With Brexit negotiations in full swing, the British and European pharma industries are gearing up for change. That Brexit will have a profound impact is not in doubt; however, the precise nature of that impact remains open to questions.

For the industry at large, the goals are clear – to establish consensus on key Brexit issues, while placing patients and public health at the centre of the negotiations. However, given the scale and complexity of the challenge, it is hardly surprising that the prevailing mood is one of concern. If the impact is not managed carefully, there could be troubling consequences for R&D funding, talent retention and much more. This is not to mention the knock-on effect on patients.

“Uncertainty is the main concern,” says a spokesperson for TOPRA, a membership organisation for individuals working in healthcare regulatory affairs. “As yet, it is unclear what the ‘divorce agreement’ will be, let alone how medicines and medical devices will be regulated, how potential interruptions to medicine supply will be averted and close cooperation will continue.”

Time is running out

The pharma industry has grown rapidly in recent years, both in Britain and on the European mainland. As of 2015, the European pharma market employed more than 700,000 people, 73,000 of whom were based in Britain. UK pharma exports to the rest of the EU were valued at around $15bn, and pharmaceutical products were one of the top 5 products most imported and exported across the Channel.

The UK’s pharma industry, then, has long enjoyed a synergistic relationship with mainland Europe’s – a relationship Brexit could place in jeopardy. According to the BioIndustry Association (BIA), the trade association for bioscience in the UK, the industry has four main areas of concern. These are the regulation of medicines; the trade and supply of medicines; movement of people; and research collaboration and funding.

“We are working with our members and stakeholders from across the sector in working groups on each issue,” says a BIA spokesperson. “There is a growing urgency for clear direction from the UK-EU negotiations that allows businesses on both sides of the Channel to plan for the future.”

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By GlobalData

It’s a sentiment echoed across the sector. In recent months, a number of pharmaceutical leaders have stressed that time is running out. AstraZeneca CEO Pascal Soriot has said the government will find it “impossible” to resolve all the necessary issues by 2019, while Merck’s Alan Morrison has said we will “probably not” be able to do everything on time.

As Ana Nicholls, chief healthcare analyst at The Economist Intelligence Unit explains, if the UK leaves the EU without a trade deal in place and without pharmaceutical regulations aligned, the consequences could be troubling.

“It would lead to immediate hold-ups in customs because the necessary paperwork is not in order, disrupting industry supply chains and possibly leading to medicine shortages,” she says. “Last year that was a distant prospect, but it is getting more acute as March 2019 draws closer with no deal in sight.”

Without so much as an interim deal in place, many pharma companies are working on contingency plans, such as stockpiling certain medicines or shifting operations abroad.

“Contingency plans will only help for a short time, and the industry badly needs a deal on mutual recognition of pharma regulation,” says Nicholls.

Regulatory concerns

In a worst-case scenario, the UK pharma industry would face reduced access to European markets, along with sharp hikes in regulation. At present, all drugs approved by the European Medicines Agency (EMA) are automatically granted access to the UK market, but this could change if no unified regulatory framework is imposed.

According to the Association of the British Pharmaceutical Industry (ABPI), establishing such a framework is the single most important issue for pharmaceutical companies. Working in partnership with the BIA, the association continues to engage the UK Government on this topic among others.

“These issues are central to ongoing conversations with the [European] Commission and governments across Europe as we work to ensure that patients across the UK and Europe can continue to get the medicines they need and from day one of Britain leaving the EU,” says an ABPI spokesperson.

Recent position papers have given the industry grounds for hope – the government has stated that it will seek to minimise disruption, and will work closely with the EMA – but nothing has been determined for sure.

The EMA, meanwhile, is facing challenges of its own, not least gearing up for an EU market in which Britain plays no role. The agency (currently based in London) will also be forced to move to a different country following Brexit, which is likely to cause problems with staff retention.

“EU pharma companies need to prepare for a scenario in which the UK becomes a third country to the EU,” says an EMA spokesperson. “This means they may need to adapt their business processes and medicines supply chains to ensure that they are not disrupted.

“Meanwhile, the EMA has launched a Brexit-related business continuity plan, an essential tool to deal with the uncertainty and workload implications linked to the UK’s withdrawal from the EU and the Agency’s relocation.”

The EMA has said that it is working to be prepared for any possible scenario, no matter where its new home may be.

“The Agency will continue to fulfil its mission to foster scientific excellence in the evaluation and supervision of medicines, for the benefit of public and animal health, ensuring that all medicines available on the EU market are safe, effective and of high quality,” says the spokesperson.

Research funding

Another major concern is R&D funding. As Nicholls explains, the UK currently accounts for nearly one fifth of pharma R&D spending in the EU, meaning large sums of money are at stake.

“The concern over Brexit is fourfold: that companies will decide to move their R&D bases elsewhere, that EU-led funding flows will be disrupted, that the UK’s international reputation and influence will fall, and that we’ll have less ability to recruit international expertise here,” she says. “The decision to fully fund all existing research projects has helped, as has the fact that the UK’s involvement in Horizon 2020 appears to be ongoing. More importantly, the government is fully aware of the problem, and recognises that sustaining R&D funding is going to be one of the factors determining whether Brexit is a success.”

From the BIA’s perspective, there are strong grounds for positivity. On top of the country’s continued participation in Horizon 2020 (which David Davis has deemed “quite likely”), UK biotech currently attracts the most venture capital financing in Europe and the third most in the world.

“With such a strong scientific base, and one of the most productive life science sectors of any country, we expect this high level of investment from across the world to continue post-Brexit,” says the BIA spokesperson. “The government has also been taking encouraging steps to further support UK bioscience, such as their recent proposal to establish a new National Investment Fund to promote the growth of innovative UK bioscience companies.”

Supply chains and talent retention

Other issues, however, are likely still causing sleepless nights. The ABPI has warned that opting out of EU clinical trial regulations could make clinical trials more costly and entail a drop in the number of trials run in the UK. Then there are concerns about supply chains – without proper regulations in place, might pharma exports and imports end up stuck in customs warehouses?

“Disruptions to trade will add to pharma prices, and so too will a weak currency, which will raise the price of imports,” says Nicholls. “Even if a deal over mutual recognition does emerge during 2018, it will be hard to avoid some disruption come March 2019.”

A final big topic is talent recruitment and retention. Although the precise numbers aren’t clear, it seems a large share of the UK’s pharma workforce are EU nationals, many of whom may leave the UK in the wake of Brexit. Additionally, if the pound remains weak, it may be hard to recruit skilled immigrants from elsewhere.

As BIA explains, securing the continued mobility of UK and EU scientists is a logical and crucial step.

“These scientists have an important role to play in the future health, wellbeing and economic prosperity of Europe,” says the spokesperson. “It is critical that we have a UK immigration system that can attract skilled talent from all over the world, whilst also developing talent in the UK via industrial strategy.”

The task ahead

With so many questions hanging in the balance, industry bodies are working hard to establish consensus and gain some clarity. It’s clear that everybody involved wishes to see the same outcome: a UK that stays hand in hand with the EU on medicines regulation. It’s equally clear, however, that if this is to happen, the UK Government has a lot of work ahead.

“With EU membership providing much of the scientific, regulatory and trade infrastructure for the pharmaceutical industry, we have worked concertedly and across sectors in partnership to navigate the implications of Brexit,” says the ABPI spokesperson. “It’s important that the UK’s strengths are reinforced, that the full implications of leaving the EU are understood and addressed, and that as far as possible a predictable operating environment is maintained.”