What does the EMA’s move from London mean for the competitiveness of the UK pharmaceutical industry?

Since the Brexit referendum in June 2016, much has been written about the likely flight of investment banks from London. Less noticed but no less impactful is the relocation of the European Medicines Agency (EMA) from Canary Wharf. Uncertainly surrounds the location of its new home, the fate of its staff and the implications for the UK pharmaceutical industry.

Numerous governments have campaigned openly for the right to rehouse the agency, especially as it comes with an estimated boost of €1 billion to the local economy.

Anders Lonnberg, Sweden’s life sciences coordinator said, “You cannot have an agency for the EU if you are not a member.” Christer Asp, a former Swedish ambassador added, “We have the European Centre for Disease Prevention and Control, so it will be possible to achieve synergies with the EMA.”

Pitching for Dublin, a government spokesperson said, “We will be making the case that Dublin offers significant advantages as a location, not least the advantage of the English language, a strong pharmaceutical and R&D sector presence.” Tommy Fanning, biopharmaceuticals head of Industrial Development Authority added, “There is a high level of expertise in R&D here; nine of the top 10 global pharma companies have a base in Ireland. Multinationals based in the city tell me they have no problem retaining staff.”

Germany, which observed that its national medicines agency is larger than the EMA, has put forth its former capital, Bonn. Barcelona, Milan and Copenhagen have also been championed by their respective governments. The ‘dark horse’ options include eastern European countries which pointed that under the EU’s own rules, they should be ahead of the queue as they do not currently host any major European agencies.

Criteria for the relocation

In May, the European Commission (EC) released its criteria for hosting the EMA. Prime among them are “business continuity”, quality housing for its 900 staff (only six percent of whom are British), international school places for over 600 children and requirement for 30,000 hotel nights annually. The EMA added that 4,000 national regulators and scientists attend 36,000 meetings at the agency every year.

Countries have until 31 July to submit their bids. At the EU Summit in June, it was announced that the other 27 Member States (minus the UK) will vote on a new location in November. The EC noted that Bulgaria, Romania, Croatia, Cyprus and Slovakia do not currently host any EU agencies.

EMA commissioner Guido Rasi expressed the need to maintain oversight of drug safety during the move: “What I really fear is that something happens exactly during the transition phase – that is the real danger for public health.” He added that uncertainty of the agency’s future location has led to prospective candidates turning down job offers, departure of some senior staff and low morale among existing staff.

Impact on the UK pharmaceutical industry In the event of a ‘hard Brexit’, where the UK stays outside the customs union, the EC warned that medicines produced here will be treated as imports by the EU. This includes active ingredients and finished products if these are deemed to be originating from the UK. While it’s unlikely that companies would relocate any existing British manufacturing facilities, would companies choose to build new facilities on EU soil to mitigate future risks?

Macclesfield in Cheshire hosts AZ’s second largest manufacturing site as well as their European centre for packing, employing 1,800 people and spending £120 million to construct a new facility there. In July last year, GSK committed to spend £275 million to boost production of its latest medicines in County Durham, Scotland and Hertfordshire.

Following Brexit, the UK is expected to leave the jurisdiction of the European Court of Justice, the body which arbitrates on appeals against EMA decisions. As such, the EC and the EMA have indicated that UK companies will face as yet unspecified new regulatory obligations if they wish to stay within the European system. This may include companies basing some aspects of their drug safety and approval operations in an EU country in order to remain compliant with EU regulations.

The Association of the British Pharmaceutical Industry (ABPI) responded by stating that setting up new EU-based operations will take several years. Its executive director, Virginia Acha observed that “it seems premature to advise companies to prepare only for an outcome where the UK is isolated from the European system” given that the outcome of Brexit is still unknown. Nonetheless, she advised that should the UK finds itself outside the EU system for medicines regulation, “companies in the UK will have to consider all options for the location of sites, systems and staff, to meet the requirements of the EMA and other regulatory bodies”.

International reactions

In September last year, the Japanese government released a statement saying, “Many Japanese pharmaceutical companies are operating in London, due to the EMA’s location in London. If the EMA were to transfer to other EU member states, the appeal of London as an environment for the development of pharmaceuticals would be lost, which could possibly lead to a shift in the flow of R&D funds and personnel to continental Europe. This could force Japanese companies to reconsider their business activities”. Japanese companies with their European HQs in London include Otsuka, Mitsubishi Tanabe, Eisai, Astellas, Chugai, Sunovion and Shionogi.

Other global companies with their EU HQs here include Amgen and Mundipharma in Cambridge, while Vertex and Gilead have their international HQs in London. It remains to be seen if foreign companies will continue to base their HQs in the UK or will they follow the EMA to its new host city? In April, the European Federation of Pharmaceutical Industries and Associations (EFPIA) and top pharmaceutical companies published an open letter regarding the relocation. The letter was signed by 19 global heads of research from American, European and Japanese companies, including Pfizer, Merck, Lilly, GSK, AZ, Novartis, Roche, Sanofi, Bayer and Takeda.

The letter emphasised the role that the agency plays in ‘providing EU citizens with effective, safe and high-quality medicines”, the need to “retain a highly competent staff” during the move and that the new host city should possess “world class connectivity”. The last point may be a damper on the efforts of the eastern European countries bidding to host their first EU agency.

Silver linings

Historically, the UK has often been used as a ‘referenced country’ in setting drug prices for the wider EU market. Following Brexit, companies may have more freedom to set NHS drug prices which are more in-line with payers’ cost-containment expectations.

The unexpected outcome of the June snap elections may strengthen the hands of ‘soft-Brexiters’, who are advocating for a customs deal which will retain some form of tariff-free movement of goods. Such a deal would also remove the imposition of a customs border and other bureaucratic red-tape when the UK exports its goods to the single market.

There are numerous potential threats to the UK pharmaceutical industry following Brexit, with few compensating upsides. Like other businesses, our industry’s future prospects will be determined by governments and bureaucrats in Europe’s capitals based on raw political considerations rather than objective economic rationale. 

Stephen Huang is a pharmaceutical medicine consultant and James Huang is a policy researcher at SCP Medical