By guest blogger Preeti Parikh
Brexit has been one of the most discussed topics across the globe ever since the referendum date was announced on the 23rd June 2016 to decide whether the UK should remain or leave the European Union (EU). The country’s decision to leave the EU (with 51.9% of voters in favour of leaving versus 48.1%) has created what some have dubbed a “political chaos” in Britain.9 While Scotland and Northern Ireland both backed staying in the EU, the UK and Wales were in favour of exiting. It has been a year since the referendum, yet the uncertainty of Brexit’s impact on the UK and the industries within her remains. In particular, the future of the pharmaceutical industry; one of the fastest growing industries within the EU and one that greatly benefits from the close-knit bond that the 28 member countries currently share.
Recently, Prime Minister Theresa May invoked Article 50 of the Lisbon Treaty, which gives both sides (the UK and the EU) a period of two years to agree to the terms of the split, according to which the UK is scheduled to leave the EU on the 29th March 2019. This can be extended if all 28 EU members agree. The terms of the withdrawal have not yet been negotiated - until then the UK remains a full member of the EU.
Before I talk about the great ordeal that the pharmaceutical industry will possibly face post-Brexit, let’s have a quick look at some interesting facts about why it’s important within the EU.
The contribution of the Life Sciences sector to the UK economy in 2015 was close to £30 billion. Published data shows that UK pharma invests £11.5m per day into research and development, making it the highest pharmaceutical R&D expenditure in Europe.3 According to IMS Quintiles, the UK contributes to 4.5% of global sales for top 20 companies. Between 2010-2014, the UK had the third largest number of NCEs launched.5 While the UK is home to several pharmaceutical giants, it is also home to the highest number of speciality biotechs.
The UK has one of the strongest pipelines in development and significantly benefits from European Research Council grants and funding. UK companies and institutes play a major role in the EU’s Horizon 2020 research and innovation initiative – the world’s largest Life Sciences public-private partnership with over 50 projects ongoing.1
The UK pharma industry employs over 70,000 people, of which 7% are EU nationals, who generate more than 10% of the country’s GDP.2 However, just this week Theresa May announced her proposed plans for EU citizens living in the UK. The main feature is the offer of "settled status" for EU citizens, as well of nationals of Norway, Iceland, Liechtenstein and Switzerland, who have been living legally and continuously in the UK for at least five years. Those who have not yet been residents of the UK for the five years can apply for continued residence until these five years are reached. Similar measures will be put in place for students from the EU.11
We know that the UK hosts a number of European organizations, the most important among those is the European Medicines Agency (EMA), headquartered in London.
There’s no doubt that the UK’s exit from the EU will leave a scar, but what will all of this mean for the future of the pharmaceutical industry, both in the UK and on a global scale?
Will Brexit bring along a harsh dose of reality?
It is obvious that Brexit’s effect will be seen across industries not only in the UK, but globally. However, I will talk about its impact on the pharmaceutical industry. While the exit will greatly impact the industry’s research, production, sale and distribution of drugs, it is also likely to weaken the UK’s influence globally as a centre of innovation and learning - all of which is very likely to cost the country jobs and investments. Let’s face the facts, one of the immediate implications of Brexit will be the uncertain future of the complex EU regulatory framework.
