Brexit: Sitting with the Discomfort to Define the Opportunity
With the uncertainty brought about by the Brexit vote, Pharma and Biotech companies need to consider a number of unique opportunities to chart future growth in the UK and EU
On 23 June 2016 the UK government held a referendum on either exiting or remaining a part of the EU and 52% of voters opted to leave the EU. Political upheaval and speculation about what this actually means for the UK and the current EU is ongoing, and while we wait for the dust to settle the one thing that is clear is that until the UK government invokes article 50, NOTHING HAS HAPPENED YET.
What we do know is this:
- The UK government must officially invoke Article 50 of the Lisbon Treaty to start the process for negotiating its exit.
- The referendum is technically “advisory” and isn’t legally binding for the UK government to act.
- To date there has been no indication if/when the UK government will invoke Article 50, so until then, nothing changes.
This was certainly a divisive vote for the country and the resulting uncertainty has heightened emotions and speculation from both camps. Now, if you view this vote at the highest level, it was a binary vote about whether the people of the UK wanted change (Brexit) or status quo (Bremain). So part of the reason this has been so emotional for many is that change is uncomfortable.
And we are now starting to the see the short-term effects of Brexit described by Mark Carney, Governor of the Bank of England, as the UK having “entered a period of uncertainty and significant economic adjustment”. Lack of clarity is leading to a lot of debate combined with fear, uncertainty and doubt.
W2O Group is known for its fluidity (H2O, W2O, get it?!). We spend a lot of time sitting in discomfort as we challenge ourselves in devising new approaches, alternative thinking and challenging traditional approaches in order to help our clients achieve their objectives. If we look at the Digital revolution, while it created far reaching change to both our clients’ and our own business it created, for many, opportunities. Our aim is to apply this fluid approach and work with clients and the industry to identify the opportunities and minimize the risks as the implications of Brexit become apparent.
So what should our healthcare clients be considering as the situation plays out:
What could Brexit mean for Pharma?
Pharma and biotech companies currently employ more than 222,000 people in the UK and spend some £4 billion each year on research and development. Prior to the referendum, big UK based drug companies had said that they wanted the country to remain in the EU. Initial uncertainty in the market on the news of Brexit had an impact on pharmaceutical stocks due to major exposure to the European market. However, the life sciences business sector has shown recovery, but uncertainty remains. In terms of the geo-political situation three key considerations for the industry include:
- Potential instability of the UK as an economy (long-term) and the degree to which the UK will continue to be a priority market or part of the EU Big 5, will have far reaching impact from commercial decisions, to reimbursement negotiations, to clinical trial planning.
- Lack of clarity about the UK’s future relationship with Europe and how this will affect medicines regulations, licensing, R&D funding, and costs for import/export of medicines.
- Political uncertainty in the UK (short-term) and if/when Article 50 may be invoked and how the sector’s needs will be championed. Key negotiation points that will most impact our clients will be in relation to the “Four Freedoms” which include free movement of goods, services, people and capital across borders. This is the foundation of the European Union and once the UK is no longer a part of it, how these points will be either included or excluded from a new arrangement will have the greatest effect on our how our clients can do business.
Considerations about the future relationship between the UK and the EU is warranted as it relates to participation in the centralised EMA (European Medicines Agency) regulatory system:
- Being outside the centralised system could increase the workload for pharma company regulatory departments. As well as necessitating the shoring up of the UK national regulatory body, there will be uncertainty over how or even if the scope of responsibilities will change, both of which could lead to disruption in providing new medicines to patients across the UK and Europe. Our clients should evaluate their current regulatory department SOPs to determine how increased flexibility can be built into their operations.
- There is speculation that there would be uncertainty within the EMA about the granting of new drug licences or the renewal of existing ones as the default period for initial licensing is five years, followed by an open-ended renewal. The EMA would therefore face a dilemma on whether to approve a drug from a UK company that would not be part of the EU for the lifetime of the licence. Licences may need to be transferred to businesses inside remaining member states and new medicines approved by the EU would not be automatically placed on the British market, but may need to undergo a protracted approval process. Our clients need to be both expediting submission of marketing authorisations and also scenario planning for those that are not yet ready for submission.
- It could be necessary to relocate the EMA out of London. This means clients should start looking at proximity of regulatory departments to international transport.
Probably the most time-critical consideration is around the new EU Clinical Trials Directive, which was agreed in 2014, introducing a raft of changes that were expected to be implemented by the end of 2017 at the earliest and by October 2018 at the latest, when the new EU CT portal and database are fully functional. The new directive is aimed at the introduction of a simplified submission process that would ease the regulatory burden on trial sponsors by effectively using a single application to carry out multi-site trials across the EU.
With Brexit in the air it now remains to be determined what the impact on CT in the UK will be and our clients need to assess what this could mean for them. Currently, when it comes to non-EU countries operating within EMA rulings there is a precedent with EEA countries which also abide by the EMA’s regulations, so in the best of cases nothing would change.
What could Brexit mean for science, research and funding?
Research funding is one of the few areas where the UK gains more money than it spends. Of the country’s gross contribution to the EU, £5.4bn (€6.84bn; $7.77bn) can be attributed to the community’s research, development, and innovation activities. But the UK gets back £8.8bn in research grants, so exiting the EU would in theory leave a gap of £3.4bn to be filled. Through programmes such as Horizon 2020 (H2020) and the Innovative Medicines Initiatives (IMI), the EU provides funding and coordinates research collaborations. UK-based companies without research facilities in other EU countries are likely to lose access to these programmes.
Clients should be looking to emphasise their robust research programs to attract talent and also looking to more closely align with leading UK universities and institutions to establish/maintain a sustainable pipeline of talent, funding and engagement with the scientific community.
What could the impact be on the NHS?
11% of UK doctors and nurses (according to the General Medical Council) hold qualifications from another EU country. This could mean a loss of non-UK healthcare workers as well as the significant problem of the loss of capacity (a loss of EU healthcare services abroad).
Clients should be looking at devising value-add programmes which support both efficiency and quality of care. These programmes will be important whether or not the worst fears of the NHS are realised, but it is timely to look at current support programmes and determine if they are truly making a difference, how they can be optimised, and where investment should focus next.
What could Brexit mean for UK public health?
The European Centre for Disease Control and Prevention (ECDC) is at the centre of a network of communication between EU and EEA member states to monitor, communicate and assist in response to a threat of communicable disease, forming an early warning and response system for the prevention and control of communicable diseases. The UK will be on the outside of this network which could impact, for example, procurement of pandemic vaccines, where the EU’s greater purchasing power might push the UK down the queue.
Clients who do have vaccine programmes, should look at how these are administered, how they can support the government in shoring up critical medicines, and discuss how to information share in a potentially dis-jointed system.
Everything entirely depends on the direction that the UK government wishes to take when negotiating its exit under Article 50…IF it negotiates its exit under Article 50. Depending on how negotiations proceed, it may even be possible to keep the UK within the European system for drug approval, and allow UK scientists and companies to continue participating in the EU’s research programmes.
So as we look at our clients’ programming needs for 2017, we are thinking in more dimensions…how we interpret global/EU challenges, how we can help clients confidently move forward with key decisions and programmes/campaigns, how we can support infrastructure changes within organisations, and how we can help UK-based clients do more with less in a challenging environment. Staying fluid will help define new approaches for our clients’ businesses, helping them to find value in uncertainty.
This article was written by W2O Group London-based leaders: Annalise Coady President of tWist Marketing; Danielle Whitney, Healthcare Lead EMEA: Effie Baoutis, Medical Communications Global Lead