Post-election jitters have struck pharma after a surprise result for the UK. With Brexit on the horizon and a minority government in charge, has the industry’s optimism been dashed?
June the 9th, 2017; the day the UK woke to news of a hung parliament and a future beset with uncertainty. How would the Tories govern? What about the Brexit negotiations? Would Theresa May stay on as Prime Minister? Would another election be called and, if so, when?
When the snap election was called – under the premise the Conservatives would increase their majority and hence their Brexit-negotiating power – the Association of the British Pharmaceutical Industry (ABPI) claimed it presented a “real opportunity” for the new government to “set out a clear strategy to secure and grow the UK’s status as a global hub for the pharmaceutical industry and improve patients’ access to the medicines they need”.
But the resulting hung parliament has called that into question. For an industry that invests more in R&D in the country than any other industry, and which is critical for the strength of the UK economy and its “world-leading” life sciences reputation, what are the implications?
Perhaps surprisingly, the BioIndustry Association (BIA) is relatively upbeat. Pamela Learmonth, BIA’s director of public affairs and communications, says: “Both the main parties, as well as the Democratic Unionist Party (DUP), were clear in the campaign and in their manifestos on the desire to turn the UK into the most innovative country in the world.” She says the sector is key to translating the UK’s science base into economic jobs and growth, and believes “measures to support this goal should attract broad support in the new parliament”.
As evidence, Learmonth points to Chancellor Philip Hammond’s recent post-election Mansion House speech where he noted that “emerging areas like biotech” and the established pharmaceutical industry will benefit the economy. Learmonth believes this highlights the government’s support of life sciences moving forward.
Leslie Galloway, chairman of the Ethical Medicines Industry Group (EMIG), has also chosen to look at the hung parliament as a positive, believing “the election result may have a better outcome than anticipated”. Agreeing with Learmonth, he says “if this has returned people such as Philip Hammond – who wants a Brexit for business and the economy – to a position of influence, then it is a good thing”, adding that the hung parliament may put the government more in “listening mode”. “This could be a good thing for the industry and business in general.”
But equally, the election result brings uncertainty. With the Conservatives having lost 12 seats, and with it their majority, they are now beholden to Northern Ireland’s DUP to help prop up a weakened minority government. Based on history, minority governments tend to fail.
“This political uncertainty is as damaging for the pharmaceutical industry as it is for other businesses,” says Mike Thompson, chief executive of the ABPI. “We have a decisive decade ahead of us and it’s essential that a minority government does not lead to a prolonged period of uncertainty over the future direction of the country.”
The ABPI had been pretty clear what it wanted from the election when it published its manifesto in April with the industry’s three policy priorities: increased investment in the NHS to the G7 average (from 9.9 percent of GDP to 11 percent) to ensure access to new meds; securing global investment and jobs to “cement the UK’s position as a leading global hub for the life science and pharmaceutical industry”, including increased funding for basic research, continually monitoring the global competitiveness of the UK’s tax regime, and building UK-based talent; and securing a new relationship with the EU that prioritises patient access to medicines and protects public health.
The ABPI said at the time that the economic plan of the new government needed to have the pharmaceutical industry at its heart. “By investing in a strong science base and ensuring the NHS is seen as a global early adopter of innovation, the new government can boost the UK’s attractiveness as a destination for global pharmaceutical investment and jobs.”
The trade body even warned that if the future government didn’t invest significantly in the NHS, pharma firms may shut up shop in the UK, placing the sector in jeopardy, while delaying access to new medicines, which could impact on the ability to carry out some clinical trials. In an interview with The Times, ABPI president and UK president of AstraZeneca Lisa Anson, said recent rationing signals were warning signs the UK was jeopardising its “research environment and access to new medicines by eroding the competitiveness of a key sector for a short-term affordability issue”, warning that the UK would become a “desert for healthcare innovation”.
When the Conservatives launched their election manifesto in May, the ABPI welcomed it; in particular, the recognition of the strategic importance of the sector and development of an Industrial Strategy to boost productivity and growth and drive the UK to be the most innovative country in the world. However, the trade body noted that “the strength of the pharmaceutical industry in the UK will also depend on securing the right Brexit deal”.
Indeed, with the election now in the past, attention has swiftly turned to Brexit negotiations to secure the ‘right deal’ – and for industry (which had backed Remain in the referendum) the outcome is of paramount importance. The snap election had been called on the premise of Brexit and to strengthen May’s bargaining power but the resulting hung parliament has left the industry questioning what this means for Brexit, specifically regarding the European Medicines Agency, access to new medicines, trade, investment and talent.
Speculation already exists that the election result will see a ‘hard Brexit’ replaced with a ‘softer Brexit’, which could be less disruptive for the pharma industry if close connections with the EU remain. Professor Trevor Jones, a former director general of the ABPI, says such an approach will be important for pharma-relevant issues during negotiations but could also “stabilise the current concern over our ability to retain and attract the best talent”. In the absence of a clear government majority, he believes there will be more discussion around Brexit proposals.
According to Terry Scuoler, chief executive of the manufacturers’ organisation EEF, the Brexit negotiating strategy will require a “careful rethink” following the election result. He says the industry should be at the table. Indeed, less than a week after the general election, a range of NHS organisations and research charities, as well as the pharma and biotech sectors, came together to form the Brexit Health Alliance to speak with one voice on Brexit and ensure healthcare, research and access to technologies get attention during the negotiations.
But as Thompson warns, time is already ticking before the Brexit negotiation deadline is up in March 2019. The future success of the pharmaceutical industry and how medicines are delivered to patients are tied up in these negotiations and the resulting relationship, he says. “There are crucially important decisions that the UK Government and the European Union need to resolve.”
Learmonth agrees. “Getting the highly complex and technical issues associated with Brexit right is the key priority for our sector.” She says early agreement on several key issues like the regulation of medicines, the employment of non-UK nationals, trade, finance support and intellectual property rules, is needed to ensure continued global investment in the UK – and that will be in the best interest of patients, she adds.
Galloway puts it simply: “We need access to the regulatory framework, single market and skilled people,” suggesting a European Economic Area model would work. But he says the new government needs to reflect on the “self harm” the UK is inflicting, which will damage the country’s image as an attractive market to invest in or as the English-speaking gateway to Europe, because it will be the global pharma leaders “who will determine the future of UK pharma – not the UK government, EU Commission or EU Parliament”.
Issues on the radar
Besides Brexit there are other concerns on the industry’s agenda in the wake of the election. Notably the investment in the NHS, as well as changes to the healthcare and medicines assessment system. For instance, the Accelerated Access Review on the uptake of innovation is still waiting for a full government response.
The next Pharmaceutical Price Regulation Scheme (PPRS) is also playing on pharma’s minds. Set to end on 31 December 2018, negotiations for a new scheme should now be beginning. Jones claims the current scheme is not working for the industry, which has forked out £1.7 billion in rebates so far.
“Astonishingly, the rebates are not hypothecated to the drugs budget nor healthcare but find their way back into the general revenue. There is an urgent need to renegotiate the PPRS.” But with a shaky government and no minister for life sciences there are a lot of question marks on how this will play out.
Moving forward, the ABPI says it is taking the lead on progressing a new life sciences industrial strategy, while the BIA will continue to engage and collaborate with the government to ensure life sciences stays high on the political agenda. The election was supposed to provide a “strong and stable” government but the resulting hung parliament has instead created uncertainty – and that is set to continue for some time. As Galloway notes, the direction the new government treads is “a case of watch and wait”.