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Brexit Implications

In vain I listened for predictions on how Brexit would impact the pharmaceutical industry in the run-up to the referendum. The future of the EMA was the sort of side issue that was hardly on the minds of British voters who opted for exit. One would be hard-pressed to see how the drug regulatory scheme fits with the grievances that animated the British electorate.

However, Brexit did send shivers through the pharma industry. There are concerns that the UK’s withdrawal from the EU will translate into an unravelling of its relations to the EMA. These fears are stoked by the fact that the Agency is currently headquartered in London, housing almost 900 regulatory and scientific experts in Canary Wharf. It will probably have to find a new home inside an EU member country once Britain formally leaves – and several countries are already vying to provide that. But this outcome is not likely to happen anytime soon, nor is the UK likely to completely exit the EMA scheme and cause drugmakers to pursue two separate and costly regulatory processes in launching products.

Losing the UK could also punch a significant hole in the EMA's scientific capability, since their experts are the biggest single contributors to its drug assessment system. In 2014, the latest year for which figures are available, British experts were leaders in examining 27 new drug applications submitted to the EMA. That compares with 15 for Germany, 14 each for Spain and the Netherlands, and 13 for Sweden. And by way of simple numerical example of other gaps that will open up: in 2015, the UK provided 39 senior advisers (rapporteurs and co-rapporteurs), compared to Germany's 25, Austria's 14 and Italy's 11. Those are some gaps to fill.

If and when the UK government goes through with Brexit and invokes Article 50 of the EU Treaty, their laws will still affect the UK during the two-year negotiation period that starts after the formal notification. The EU's Clinical Trials Regulation was agreed only last year – and is due for implementation as of now. The EMA has been creating the clinical trial portal and database for what they call: “This ambitious new piece of legislation, which is leading to the most significant overhaul of the processes for authorisation and oversight of clinical trials in the last two decades.” Designed to provide seamless links to all trials in the EU, suddenly it is going to be connected to studies conducted only in some European countries – and one of the principal countries is not going to be included.

Pharma companies have survived largely unscathed from the turmoil that has gripped virtually every other sector in the stock market. Big hitters such as AstraZeneca, GlaxoSmithKline, Shire and BTG actually enjoyed a slight uptick in their share prices. The sector is widely seen as a defensive play to which investors flee for safety when markets are volatile. Pharma is also relatively immune to macroeconomic conditions, because even in times of economic distress and political chaos, the need for lifesaving drugs is still prevalent.

Moreover, big companies such as GlaxoSmithKline and AstraZeneca are global businesses, with the lion’s share of sales generated overseas, and largely in the US. The weaker pound will make their products more competitive and result in a significant profit boost when converted back into sterling. Many mid- and large-cap stocks have also become far cheaper for rich overseas investors looking for acquisitions to spur growth.

Undoubtedly, Britain’s acrimonious divorce with Europe will have implications in the way drugs are approved. Ideally, the country will, in some way, be able to remain part of the EMA. That would avoid the need for companies to file for approval in the UK separately to the EU. The Department of Health now faces the massive task of reviewing individual EU regulations and deciding if they should be repealed or replaced with UKdrafted alternatives. Like other government departments, it has a significant capacity issue as it is currently implementing a programme to reduce the number of staff in the department by about one third over the course of this parliament.

With the referendum result now clear, there are many issues at stake that will require the government’s urgent attention. While the immediate focus will be on negotiating favourable terms for trading and working with the EU after Brexit, the impact on health and social care should not be forgotten. If an economic shock materialises, the implications for patients and service users could be profound. The challenge now is to find a creative way in which the UK can both participate in the EMA, and continue to deliver benefits to British patients.

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