescription drugs and consumer health products, for example. Likewise, some medicines cross categories, such as when drugs become available over-the-counter having previously been prescription-only.

This segment comprises branded prescription medicines that are typically under patent protection. These are developed via resource-intensive R&D and clinical trials, and are often sold at premium prices to reflect their novel therapeutic value.

Leading multinational pharmaceutical companies (such as GSK and AstraZeneca) dominate this segment, focusing on treatments for a wide range of conditions from cancer and immunological disorders to infectious diseases.

This segment comprises off-patent drugs – unbranded versions of small-molecule pharmaceuticals and biosimilars of older biologics – which are typically sold at lower unit prices compared to branded drugs. Biosimilars have become an important subcategory within this segment in recent years.

According to Medicines UK, generics and biosimilars account for about 85% of all NHS-prescribed drugs in the UK – equivalent to 2.5 million medicine packs per day.

The UK has a very competitive generics market with many suppliers, which has driven prices down – generic versions of a medicine often cost 80–90% less than the original brand within a few years of patent expiry. As such, the segment is volume-driven, and operates on relatively slim margins.

This segment covers medicines sold directly to consumers without a prescription. It includes items such as simple painkillers (eg, paracetamol, ibuprofen), cold and flu remedies, indigestion and gastrointestinal remedies, and so on.

Pharmacy chains, supermarkets, and online retailers are key distribution channels for OTC medicines.

Whilst the sale and supply of OTC medicines is less stringently controlled than that of prescription drugs, they must meet safety and quality requirements overseen by the Medicines and Healthcare products Regulatory Agency (MHRA).

The UK’s pharmaceutical sector faces a regulatory and policy environment that many industry leaders view as a barrier to growth and innovation.

Perhaps most notable in this regard are the schemes which control the costs of branded medicines to the NHS: the Voluntary Scheme for Branded Medicines Pricing, Access and Growth (VPAG) and the Statutory Scheme. Both require manufacturers to pay back a proportion of their UK sales revenues, with the Statutory Scheme applying to companies that do not sign up to the voluntary one.

These schemes have become a major source of contention between the government and industry. VPAG repayment rates soared to 23.5% in 2025, far above the 6–8% rates typical in comparable European markets such as Germany and France. Meanwhile, from July 2025, the headline statutory rate increased from 15.5% to 23.4% of NHS sales.

Many industry voices argue that these 'clawbacks' undermine the UK’s attractiveness for pharmaceutical launches and inward investment. Johnson & Johnson (J&J), for example, warn that such high and unpredictable rebate rates deter R&D investment and risk weakening the wider life sciences ecosystem. In their view, a reduction in clawback rates is necessary to "increase UK market competitiveness".

In addition to clawback rates, further issues cited by prominent industry actors include:

• Relatively low spending on medicines.
  UK spending on medicines accounts for just 9% of total healthcare expenditure — well below the levels in France (15%) and Germany (17%). Industry voices including Novartis, Organon and the ABPI argue that this undermines the UK’s competitiveness and ability to attract clinical trials and innovative launches.
• Perceived shortcomings of the NICE quality-adjusted life years (QALY) framework.
  Moderna contend that the cost-effectiveness threshold, unchanged for over 20 years (though set to be increased), has undervalued preventive and innovative therapies by ignoring wider productivity and societal benefits.
• Slower and lower uptake of new medicines.
  Compared to its European peers, the UK shows slower adoption and lower availability of newly licensed medicines. According to Novartis, this undermines the impact of innovation.
• Limitations in the capacity and capability of the Medicines and Healthcare products Regulatory Agency (MHRA).
  Moderna and others have called on the government to improve the MHRA's agility, citing delays in trial approvals and regulatory uncertainty as impediments to growth.
• Increased operational costs as a result of environmental and sustainability regulations.
  Examples include the Extended Producer Responsibility (EPR) scheme. These are of particular concern for generic manufacturers: some, such as Teva, have called for the introduction of exemptions.
• Apparently uncompetitive tax incentives.
  While the UK’s R&D tax credit and Patent Box schemes have boosted investment, Novartis argue that they are less generous and less consistent than incentives offered by countries such as Ireland or Belgium.
• A difficult funding landscape.
  The UK’s system for direct public funding is described as fragmented, slow, and risk-averse, leading to calls for more flexible, proactive grant mechanisms to support life sciences investments.

