​How will Brexit impact pharmaceutical market access in Europe?

February 21st 2018

With the UK government poised to invoke Article 50 in March, the life sciences industry is waiting anxiously to see what impact Brexit will have on the European pharmaceutical market. This subject was explored in a roundtable discussion at the recent World Pharma Pricing and Market Access Congress 2017. The participants were senior industry executives and experts, including one with many years of experience in senior management at the European Medicines Agency (EMA). Here are some of the key findings from this discussion, as well as recent news reports.

With the UK government poised to invoke Article 50 in March, the life sciences industry is waiting anxiously to see what impact Brexit will have on the European pharmaceutical market. This subject was explored in a roundtable discussion at the recent World Pharma Pricing and Market Access Congress 2017. The participants were senior industry executives and experts, including one with many years of experience in senior management at the European Medicines Agency (EMA). Here are some of the key findings from this discussion, as well as recent news reports.

Relocation of the European Medicines Agency

The greatest challenge that Brexit poses in terms of pharmaceutical market access relates to the future location of the EMA. There was a clear consensus among roundtable participants that the agency will have to move from London to a location within the EU27. However, Guido Rasi, the EMA’s Executive Director, believes that relocation is not inevitable. In an interview with the Financial Times in early January, Rasi suggested that a “good deal … might affect the decision to relocate or not, but that’s really beyond me.”

According to Rasi, uncertainty about relocation is already taking a toll on the EMA’s staff. Morale has reportedly plummeted and staff turnover has increased sharply. Rasi disclosed that seven senior executives had resigned in the six months following the referendum—more than in the preceding ten years. An internal survey found that approximately 50% of the 900 employees would leave if the agency moved to an “undesirable” city. To make matters worse, there is a shortage of candidates for vacant positions.

The relocation process is unlikely to be straightforward. The EMA moved to its current offices in Churchill Place as recently as 2015, and is tied in to a 25-year lease (without a break clause) that runs until 2039. In addition to the cost of walking away from this lease, the agency will presumably have to pay substantial redundancy and relocation expenses.

Croatia, Denmark, France, Germany, Greece, Italy, Ireland, Spain and Sweden have all declared their interest in hosting the agency. The European Commission is expected to reach a decision regarding the EMA’s future home by the summer. Experience (e.g., the decision to site the European Food Safety Authority in Italy in preference to Finland) suggests that the destination of the EMA could be decided largely on the basis of political expediency, rather than objective criteria to determine the most suitable location for the agency. Rasi, however, believes the most important factor in choosing the EMA’s future home should be transport connectivity.

The success of the relocation process will depend heavily on the timetable for the move. Given the enormous logistical challenges of shifting one of the EU’s largest, most complex and most important agencies from one country to another, stakeholders hope that there will be an adequate transitional period. Rasi believes relocation will take at least two years. If the move is not managed efficiently, marketing authorisation applications in Europe could be delayed, potentially prompting manufacturers to prioritise markets in other regions of the world.

Loss of the UK’s contribution to drug regulation

Aside from being the home of the EMA, the UK plays a major role in drug regulation in the EU through the work of the Medicines and Healthcare Products Regulatory Agency (MHRA). The UK frequently serves as rapporteur/co-rapporteur in the EU’s Centralised Procedure and as the reference member state in the Decentralised Procedure. It will not be an easy task to replace the MHRA’s capacity and expertise, particularly if the timetable for reform is aggressive.

Prospect of a separate UK regulatory system

Since the EU referendum, the life sciences industry has argued strongly for the need to keep the UK within, or at least closely aligned with, the EU regulatory system. A recently published government white paper on Brexit specifically mentions the EMA as one of a number of key EU agencies. The United Kingdom’s exit from and new partnership with the European Union states: “As part of exit negotiations the Government will discuss with the EU and Member States our future status and arrangements with regard to these agencies.”

The government is, however, prepared for the possibility that the UK will need to establish its own independent regulatory system following Brexit. The Times reports that, at a cabinet meeting on 28th February, David Davis, the Secretary of State for Exiting the European Union, advised his colleagues that the UK must prepare for the eventuality that it may prove impossible to negotiate an acceptable deal with the EU. Among other challenges, Davis reportedly stated that the MHRA would have to assume responsibility for assessing all new medicines.

Having to review all new drugs would significantly increase the workload on the MHRA and require the recruitment of additional staff. Conceivably, some EMA employees who elect not to relocate with the agency could be hired by the MHRA to fill the gaps in its staffing. However, it remains to be seen if the UK government will provide the funding needed to enable the MHRA to fulfil its expanded brief.

Clinical trial environment

The life sciences industry is also concerned that the UK will not be covered by the EU Clinical Trials Regulation (EUCTR), which is expected to streamline access to trials across the EU when it begins operation towards the end of 2018. The EMA will manage a single portal and database to coordinate trials conducted in multiple member states.

According to the Association of the British Pharmaceutical Industry (ABPI), in 2015, the UK was the clear leader in Europe in the number of Phase I trials conducted, and ranked second only to Germany in the number of Phase II and III trials conducted. However, participants in the roundtable discussion expressed the view that, whilst the UK is an attractive environment for Phase I trials, companies often elect not to perform Phase III studies in the country on account of the prohibitive costs of late-stage research in the UK.

The potential exclusion of the UK from the new harmonised system under the EUCTR could be a significant deterrent to conducting trials in the country in the future.

