Why Brexit Keeps Drugmakers Up At Night

By John LauermanJohn Lauerman, Naomi Kresge Naomi Kresge and Hayley Warren Hayley Warren

There’s a reason that U.K. pharmaceutical companies are raising their voices about getting a Brexit deal done: leaving the European Union has the potential to disrupt almost every aspect of their business.

Hiring qualified staff? Brexit impact. Drug research regulations? Brexit. Approvals of new medicines? There’s Brexit again. What companies are hoping for is a regulatory scheme that changes as little as possible in March 2019, essentially evaluating and tracking their products as it’s done right now. But until they know for sure, GlaxoSmithKline Plc and rivals are drawing up contingency plans that range from constructing new testing facilities to refiling for permission to sell drugs that have been on the market for years.

Big Business

Biopharmaceuticals value to the U.K. in 2015

Companies

Jobs

Turnover

664

62,300

£29B

Companies

Jobs

Turnover

Source: U.K. Office for Life Sciences

Discovering new drugs is a process that can take years, often involving hundreds of scientists combing through thousands of potential medicines. The U.K. has been one of the top recipients of EU research funds, garnering almost 9 billion euros ($10.7 billion) from the Horizon 2020 program from 2007 through 2013.

EU Money

Expenditure on research, development and innovation

Awarded on a competitive basis

Germany

€12.1B

Poland

Italy

U.K.

€8.9B

Spain

France

Finland

U.K. was the second largest recipient of competitively awarded funding after Germany, securing €6.9 billion

Portugal

Czech Republic

Netherlands

Proportion awarded on a competitive basis

Germany

Poland

Italy

U.K.

Spain

France

Finland

Portugal

Czech Rep.

Netherlands

€12.1B

€8.9B

U.K. was the second largest

recipient of competitively awarded funding after Germany, securing €6.9 billion

Framework Programme 7 and structural funds awarded 2017 to 2013.
Source: Royal Society

When that funding expires, the U.K. will have to replace it for work to continue. Top universities have made the country a magnet for young scientists worldwide, and while the government has tried to be reassuring about their status post-Brexit, many aren’t buying it. AstraZeneca Plc’s Mene Pangalos told a House of Lords committee that foreign scientists are turning down U.K. jobs because of Brexit fears. 

We need to know as a company that we can continue to recruit

John Haurum, CEO of U.K. biotech F-Star Biotechnology Ltd.

Long before drugs make their way to pharmacy shelves and patients’ bodies, they undergo a rigorous proving process that ends with clinical trials -- testing in people. The U.K. clinical testing industry is worth about £2.5 billion ($3.4 billion) annually, according to the Association of Clinical Research Organizations, a Washington-based industry group. Right now, about 40 percent of experimental drugs used in EU clinical trials are manufactured in the U.K. But under EU rules, experimental drugs made for clinical studies in member countries must also be manufactured and cleared by union authorities, who are called qualified persons. Once outside the EU, conducting studies in the U.K. may become difficult enough that the operations are moved to other countries.

Pedestrians pass the European Medicines Agency in Canary Wharf, London

The European Medicines Agency’s departure from the U.K. looms over all drugmakers who want to sell drugs in Europe. When it leaves London for Amsterdam, it will take with it about 900 jobs, a budget of $322 million, and about 40,000 visits a year from people who have business with the agency. Without the EMA “the appeal of London as an environment for the development of pharmaceuticals would be lost,” Japanese officials said in 2016. Member countries contribute to the drug regulation work, and U.K. officials currently perform about 20 percent of that work.

Pooling Expertise

EMA committee managers and co-managers across Europe

U.K.

37

Sweden

33

Germany

28

Netherlands

26

Portugal

17

Spain

16

Denmark

13

Austria

9

Norway

8

Italy

8

France

8

Ireland

6

Poland

6

Finland

4

Belgium

3

Estonia

2

Latvia

2

Lithuania

2

Czech Rep.

2

Hungary

2

Slovakia

1

8

Norway

4

Finland

33

Sweden

2

Estonia

2

Latvia

2

Lithuania

13

Denmark

6

Ireland

37

U.K.

6

Poland

26

Netherlands

28

Germany

Czech Rep.