According to the ABPI, the cumulative effect of these issues has been "weakening competitiveness" in the UK’s life sciences and pharmaceutical sector. Investment in the sector has declined sharply in recent years, with inward foreign direct investment falling by 58% between 2021 and 2023. Meanwhile, there has been a marked downturn in clinical trial activity: the number of industry-sponsored trials fell from 690 in 2015 to 394 in 2021 (though there have been some signs of recovery recently).

Recognising the need to improve the commercial environment, the government has recently committed to capping the VPAG repayment rate for newer medicines so that it will not exceed 15% during 2026-2028, and announced an increase to NICE cost-effectiveness thresholds. It has also pledged to cut trial set-up times to under 150 days and promised additional funding for pharmaceutical R&D and manufacturing, as well as setting out its commitment to making the MHRA faster and more agile, instituting joint advice and parallel approvals with the National Institute for Health and Care Excellence (NICE), and enabling international recognition of medicines to speed up patient access to innovation.

As noted in a recent Financial Times article, a looming ‘patent cliff’ is set to transform the global pharmaceutical industry in the coming years, and the UK is not immune to this trend.

In 2023, the number of patent expirations rose sharply, exceeding those seen in 2021-22. Medicines UK estimate that around 250 more products or molecules will lose patent protection over the next five years. Products such as Dapagliflozin, recently off-patent, have already opened up new markets, and a similar pattern is expected for GLP-1 weight-loss drugs in the near future.

This development is likely to lead to a significant drop in revenues for branded drug manufacturers. Once a drug loses patent protection, generic alternatives typically enter the market at much lower prices, cutting branded revenues by as much as 70–80%. In some cases these revenue reductions will be offset by income from new branded drugs — though this may depend on the costly acquisition of smaller drugmakers with late-stage or already approved products.

On the flip-side, it presents a major opportunity for generic producers, particularly given the NHS’s emphasis on generic prescribing (around 81% of primary-care items are prescribed generically in England). However, gains may be tempered by strong price erosion and intense competition from overseas producers such as Biocon in India. Success may depend on achieving scale and maintaining low-cost, efficient production.

Artificial intelligence (AI) is rapidly transforming pharmaceutical research and development, and the UK is well-placed to lead this shift. Here, the country stands to benefit from two major strategic advantages: world-class health data assets and a thriving AI research ecosystem. Notably, with its cradle-to-grave model, the NHS holds extensive health records for a diverse population. At the same time, the UK has an established AI research community that is increasingly turning its attention to bioscience problems.

Recent government action aims to harness this potential. The creation of a Health Data Research Service, backed by up to £600 million in joint investment from government and the Wellcome Trust, promises to make health data more accessible and AI-ready. It will provide researchers with a single secure access point to national datasets. Industry voices such as J&J and the ABPI have welcomed the move, noting its potential to power the discovery and development of new treatments.

There are promising signs: the UK is currently Europe's foremost producer of AI life science research publications, and domestic innovators such as Exscientia have successfully advanced multiple AI-designed drug candidates into clinical trials.

However, persistent concerns remain — particularly around data privacy and security. Ensuring that datasets are both securely managed and readily usable will be essential if the UK is to fulfil its potential in this area.

Advanced therapy medicinal products (ATMPs) – encompassing gene therapies, somatic cell therapies, and tissue-engineered products – represent one of the most dynamic and promising frontiers of innovation in the UK pharmaceutical industry today. According to the European Medicines Agency, these therapies "offer groundbreaking new opportunities for the treatment of disease and injury".

The UK has established a strong position in this emerging field. Notably, it hosted 9.5% of the world’s advanced therapy clinical trials in 2024. Manufacturing capability is also expanding: the number of dedicated UK cell and gene therapy manufacturers rose from 22 in 2022 to 26 in 2023. Gaining and maintaining a competitive advantage in the production of high value products such as advanced therapeutics may offer a route to recovery for pharmaceutical manufacturing in the UK.

