The stream of large cap announcements has slowed again this week, making way for the small-cap updates. Paul, Graham and Roland have done a monumental job covering as many announcements as possible this week. You can catch up with all their commentary here.
But there is still plenty to cover in this week’s FTSE Friday:
- A bombshell in pharmaceutical price negotiations which might have negative consequences for the entire sector
- The latest crusade from Wetherspoon’s director Tim Martin
- A surprisingly resilient performance from advisory group St James’s Place
Why pharma investing is a catch-22
The UK isn’t an especially important market for pharmaceutical companies - even the British ones make most of their revenue overseas - but the recent fracas between some of the biggest companies in the industry and the British government is still worth taking notice of.
What happened: Drugs companies break agreement
Since 2019, most of the major drugs companies have been part of a scheme which states that if the NHS bill for drugs grows by more than 2%, the pharmaceutical industry pays the difference. And until recently, the scheme worked well: the pharma groups get access to the entire UK market with very little effort (the NHS, of course, has a monopoly) and the health service gets access to the medicines it needs. What’s more, these clawbacks were previously a relatively small proportion of UK revenue, which was in itself a small contributor to pharma sales.
But in 2022, the NHS handed the pharma industry a £3.3bn clawback bill, equivalent to more than a quarter of the revenue generated in the country. In response, US giants AbbVie and Eli Lilly quit the scheme and are making sure the rest of the industry knows why.
Let’s be clear, this doesn’t mean AbbVie or Eli Lilly (which make some of the world’s best selling drugs) are no longer supplying to the UK. Nor does it mean that the US giants won’t still have to pay money back to the NHS (companies that aren’t part of the voluntary scheme have to pay clawbacks to the NHS under a statutory scheme). But it does hint at a changing dynamic between the drugs companies and the governments they supply to, one that circles around the age-old problem in the pharma industry: pricing.
Why it matters: Pricing fears for a new era in pharma
And here-in lies the…
