Merck Research Site

Lord Vallance of Balham Excerpts

Thursday 11th September 2025 Lords Chamber

[The Earl of Effingham]

To ask His Majesty’s Government what assessment they have made of the impact on jobs and growth of Merck’s decision to cancel plans for a £1 billion research site in London.

[The Minister of State, Department for Science, Innovation and Technology and Department for Energy and Net Zero (Lord Vallance of Balham) (Lab)]

My Lords, the decision by Merck, or MSD, not to progress its investment, with 126 jobs lost—I express my sympathy to those individuals—is part of a broader effort by MSD to optimise its resources. It announced in July that it would cut $3 billion per year by 2027 and that 6,000 jobs would go worldwide. MSD continues to employ over 1,600 staff in the UK across other operations, including more than 40 collaborative working agreements with the NHS, the Our Future Health project and UK clinical trials. We will continue to work with the sector to unlock growth.

[The Earl of Effingham (Con)]

My Lords, I thank the Minister for his response, but the cancellation of the Merck research site is not only a major blow for our life sciences economy; it cuts across many other sectors that work with Merck—accounting, law, banking and other professional services. It is a blow for research scientists in training, as those future job opportunities have disappeared. How would the Minister respond to the feedback from one of the largest pharma companies in the world that the UK is

“not making meaningful progress towards addressing the lack of investment in the life science industry”?

[Lord Vallance of Balham (Lab)]

The decrease in funding for the life sciences sector, in terms of NHS purchasing of medicines, started in 2015 and has continued since. It has not been a good position. We are reversing that now with the Life Sciences Sector Plan to make sure there is proper investment. Some £2 billion is going in as part of that plan, and £500 million has already gone in for a manufacturing investment fund and £600 million for a health data research service. The changes we are making will continue to make this a place where people want to invest, but I reiterate that the loss of those jobs and the Merck research centre as part of its global cuts is very disappointing.

[Lord Clement-Jones (LD)]

My Lords, a narrative is developing: AstraZeneca is relocating to Ireland; the Health Secretary walked out of talks with the industry in August on the voluntary pricing scheme for branded medicines; and now we are seeing this cancellation by Merck. Does this not call into question the whole of the Government’s VPAG policy, which has seen payback rates for new medicines unexpectedly surge to 22.9% in 2025? What are the Irish doing right that this Government should emulate?

[Lord Vallance of Balham (Lab)]

I thank the noble Lord for raising the VPAG scheme. The VPAG scheme, which was negotiated under the previous Government, turned out with a figure of 23%, which was completely unexpected on both sides. The industry entered the scheme jointly with government, negotiated it and that is the number it came up with. We have been trying to negotiate a better position so that the industry gets more from that and is not hit with 23%. That is the deal going on at the moment. We are trying to make the environment better for companies and to rectify something that ended up in the wrong place.

[Baroness Jones of Whitchurch (Lab)]

My Lords, although this news is very disappointing, can my noble friend say something about the bigger picture? My understanding is that a number of other companies are continuing to invest here and that our dedicated life sciences action plan is being widely welcomed across the sector. Can he update the House on those issues?

[Lord Vallance of Balham (Lab)]

I thank my noble friend for her work over the past year as a Minister in two departments, which I think she did brilliantly. There are indeed other companies that are investing. In the same period, Moderna has invested £1 billion in the UK, and BioNTech has invested £2 billion in the UK. There is significant growth going on in Isomorphic Labs, one of the latest companies doing AI drug design. There are numerous examples of companies that are investing. We have a Life Sciences Sector Plan that has been welcomed by industry, and we know that as part of that the commercial environment for medicines in the UK needs to be improved.

[Lord Lansley (Con)]

My Lords, the UK is potentially the best location for life sciences investment in Europe, but it is undermined at present by the lack of agreement over the rebate under the voluntary pricing and access agreement. Will the Minister and the Government rapidly enter into mediation with the industry so that this can be resolved?

[Lord Vallance of Balham (Lab)]

I reiterate my point about VPAG: it ended up in an unexpected place. It was negotiated in good faith by the previous Government and the industry, and the result was not the one that anyone expected. We are negotiating to try to get that in the right place. We got very close to a deal. That is clearly now complicated by a number of factors, including the prospect of tariffs from the US. We continue to talk to the industry regularly on all these matters.

[Lord Bassam of Brighton (Lab)]

My Lords, the decision by Merck is disappointing, but I am encouraged by what the Minister said about the way in which the Government are approaching this. Is it not the case that the botched Brexit deal and the failure by the previous Government to raise levels of investment have left us in this rather invidious position? This decision stretches back more than the past 14 months; it was left to us by the previous Government.

[Lord Vallance of Balham (Lab)]

There is no doubt that Brexit had an effect on the entire sector. It also had an effect on academia and led to us ending up with a very much reduced income from the Horizon Europe programme. There was a significant effect there. It is true that NHS uptake of new medicines as a percentage of the total has decreased; that decrease started somewhere around 2014-15 and has been relentless since. That has been part of creating an environment that is not conducive, and part of why, as part of the Life Sciences Sector Plan, we are determined to support R&D, company formation and growth and to make sure that the NHS is an adopter of innovation.

