Implications for pharma as Britain votes to exit EU

In a British referendum poll, a majority voted in favour of leaving the European Union (EU). The result gives the British government a mandate to trigger Article 50 of the Lisbon Treaty, which would give the UK two years to negotiate its withdrawal from the EU. Some "Leave" campaigners have suggested there should be no hasty departure and perhaps the exit should be timed to coincide with the next general election in 2020, according to the BBC. Earlier or later, however, a British exit from the EU, also known as Brexit, now appears certain.

ABPI raises investment concerns

Following the announcement of the referendum results, the CEO of the Association of the British Pharmaceutical Industry (ABPI) said in a statement available here, "This creates immediate challenges for future investment, research, and jobs in our industry in the UK. With that being the case, we are committed to working closely with the government to agree what steps need to be taken to send a strong signal that the UK is open for business."

On the eve of the referendum vote, leading pharmaceutical figures issued a joint statement printed in The Times newspaper warning of the potential impact on the sector from leaving the UK leaving the EU.

“We know that Britain leaving the EU would mean having to re-establish terms of trade from scratch with our home market of 500 million consumers," the letter stated. "That wouldn't just hurt exporters but the hundreds of thousands of small and medium firms who do business with them ... Britain leaving the EU would mean uncertainty for our firms, less trade with Europe and fewer jobs."

The letter was signed by ABPI chief executive Mike Thompson, along with the CEOs of GSK and AstraZeneca, and key executives from Merck Sharp and Dohme (the name that Merck &Co (US) operates under in Europe), Eisai (Japan), AbbVie (US), Actelion Pharmaceuticals (Switzerland), Amgen (US), Bayer (Germany), Celgene (US), Chiesi (Italy), Grunenthal (Germany), LEO Pharma (Denmark), PharmaMar (Spain) and Sanofi (France).

Concerns over investment are supported by a study by the Center for Economics and Business Research (CEBR) reported in City AM newspaper. This found that GBP6 billion (USD8.9 billion) of investment in the UK had been delayed because of the pending EU referendum, with only 30% (GBP1.8 billion) set to go ahead if the UK voted to leave the EU.

UK's attractiveness as first-tier launch market to diminish

In addition to investment pressures and the risk to jobs from uncertainty, there are direct consequences from exiting the EU to be considered.

The European Medicines Agency (EMA) – the EU's body for centralised marketing authorisation of medicines – is located in London. The EMA can only be based in a EU member state so leaving the EU would certainly trigger relocation of the EMA to another EU country, resulting in the loss of about 600 full-time jobs in London.

The UK would probably seek to become a member of the European Economic Area (EEA). Instead of conducting its own drug reviews for marketing authorisation it would remain part of the European centralised process and EMA drug approvals would be binding for the UK. But as the UK would no longer be a member of the EU it would have no voting rights in EMA scientific opinions. While the UK could revert to national review of marketing authorisation applications, it might no longer be a first-tier launch market for medicines as companies could choose to delay their UK marketing applications.

Following its exit from the EU, the UK is at risk of losing the Unified Patent Court (UPC) responsible for decisions related to the long-awaited EU-wide unified patent system due to be created in 2017. The Life Sciences division of the UPC was meant to be based in London. The UPC itself is likely to move ahead following the UK's exit, but the UK would no longer be a viable site for the court.

More worryingly, the UK would no longer be part of the EU patent system and it might become necessary for pharmaceutical companies to seek patent protection in the UK separate from the Unified Patent protection. EU trademarks would not be valid in the UK following its EU exit either. Having to file for separate patent protection and trademark protection in the UK would put pressure on smaller and medium-sized pharmaceutical companies.

Following the UK's exit, UK scholars would no longer have access to EU research funds. The UK might also lose its attractiveness as a location for clinical trials, as unless the UK enters the EEA, pharmaceutical companies would need to file a separate application for clinical trials conducted in the UK in addition to EEA trials.

Another serious impact is that if the UK does not become part of the EEA following its EU exit, pharmaceutical companies would consider relocating their European pharmacovigilance operations – many of which are now based in the UK – to an EU or EEA member state. 

Outlook and implications

A period of uncertainty is expected following UK voters' decision to leave the EU. For the pharma industry this is likely to put investment at risk, which could threaten jobs, particularly in smaller enterprises. The plunge in the value of sterling may offer short-term advantages to exporters, but these are likely to be outweighed by the loss of access to the common European market. Other serious issues for the pharmaceutical industry that companies should start preparing for are potential marketing authorisation process changes if the UK chooses to revert to national authorisations, patent, and trademark filings and the possible need to relocate pharmacovigilance operations.