Collaboration on health technology assessment

Thanks to the activity of the National Institute for Health and Care Excellence (NICE) and the Scottish Medicines Consortium (SMC), the UK ranks among the leading nations in health technology assessment (HTA) in Europe. The UK also plays a key role in initiatives to promote increased cross-border collaboration in HTA, such as Joint Action 3 of the European Network for Health Technology Assessment (EUnetHTA), which runs from 2016 through 2020. For example, NICE is the lead partner in work package 7 (national implementation and impact), and an associated partner in five of the six other work packages: only France’s Haute Autorité de Santé (HAS; National Health Authority) has a more extensive role in these initiatives.

In the long term, the European Commission and the European Parliament would like to see experimental initiatives such as EUnetHTA and Shaping European Early Dialogues for Health Technologies (SEED) translated into routine cross-border collaboration on HTA in Europe. Specific objectives include reducing duplication of effort, promoting convergence in procedures and methodologies, improving the reuse of joint work by member states and ensuring the long-term sustainability of EU HTA cooperation.

But for Brexit, the UK would be expected to play a leading role in future cross-border collaboration on HTA. However, given the current uncertainty regarding the exact nature of the UK’s future relationship with the EU, it is unclear whether formal cooperation will be feasible. Switzerland and Norway both participate in EUnetHTA, but they are also within the Single Market, a status that will be denied the UK if it pursues a “hard” Brexit.

Participants in the roundtable discussion generally thought that the potential withdrawal of the UK from European collaboration on HTA would inevitably strengthen the influence of the two other dominant players in this arena—the HAS and Germany’s Gemeinsamer Bundesausschuss (G-BA; Joint Federal Committee). Whereas NICE has long been the leading advocate of HTA based on cost-effectiveness, the GBA has rejected this approach in favour of the assessment of additional benefit, and the HAS remains ambivalent towards health economic evaluation. If plans for closer pan-European integration of HTA come to fruition, it will be interesting to see which approach ultimately prevails.

External reference pricing

The UK is used as a comparator country for external reference pricing by 15 other EU member states, plus Switzerland and Norway. UK prices for many branded medicines were already among the lowest in Europe, and sterling’s 11% depreciation against the euro since the EU referendum has depressed prices further relative to those in the euro zone. Some of the participants in the roundtable discussion reported that responding to the relative decline in UK prices in recent months has been a significant challenge for them.

In the longer term, it is unclear whether the UK will remain a comparator country for EU member states. At present, most European countries that practise external reference pricing limit their baskets of comparator countries to some or all EU member states. There are, however, a few exceptions to this rule: Italy includes Norway in its basket, Finland uses both Iceland and Norway as comparators, while Hungary benchmarks prices against Iceland, Norway and Switzerland. Bulgaria is unusual in including Russia among its comparator countries. It remains to be seen if governments will elect to remove a relatively low-priced market such as the UK from their baskets of comparator countries following Brexit.

Parallel trade

Historically, the UK was overwhelmingly a parallel importer, but patterns of parallel trade have become more complex in recent years: the UK continues to parallel import many drugs, but is simultaneously a major source of parallel exports in other drug classes. The aforementioned depreciation of sterling has shifted the parallel trade balance away from parallel imports into the UK towards increased parallel exportation to other European countries. However, this trend may be short-lived. Given that parallel trade is limited to the European patent exhaustion zone, it will presumably cease if the UK ends up outside the European Economic Area.

Launch sequencing and the threat of delayed access to the UK market

At present, the UK is typically one of the first markets in Europe in which new medicines are launched. The UK is a priority market not just on account of its size (ranked fourth in Europe), but also because of its minimal market access delays. QuintilesIMS reports that, in 2015, the delay between regulatory approval and first sales averaged 4.5 months in the UK, compared with 3.1 months in Germany, 7.9 months in France, 16.2 months in Spain and 16.8 months in Italy.

The life sciences industry is concerned, however, that the attractiveness of the UK as a priority market may decline following Brexit. In particular, the possibility that companies would need to navigate a separate regulatory process in the UK, combined with the likelihood of relatively low prices, could prompt them to delay launching new drugs in the UK.

Outlook

With the negotiations yet to begin, there are inevitably more questions than answers regarding Brexit at present. The general mood in the roundtable discussion was one of measured pessimism about the likely impact on both the UK and the EU27.

It is important to bear in mind, however, that the EU has never before had to deal with a full member state leaving the bloc. The closest thing to a precedent for Brexit is the departure of Greenland from the EU in the 1980s, after the territory gained autonomy from Denmark. Exit negotiations took three years to complete and were, according to Lars Vesterbirk, who led the discussions for Greenland, a “surprisingly unpleasant job.” This experience may suggest that negotiating the departure of the UK will be much more challenging and time-consuming.

On the other hand, the UK government is working on the assumption that the size of the country’s economy—and more particularly of its imports from the EU27—will make the EU more willing to show flexibility in the negotiations. In the life sciences sector, in particular, the fact that the UK is such an integral part of the regulatory ecosystem might encourage both sides to think creatively about what can be done to minimise the disruption caused by Brexit.

In the meantime, the industry must wait patiently to see the ultimate impact of Brexit on market access.

Originally Published on March 2, 2017

About the author

Neil Grubert

Neil Grubert

A multilingual pharmaceutical market access specialist with 27 years of experience tracking the global prescription drug and self-medication markets. Neil spearheaded the establishment and growth of Decision Resources’ international market access business. As the author of more than 150 reports covering 20 mature and emerging markets, multiple therapeutic areas and numerous industry issues, Neil has earnt a reputation for extensive knowledge of market access environments around the world. He is an effective communicator with both the written and spoken word, and an accomplished chair of international events, having delivered numerous presentations at conferences, seminars and training workshops.