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Office of Health Economics urges supercharged R&D investment

A new report by the Office for Health Economics (OHE) has warned that without immediate action from the Government to “supercharge” private and public sector investment into the pharmaceutical industry, the UK will struggle to maintain its global competitiveness.

The Government had already promised to double public R&D investment, with the OHE report outlining ambitious targets to increase UK R&D investment to the OECD average of 2.4% of GDP by 2027 – which would require an increase by more than half its current amount over the next seven years.

The report also made reference to the importance of ensuring the incentives were right for business to invest more too.

With the Chancellor’s Summer Statement, Autumn Budget and Comprehensive Spending Review all expected in the not too distant future, there is currently an opportunity to increase investment in research fields, allowing the UK to not just keep pace with OECD rivals, but similarly attract global investment which otherwise might head elsewhere.

The OHE report analysed data from the United States, South Korea, Germany, Japan, Belgium and Austria – all of which have boosted R&D spending up to or beyond the level suggested for the UK – in order to better understand policies that the UK could adopt.

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While the United States and South Korea demonstrated how greater investment in R&D had led to greater innovation, it wasn’t a guaranteed success. From the data, Austria – which has rapidly increased R&D to levels way above OECD average in a short time frame – represented a cautionary tale, with the European country having struggled to turn the investment into innovation.

Reflecting on the report, the Association of the British Pharmaceutical Industry (ABPI) stressed the importance that any policies the Government adopts must be tailored to the UK’s specific strengths to support sustainable innovation.

Suggestions for the Government to take on board included:

  • Growing investment in experimental and commercial research and development which offer the largest private-to-public funding ratios in all countries, ranging from 7-1 to 20-1.
  • Strengthening fiscal incentives and bringing global investment to the UK by bringing UK tax credits in line with leading countries while futureproofing areas where industry needs to invest, e.g. big data and data science.
  • Mission-orientated innovation policy with direct funding and public procurement towards finding solutions for specific challenges. For example, the UK has already identified AI and data; aging population; clean growth; and future mobility as the focus areas.
  • Collaboration with the pharmaceutical industry is key as the industry spends more than half of its annual budget on experimental development. In particular, clinical trials provide an opportunity for public-private collaboration.
  • Strengthening the entrepreneurial role of the academic sector by incentivising academics to commercialise basic and applied research results and by ensuring an availability of public funding and venture capital for early stage projects.
  • Commitment to the UK’s gold standard intellectual property system to foster and reward innovation: effective intellectual property protection and enforcement is essential to develop new medicines for patients who need them and is crucial to avoid undermining the value of UK innovation and reduce incentives for UK innovators to develop new medicines.
  • Ensuring the supply of world class talent by strengthening the attractiveness of UK universities to national and international students.

With the pharmaceutical industry representing the UK’s biggest investor in R&D at £4.5bn annually – £750m more than the motor industry; the UK’s next largest industry – collaboration with the Government will be essential to bolstering investment and helping secure the UK business landscape.

Chief Executive at the Office of Health Economics, Professor Graham Cookson, said: “We have an opportunity to implement policies which will drive investment in research and development across all sectors. But, evidence from around the world shows that Government cannot do this alone.

"It should partner with leading industries - including life-sciences - to ensure we have the most attractive environment for R&D investment, and that this investment leads to innovative goods and services that will fuel economic growth and prosperity across Britain.”

READ MORE: Pharmaceutical industry invested £381m into UK R&D collaborations

Chief Executive of the ABPI, Dr Richard Torbett, added: “This is timely reminder about the importance of research and development to the UK economy.

“If we want to be attractive to global investors and compete with the leading high-tech nations of the world, the Government must commit to increasing private and public investment, on a par with countries like Germany and emerging powerhouses in Asia.

“The pharmaceutical industry is fundamental to achieving this success. Supporting British business and jobs by supercharging investment at a time when we are negotiating our future relationship with the rest of the word is critical.”


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