RUTH SUNDERLAND: Donald Trump's bitter pill for pharma could benefit UK
Proper news from Britain - News from Britain you won’t find anywhere else. Not the tosh the big media force-feed you every day!
Donald Trump's desire to persecute pharma companies with his illogical and unjustifiable tariffs is a particular threat to the UK.
Life sciences is one of the areas in which the country still excels and that the Government sees as a pillar of growth.
An attack on pharma would hurt UK pensioners and savers. The most valuable company on the FTSE 100 is pharma giant AstraZeneca, and rival GSK is another stalwart of the index. These shares, which have taken a battering in recent weeks, are widely held by ordinary investors.
Tariffs on pharmaceuticals are also a very serious threat for Ireland, whose ultra-low corporation tax rate has been a big magnet for US giants such as Eli Lilly and Pfizer.
It is not clear yet what the levies may be. Trump has ordered an investigation into imports of medicines into the US as a first step and has suggested the levy could be 25 per cent, taking effect in the 'not-too-distant future'.
Whatever the detail, he wants to rip up a 30-year old World Trade Organisation agreement that exempts medicines from tariffs in a number of developed countries.
The morality is questionable. Medicines are not just any old goods; they are vital for human health. Diseases, as we know too well from Covid, don't recognise borders.
The 'rationale' is the usual Trumpian trope that the US is being ripped off.
In his account, most pharmaceutical innovation takes place in the US and is ultimately funded by American patients who pay higher prices for their drugs than in other countries. Plus, some big US pharma companies have shunted some of their operations to low-tax countries, particularly Ireland, thereby depriving the US Treasury of revenues. Ergo: foreigners must be freeloading.
No less an individual than Sir John Bell, former Regius Professor of Medicine at Oxford and now president of research hub the Ellison Institute, said this weekend he can see why the Americans are 'a bit grumpy' about the situation.
It is, however, a fairly crude and highly contestable narrative that does not capture the complex, opaque nature of drug pricing and corporate tax strategies. And it isn't obvious that 'foreigners' are to blame.
The idea, supposedly, is to incentivise pharma companies to set up facilities in the US – something GSK and Astra are already doing. This is not quick, easy or cheap and the costs in future will be even higher thanks to steel tariffs. Some may calculate it is not worth it, given Trump could be gone in less than four years.
The incentives to relocate are lowest for makers of off-patent generic drugs, many of them produced in India. These account for the vast majority of medicines dispensed to US patients.
Tariffs may well backfire, with Americans paying more for their medicines as well as facing shortages of drugs they need. This will doubtless be on the agenda when Chancellor Rachel Reeves meets White House officials in Washington this week.
It's possible there are glimmers of opportunity here. One is that Trump's attacks on universities in the US may well have alienated some very brilliant minds.
Perhaps we can lure scientists who are disaffected with the President to come and work in our universities or leading companies instead.
A couple of years ago, the bond markets slapped what they called a 'moron' premium on the UK because of the antics of Liz Truss. The moron premium has been exported, tariff-free, across the Atlantic, but we could do with a reverse brain drain.
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