Uncertainty about R&D funding
Among the other benefits that the UK enjoys as being a part of the EU, one of them is the grants and funding that it receives for scientific research (between 2007-2013, the UK received EU grants of €7 billion).3 Once Brexit comes into play, UK pharma companies would no longer have access to the EU’s research and innovation programmes including Horizon 2020. Given that the negotiations of exit from grants will not happen overnight, UK based multinationals might transfer their key research projects outside of the UK to ensure continuity of participation in international research programs.6
Impact on marketing authorization
Perhaps one of the biggest uncertainties the pharmaceutical industry will face post Brexit is the impact on regulatory processes and market authorization of drugs in the UK. For more than two decades, the EMA has been practically running the show when it comes to providing marketing authorizations to drugs across the EU member countries - including the UK. The EMA is responsible for a centralized marketing authorization that provides pharmaceutical companies access to all EU member states. This “single marketing authorization” has been very attractive for most pharma companies looking to access the EU market.2
The UK also has its own national authorization agency for drugs that fall outside the remit of the centralized procedure, known as the Medicines and Healthcare Products Regulatory Agency (MHRA). However, the question is if the UK were no longer a member state of the EU, would the drug approvals still fall under EMA?4
Brexit will take away this access to the single market. Companies will have to file two separate regulatory submissions – one for the UK and the other for the EU. Companies outside of the UK will have the choice to choose the EU submission route, since this would mean easy access to the 27 member states within the EU (excluding the UK). However, for UK companies there will be no such privilege. This would not only increase the regulatory burden for many companies but also make the UK a less attractive market for launch.2,10
Currently, the National Institute for Health and Care Excellence (NICE), which develops guidelines and enforces pricing strategies in the UK, is included within the EUnetHTA (European network for Health Technology Assessment). The latter provides important information about pricing and develops innovative pricing models in the EU. Exiting the EU could close doors to this network for the UK, which could negatively impact treatment guidelines and the cost of drugs.4
Another Brexit effect could be the relocation of the EMA from London. The decision of which member state to relocate to will surely be a tough one, made even more difficult by the fact that they employee nearly 900 people, who may need to be relocated. It is still unclear how the UK’s MHRA and experts will continue to work with the EMA. Moving the EMA out of the UK will most likely weaken its regulatory status. With this uncertainty of how Brexit might impact the regulatory framework, drugs currently under review can be affected and authorizations can be put on hold. On the other hand, there could be a possibility for the UK to remain under the EMA umbrella. However, several questions would remain unanswered as to whether this would place the UK in a weaker role. Or would it have less influence on the EMA compared to other member states?2,7,8
Impact on clinical trials
According to the Association of the British Pharmaceutical Industry (ABPI), the UK is the most popular location for clinical trials (across development phases). Post-Brexit, the UK clinical trials industry may see a drop in the number of trials run out of the country.6
By 2018, the new EU Clinical Trails Regulation is likely to have kicked-in, aiming to facilitate pan-European clinical trials. This will allow for central application and approval to conduct trials across the EU. Given the inevitable exit of the UK from the EU, the clinical trial market for the UK is likely to shrink, giving a much larger patient pool within the EU versus that of the UK. Under the regulatory scheme of a single-EU portal, pharma companies would not want to incur an additional expense of conducting trials in the UK, when they’ve already won EU-wide approval.2
Another downside of Brexit could be the inaccessibility to EU databases such as Eudravigilance, a repository of drug adverse events from the 28 EU members. No access to this information by the UK could negatively impact drug safety.
While I have focused on only a couple of effects, there are several other areas that will be impacted as a result of Brexit including patents, freedom of movement for pharmaceutical employees, the impact of launch across the EU for novel drugs, the future of scientific funding and so on.
Could Brexit mean an unseen opportunity for the UK?
One can anticipate multiple scenarios of Brexit from a regulatory standpoint; the UK could form an entirely separate regulatory agency to the EMA while retaining close relationships with the EMA, or it could remain regulated by the EMA but only move its headquarters outside of London, or the regulatory framework stays as it is right now. Whatever may be the case, there are both struggles and opportunities for Britain within this “Brexit chapter”.5
If we were to assume that the UK creates a separate regulatory agency, it has the opportunity to streamline and speed up the regulatory process, potentially facilitating the approval of innovative drugs and technologies even earlier than the EU member states. With a close-knit collaboration between the MHRA, NICE and the government, Britain could leverage its valuable experience with real-world evidence. The UK could then focus more on its own healthcare needs, identifying and prioritising the launch of medicines which are in the best interest of the country.5
Another upside of Brexit could be the rapid and efficient assessment of the comparative clinical and cost effectiveness that is currently conducted by NICE independently, giving the governing body greater bargaining powers over drug pricing.
There is increasing ambiguity around Brexit ever since the referendum date was announced last year, but what seems clear is that whatever the consequences of the UK’s exit, it will surely be a complex one! Whatever scenario the UK opts for, it would still have to negotiate its relationship with the EU, and this would be subjected to approval by the remaining EU members. While Switzerland has been a successful example of “life outside of the EU”, it remains uncertain whether the UK will be as lucky. Like all arguments both sides need to be taken into account. While there are several unfavourable implications to Brexit, there are also a bunch of opportunities that await the UK. As 43 years of fostering from the European Union comes to an end, one thing is for certain - changes are coming to the UK pharmaceutical industry.
Preeti currently works as a strategy consultant with RAS LSS, a boutique Life science consulting company (http://consulting.raslss.com/). Her key focus areas include strategy development and competitive intelligence.