Bracing for ‘Brexit’?

February 1, 2016
Reflector

Pharmaceutical Executive

Volume 36, Issue 2

What the drug industry stands to gain - or lose - from the unthinkable: Britain departing the European Union.

It’s the most obvious question for every pharmaceutical executive-and it’s the question no one dares to answer: what happens if the UK leaves the EU? The threat of new trade barriers, abandoned research projects, and strategic disinvestment figures high among the concerns, while the aspirations for advocates of a British exit-and the anxieties of its opponents-include greater national autonomy and the end to years of uncertainty.

There’s no mystery about this still being a mystery. Right now it’s just too open-ended for comprehensive answers, because just what any “Brexit” will mean is too hard to predict on current knowledge. Not just too many known unknowns, but too many unknown unknowns, Donald Rumsfeld would have said.

But that doesn’t mean the questions can’t be asked. (And for anyone who wants a refresher of how we got into this quandary, look further ahead for a quick summary.)

Initial ponderings

Some of the questions are very obvious. If Britain withdraws from the EU, will new medicines have to be authorized separately for the EU and for the UK? And what happens to existing authorizations when they come up for renewal, or need a variation? In the event of Brexit-and the protracted negotiations this would require-would the European marketing authorization procedures have to go into hold?

What will happen to the European Medicines Agency (EMA)? Doubtless it would have to relocate its headquarters into another country (in itself no small feat, since it has taken 20 years for it to hit cruising speed in London’s Docklands), but would the EMA still allow UK input to its deliberations-and if not, would that make the agency stronger or weaker? And would the UK have to resume full independence of not only authorizations, but, for instance, good manufacturing practice (GMP) inspections abroad, with all the duplication that would entail?

Could the UK still contribute to the current EU reflections on everything from health technology assessment to clinical trials, from e-health to orphan medicines, and from adaptive licensing to the combat against falsified medicines?

Wider implications

Other questions are more complex. What would be the impact on the EU as a whole if it lost one of its big five members (and, for all the UK’s diminished status in the modern world, still a member with disproportionate global profile and influence)? Would the EU remain as interesting a market for investments in

research, manufacturing, and marketing? Would withdrawal tilt the balance against investment in the UK, as the access to a large EU market would no longer be there to compensate for the UK’s own tough domestic environment for take-up of innovation in the national health service? Would the loss of the UK reduce the attractions of the EU as a site for clinical trials? And how would the EU’s negotiating powers be affected on international issues such as the Transatlantic Trade and Investment Partnership (TTIP), safe harbor agreements for data transfer, or intellectual property rights?

Other subsidiary questions emerge. Would UK scientists-or pharmaceutical executives-enjoy the same rights they do now to work in any EU country, or would they become subject to new residence, visa, and work permit controls? The same question relates to staff from other member states posted to work in the UK. And if EU funding was cut to UK research projects, how fast would academics desert the UK for countries with easier access to collaborative international research projects?

And what would be the status of expatriate Britons seeking access to healthcare in countries where they currently cluster- Cyprus, Spain, Portugal, France and Italy-if the UK pulled out of cross-border care arrangements? It may not gain much public sympathy, but there is also a question over the fate of thousands of UK civil servants or scientists or politicians currently working in EU institutions, often on health-related issues. There could be implications not only for their jobs but also for their pension and social security rights-to say nothing of the chilling effect on forward planning of everything from recruitment to participation in EU research projects.

 

 

Trade bodies in Europe and the UK are keeping their powder dry. The European Federation of Pharmaceutical Industries and Associations (EFPIA) in Brussels says the situation has not developed enough yet to warrant public discussion, and keeps diplomatically on the right side of saying it’s a decision for the citizens of the UK. However, it is preparing an impact assessment of a potential Brexit. The Association of the British Pharmaceutical Industry (ABPI) has declared itself in favor of EU reform and greater competitiveness-but that doesn’t amount to a very precise manifesto, and it is really in wait-and-see mode.

European wholesalers have hardly begun to consider the implications. For them, the question is whether the deal reached would mean pharmaceutical trade between the UK and the EU would continue to be considered as part of the internal market (as is the case with non-EU members Norway and Iceland, which are members of the European Economic Area), or import/export trade (as is the case with EU drug wholesale trade with non-EU-member and non-EEA member Switzerland-an arrangement that leads to hold-ups and complications at borders).

The spark from within

The most partisan arguments are, naturally, within the UK, where the debate started in response to sharp dissatisfaction in some quarters with a vague and often ill-informed notion of “EU interference.” Sentiment in the UK life sciences sector largely favors the UK staying in. One of the UK’s pro-EU lobby groups-unambiguously named “Pro-Europa”-is on the record with a passionate declaration in favor of Britain’s continued EU membership, claiming that “the overwhelming opinion” is that withdrawal would damage not only the domestic life sciences industry but the wider healthcare system and regulatory framework of Europe, where, it claims, UK policies and healthcare thinking are driving much of the EU’s agenda, extending also to reform of the common agricultural policy and plain-packaging for cigarettes.

And what about the process? What options might there be in a Brexit?  If the UK wanted political independence but continued access to the EU market, any deal would doubtless require it still to comply with EU rules, while forgoing any effective input to regulation-and would have to contribute to the EU budget anyway.  That’s the price Norway, a non-member, pays- and handsomely-for being able to sell into the EU. A new free trade agreement is another possibility, but, again, the more comprehensive it was, the more likely would be demands to accept EU regulations. And for the UK to fall back only on World Trade Organization (WTO) rules would leave its exports to the EU, having to pay the tariff the EU routinely imposes on imports from abroad.

More answers than questions-and the matter has acquired new urgency since British Prime Minister David Cameron announced that an in-out referendum could be held as early as this summer. Things have moved faster than had been imagined since he won the general election on a pledge to hold a vote by the end of 2017, and since the start of 2016, the pace and intensity of negotiations have increased noticeably. Much depends now on what sort of deal Cameron is able to reach with EU partners, with a first bid at a summit within weeks.

Current British demands relate to economic governance, competitiveness, sovereignty, and immigration, but even if EU leaders agreed last December “to find mutually satisfactory solutions in all the four areas” at their February summit, the game is still very much on. 

What to look for-now 

So, three things to watch. One, what sort of outline terms can Cameron extract from EU partners? Two (and crucially), will UK voters opt to stay in the EU on those terms? And three, if they don’t, and they vote for leaving, how long will the complex exercise of negotiating detailed terms and putting them into effect take? If the referendum leads to a “stay-in” result, that should take the question off the table for a generation. If the vote is to leave, it could take another generation to finalize the withdrawal.

 

Reflector is Pharmaceutical Executive’s correspondent in Brussels

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