The Conservatives' 2015 election manifesto committed to hold a referendum by 2017 on whether or not the UK should stay in or leave the European Union. Increasing unrest among Eurosceptic politicians and a narrowing of the polls on the likely outcome of the vote has led to the suggestion that the referendum could be held as early as June or September 2016. While all industries are speculating on the potential impact of an "out" vote, the global pharmaceutical industry faces some very specific concerns. This blog considers some of the main questions that the pharmaceutical industry is contemplating as part of the in/out debate.
Investment and research funding
The UK has a strong history of research and commercial science, having pioneered many scientific breakthroughs and driven scientific collaboration worldwide. It is the headquarters for some major European organisations, such as the European Medicines Agency, and is enjoys a strong and productive life sciences sector, underpinned by a university sector that has the strongest global university rankings in Europe. Membership of the EU has been important in attracting investment into domestic life science capabilities. Brexit is likely to result in the following risks to such investments:
- If global pharmaceutical companies invest in the UK they will have access to the EU market which may not be the case in the event of a Brexit. For many investment decisions unrestricted access to the EU market is important. Brexit risks removing this incentive
- the UK receives more funding from the European Research Council than any other EU country supporting universities project based research. One government minister has told Parliament's Science and Technology Committee that Brexit could threaten £8.5 billion of EU funding for UK science over the next four years1. There is also a risk that UK researchers will lose their priority access to scientific facilities across Europe2
- a wide range of EU public/private partnerships exist, such as the Innovative Medicines Initiative (IMI), which supports collaborative research projects and helps build up networks of industry and academic experts to boost pharmaceutical innovation in the EU. With half of the funding for the IMI coming from the EU, the advantages lie not just in the money but in the ability to bring together companies and researchers from different EU countries to share knowledge and experience. Domestic research investment is likely to suffer if the UK was no longer part of this initiative.
Regulation and clinical trials processes
Currently the European Medicines Agency (EMA) can grant pharmaceutical companies a single marketing authorisation, providing faster access to the whole of the EU market - half a billion potential patients.iii The level of disruption following a Brexit would depend on whether the UK remained part of the European regulatory framework. If not, the UK will have to resume separate authorisations and inspections leading to duplication and delay. It's also clear that the EMA would relocate its UK headquarters to another country within the EU in the event of Brexit, this could interrupt drugs currently under regulatory review. However, if the vote was to leave the EU, it could still be possible to remain under the EMA's umbrella, as demonstrated by Norway and Iceland, a move that could be seen as mutually beneficial.
Talent
There are also additional risks to the pharmaceutical labour force. Brexit could isolate the country's scientists and reduce its influence in medicine. Most research and development facilities in the UK are staffed by people from across the EU; meaning pharmaceutical companies may find it more difficult to attract talent from abroad and retain existing talent. For example, if EU funding was cut to UK research projects, how quickly might academics desert the UK for countries with easier access to collaborative international research projects? There are also questions as to whether UK scientists, or pharmaceutical executives, would enjoy the same rights they do now to work in any EU country, or would they become subject to new residence, visa and work permit controls?
Access
The UK plays an important role in initiatives like early-access programmes, adaptive pathways and international collaboration on health technology assessments etcetera. Brexit could jeopardize UK participation in pan-European projects intended to speed up patient access to innovation.
Brexit could also impact domestic drug access. Pharmaceutical companies think carefully about their launch sequences and an EU exit could see the UK slip down the priority list if companies have to jump through extra hoops to win approval there. The UK's approach to market access and approach to pricing could compound the situation, making the UK a less attractive launch market and reducing patient access to innovative medicines.
While recent weeks have seen an increase in reactions to the Brexit debate, many parties, including pharmaceutical trade bodies, appear to be keeping their powder dry. Indeed it's difficult for anyone to predict accurately what a post-Brexit world will look like. For many in the UK, the debate seems similar to that seen during the recent Scottish independence referendum and, as yet, decision time feels seems some way off, with current debate dominated by factors such as immigration and the migrant crisis rather than the impact on industrial competitiveness.
There is much uncertainty surrounding Brexit, but what does seem clear is that there will be complex consequences for the pharmaceutical industry. Among the many nuances that will become clearer, as the time to decide gets closer, is the fact that it is more than simply an in/out vote. Even if the referendum yields an 'out' vote, the UK would still have to negotiate its relationship with the EU. The status of its relationship with the EU would be subject to the agreement of remaining EU members, options could include remaining part of the European Economic Area (EEA), joining the European Free Trade Association, which allows participation in the EU single market or a more remote trade relationship. While Eurosceptics point to the success of Switzerland's pharmaceuticals industry (the biggest in Europe by market capitalisation) as evidence that life outside the EU is compatible with a thriving life-sciences sector it remains uncertain whether European governments will grant the UK similar privileges.
Footnotes
1 http://www.ft.com/cms/s/0/9216298e-bf67-11e5-846f-79b0e3d20eaf.html#axzz3zr7WOYXF
2 http://www.nature.com/news/academics-across-europe-join-brexit-debate-1.19282
3 http://uk.reuters.com/article/us-britain-eu-medicines-idUKKCN0V71AS
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