The healthcare sector and life sciences industry will finally start to look beyond Brexit this year

2020 began with a bang in the Middle East, with the killing of Iranian general Qassem Soleimani. In the UK, however, it has been an altogether more sedate New Year, especially after the high drama of 2019, with its Brexit delays, constitutional crises and high-stakes general election. The most notable event for the pharma industry so far has been the update of the government’s life sciences strategy, which lays out plans for the sector’s future. That future starts in earnest on January 31, when Brexit will finally ‘get done’, but even then changes will come only slowly – at least at first.

Thanks to the decisive general election result in December, the government has finally been able to agree a transition deal with the EU that will keep the terms of trade relatively stable. The transition period, however, lasts only until the end of the year. Unless an extension is agreed before then (unlikely) or a free-trade agreement is rushed through (even more unlikely given the tight timeframe), the UK could yet see a no-deal Brexit. The Economist Intelligence Unit thinks the most likely outcome is that a limited trade deal will be agreed, but that it will still leave plenty of thorny questions unresolved.

Some of those unresolved questions could concern the life sciences and healthcare sectors, where regulation rather than tariffs is the primary concern. But the endless Brexit delays have already pre-empted many decisions. The slow divorce between the MHRA and the EMA means that ties between the two are already unravelling, for example, without their new relationship becoming clear. That has forced many pharmaceutical companies to hedge their bets, by treating the UK and EU as separate markets for regulatory purposes – just in case there is never an agreement on mutual recognition.

The same is happening with EU research programmes. Although the UK is still part of Horizon 2020, the uncertain future beyond that means that many UK researchers are already looking elsewhere for funding. The UK parliament has also voted against staying in the Erasmus programme that gives students the right to study across the EU. In the NHS, meanwhile, the Liberal Democrats claim that around 10,000 EU staff have voted with their feet, by going back home rather than waiting for Brexit to happen.

Not just Brexit

In 2020, though, the UK’s life sciences sector will have to look beyond Brexit, as a new EIU white paper makes clear. There are plenty of policy areas that have been ignored amid the mayhem, among them the NHS. The Conservative majority does give the government a freer hand to increase spending on healthcare, after nine years of constrained public finances. The promises made in the general election – and the subsequent Queen’s speech – may have been patchy or contradictory on detail, but they will still put politicians under pressure to deliver new hospitals and new staff. That may mean more fast-track routes to recruit nurses, doctors and other staff.

New digital services, too, will start to become more important during 2020. Many were on show earlier this year at CES and JP Morgan’s Healthcare Conference, and will feature at the huge Dubai Expo in October. Integrated care systems will be rolled out to meet the 2021 target set in the NHS Long Term Plan. Five new Patient Recruitment Centres will open, helping the NHS and pharma companies to coordinate clinical trials, while a patient data Gateway will start to come into operation. An NHS Genomic Medicine Service will start offering regular testing for children and adults with cancer. The NHS will begin to use the opportunities offered by its unrivalled access to patient data.

Further afield

UK pharma companies, meanwhile, will focus on maximising opportunities outside the EU. China is the biggest of these. The Chinese government has finally begun encouraging the uptake of innovative medicines, after liberalising the use of foreign trial data, speeding up approvals, lowering import barriers and adding newer drugs to its essential medicines list. AstraZeneca is already seeing sales there soar as it prepares to build a new global research and development base in Shanghai, together with an artificial innovation centre.

But continuing tensions over the protests in Hong Kong could present a stumbling block.

GSK, meanwhile, is eyeing the US market, where it hopes to gain six new drug approvals this year. The potential stumbling block there is the upcoming Presidential election in November 2020. While the various Democrat contenders have focused on presenting alternative plans for health insurance reform, Donald Trump is keen to keep the focus on drug prices. His package of price transparency measures last year seem to have had little effect, but a more drastic plan to introduce an international reference pricing system for Medicare Plan B drugs is still on the table. If it gets approved, either before or after the election, that will affect revenues in a market that still accounts for around 45% of the global total.

The industry will respond to these threats, as it has for the past decade or more, by consolidating. The merger of AbbVie and Allergan looks as though it will go ahead, following its approval in Europe this week. That could set the scene for yet more mergers in 2020, although the deal-making is unlikely to top 2019’s tally. And although the US market will remain the focus, there will be an impact for the UK – not least in Shire’s unexpected tax bill from its abortive AbbVie merger.

Ana Nicholls is director, Industry Operations, at the Economist Intelligence Unit