Compass

We have now had the best part of a week to absorb the momentous news that the UK has voted to leave the European Union. Much has been written about this seismic event and, following our blog in February this year, on what Brexit might mean for the healthcare and life sciences industries,i we thought we should use this week’s blog to update our views on the potential risks and opportunities for our life sciences and healthcare sectors.

What we know for certain is that the UK government faces the unprecedented task of engineering the UK’s withdrawal from the EU, in the absence of any template or good practice model. We also expect that Brexit will not happen immediately nor indeed for at least another two years. For now, the UK can draw on its evident strengths, including the fact that it:

  • is in the top tier of the world’s most competitive economies
  • has strong institutions and a highly skilled workforce
  • has enjoyed a great deal of success in attracting inward investment
  • has four of the world’s top 20 universities (and the strongest global university rankings in Europe)
  • enjoys unemployment rates among the lowest in Europe, with employment at record levels demonstrating a level of economic resilience in the face of slower growth in much of the rest of the world.

In considering the likely risks to this position for the healthcare and life sciences industries, it is useful to examine the implications through a number of specific lenses: talent, regulation and investment and research funding.

Talent
Both health and life sciences companies are dependent on the mobility of skills across Europe, with over 10 per cent of doctors, four per cent of nurses and 15 per cent of academic staff in UK research institutions, from other EU countries.ii While the leave vote could eventually result in restrictions of the free movement of people in the EU, it may also deter other EU staff, with the requisite clinical and research skills, from choosing to work in the UK. While the above percentages may seem like a relatively small proportion of staff (in England this equate to some 55,000 out of 1.2 million NHS staff), a recent National Audit Office report highlights the fragility of the current staffing situation in the English NHS. Currently the gap between what providers say they need and the numbers in post is some 5.9 per cent (or around 50,000 full-time equivalents) with notable gaps in nursing, midwifery and health visitors.iii Losing the EU as a source of skilled staff could tip the balance in service delivery for the NHS. For our universities, there is a risk that Brexit could shift the balance of power in academic research away from the UK.

There are similar risks to the pharmaceutical labour force. Brexit could end up isolating the country’s scientists and reducing its influence in medicine. Most research and development facilities in the UK include staff from across the EU and Brexit may mean pharmaceutical companies will find it more difficult to attract talent from abroad and retain existing talent. If EU funding was cut to UK research projects, academics may well desert the UK for countries with easier access to collaborative international research projects. Moreover, UK scientists, and pharmaceutical executives may no longer enjoy the same rights as they do now to work in any EU country.

Until the UK extracts itself from its obligations under EU treaties, the policy on freedom of movement remains unchanged, however, there is a need for the government to clarify at the earliest opportunity its intentions on the ability of EU nationals to work in the above roles in the UK, and to consider adding these occupations to the Migration Advisory Committee’s shortage occupation list.iv 

Regulation
The UK’s role and influence on the regulatory landscape in Europe is also likely to change now that the UK has voted to leave the EU. The European Medicines Agency (EMA) is likely to come under immediate pressure to consider moving its headquarters from London to another EU member state. Already countries like Denmark, with its vibrant life science industry, is offering to host the EMA. Furthermore, the close ties between the UK’s Medicines and Healthcare Products Regulatory Agency (MHRA) and the EMA, that resulted from their close proximity, could be adversely affected and potentially lead to a decrease in influence over regulation and participation in assessment activity, including the assessment of new drugs. Conversely, Brexit could provide the UK with an opportunity to introduce a more collaborative regulatory regime.

Other issues that will impact the future of the life sciences industry include the fact that:

  • most drugs are approved for sale in EU countries by the EMA, giving drug-makers a single marketing authorisation, the UK may have to resume separate authorisations and inspections
  • cutting ties with the EMA could impact where pharmaceutical companies choose to run their clinical trials, the current mutual recognition and central drug approval pathway can provide faster access to Europe’s half a billion potential patients (avoiding the need to navigate multiple national drug approval pathways)v
  • the new EU Clinical Trials Regulation (CTR), whose provisions are due to take effect in late 2018, offers the possibility of a single trial application for multicentre clinical trials, and a new database that will make it easier to access trial data. If outside the EU, the UK may not be able to access these systems.

