As Brexit row becomes increasingly anarchic, is UK’s reputation with pharma suffering?

The political crisis surrounding Brexit shows little sign of ending after the tumultuous events of this week. Paul Ranson and Jeffry Mann from Morgan Lewis’ life sciences group, spoke to pharmaphorum’s Richard Staines to give their perspectives on how the uncertainty is affecting life sciences companies, and whether the increasingly embarrassing political row is undermining industry’s trust in the UK.

It’s nearly three years since the UK took the momentous decision to leave the European Union in the referendum – and despite a general election and a protracted period of negotiation with Brussels there are still many issues that need to be resolved.

‘Uncertainty’ has been a word that has been mentioned many times since the process began, and for a complicated industry such as life sciences, trying to second-guess the outcome of Brexit has been challenging.

One of the main issues for life sciences is that it is highly regulated, principally by EU laws, and the legal scaffolding that props up research, trade, and licensing of medicines could change or be compromised by decisions taken in the coming weeks.

As Ranson, a consultant to Morgan Lewis, pointed out, one of the biggest issues to have made headlines is the supply of medicines between the UK and Europe in the event of a no deal Brexit.

It’s estimated that each month 45 million packs of medicines are flown from the UK to other EU countries, while another 37 million go from the EU to the UK, and any disruption to this caused by increased border checks could threaten the supply of drugs to the UK, and to a lesser extent Europe.

“The government’s demands that the industry builds up six weeks of stock, later extended to 6 months, imposed quite a burden on the industry and the supply chain.”

One issue that has already emerged is batch testing – currently a batch of new medicines needs only to be tested on entry into the EU. Leaving without a deal would mean one batch test for the EU27 and another for the UK.

However, Ranson states that “The UK government announced that if the UK leaves without a deal, so as to ensure continuity of supply, it will continue to accept batch tests carried out in EU.”

There are also worries about how prices of generics are going to be affected. The UK’s NHS is an enthusiastic user of off-patent drugs where appropriate and with prices subject to supply and demand pressures, they could be adversely affected by any increase in price should Brexit affect availability.

“It’s something that the government could have to face,” said Ranson.

There is also the potential impact of Brexit on parallel trade. The MHRA says it will allow the parallel import of medicinal products that hold a marketing authorisation from an EU or EEA country, but parallel trade can be reversed when the currency is weak, something that became apparent after Sterling took a hit after the Brexit referendum in 2016.

In this case, the UK’s supply of drugs could also be affected should the currency tides turn it into a net exporter. “Parallel exports could lead to shortages,” he said.

Regulatory Challenges and Launch Sequencing

The European Medicines Agency has officially left London now, and it will likely never return. The agency moving has already caused upheaval and it is still unclear how Brexit will affect the drug regulation system in the EU in the short and medium term.

With its Medicines and Healthcare products Regulatory Agency (MHRA) the UK has a very well respected and robust medicines regulation body that previously played a leading role in the EU.

Ranson said that neither the UK nor the EU is likely to benefit from the UK’s departure – the EMA had previously relied on the MHRA to do a sizeable chunk of its regulatory work, while the UK benefited from being part of Europe’s centralised and decentralised medicines approval systems.

“A major high technology product would go through the centralised procedure, and if a separate approval for the UK were to be required, companies would logically look at Europe first with its 500 million population.”

Even if the UK mirrors the EU system then it’s unlikely that drug companies will go there first when it comes to getting marketing approval.

“The other thing you have to bear in mind is pricing and reimbursement,” said Ranson, pointing to well-known concerns from industry about NICE and the NHS’s willingness to adopt new medicines.

“Such reluctance could further impact upon the UK’s place when a company decides on its launch sequencing strategy, “ said Ranson.

Investment

Many US companies set up offices in the UK because of the presence of the EMA in London and have looked favourably on the UK as a gateway into Europe, thanks to its membership of the EU.

“Inevitably the EMA being based in Amsterdam may well lead overseas companies instead to favour a Netherlands base,” Ranson said.

Mann however concluded that in the long run the supply chain and regulatory issues would be figured out.

From his US-based perspective the UK has a “highly dynamic” life sciences industry, with an educated population and a high concentration of top universities doing exciting and translatable research.

“Whether a big pharma company will invest in new infrastructure is a little difficult to predict. But for small venture-backed pharma, I think there will be a blip as people take a step back and watch, but unless there is a massive societal change, I think they will jump back in.”

Trading places

US-based pharma companies are perhaps distracted by the political climate on the other side of the Atlantic, which if anything is even more unpredictable and volatile than the UK.

The UK’s ties with the US would become even more important after Brexit, and it’s anyone’s guess whether discussions with the Trump administration will produce a deal that is broadly favourable to the UK or is detrimental.

There are fears among many in the UK that doing a deal with the US would force the country to change the way it conducts healthcare and could cause further privatisation of the treasured taxpayer-funded NHS.

With the Trump administration’s fondness for individual trade deals with countries, the UK could feel the pressure because of the “aggressive stance” being taken in talks so far when it comes to tariffs.

“Whether that accrues to the good of the UK, or the ill of the UK, or the EU, or both, it’s pretty tough to say,” added Mann.

Reputation

Perhaps the biggest issue with Brexit has been the sometimes embarrassing political infighting that it has caused.

There is widespread frustration from both Leavers and Remainers about how government has handled Brexit, and the potential damage it has done to the UK’s credibility as a place to do business for instance, the loss of the EMA and the fact that the UK will not be part of the European clinical trial portal.

But, from the perspective of a US pharma company, the political crisis caused by Brexit may not be the issue of the greatest immediate concern given the problems they face in their own country.

Mann said: “On some level, we have so much of our own self-generated disruption with regards to healthcare and drug pricing, there is not a keenly articulated level of distress around it.”

Nevertheless, the kind of political dysfunction that has been rife in the past few weeks will not be seen as an advantage in helping the UK attract big pharma investors, he conceded.