Reappointment of UK health secretary likely to have health and pharma policy implications

Following the resignation of former prime minister David Cameron, former home secretary Theresa May has taken office as the United Kingdom's prime minister. May immediately opted for a degree of health policy continuity, reappointing Jeremy Hunt as Secretary of State for Health on 14 July; the reappointment is somewhat surprising, given that Hunt faced a political backlash for his handling of recent industrial action by junior doctors regarding working times, which remains a politically-charged issue in the UK. It is thought likely that Hunt has been given a policy brief by the prime minister to ensure that negative health headlines remain out of the national media as the UK develops a strategy to exit the European Union (EU); whether this is feasible under Hunt's tenure is doubtful. Indeed, Hunt's reappointment already risks sparking fresh tensions between junior medical doctors in the UK and the incoming government.

A primary focus for the UK health secretary – alongside cabinet colleagues such as Liam Fox as Secretary of State for International Trade, and new chancellor Philip Hammond – will entail the development of mechanisms and incentives aimed at maintaining pharmaceutical investment in the country. One option apparently under serious consideration involves possible reductions in the UK's corporation tax on company profits, from a current 20% to below 15%; the corporate tax rate is already scheduled to fall to 17% by the year 2020. This is seen as an essential component underlying the government message that the UK remains "open for business" as a location for pharmaceutical firms. The corporation tax-reduction plan was originally developed under former chancellor George Osborne, and it remains unclear at this stage whether the new chancellor will proceed with these cuts or go even further – although some form of further reductions appears to be a likely scenario. A shift in the UK's tax status would undoubtedly be welcomed by the pharmaceutical sector; however, the timing of the proposed tax changes could be critical, since pledges of cuts by 2020 would carry a less positive impact in terms of boosting short-term investor confidence during the uncertainty of negotiations between the UK and EU rapporteurs. Nevertheless, aggressive corporation-tax cuts on the scale that is being considered should still produce an overall positive impact in terms of reassuring several pharmaceutical companies to retain their headquarters in the country.

The pharmaceutical sector will be seeking to engage with new government ministers through the recently-convened steering group for planning in the life-sciences sector (see United Kingdom: 11 July 2016: UK government convenes steering group for post-Brexit planning in life sciences sector). Life-sciences minister George Freeman is expected to consider post-Brexit issues over the next two months, and may reach a position to present preliminary findings to the government by September. The steering group will be a critical body for addressing uncertainty in the pharmaceutical industry regarding the post-Brexit regulatory framework. The body is also expected to consider recommendations for improving and developing UK patent-box schemes for the pharmaceutical sector.

There is concern within some quarters of the pharmaceutical industry that exiting the EU could interfere with pharmaceutical launch sequences for new medicines in the UK; this could potentially negatively affect UK patients' rapid access to innovative medicines. For that reason, the pharmaceutical sector will be closely watching for policy signals from the final accelerated-access report on transformative medicines, which is due to be published around September 2016 (see United Kingdom: 6 November 2015: UK's Accelerated Access Review interim report puts forward proposals to accelerate access to innovative drugs and technologies). The accelerated-access review report will have increased in importance in the wake of the UK's referendum vote. The report is expected to detail recommendations for accelerating the access and uptake of innovate medicines, as well as medical technologies (an interim report published in late 2015 considered the potential creation of a managed entry scheme for emerging products and a national innovation partnership scheme). The proposed reforms will have implications for regulation, reimbursement, and innovative-drug uptake; while the final report will focus primarily on improving access to innovative medicines, the authors' report may be obliged to consider some reform reappraisals, given the new budgetary constraints and costs that have arisen in the wake of the Brexit referendum.

An additional policy area that has come into focus under May's early days in government has involved concerning indications that the UK government could attempt to "defend" some parts of the strategic pharmaceutical industry from international takeovers. Bloomberg news reported on 11 July that the government is considering measures to shield the industry from high-profile "mega-mergers", particularly cases that draw concern from UK legislators regarding the potential impact that certain types of merger and acquisition (M&A) deals could have on the UK's life-sciences workforce (see United Kingdom - United States: 19 May 2014: AstraZeneca rejects Pfizer's USD119-bil. raised final acquisition offer).

Resourcing of the UK's National Health Service (NHS) will also top the political agenda in the coming months. As prime minister, May has made an early appeal to the centre-ground of the electorate: on that basis, it is possible that the threat of a tightening of medicine funding in the UK in coming years has probably been somewhat reduced, since May's socio-economic policy commitments would be unachievable without some funding increases for the NHS budget (see United Kingdom: 6 July 2016: King's Fund highlights possible post-Brexit health and social care issues).

Outlook and implications

The new UK cabinet is finely balanced between members of the pro-Brexit and pro-EU factions of the ruling Conservative Party; this inter-mixture is regarded as essential to the process of reconciling the Conservative Party and stabilising the UK government. The new political appointees have indicated that the priority over the next several months will be focused on preparations for Brexit negotiations; these are unlikely to be triggered before the end of 2016 or early 2017. Elsewhere on the political front, May has repeatedly stated that she will avoid calling an early parliamentary election to confirm her premiership and decisions regarding Brexit policy. This approach should ensure a greater degree of political certainty in the short-to-medium-term outlook – although an early election strategy could arguably exploit current turmoil in the opposition Labour Party. In any case, the UK Fixed-term Parliaments Act 2011 renders the dissolution of parliament possible only with two-thirds support (433 votes) for an early election in the 650-member legislature. The required support for such a move from a majority of Labour members of parliament currently appears to be unrealistic.

The new UK ministerial team will focus on developing new measures to ensure that the country continues to attract pharmaceutical investment, which in the past has been well in excess of the size of the market. This will require a consistently robust message over the coming months (and indeed years) to international pharmaceutical companies that the UK remains open for business.