How will our health and pharmaceutical sectors cope with Brexit?

How will our health and pharmaceutical sectors cope with Brexit?
Warrington, United Kingdom - March 6, 2016: Warrington, UK - march 6, 2016: View of the NHS (National Health Service) logo at the Springfields Medical Centre in the centre of Warrington, Cheshire.

A demographic timebomb 

“Without that safety net many may feel they have no choice but to return.” That’s how Age UK described Brexit putting an end to the reciprocal healthcare agreements with our European neighbours. The charity believes that ageing expat Brits will return to these shores because they cannot access EU healthcare post-Brexit.

The danger of this grey-haired exodus across the Channel was made all the more apparent by a BBC Freedom of Information request, which found that while 145,000 British expat pensioners are registered on European Economic Area (EEA) healthcare systems, only 4,000 EEA pensioners are signed up here. 70,000 retired Brits use Spain’s health system, while just 81 Spanish pensioners use the NHS.

An NHS already at breaking point, and with an adult social care system in crisis, may not be able to cope with a wave of OAPs returning to British shores. It seems this could be another unintended consequence of Brexit.

As vital as managing this demographic surge is, it is not the only looming threat for the UK’s health, science and pharmaceutical industries. While it would be unfair to say these have been left out of the public debate so far, they have clearly been given far less attention than financial services or car manufacturing. But these issues are just as real and just as pressing.

Held at the border

In her Lancaster House speech in January this year, Theresa May declared that Britain would be leaving the single market and leaving the customs union to forge a new relationship with the EU. The nature of the “associate membership” in customs she spoke of is, of course, still unclear. But if it ends with tariffs or non-tariff barriers placed on cross-Channel trade, the pharma sector could find itself in a very uncomfortable situation.

The difficulty here is that when a car, a computer, or a carton of coffee is left stranded at the border, it is ‘just’ bad for business. If biological material or biodegradable specimens are held up, they can become useless. They cannot be stored indefinitely, and they have to be transported quickly. So it is no exaggeration to say that putting up trade barriers could have life-changing consequences.

A further danger lies in the medical manufacturing industry’s inherent mismatch in tariffs. Medical devices are exempt from EU import duties and sales taxes, but the same is not the case for the nuts and bolts of which they are made. With the UK a hub for medical manufacturing, we could stand to lose out twice when we leave the customs union – paying for parts to come in but not being recompensed when the final device is shipped out. Britain would not be a centre for medical engineering for much longer if this sharp rise in costs was passed on to each step of the supply chain. And so the balance of power would shift quite rapidly from Britain to the continent.

Top spot up for grabs 

The UK’s place as a centre for innovation in science and medicine, therefore, is under threat. The transposition of the new Clinical Trials Directive into UK law was due for 2018, and will in all likelihood still go ahead. This is designed to reduce the administrative burden for trials across the EU. If the UK is not a part of this directive and no reciprocal arrangements are struck, the burden on companies wishing to run trials in both the EU and the UK will become heavier still.

Even if we do enter into certain arrangements on funding and research, it will matter little if all the EU talent currently in the UK decide the current uncertainty is simply not worth it. As things stand, ‘brand Britain’ is a hallmark of quality. A Britain outside the club might lose some of that lustre.

And at last count, there were 20 European cities all baying to host the European Medicines Agency (EMA) when London is no longer permitted to do so. Fears of a staff exodus at the EMA have not subsided, but the far bigger question of who regulates our medicines come mid-2019 has not even been asked. The Government has said it will seek as close to regulatory equivalence with the EU as possible, but how this manifests itself on ‘Brexit day one’ is uncertain to say the least. But either way, pharma companies will have another hurdle to jump when trying to get drugs approved in the UK – the one-stop-shop for all 28 member states, which the EMA offers, no longer applying on this side of the Channel. What is undoubtedly clear, though, is that losing 900 highly qualified EMA staff will severely detract from the medical and pharmaceutical industry in this country.

The other Swiss model

In other ways, Brexit could loosen the shackles on Britain’s medical research sector. The UK is responsible for around 25 per cent of the EU’s pharma industry and is consistently backed by government tax incentives, funding, and investment in R&D. As with other sectors in which we have a comparable advantage, Theresa May and David Davis have set the EU a challenge of avoiding cutting off its nose to spite its face. Switzerland – not in the EU, not in the EEA and host to industry heavyweights Hoffmann-La Roche and Novartis – is a great example of pharma flourishing outside of the bloc.

The Government has said it will aim to keep contributing to certain EU projects after leaving. Near the top of this list, perhaps only below the Erasmus student exchange programme, will be research funding. The Horizon 2020 initiative, which opens up €80 billion of funding for science and innovation between 2014 and 2020, is one such programme. The Treasury has already offered to underwrite Horizon 2020 projects beyond Britain’s membership to calm jittery UK researchers. And paid-up member Israel’s relationship with the scheme offers a model for the UK post-Brexit.

Future of the NHS

Last but not least are the EU nationals who form the backbone of the NHS’s frontline services. The health service in England employs around 57,000 people from the EU. One in 10 of the UK’s registered doctors is an EU national. Take them out of the equation and the whole NHS could come tumbling down. The Government has been upfront in its desire to guarantee the rights of EU nationals here, with only political reality standing in its way. By hesitating in securing these rights, however, the number of EU nationals applying to be nurses in England has already plummeted 92 per cent since the referendum. We are facing down the perverse, if unlikely, possibility of losing more than 50,000 health workers, just as three times that number of OAPs look to move back home. An unintended consequence indeed.

If you’d like to speak to Portland about the impact of Brexit and what it means for you, then contact us here.

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