Since the referendum several UK based pharmaceutical companies, including GlaxoSmithKline and AstraZeneca, have made reassuring statements committing themselves to their current investments and staffing in the UK. Outside the UK, leading pharma companies such as Novartis have also played down the long-term impact on their business and reaffirmed their commitment to bringing medicines to the UK market. However, it is clear that Brexit presents challenges to many other companies in the UK life sciences sector. These make up a significant part of the economy, with over 5,000 organisations employing 220,000 people, and they will need to make their voices heard as negotiations begin about the exact terms of the exit from the EU.
The UK has a strong record in research and delivering clinical development services
One part of the sector that may be particularly affected by Brexit is contract research organisations (CROs), along with contract manufacturer and packaging organisations (CMOs & CPOs), and supply chain businesses, that all offer services to support clinical development. The strength of this sector is reflected in the fact that most companies conducting R&D activities in Europe have a part of their clinical supply chain going through or organised in the UK. In many cases, a key element in the success of these companies has been their ability to position themselves as an effective gateway to the EU, something which will be weakened by Brexit.
How will Brexit impact the UK’s clinical development services?
The other key Brexit risk is that regulatory constraints will prevent many intra-EU services from being located outside the EU. For example, within clinical trials, a single depot within the EU can receive, package and release investigational medicinal products to investigator sites across all the 28 member states. In the past, the UK has led in this particular European field. The main players, Catalent, Fisher Clinical, Almac, PCI & DHL Supply Chain, all have major UK based clinical packaging and distribution operations which serve the EU. Without an agreement to continue existing arrangements, they may be unable to offer this pan-EU service from the UK in the future.
It is yet to be seen how closely the UK will remain aligned to the EU’s regulations, either as part of the EEA or through a mutual recognition agreement, or through a completely new rulebook. We also do not know if the UK government will counter any disadvantage with improved financial incentives such as lower corporation tax. However, looking purely at the logistics, a pan-European clinical trial will always be more effectively managed from within a customs union, since time critical movements of investigational medicines and blood samples from outside its boundary may be subject to additional import clearance complexity, cost and delay. So, the question is – will these organisations adapt by repositioning resources within the future EU boundary at the expense of the UK? The likely answer is, yes, and those that do not plan to do so run the potential risk of losing their share of an adjusted and competitive European market.
Clearly, companies in this sector cannot wait until the point when the UK leaves the EU and risk being left behind by the competition or unable to do business in the EU due to regulatory constraints. And waiting until the extent of political separation, regulatory changes and associated impacts become known may also be too late. Steady and controlled management of clinical trials is critical to big pharma and the nature of multiple year studies means that pharma will make decisions now that minimise future disruption as and when the UK leaves the EU. This is a point not lost on some European CROs which are already able to position themselves as better placed than those in the UK.
To counter this, affected UK companies should be scenario planning for life outside the EU and its regulations, making the relocation of services within the future EU boundary a priority. This will not be a straightforward exercise. Aside from the significant change management requirement, services within this sector are subject to tight regulatory controls and quality assurance processes, often with complex operational solutions and reliance on expert resource.
Organisations that possess existing infrastructure across Europe are less exposed than the smaller players for whom Brexit represents a greater strategic challenge. Those with footprints in mainland Europe may well start planning for greater operational volumes and the transfer of resources and services ahead of UK government decisions. And those without the existing infrastructure should start assessing options for developing services in new locations. The sooner a company is able to offer big pharma an option of clinical development services which will not be disrupted by Brexit, the greater their potential advantage over rival companies. Indeed, 2017 may see some companies with UK centric operations migrate clinical supply chain resources over the Channel, even before the extent and the timing of the UK’s separation from the EU is known.