Brexit's Bright Spots

The life sciences industry has now been reacting to and processing the UK’s imminent withdrawal from the EU for 18 months, and as the historic transition moves closer into view, many commentators have begun to temper their initial resistance with a pragmatism geared to accepting the inevitable. Nevertheless, their repeated warnings to the Brexit negotiators and their ongoing calls for caution remain an emphatic part of the discourse. 

However, there have been voices within the pharma debate that take a more upbeat and optimistic view of the UK’s future, and while these voices are still very much in the minority, it is worth taking a look at some of their arguments. It’s an admittedly reductionist exercise, but in the midst of Britain’s winter gloom, a few rays of sunlight can have an edifying effect.

In November last year, Tom Cowap, a pharmaceutical specialist in Catalyst Corporate Finance’s healthcare team, argued that “the opportunities of Brexit far outweigh the potential risks.” He pointed to seven factors that will “positively contribute” to the UK pharma sector in the lead up to and aftermath of Brexit. Among them, he said, was that the UK will remain a global center of academic pharmaceuticals research, boasting three of the 17 most important clusters of life sciences research facilities in Europe. R&D spending on pharma in the UK remains strong, he added, noting that almost half (47%) of all R&D spending in the UK is in the pharma sector, with the Wellcome Trust awarding £600 million ($831 million) of new research grants in the UK last year alone. He argued that the UK’s Medicines and Healthcare Products Regulatory Agency (MHRA)-which is “among the world’s most highly-respected and authoritative regulators” and “currently undertakes more cross-border authorization work in Europe than any other country-based institution”-“will flourish outside of the EMA system.” Post-Brexit, MHRA “supremacy” will be a major boost for the UK, as it seeks to develop individual trade and authorization agreements with the US, the Middle East, and Asia. “Regulatory harmonization is key to trade agreements… and this will be simpler and quicker to agree on a one-to-one basis.” 

Finally, Cowap pointed out, the UK’s tax regime is especially favorable to the pharma sector, with the UK government’s promise to reduce corporation tax to 17% by 2020 making it “one of the lowest rates in any western economy.” 

MHRA’s ex-chairman, Sir Alasdair Breckenridge, offered his own positive spin in the Financial Times (May 16, 2017). “Current [UK] systems for regulating healthcare products date from the 1960s,” he wrote. “The opportunity exists to modify these specifically for the UK. The creation of a single UK agency for medicines, medical devices, and veterinary medical products would be pivotal.” 

Pointing out that the current European regulatory system for medical devices depends on assessments made by more than 70 commercial organizations of “varying ability,” Breckenridge said, “a new generation of products incorporating both pharmaceuticals and medical devices is rapidly evolving, which presents the opportunity for new forms of regulatory practice unencumbered by European considerations.” He concluded that a new single agency, one that includes health technology assessment, could “create a model system equipped for real advances in regulatory science and making the UK an attractive site to launch new products.”

Writing in The Pharma Letter (June 20, 2017), Michael Jewell, healthcare partner at Cavendish Corporate Finance, argued that Brexit could boost M&As and investment in UK pharma. The “need to stay on top of EU regulations and the prospect of having to move a significant number of staff to the continent could well prove to be drivers for an uptick in sector M&A,” he wrote, “as UK pharma companies might opt to acquire firms in the EU so they can more easily stay abreast of changes to regulation, trade with their European neighbors, and continue to benefit from the advantages of being part of the EU.” While greater clarity concerning the relationship with the EU after Brexit is required, “there is potentially good value to be found by both buyers and sellers, as sector restructuring and consolidation continues,” Jewell concluded.

Readers will note a conspicuous absence of industry leaders in the chorus above; it’s fair to say that these slivers of sunlight should be taken with a dose of salts. But as the debate intensifies ahead of the UK’s March 2019 departure-time deadline, a few shots of Vitamin D may prove a welcome boost in maintaining the required energy and sustenance. 

Julian Upton is Pharm Exec’s European and Online Editor. He can be reached at julian.upton@ubm.com