Investment and research funding
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:

  • global pharmaceutical companies invest in the UK to sell to the domestic and other EU markets, Brexit risks removing this incentive
  • UK universities receives more funding from the European Research Council than any other EU country, Brexit threatens the receipt of this (some Euros 8.5 billion for UK science over the next four years).vi There is also a risk that UK researchers will lose their priority access to scientific facilities across Europevii
  • a wide range of EU public/private partnerships exist, like the Innovative Medicines Initiative (IMI), while half of the funding for the IMI comes 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. Domestic research investment is likely to suffer if the UK was no longer part of this initiative.

The life sciences industry is a critical element of the UK economy, accounting for over 220,000 jobs and revenue of over £60 billion, according to the Office of Life Science.viii The UK has a strong history of research and commercial science, having pioneered many scientific breakthroughs and driven scientific collaboration worldwide. The UK received Euro 8.8 billion in direct EU funding for research, development and innovation activities from 2007 to 2013, the second largest beneficiary of research funding of all European countries.ix While many commentators believe this funding could ultimately reduce or even disappear there is an opportunity to build on the government’s Innovation Health and Wealth Strategy and Life Sciences strategy to maintain the UK’s position as a leader in medical research.

The UK also plays an important role in initiatives like early-access programmes, adaptive pathways and international collaboration on health technology assessments. Brexit could jeopardize UK participation in pan-European projects intended to speed up patient access to innovation. However, the government's imminent publication of the Accelerated Access Review could provide a boost to the UKs position.

Conclusion
While we now know the results of the referendum we are still left with a great deal of uncertainty. What is likely is that there will be complex consequences for the healthcare and life sciences industries. As the many nuances become clearer, including whether the UK decides it wants to be part of the European Economic Area (EEA), join the European Free Trade Association, or negotiate a more remote trade relationship, there is likely to be a growing belief that like Switzerland’s pharmaceuticals industry, life outside the EU can be compatible with a thriving life-sciences sector.

We believe that the UK is likely to remain a world leader in R&D and a hub for innovation. This will help businesses capitalise on the opportunities and respond to the competitive threats created by the Brexit storm vote. The government must also play an active role in setting a vision for a new, post-EU environment which is open, pro-growth and delivers prosperity and opportunity for all. The resilience and dynamism of our economy and institutions and the uniqueness offered by a resilient NHS, will be huge advantages as we start to navigate a prosperous future outside the EU.

Pete_professional

Karen Taylor - Director, UK Centre for Health Solutions

Karen is the Research Director of the Centre for Health Solutions. She supports the Healthcare and Life Sciences practice by driving independent and objective business research and analysis into key industry challenges and associated solutions; generating evidence based insights and points of view on issues from pharmaceuticals and technology innovation to healthcare management and reform.

Email | LinkedIn

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i http://blogs.deloitte.co.uk/health/2016/02/what-would-brexit-mean-for-the-pharma-industry.html
ii https://fullfact.org/immigration/immigration-and-nhs-staff/
iii https://www.nao.org.uk/report/managing-the-supply-of-nhs-clinical-staff-in-england/
iv https://www.gov.uk/government/organisations/migration-advisory-committee
v http://uk.reuters.com/article/us-britain-eu-medicines-idUKKCN0V71AS
vi http://www.ft.com/cms/s/0/9216298e-bf67-11e5-846f-79b0e3d20eaf.html#axzz3zr7WOYXF
vii http://www.nature.com/news/academics-across-europe-join-brexit-debate-1.19282
viii https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/525102/bis-16-237-strength-and-opportunity-2015-UK-medical-and-biopharmaceutical-landscape.pdf 
ix https://royalsociety.org/~/media/policy/projects/eu-uk-funding/uk-membership-of-eu.pdf

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