[Lord Markham (Con)]

Unfortunately, contrary to the bigger picture just painted by the Minister, the actual picture is one of a 50% decline in investment in life sciences in the past few years, the loss of three major investments—AstraZeneca, Eli Lilly and Merck—and the fact that 35% of the newest drugs available on the continent are no longer available or not being made available in the UK. The unfortunate situation is that the Treasury is looking at this only as a saving to the NHS and is not considering the wider impact on drugs for patients, valuable UK jobs and the life sciences industry. Has the Treasury performed a cost-benefit analysis that looks at all the costs to industry, patients and business versus the NHS savings? If yes, will the Minister commit to publishing it? If not, will he commit to commissioning one as soon as possible before we lose any more jobs?

[Lord Vallance of Balham (Lab)]

I thank the noble Lord for that question. It is a point I agree with: this is about the overall economic picture as well as the health costs. It is something that we need to look at as we think about the way medicines are used in this country. I think that the macroeconomic picture is different from the simple health economics picture, and it is something that is an active part of discussion. It is something I have discussed with macroeconomists, looking at ways in which we might think about introducing that as part of the system.

[Baroness Browning (Con)]

Given the changes announced in the United States in the past year about its approach to medical research and pharmaceuticals, have the Government made any assessment of the gap that is widening in the US in terms of other countries being able to fill the gap, particularly for medical research? Is there a plan, because this is a global marketplace and unless we are quick other countries will soon take up the slack that America is creating?

[Lord Vallance of Balham (Lab)]

We should not be under any illusion: the US is the major powerhouse in pharmaceutical research and development and will remain that powerhouse. Despite some of the changes, there is enormous investment going into, in particular, private sector R&D in the US. However, the noble Baroness is right that there are changes in public sector funding. As I hope she will be aware, we launched a £112 million global talent scheme, with £54 million coming from the Government and the rest from the Royal Society and the Royal Academy of Engineering, looking for global talent to get to the UK. We believe this is a time when we can attract global talent into our leading universities and biotech scene.

[Baroness Neville-Rolfe (Con)]

When I visited the excellent Chase Farm Hospital last year, I talked to the pharmacy. It had a lot of shortages of particular medicines. I have experienced the same in my local pharmacy. Is this a problem that the Minister is concerned about?

[Lord Vallance of Balham (Lab)]

The shortage of medicines is always a problem. We cannot have a situation where essential medicines are not available. That speaks to better understanding of supply chain resilience. The noble Baroness will be aware that supply chain resilience came to the fore very much over the past few years, when it was obvious that most countries did not understand their supply chains. A lot of work has been done on understanding supply chains and making sure there is resilience for essential medicines. There are opportunities there in terms of how the UK can work more closely with Europe to ensure that we get better supply chain resilience.

[Lord Kamall (Con)]

My Lords, the Minister will be aware, because I have raised this issue with him personally, that when I was the Life Sciences Minister, I wanted to work with other parts of government which were involved in life sciences. When I asked my private office to do a survey of government, it found someone in the Treasury, someone in No. 10 and someone in DIT. We insisted that all people in government working on life sciences should meet together so that we could have a co-ordinated approach. I understand that those meetings did not continue. I have raised this issue with the Minister. Have those meetings recommenced? When did all the relevant people in government on life sciences last met?

My second question is about VPAG or VPAS. Given that many of the people who negotiate for the pharmaceutical companies have worked for the NHS, they will understand the challenges on both sides of the table. Could the Minister ask the industry for some blue-sky thinking, especially from those who have worked in the NHS and understand the pressures but are now working in private industry?

[Lord Vallance of Balham (Lab)]

I have indeed tried to continue the brilliant work of the noble Lord on bringing together parts of government in this area; I met people from many different departments about this as recently as yesterday. We are joining up the life sciences sector right the way across government. On the point about blue-sky thinking, that is exactly one of the things we have done with industry leaders. We said, “Could you think about the most imaginative way to come up with answers to some of these?” We got a piece of work on that, and we will continue working with them. There are indeed people from the NHS working in industry and people from industry working here, and of course I have quite an extensive background of understanding the pharmaceutical sector.

[Lord Johnson of Lainston (Con)]

Would the Minister follow up my noble friend’s comment—

[Lord Johnson of Lainston (Con)]

I am sorry, but I was actually in the doorway, coming in. I would be grateful if I could ask the question, if that is possible. My noble friend Lord Markham raised an important point about the Treasury’s view of how these pricing processes function. The reality is that if we do not have the drug companies in this country, we are not just going to miss the opportunity for investment, we will lose the opportunity for clinical trials for our patients and individuals in the NHS to get access to these new medicines. I return to the question about an assessment of the overall cost of these measures and a proper assessment of the understanding of how investment from the biopharma sector in the UK actually adds up, not just in relation to the pounds, shillings and pence of the medicines.

[Lord Vallance of Balham (Lab)]

I agree that this is a key area, and it is one that I am working on. I have worked on it with macroeconomists because it is something that we need to look at. We care about the industry in this country. We have two of the world’s largest pharmaceutical companies based here and our largest company is a pharmaceutical company. Those companies are essential. They train most of the people who end up working in SMEs and start-ups, and they are the reason why we have such a flourishing life sciences sector here. We need to look at the expenditure, not just from a narrow health economics perspective but from a broader economic perspective.