British chancellor Jeremy Hunt told pharmaceutical companies the government had no “magic wand” to deal with the financial pressure and was unlikely to heed industry demands to pay a much higher price for medicines.
On Friday, the government will unveil £650m of reforms to boost the life sciences sector as part of a broader package of measures.
Pharmaceutical companies have condemned the government this year for increasing the tax on drug sales to the NHS to 26.5 per cent, from 5.1 per cent over the previous two years. They argued that lower prices meant that the UK would lose out on investment in innovation.
The tax, or the Voluntary Branded Medicines Pricing and Access Scheme (Vpas), is designed to reduce the NHS drug bill.
The chancellor and other ministers met pharmaceutical company leaders, including AstraZeneca and GSK, on Thursday to discuss proposals to stimulate growth in the life sciences sector, which is worth £94 billion to the UK.
Hunt said drug manufacturers knew the prices paid for NHS drugs would still be lower than in other countries.
“[Pharma companies] We know the NHS will continue to have the cheapest prices globally for medicines because it is one driver for one of the largest healthcare systems in the world.
“I am very honest with the pharmaceutical companies that we do not have a magic wand to deal with these financial pressures. Responsible public finances are absolutely essential if we are to achieve economic stability.”
Hunt said the government wanted to work with companies to find a “win-win” outcome while negotiating an agreement on the NHS medicines bill for the coming years.
The announcement came as US drugmaker Eli Lilly – which is developing innovative drugs for Alzheimer’s and obesity – said it was pausing a potential investment in London.
Eli Lilly said it is considering other sites in Europe due to concerns about a “stifling business environment” in the UK.

Jeremy Hunt, UK Counsellor © Aaron Chown / PA Wire
“In the short term, negotiating a new, sustainable pricing deal that unlocks the growth potential of our sector is key to restoring the UK’s international competitiveness and attracting future investment,” it said in a statement.
Ministers also unveiled £121m of funding to revive commercial clinical trials by the NHS, some of which had been previously announced.
The government has also set aside up to £250m to stimulate pension schemes to fund science and technology companies in the UK.
In a government-commissioned report published on Friday, former life sciences minister Lord James O’Shaughnessy made recommendations to address the significant drop in the number of commercial trials in the UK, including paying GPs to take part in clinical research.
Hunt supported O’Shaughnessy’s goal of quadrupling the number of patients in clinical trials by 2027. The government also accepted his recommendations to reduce the approval time for commercial trials to 60 days, and to create a single contract for research across the entire NHS.
Richard Torbett, chief executive of the Confederation of British Pharmaceutical Industry, said the measures showed the government had listened to industry.
But, he added, optimizing search is “only one part of the equation”. “To get innovative medicines to patients and fully seize the growth opportunity, we must also reform the business environment.”