November 23, 2016 By FTI Consulting
Discussing Brexit and its impact on the healthcare sector is a risky exercise, especially in the current rather blurred context. The UK Prime Minister, Theresa May, already under fire for failing to grasp the scale of the challenge facing the National Health Service (NHS), recently scrapped a high-level task force working on the issue. If the UK government gives the impression of stumbling around in the dark, the outcome for the healthcare sector will become increasingly uncertain. The future of the NHS, and the life sciences sector more broadly, that emerge from two years of negotiations due to kick off once article 50 is triggered in March 2017, remain even more precarious than those resulting from any extended period of austerity.
Brexit is on the mind of every UK healthcare executives, as highlighted during the 10th Annual Technology Transfer Summit in Edinburgh, a city that voted almost three to one for remain. The conference brought together industry leaders from biopharmaceutical companies, technology transfer offices from universities, venture capital and corporate VCs, as well as mid-cap biotechnology companies, industry associations and research funders.
The summit closed posing a long list of unanswered questions. What will happen to EU research and innovation funding, projects, and partnerships? How to secure patentable discoveries if the UK does not join the long awaited Unitary Patent system? Should small companies’ set-up offices on the continent to keep their exit strategy options open? How to keep attracting the best global talents despite the reputational damage associated with anti-immigration speeches?
These questions are particularly striking in a country which has been leading the life sciences innovation race in Europe. The UK ecosystem is second to none in Europe: excellent science, highly skilled technology transfer offices, a strong entrepreneurial spirit backed-up by a vibrant venture capital community, a dynamic second market for public listing of healthcare biotechnology companies and the ability of leading pharmaceutical and biotechnology companies to bring healthcare innovation to the market fast.
During the roundtable on Brexit, several scenarios were put forward, each of them requiring different deals to be negotiated, leading to various outcomes. It is difficult to say whether the hard Brexit, currently anticipated, will survive the actual negotiations. For Siobhan Mathers, Director of the Reform Scotland think tank, a hard Brexit would lead to calls for another Scottish independence referendum, a situation that would put the UK’s current status at risk. For Sally Shorthose, Partner at the UK law firm Bird&Bird, whatever direction the Brexit negotiations take, it is highly unlikely that the divorce between Europe and the UK will take place within the next two and half years. CETA – the far less complex free trade treaty between the EU and Canada – was only adopted after seven years of negotiations, and last minute breakthrough discussions with the Wallonian government. The difficultly in reaching an accord between the EU and Canada, provides an ominous backdrop for the prospects of decoupling the UK from the EU within a mere two-year time frame.
This is exacerbated by the fact that, under EU rules, if negotiations are not completed within two years of Article 50 being triggered, the UK would be at risk of simply crashing out of the bloc and adopting World Trade Organisation rules, unless all other countries agreed to an extension of the time to leave. This would result in tariffs being imposed on trade between the UK and the EU. Such a scenario would be seen as the hardest possible Brexit, with no access to the single market at all.
The referendum is however already having an impact on the sector. Since the vote there has been a reduction in the number of UK organisations involved in collaborative project proposals submitted to the EU’s €80 Billion research and innovation funding programme Horizon 2020.
Although legally speaking nothing has changed, and the UK remains a full member of the EU, science projects by their very nature have to deal with a lot of uncertainty and arguably the UK’s research counterparts are not keen on adding an extra dimension. It is also difficult to argue against such sentiments, since research and innovation in the healthcare sector requires complying with stringent rules edicted at EU-level: performing a multi-centered clinical trial involving UK sites will require the UK to apply the upcoming EU clinical trials regulation.
Similarly, transferring patients’ data from the UK to Europe necessitates full compliance with the recently adopted Data Protection Regulation. The testing, validation, and launching of a new diagnostic test will require compliance with the new Medical Device Regulation. And market access for innovative drugs and biologics is dependent on the green light from the European Medicines Agency.
Even with the best of efforts, Brexit will undeniably affect Europe’s leading hub for biopharmaceutical innovation. It is therefore essential that healthcare stakeholders step in and start framing the debate by engaging with political leaders to limit, as far as possible, the inevitable damage that will arise. A prolonged period of uncertainty will benefit nobody, least of all the UK.