Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Eli Lilly has called on European nations to scrap clawback taxes on drug sales, as the pharmaceutical industry puts pressure on governments to pay more for drugs or risk losing access to new medicines.
The US drugmaker, best known for its obesity and diabetes drugs, announced plans on Monday to build a new €2.6bn factory in the Netherlands, expanding its capacity to produce oral medicines including a weight loss pill for which it hopes to win approval next year.
But as the Trump administration pushes for a “most favoured nation” policy under which historically high drug prices in the US would now match the cheapest levels in other developed nations, Lilly chief executive David Ricks said the company would equalise prices by lowering them in the US and raising them in Europe.
The pharma industry has been battling the UK’s clawback tax, under which a percentage of revenues above a certain cap must be paid back to the government, after the rate soared this year — but Ricks said the system should not exist in any country.
Roughly two-thirds of European governments use clawback taxes to reduce the cost of medicines for their healthcare systems, according to industry lobby group the European Federation of Pharmaceutical Industries and Associations.
Ricks told the Financial Times the taxes were unfair, describing them as a “one-way insurance system” to protect healthcare systems and taxpayers. He warned that the industry would not be able to introduce new medicines in Europe if the taxes persisted.
“Let’s off-ramp this system — it’s well past time — and let’s focus spending on medicines, on things that are breakthroughs, but reward them, and then go through the hard work of compressing budgets in the part of the healthcare systems that are now obsolete because we have breakthroughs and cures,” he said.
Ricks said that if healthcare systems invested more in obesity drugs, they could quickly find savings by paying less for services such as diabetes clinics or treating fewer patients suffering cardiac arrests.
Lilly is one of many drugmakers that recently scrapped or paused investment in the UK, as the industry tries to press the government to pay more for drugs. Ricks said in September the UK was “probably the worst country in Europe” for drug prices.
He said the UK government had now taken the issue “beyond lip service”, and that its proposed 25 per cent rise in the price threshold at which drugs that add a year of healthy life to a patient are deemed cost-effective was a “positive step forward but not sufficient”. He added that drugmakers wanted a higher increase in the measure along with a commitment that it would continue to rise with inflation.
Lilly plans to invest $27bn in the US across four new manufacturing sites as drugmakers try to minimise the impact of tariffs on the sector. Ricks said the US sites would provide for all US demand, with the new European site, along with existing ones in France, Ireland, Italy and Spain, supplying Europe, the Middle East and Africa.
