United Kingdom / Industry Insights
Fickle Pharmaceuticals: How Brexit Will Affect The Industry
by Kathryn Blay, Content Editor
Aug 29 2019

Despite significant planning and preparation efforts from operators and regulators, the United Kingdom leaving the European Union is expected to significantly disrupt the Basic Pharmaceutical Product Manufacturing industry over the next five years. From trade barriers limiting the movement of medical supplies to facilities and workers moving to the European Union, the industry’s future remains uncertain.

The weakness of the pound since the EU referendum has benefited operators in the Basic Pharmaceutical Product Manufacturing industry by making exports more competitive in overseas markets, while inflating the price of imported products. However, the potential erection of trade barriers after the United Kingdom leaves the European Union could decrease international demand for UK-manufactured pharmaceutical products and constrain long-term revenue growth. Increased customs controls at ports and other borders between Britain and the European Union could also disrupt supplies of drugs and the chemical compounds needed to produce them.

The impact of the United Kingdom leaving the European Union on the international movement of medical supplies will also be felt in the remaining EU countries. For example, approximately 45 million packs of medicines are shipped from Britain to the European Union every month, which in trade was worth nearly £12 billion in 2016, according to a British parliament report.

Leaving the European Union also means that UK pharmaceutical products could be subject to a separate authorisation process, increasing the regulatory burden for UK pharmaceutical manufacturers. As a result of uncertainty regarding changes to the regulatory process, drugs currently under medical review could also be disrupted. This is likely to increase costs for the Basic Pharmaceutical Product Manufacturing industry.

 ‘Despite the regulatory disruption that leaving the European Union is expected to cause, the UK government is likely to want to maintain a close regulatory relationship with the European Union in order to support the integrity of the industry,’ according to industry analyst Alice Crundwell.

However, some drugs might not have the required regulatory approval by 31 October to continue being sold between the United Kingdom and the European Union. ‘Despite intensive preparation by industry for every scenario, a no-deal Brexit risks disruption to the supply of medicines’ said Andy Powrie-Smith, an official at the European Federation of Pharmaceutical Industries and Associations.

EMA

The European Medicines Agency (EMA) said the European Union is well prepared for the United Kingdom leaving the European Union and has finalised authorisations for nearly all the 400 drugs under its watch that required further clearing, but authorisation is pending for three medicines that need EU-wide licences, according to an EMA official. Other essential medicines could also be blocked because of supervisory hurdles caused by the United Kingdom leaving the European Union. Many other medicines authorised at the national level could also be at risk. Nearly 6,000 drugs will need to go through a new licensing process after the United Kingdom leaves the European Union.

Moving operations

 The EMA, which was previously based in London, relocated to Amsterdam in March 2019 prior to the United Kingdom leaving the European Union. The relocation of the EMA is likely to result in the United Kingdom having less influence on regulatory matters going forward. Britain is also losing supervisory and clinical-trial capacities as operations are being moved elsewhere to remain able to test and approve drugs for the EU market. This ongoing trend could shrink the UK pharmaceutical industry and lead to tighter supplies and higher costs.

Funding and working

The United Kingdom has previously been an attractive location for companies to undertake research and development. Operators benefited from EU funding for research and development, leading to a significant number of projects and both public and private funding to support them.

As a collaborative sector, there are benefits to both the European Union and the United Kingdom for continuing access to funding, including Horizon 2020 and its successor Horizon Europe, and to projects such as the Innovative Medicines Initiative. The support that will be available to maintain international collaboration is currently uncertain and may be lost after the United Kingdom exits the European Union.

Currently, the pharmaceutical sector is able to fill skills gaps in the United Kingdom through global recruitment and intra-company transfers. Reduced access to skilled EU workers could negatively affect the Basic Pharmaceutical Product Manufacturing industry and increase competition from overseas manufacturers.

End result

Overall, leaving the European Union could shrink the UK pharmaceutical industry and lead to tighter supplies and higher costs from increased regulatory burdens over the next five years. The erection of trade barriers could decrease international demand for UK-manufactured pharmaceutical products and constrain long-term revenue growth, and the impact on the international movement of medical supplies will also be felt in the remaining EU countries.

For a printable PDF of Fickle Pharmaceuticals: How Brexit Will Affect The Industry, click here.

IBISWorld industry reports used in this Industry Insight piece:

C21.100 - Basic Pharmaceutical Product Manufacturing in the UK

For more information on these, or any of the UK’s 400 industries, log on to www.ibisworld.co.uk, or follow IBISWorldUK on Twitter.