AstraZeneca chief says industry should not pay for NHS Covid costs

AstraZeneca’s chief executive said the pharmaceuticals industry should not be made to pay for the “explosion” of NHS costs related to the Covid pandemic, as drugmakers ramp up their criticism of the UK government.

Pascal Soriot said the pricing agreement reached with the industry in 2019 — which stated the NHS would not have to pay more than a 2 per cent increase each year for branded drugs, however much it buys — did not take account of soaring demand from treating Covid patients.

When the NHS’s branded drug bill exceeds the cap, drugmakers have to pay back the extra revenue.

The UK health department’s clawback rose from about 5-10 per cent before the pandemic to 26.5 per cent this year, prompting other pharmaceutical chief executives to warn that it could hit life sciences investment in the UK.

Soriot said he would like to see a return to the lower rebate rates.

“Now we’re told you have to live with what you signed up to and we didn’t sign up to have to cover the cost of Covid,” he said. “The rebates are so large because the innovative industry has to pay for the explosion of cost coming from Covid. And so that is really what we find a little bit difficult.”

He also blamed a “discouraging tax rate” for AstraZeneca’s decision to build a $360mn factory in Ireland rather than the UK.

Soriot said the company had wanted to make the investment in the UK, where it has manufacturing sites at Macclesfield in the north-west and a headquarters and research and development in Cambridge.

“We really have invested a lot and the country was making a lot of progress building a life sciences sector. I have to say in the recent past [it] has not been as supportive as we would have hoped,” he said.

AstraZeneca said it expected profits to rise this year despite investing in 30 late-stage clinical trials to try to replace revenue from blockbuster drugs due to go off patent in the second half of the decade.

Soriot said the group’s research and development success and increase in sales in 2022 demonstrated it was “on track” to deliver “industry-leading revenue growth” through 2025 and beyond.

Soriot has been chief executive of AstraZeneca for more than 10 years — but said he had no plans to depart “any time soon”.

“Always, people look at internal and external candidates, but we have a very, very strong internal team and I certainly personally hope very much that someone from the company will replace me, but at the end of the day, it’s not going to be my decision,” he said.

This year, AstraZeneca expects core earnings per share to rise by a high single-digit to low double-digit percentage and total revenue, excluding Covid-19 medicines, to increase by a low double-digit percentage.

In the fourth quarter of last year, total revenue fell 7 per cent to $11.2bn, because of a decline in sales of the company’s Covid-19 vaccine, developed with the University of Oxford. On a constant currency basis revenue increased 1 per cent. Excluding the Covid-19 vaccine, total revenue jumped by 17 per cent, driven by sales of drugs for heart failure, cancer and rare diseases. Sales were in line with expectations.

For the full year 2022, total revenue increased by 25 per cent compared with 2021 to $44.4bn, stripping out exchange rate movements. Core earnings per share were $6.66, up 33 per cent. Pre-tax profit was $2.5bn, compared with a $265mn loss the year before.

Shares in AstraZeneca have soared almost 30 per cent in the past year, after strong trial results showed the potential for a huge market for its Enhertu oncology drug, partnered with Japanese drugmaker Daiichi Sankyo.