GERMANY — German firm Bayer is shifting away from Europe and the United Kingdom, citing the continent’s “unfriendly” policies to innovation, amid widespread concern about new taxes threatening profits.

The Pharma giant will focus on its US and Chinese businesses after an expanded medicines levy in the UK and similar schemes in Germany deterred investment, Stefan Oelrich, head of Bayer’s drugs business, told the Financial Times.

Europe is making some real big mistakes,” he said, detailing how his firm would shift its commercial footprint away from Europe. “European governments are trying to create incentives for research investments, but they are making our lives miserable on the commercial side,” Oelrich added.

As a result, Oelrich says Bayer is “deprioritizing Europe to some degree” and focusing on the US and China, where the company’s pharma division has already established a sizeable presence.

He noted that China is becoming increasingly welcoming when it comes to innovation, while higher drugs prices in the US allow the company to compensate for inflation.

We are really shifting our commercial footprint and the resourcing of our commercial footprint much away from Europe,” he added.

Several other multinationals have underlined their worries about European competitiveness. In October 2022, German chemicals giant BASF said it will have to “permanently” downsize in Europe due to higher energy prices.

According to the Financial Times, Europe, the Middle East, and Africa (EMEA) account for roughly 40% of Bayer’s pharma division sales, while North America and the rest of the world account for 23% and 37%, respectively.

Oelrich stated that the company was heavily investing in the United States, where it had recently acquired Asklepios BioPharmaceutical and Vividion Therapeutics in deals worth up to US$6 billion.

The comments coincide with AbbVie and Eli Lilly’s withdrawal from the Voluntary Scheme for Branded Medicines Pricing and Access (VPAS), a UK drug pricing agreement, over what they claim are penalizing revenue clawbacks.

The scheme requires companies to pay the government a percentage of their revenue if the overall NHS drug bill rises by more than 2% per year.

The rate was set at 15% in 2022, generating £1.8 billion (US$2.2 billion) in industry rebates, but it was raised to 26.5% this year, costing £3.3 billion (US$4 billion).

The current voluntary drug pricing and access scheme, according to Lilly, has harmed innovation and made the UK a “global outlier” among major countries, while AbbVie claims that this year’s repayment rates of 26.5% will impair its ability to operate sustainably in the country.

The Association of the British Pharmaceutical Industry (ABPI), the industry body, says it will present proposals for a “completely new settlement” in the coming months.

Bristol Myers Squibb recently warned that VPAS could divert investment away from the UK. Germany also passed a new law in October aimed at reducing the country’s drugs bill.

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