UK Pharma Industry Pushes for 67% Increase in NICE Cost-Effectiveness Threshold Amid Investment Exodus
Key Insights
The Association of The British Pharmaceutical Industry (ABPI (search)) is calling for NICE's cost-effectiveness threshold to increase from £20,000-£30,000 to £40,000-£50,000 per QALY (search), arguing the current limit has lost 47% of its real value since 1999.
Major pharmaceutical companies including Eli Lilly, MSD, and AstraZeneca have scaled back UK investments worth over £1.4 billion, citing the country's restrictive drug pricing policies.
The UK government is reportedly considering raising the threshold by up to 25% in response to US threats of 100% tariffs on imported drugs and pressure from Trump's Most Favoured Nation policy.
The UK's pharmaceutical sector is intensifying pressure on the government to substantially increase the National Institute for Health and Care Excellence (NICE) cost-effectiveness threshold, as major drugmakers withdraw billions in planned investments from the country.
The Association of The British Pharmaceutical Industry (ABPI (search)) is demanding an urgent review of NICE's baseline cost-effectiveness threshold, which has remained frozen at £20,000 to £30,000 per Quality-Adjusted Life Year (QALY (search)) since 1999. The organization argues for an increase to £40,000-£50,000 per QALY, representing a potential 67% jump from the current upper limit.
Investment Exodus Highlights Pricing Tensions
The call comes as several pharmaceutical giants have scaled back their UK commitments in recent months. Eli Lilly has paused plans for a £279 million biotech laboratory, while MSD scrapped a £1 billion research centre in London. AstraZeneca has delayed a £200 million research site in Cambridge, collectively representing over £1.4 billion in stalled investments.
Eli Lilly CEO Dave Ricks has publicly criticized the UK as the "worst country in Europe" for drug prices, highlighting the growing frustration within the industry over the country's pricing policies.
Victoria Wood, director of value and access policy at the ABPI (search), explains that the situation has reached a critical point under mounting pressure from multiple fronts, including failed negotiations for the UK's Voluntary Scheme for Branded Medicines Pricing, Access and Growth (VPAG) scheme.
Economic Reality vs. Frozen Thresholds
According to ABPI (search) analysis, the real value of UK health spending has declined by 47% between 1999 and 2025. If the upper threshold had tracked inflation, it would now stand at approximately £56,794 per QALY (search). The Treasury's current recommendation for valuing a QALY in other government spending areas, such as transport and education, is £70,000.
However, health economists question this inflationary approach. Sally Gainsbury, a senior policy analyst at Nuffield Trust (search), notes that the initial basis for establishing the cost-effectiveness threshold lacked empirical evidence. A 2013 University of York (search) analysis estimated the average cost per QALY (search) to the NHS at £12,936, later uplifted to £15,000 and adopted by the Department of Health and Social Care.
Wood counters that "there are a lot of large assumptions" made with cost per QALY (search) estimates, which don't reflect the complexity of the NHS and different disease areas. She notes that in many cases, drugs are approved at the lower end of the threshold.
US Political Pressure Intensifies Debate
The timing of these discussions coincides with external pressure from the United States. The UK government is reportedly considering increasing NICE's cost-effectiveness threshold by up to 25%, according to Politico reports, in response to threats of tariffs as high as 100% on imported branded medicines and the looming Most Favoured Nation policy for deciding drug prices in the US.
Gainsbury observes that industry lobbying in the UK is being "significantly bolstered" by pressures from the US. "The game changer this time around is obviously Trump and the most favoured nation policy," she says.
Els Torreele, an independent researcher and founding director of æqua, describes the situation as the UK facing "bullying" from the US Government, driven by efforts to lower drug prices in America by calling on other developed countries to pay more.
Access Restrictions and Market Dynamics
Grant Castle, partner at UK-based law company Covington & Burling (search), notes that drugs are often recommended for only specific patient subgroups within approved indications, meaning access is restricted to narrower patient populations due to the current threshold limitations.
The introduction of the NICE severity modifier in 2022 provided some flexibility in the cost-effectiveness threshold related to disease severity. While an improvement over the previous end-of-life modifier, Wood argues that the bar for classifying a disease as 'severe' remains too high, continuing to exclude medicines.
VPAG Scheme Complicates Pricing Landscape
The ongoing tension centers on the net price of drugs, which Wood says won't be substantially impacted by a cost-effectiveness threshold change in isolation. The VPAG scheme effectively caps annual NHS spending increases on branded medicines, requiring companies to pay back sales exceeding the cap.
"If a decision was made and the NICE threshold was increased, and there were no changes to the VPAG, the industry would completely pay back all of the additional spend that that change in the threshold would incur for the new medicines that do come through," Wood explains.
Rebate rates under VPAG have surged to 22.9% in 2025, with Wood describing the UK as a "huge outlier" compared to European neighbors where the ABPI (search) would prefer rebate rates to remain in "single digits."
Global Competitiveness Concerns
The ABPI (search) argues that the UK is sinking in global rankings for pharma investment and research, with the frozen threshold undermining international competitiveness and disincentivizing global pharmaceutical companies from launching new products or investing in UK-based R&D and manufacturing.
Wood emphasizes the broader economic argument: "We want to attract the global pharmaceutical industry. We want them to invest in the country. We want them to bring their medicines here."
However, Gainsbury notes that evidence suggests no direct link between what a local market pays for a drug and where R&D investments are directed, with investment typically dictated by local policy, tax breaks, and government grants.
The ABPI (search) concludes that decisive action to raise the threshold would ensure the UK can continue to be a leader in life sciences and, most importantly, that patients can access the medicines they need when they need them.