With the Cell and Gene Therapy Catapult and the Advanced Therapy Treatment Centre (ATTC) network working to bridge the gap between research and commercialisation, there are clear opportunities for growth in this area. According to the ABPI, the number of ATMPs launched in the UK could rise from around two per year to as many as 10–15 annually by 2030.

Significantly, the MHRA has been proactive in adapting its regulatory approach to accomodate ATMPs — it was the first global regulator to approve Casgevy, a CRISPR-based therapy, and it has introduced a new “principles-based” framework for point-of-care manufacturing.

Nonetheless, substantial challenges remain. As Pinsent Masons note, high production costs, short shelf lives, and the need for near-patient manufacturing make these therapies complex to deliver. In addition, affordability issues and uncertainty around longer-term outcomes mean that reimbursement is difficult (though innovative payment models may provide a solution here).

The tax treatment of the UK pharmaceutical industry is complex, meaning that a comprehensive explication of its nuances is impossible here.

That said, given the highly R&D- and capital-intensive nature of the industry, perhaps the most significant features of the tax landscape for businesses operating in this sector are the various fiscal incentives aimed at promoting innovation and investment. These include:

• Research & Development (R&D) tax reliefs – including the enhanced R&D intensive support (ERIS) scheme for loss-making R&D-intensive SMEs.
• Patent Box – profits from patented inventions taxed at a reduced rate of 10%.
• Capital allowances and full expensing – tax relief on qualifying equipment and machinery.
• Place-based incentives – designated Freeport and Investment Zone sites can offer (time-limited) business rates relief, enhanced capital allowances and NICs relief; check the current scheme rules and local designations.

For large pharmaceutical groups, international tax rules are also an important concern. Notably, under the OECD’s Pillar Two agreement, countries are introducing a 15% global minimum corporate tax for multinationals. The UK has implemented this via a Multinational Top-up Tax (and a parallel Domestic Top-up Tax).

In recent years, some industry voices have called for fiscal reforms aimed at boosting pharmaceutical and other life sciences investment. For instance, the ABPI has called for R&D tax credits to be extended to cover capital expenditure, while Organon has argued in favour of a more generous Patent Box regime, noting that countries like Belgium, Ireland, and the Netherlands offer lower rates of corporation tax under a such a regime.

The size and diversity of the UK pharmaceutical industry means that any list of notable players will not be fully representative or comprehensive.

That said, some examples of noteworthy players are set out below.

• Advanz Pharma – London-headquartered specialty pharmaceutical business focused on acquiring and marketing off-patent drugs.
• Alliance Pharma – UK-based international pharmaceutical company with a strong emphasis on consumer brands and OTC products.
• AstraZeneca – major British-headquartered biopharmaceutical company active in multiple therapeutic areas in the branded prescription segment.
• Autolus Therapeutics – London/Stevenage-based pioneer of next-generation CAR T-cell therapies.
• eXmoor Pharma – Bristol-headquartered full-service cell & gene therapy CDMO (contract development and manufacturing organisation).
• GSK – large, well-known UK-based company engaged in branded prescription pharmaceuticals (and vaccines) with global reach.
• Haleon – consumer healthcare/OTC business (spin-out from GSK) supplying a wide range of over-the-counter medicines and wellness products.
• Hikma Pharmaceuticals – UK-based company specialising in generic and non-branded prescription products, serving global markets.
• Oxford Biomedica – Oxford-based company focused on gene and cell therapy.

ICAEW’s Library & Information Service can provide information on UK and Irish participants in the pharmaceutical industry via its wide range of company information services. This includes:

• Information on company acquisitions in the sector
• Private company transaction multiples
• Company data
• Beta values for companies and the sector
• P/E ratios for companies and the sector

For more information, please contact our enquiry team on +44 (0)20 7920 8620 or at library@icaew.com to discuss your requirements.

• Association of the British Pharmaceutical Industry (ABPI)
• BioIndustry Association (BIA)
• Medicines UK
• Proprietary Association of Great Britain (PAGB)

• Association of the European Self-Care Industry (AESGP)
• European Federation of Pharmaceutical Industries and Associations (EFPIA)
• Global Self-Care Federation
• International Federation of Pharmaceutical Manufacturers and Associations (IFPMA)
• International Pharmaceutical Federation (FIP)
• Medicines for Europe