Brexit Blues: What Now for UK Life Sciences?

July 1, 2016

Leela Barham looks at the implications for the UK industry in the aftermath of last week's vote for Brexit.

The UK has voted by a narrow margin of 52% to 48% to leave the European Union (EU). Well those that bothered to vote, 28% of the population eligible to vote, didn’t. To say it was close is an understatement. To borrow the words of a famous British footballer and actor, it’s been emotional.

Brexit by 2019?

The precise timetable for leaving the EU is unclear: partly due to the resignation of the Prime Minister, David Cameron. It seems he doesn’t want to formally start the process and will leave that to whoever steps into his shoes later this year. There are also those in the EU who are pressing for a speedy start to negotiations. However, unless there is (another) seismic shift in UK politics and the underpinning principles of democracy, it looks like the UK is to be out, possibly as early as 2019.

Risky business

Many saw risks if the EU were to leave for both health and within that, the pharmaceutical industry. The Economist Intelligence Unit (EIU) warned that the recession that was likely in event of Brexit would affect available money for the NHS. An NHS that was already feeling the squeeze.

The Association of the British Pharmaceutical industry (ABPI) warned in May that patient access to innovation would be under threat from Brexit. Big names in industry too added their weight to the remain campaign, including GSK and Eli Lilly. For those who might wish that more weight had been added before the vote, organisations like the ABPI are limited by the rules on just how much lobbying they could do. Supporters of leaving the EU suggested that leaving might free the industry from stifling regulation, such as the EU’s rules on clinical trials.

Uncertainty is the new normal

The real problem now is simply that we don’t know what the full impact of Brexit will be aside from the immediate devaluation of sterling and shares (and their bounce back). Even these short-term impacts have uncertain spillovers. Parallel imports in the UK, for example, are driven by exchange rate changes. That could then have a follow on impact on what companies pay back to the Department of Health as part of the Pharmaceutical Price Regulation Scheme (PPRS). That affects how much money the NHS gets too. To say that there are ripples is probably an understatement: there may be waves (even if not tidal) as a result of the vote for the industry.

For an industry that needs to make decisions that bear fruit in ten to fifteen years adding in uncertainty about Brexit will do little to boost their confidence in the UK. Brexit will likely prove to be a distraction that many could have done without. For example, it already has overshadowed industry and others work on the Accelerated Access Review (AAR) – an independent review to explore how to speed up adoption of innovation in the English NHS – by delaying publication of its final report.

So what could be the impact?

We know from, somewhat old, research that the UK was always on a knife edge when it came to where industry chooses to locate its activities. On the plus side the European Medicines Agency (EMA) has its offices in London. That made it easy for companies located in the UK to go and talk to the regulator. Although no immediate plans to relocate have been announced, it’ll be no surprise if the EMA moves. Italy has been mooted as a new location, the homeland of the current EMA head, Guido Rasi. Similarly the anticipated unit of the European Unitary Patent Court to focus on life sciences will be unlikely to make its home in London, as planned. If EMA relocates, many companies may also look again at where it’s best to put their HQs.

Many companies were already worried about the UK’s attractiveness for clinical trials when access to some of the latest products is not routine. Add to that a big question mark over future approaches to regulation affecting the industry - including on clinical trials - and there will likely be even closer scrutiny of the choice of the UK as a location for clinical trials versus counterparts. The risk is that UK could host fewer trials in future.

There are also questions about the future state of some of the fundamentals that the life sciences needs for research. It’s not clear if the talented scientists working in the UK – many of whom are from Europe  – will stay. It’s not clear if the UK can do a deal much like those in the wider European Economic Area (EEA) to secure access to EU research funding or not. Even if the UK can reach such an agreement, that may not stop European scientists from leaving because of wider sentiments about whether those from outside of the UK are still welcome in the UK.

Brexit could also make negotiation of the next PPRS harder. If the predictions of recession come true, the value of a rebate from PPRS members on sales of branded medicines to the NHS becomes even more attractive. Industry was already expecting negotiations to be tough, it may be even harder to argue against a continuation of PPRS payments and for more generous growth rates in spend than had been seen in the 2014 agreement.

The warning of poorer patient access – whether through the loss of trials that would have been undertaken in the UK or slower access to those that are approved as it’s worked through whether or not the EMA will still a play a role in approving new drugs – could represent the biggest worry for patient groups. Poorer patient access translates into either a longer time to enjoy revenues, or fewer sales overall for companies.

There may also be subtle changes too: will the Health Technology Assessment network (HTAN) still include the UK? Will NICE still be part of European initiatives such as EUnetHTA (and its more permanent successor following the end of the third and final joint action)? Whether that’s a loss or not depends on your views on how valuable these activities really are: talking shops or with the potential to reduce the risk, time and complexity of pricing and reimbursement. Both HTAN and EUnetHTA are all ultimately about collaboration and, as far as possible, building consensus. If the UK isn’t represented it will certainly be missed: for good or bad.

A life sciences roadmap for Brexit

There is a need now for industry to work out what it’s preferred road map for Brexit is. There is an opportunity for industry to step in: after all, the politicians will face a significant task covering everything from movement of people to trade in unraveling the union and might welcome some help to secure the ‘best’ deal that it can for life sciences. Proposals and a deal for life sciences should set itself a stringent test: whether it will benefit patients or, at the very least, secure the least worst deal.

Leela Barham is an independent health economist and policy expert. You access her website here and contact her at leels@btinternet.com