2

1

Slovakia

2

Hungary

9

Austria

8

France

3

Belgium

8

Italy

16

Spain

17

Portugal

Source: European Medicines Agency

The EMA had predicted that in the wake of its move to Amsterdam, about 20 percent of its staff will quit, possibly resulting in delayed approvals. Guido Rasi, the EMA’s head, has raised that estimate to a loss of about 30 percent. That’s a nightmare for manufacturers counting the days until their products are on the market. A slowed pace of work could also result in a significant drop in income from fees that it charges for product review, which would ripple down to member country regulators that get part of their funding from the EMA, the agency said this month. The worst case is that about 70 percent of workers leave, rendering the agency “unable to operate.”

Staff Retention Scenarios

The EMA could lose 20-30 percent of staff in its move to Amsterdam

Over 65%

 

Approval of new medicines and safety monitoring are largely maintained, but with possibility of delays

50% to 64%

Patients wait longer for new medicines, safety monitoring maintained by rerouting resources and deprioritizing other tasks

30% to 49%

Patients are at serious risk because of delays in access to medicines and poor safety monitoring

Below 30%

EMA is unable to operate, public health crisis

50% to 64%

30% to 49%

Below 30%

Over 65%

 

Approval of new medicines and safety monitoring are largely maintained, but with possibility of delays

Patients wait longer for new medicines, safety monitoring maintained by rerouting resources and deprioritizing other tasks

Patients are at serious risk because of delays in access to medicines and poor safety monitoring

EMA is unable to operate, public health crisis

Source: European Medicines Agency staff survey

The UK must also strike a deal for its drug approvals to be recognized in the EU. If that doesn’t occur, James O’Shaughnessy, a Conservative lawmaker in the upper house of Parliament suggested, the country might seek closer ties to the U.S. Food and Drug Administration.

Manufacturing drugs for the EU must also be overseen by its agents in member countries. GlaxoSmithKline Plc Chief Executive Officer Emma Walmsley said in October that the company is paying “real costs” related to Brexit, in part to construct new testing facilities to duplicate those it has in the U.K. Over the next nine months, companies will begin moving hundreds, perhaps thousands of workers in drug testing and manufacturing facilities to other EU countries, according to Tim Sarson, a KPMG consultant who advises health care companies on Brexit preparation. “The big companies are only starting to scratch the surface of what they need to do with this,” he said.

Once approved, the EU requires drugs to be registered in a member country. The registration is like a pedigree that tracks all the drugs approved uses and the justification for those uses from the beginning of its testing. While it sounds simple enough to move the registration to another EU country, drug executives insist that it isn’t, especially without knowing what the U.K.’s relationship with the EU will be. About 2,400 medical products will need new marketing authorization through an EU country, and if the new rules are issued close to the Brexit deadline in March 2019, thousands of new registration documents may come crashing into the EMA’s new headquarters all needing immediate attention. “Could there be a significant disruption?” said Steve Bates, chief executive officer of the BioIndustry Association, a London-based trade group. “Yes there could.”

394-Year Queue

A 60-day marketing authorization transfer time would apply to 2,400 medical products registered in the U.K.

= 1 medical product, 60 days

= 1 medical product, 60 days

Source: European Federation of Pharmaceutical Industries and Associations

Before Brexit, trade among EU nations was “like the wiring in the wall,” said Virginia Acha, director of research, medical and innovation for the Association of the British Pharmaceutical Industry. It was like flipping a light switch; drugmakers didn’t have to think about it.

Supply Chain Disruptions

Patient packs supplied each month

U.K. to EU

EU to U.K.

U.K. to EU

EU to U.K.

Source: European Federation of Pharmaceutical Industries and Associations

AstraZeneca Plc CEO Pascal Soriot has pointed out a lack of trade agreements that could interfere with the sale of drugs over borders. Now the process of sending drugs to mainland Europe is a huge, looming question mark. Each month, about 45 million packs of patient supplies leave the U.K. for the EU, according to the European Federation of Pharmaceutical Industries and Associations, and 37 million come back the other way. A government white paper suggested that facilities could be made to inspect shipments far from the channel, to avoid trucking traffic jams. Such complexes are “a nice idea, but they’re not going to be able to implement it in time,” said KPMG’s Sarson.