Brexit: A bitter pill to swallow? Part 1

June 23rd 2016 marked a new era in UK history as the country decided to leave the EU. The ‘Leave’ vote was unexpected and it soon became clear that little had been done in the way of planning how this Brexit would pan out in practice, leaving companies that operate in the region immersed in a shroud of uncertainty.

With the smoke still billowing from the trigger of Article 50, Moorhouse will explore the impact of Brexit on 4 key functions that comprise pharmaceutical operations over a series of blog posts; the first of which covering Research and Development. Before we delve into this area, however, we’ll touch upon the industry’s position and contribution to the country. 

The pharmaceutical industry is a massive contributor to the health of the UK economy. It is estimated that it currently employs 73,000 people, contributes around 10% of the UK’s GDP and generates over £3 billion in trade surplus. The industry also provides a philanthropic service to the UK in the way of supporting its healthcare system and keeping the population healthy through the manufacture and supply of innovative products that combat some of the most burdensome and life threatening diseases.

The industry’s success relies on the ability of its players to discover and develop innovative products; a feat carried out by research and development departments, independent research organisations and universities. The UK operations of this function have developed to permeate EU regulatory and funding structures, so what implications could Brexit bring about? 

Research and Development Resources

One of the focal points in the referendum debate was free movement of people from EU countries across UK borders. With the abolishment of free movement likely to be announced – and put into effect – with the trigger of Article 50, there are potential resource implications for research and development. The principal issues would be around sourcing appropriately skilled staff to carry out pharmaceutical research activities or moving said staff between UK and EU sites where necessary.

Whilst the UK will want to maintain access to highly skilled staff, cherry-picking them amongst the rest of restricted EU citizens won’t be possible.  A potential workaround for this would be to establish free movement relationships with new geopolitical partners such as Australia and/or Canada. Another option would be to implement visa systems whereby a quota of non-UK nationals can apply to work in the UK for a fixed period of time, similar to the current easy-access immigration quota arrangement between the UK and India.

Research and Development Funding

22% of projects funded by the European Research Council (ERC) are run by the UK, which contributes over £1bn to UK universities. New funding structures are yet to be finalised but any shift in net research funding away from the UK could result in a shift in their standing as a highly reputable country for scientific research.

Moreover, the EU has been working towards a harmonised approach to managing clinical trials and Brexit could see the UK removed from this collaboration. This would mean pharmaceutical companies would be burdened with registering twice – once in the UK and once in the EU – to run UK trials. Such a burden would compromise the UK’s position as one of the most popular EU locations to run trials. It’s currently ranked as number one in popularity for phase one clinical trials.

The effects of the above, compounded by the potential introduction of new regulatory hurdles put in place to replace existing EU ones, could result in a hike of trial costs and cause an increase in administrative activities.

From a research quality perspective, a hard Brexit could see UK researchers no longer being eligible to apply for EU grants or participate in EU-wide projects. This may be able to be offset by the UK government subsuming the cost of these, but there would still be a loss in the way of opportunities for international collaboration; an opportunity that has both enriched the UK’s knowledge base and brought about advancements in research worldwide.

Our views on what the impact of Brexit will be on research and development are speculative due to the uncertainty of what a post-Brexit world will look like. They have, however, been formed based on our understanding of the industry and how this function operates in the EU. Moorhouse would be delighted to discuss any of the points mentioned and welcome all comments on this blog and the others in the series.

Next week we’ll cover Pharmaceutical Supply Chain operations and the effects Brexit could have on this function.

Infographic designed by James Hemson.  

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