UK R&D credit increase, faster drug approvals promised in budget speech

When Chancellor of the Exchequer Jeremy Hunt announced that he had plans to scale back R&D tax credits in November, it sparked backlash in a country that has seen a decline in clinical trials and drug pricing question marks.

But Hunt, the former UK health secretary, said today in his Spring 2023 budget speech that he had returned with a “more robust” R&D tax credit scheme.

Part of that is an “enhanced credit” for qualifying small or medium-sized biopharma businesses. If a company spends 40% or more of its total expenditure on R&D, it can claim a credit worth £27 for every £100 they spend, as well as a £1.8 billion support package for 20,000 companies.

“That means an eligible cancer drug company spending £2 million on research and development will receive over £500,000 to help them develop breakthrough treatments,” Hunt said.

The chancellor also turned to drug regulation reform.

Starting in 2024, the Medicines and Healthcare Products Regulatory Agency (MHRA) will get an extra £10 million in funding over the next two years and be able to have “rapid, often near automatic sign off” for medicines already OK’d by regulators in the US, Europe or Japan. The regulator hinted at such a move last month, saying reciprocal approvals with the FDA, EMA and PMDA could begin next year, although some critics have warned of a race to the bottom.

“We are proud of our life sciences sector, which received more inward investment than any in Europe last year,” Hunt added. “Today’s change will make the UK an even more exciting place to invest — as well as speeding up access for NHS patients to the very newest drugs.”

Richard Torbett

It’s a turn for the better, ABPI chief executive Richard Torbett said in a statement.

The association has pointed out that the UK is falling behind in medicine innovation after a decrease in clinical trials; the number of trials fell by 41% between 2017 and 2021. Cancer trials fell by the same margin. The UK also took a major hit in the overall pharmaceutical trade balance, going from fourth to 98th place since 2010.

“It is also right that the Government wants the most attractive possible environment for investment,” Torbett said. “Boosting incentives for R&D focused SMEs, alongside the introduction of ‘full expensing’ and a comprehensive R&D tax credit offer, will help achieve this goal for UK life sciences.”

Torbett referenced what the association and big pharma see as an incoming liability — the proposed revenue clawback rate coming in April.

Generic drugmaker Viatris said it would stop selling certain drugs in the UK that are in short supply if the voluntary scheme option wasn’t changed. Earlier this year, Eli Lilly and AbbVie exited the NHS’ voluntary medicine pricing agreement after the government said companies with branded medicines under the voluntary agreement would have to return almost £3.3 billion in sales revenue to the government.

“But to further unlock this potential, it is essential that a new Voluntary Scheme is agreed between industry and Government, which will help build on the Chancellor’s vision for a globally competitive, high growth UK,” Torbett added.

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