Brexit and the UK Pharma Industry

The ‘In’ and ‘Out’ campaigns are now intensifying, but ‘Brexit’ has been a constant topic of conversation since the referendum date was announced 3 months ago. According to a recent study that asked 1,002 British adults (18+) were asked how they will vote in the EU referendum, 55% say they will vote to remain while 37% say they will vote to leave (8% are still undecided). [1]

A British exit could have widespread repercussions for many sectors within the UK economy, especially in highly regulated and controlled industries such as pharmaceuticals. It is estimated that the pharma industry currently employs 700,000 people in Europe, contributes around 10% of the UK’s GDP and generates over £3 billion in trade surplus.

The biggest uncertainty facing the pharmaceutical industry if the UK were to leave the EU is the impact on regulatory processes and market authorization of drugs in the UK. Currently, the European Medicines Agency (EMA) is responsible for the centralized authorization of medicines that is valid in all EU countries. The UK also has its own national authorization procedures for medicines that fall outside the remit of the centralized procedure, which is known as the Medicines and Healthcare products Regulatory Agency (MHRA).

The question is, if the UK were not a member of the EU, would the approval of drugs in the UK still fall under the EMA? The centralized authorization process allows for the early approval of some drugs where there is high unmet medical need, providing faster access to the whole EU market. If the UK no longer falls under the remit of the EMA, a number of questions arise: would the UK have to go through a separate authorization process, increasing the regulatory burden for many pharma companies?  Would the UK lose out to early access programmes, resulting in the delayed launch of drugs?

In addition, the EMA’s headquarters are based in London, placing the UK as a recognized hub in the regulatory environment. Brexit may mean the EMA would need to relocate to a member state, possibly resulting in a diminished regulatory status for the UK. With this uncertainty on how Brexit might affect the regulatory process, drugs currently under medical review could also be disrupted and authorizations put on hold. On the other hand, there may be the potential for the UK to remain under the EMA umbrella – but could this place the UK in a weaker role in terms of their influence on regulatory matters?

NICE, which develops guidelines and enforces pricing strategies in the UK, is currently included within the EUnetHTA (European network for Health Technology Assessment); EUnetHTA provides important information about pricing and innovative pricing models in the EU.  Brexit would mean that NICE may no longer be included within this initiative and would lose access to this information, which could have a knock-on effect on treatment guidelines and the cost of medicines in the UK. 

The UK’s role in early access initiatives could be at risk if the UK were no longer part of EU collaborations, jeopardising whether a patient can gain access to new life-saving, innovative medicines. UK access to other EU partnerships, including the Innovative Medicines Initiative, which supports collaborative research projects and helps build networks of industry experts to grow pharmaceutical innovation in the EU, may also become limited.

The UK receives a huge amount of funding from the EU; if the UK were to vote to leave, it is estimated that this could threaten up to £8.5 billion of funding and investment in UK science over the next four years. A combination of a lack of innovative research and funding could isolate UK research and development and reduce its influence within the global scientific community.

Another question that may arise in the event of Brexit is the UK’s access to EU-wide databases on clinical trials; it could mean that the UK becomes subject to new access fees. There could also be additional uncertainty on the pharmaceutical workforce if restrictions are placed on the freedom of movement within EU countries, limiting the UK’s reach across Europe’s skilled workforce.

Against this backdrop, a letter was signed by over 90 top executives within the UK biopharmaceutical industry earlier this month in support of the UK remaining in the EU. The letter was signed by both the CEOs of UK-based pharmaceutical companies, GlaxoSmithKline and Astrazeneca, who agreed that the UK would lose out to early access initiatives and the currently “established and harmonized” regulatory system would be disrupted. Indeed, both companies have voiced strong support for the ‘In’ campaign, commenting that there would be too much regulatory uncertainty and jobs could be at risk in the event of Brexit. Specifically, GSK’s Sir Andrew Witty, stated that “It’s better to be in and improving it, than to be on the outside and trying to plot a new course.” Astrazeneca’s Pascal Soriot agreed: "Our view is that the UK would be better off in the EU than outside. [That's] from the simple viewpoint that this is the general direction of history, and for countries to work together in a collaborative way."

The pharma leader perspective also concurs with recent Ipsos MORI research among Britain’s ‘Captains of Industry’ (September-December 2015). The 102 respondents – all executive board-level directors and chairmen across a wide range of industries – were asked what outcome of the referendum would be best for their business and what outcome they would personally prefer. The results showed that 87% of these respondents would vote to stay in the EU from a business and personal perspective, whilst 7% said that they would prefer the UK to leave the EU[2].

Like all arguments, however, both sides need to be taken into account. If the UK were to vote leave, it’s possible that the UK could have more say on how to spend their budget and channel surplus money into scientific research and innovation. The government could also negotiate that the UK remain under the EMA umbrella and therefore have to make little or no adjustments to any of their current regulatory processes – whilst also gaining some degree of autonomy in other areas, such as funding. Conversely, if the UK did decide to operate outside of the EMA, it could gain a greater level of regulatory freedom by setting up its own regulatory systems, using existing bodies such as NICE as foundations to build upon.

Outside the rules and regulations of the EU, the UK could potentially focus its own healthcare needs more, identifying and prioritising the launch of medicines which are in the UK’s best interest. Switzerland and Norway have been used as case studies for the UK to envisage the possible outlook for life outside the EU. The Swiss pharmaceutical industry is considered world-class, showing strong evidence that outside of EU regulations companies within this sector can still thrive and be successful. Swiss-based pharmaceutical companies, Roche and Novartis, have proved this, operating successfully despite some of difficulties faced by having their headquarters in a country outside of the EU. It appears that non-EU/European Economic Area countries like Norway have their own regulatory bodies, but still work closely with the EMA, following their guidance and opinion on regulatory decisions.

Taking into account all of these possible impacts, there appears to be a lot of uncertainty surrounding the future of the UK pharmaceutical industry. It is likely that pharma companies will have developed business plans for either outcome in order to identify their direction for the future. All this is yet to unfold, but it will hinge on how the UK public votes in June.

About the author

Eleanor Biggs, Cardiovascular & Respiratory Therapy Monitors, Ipsos Healthcare.

[1] Ipsos MORI (2016) Ipsos MORI Political Monitor (Technical note: Ipsos MORI interviewed a representative sample of 1,002 adults aged 18+ across Great Britain. Interviews were conducted by telephone 14th – 16th May 2016. This month we have also updated our weighting profile to the latest ONS and LFS population estimates. We have tested this weighting and have found the new weights make minimal difference to the overall results)

[2] Ipsos MORI (2015) Ipsos MORI 2015 Captains of Industry Study(study included 102 executive board-level directors and chairmen in Great Britain; interviews were conducted face-to-face and 5 by telephone between September – December 2015)