Our pharma industry powerhouses need emergency treatment

Ireland has become a hub for the American pharmaceutical manufacturers – Ringaskiddy in Country Cork has been dubbed “Viagra Village” because production of the drug dominates the area. Its £42bn of annual exports could well be wiped out completely. That will hurt.

But there is no point in kidding ourselves. The UK is going to be badly impacted as well.

It is not just that the UK racks up £8.8bn annually in pharma sales into the US market. The issue goes much deeper than that. Life sciences is one of our most important industries. And the tariff campaign may well mean that companies end up moving to the US completely.

In fairness, and unlike many of the tariffs he has imposed, Trump has a point about medicines.

The drugs industry has long treated the American market as a source of easy profits. Prices for the same medicines are, on average, 2.7 times higher in the US than in the rest of the world.

In effect, it keeps the entire global industry afloat, paying for the massive sums in R&D that have to be spent on each new medicine.

Even worse, the industry has also side-stepped American corporate taxes by manufacturing elsewhere, declaring the bulk of the profits in another country, and shipping the final pills across the Atlantic. Overall, it has been a very bad deal for American consumers, and it is hard to complain if President Trump wants to change it.

And yet, it will mean the drugs giants have to shift manufacturing to the US.

We are already seeing the early signs of that. AstraZeneca has announced a £37bn investment in America. The chief executive of GSK, Emma Walmsley, has said her company will invest “tens of billions of dollars in the US over the next five years”. The diggers will be getting to work very soon.

Meanwhile, the Labour Government here in the UK can forget about any extra capacity being opened up in Britain. The US will be the priority for the next couple of years.

The new tariff regime will accelerate the move of the British giants to the other side of the Atlantic. All the major British players already have huge sales in the US market. Last year, that one market accounted for 40pc of AstraZeneca’s overall revenues, and the figures for GSK are likely to be very similar.

Sir Pascal Soriot, the chief executive of AstraZeneca, has already reportedly privately discussed moving its main listing from London to New York, while making little secret of his enthusiasm for the British stock market.

GSK may have deeper roots in the UK, and has said nothing about shifting its headquarters, but it is worth keeping in mind that the ‘SK’ in its name stands for SmithKline, originally an American business with its roots in Philadelphia.

With significant sales in the US, major manufacturing plants there, and with many of their R&D labs there as well, it may only be a matter of time before either AstraZeneca or GSK moves, leaving the UK as little more than a branch operation, and one of declining significance as time moves on.

The UK can’t afford to let that happen. A deal with the White House should not prove impossible. The UK does not have a significant trade surplus with the United States, either overall or in pharmaceuticals. Trump is mainly driven by a hatred of deficits, and so long as trade is roughly in balance, he can be persuaded to come to an agreement.

True, we may have to increase the amount that the NHS pays for American made medicines. But that would hardly be the end of the world, while opening up our health care system to more US based competition would, despite the hysterics, probably improve outcomes for patients.

The President likes the UK and is open to giving us special treatment. We need to negotiate a deal on pharmaceuticals before it is too late – otherwise we risk losing one of our few remaining major industries.

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