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Brexit could hit U.K. life sciences hard

Separation from Europe will impact R&D funding, drug regulation and sales

by Ann M. Thayer
November 9, 2016 | APPEARED IN VOLUME 94, ISSUE 45

Investment destination
Credit: EvaluatePharma
U.K. drug firms lead in raising capital in Europe.
Note: IPO = Initial public offerings of stock.
Source: EvaluatePharma

As the U.K. government prepares to begin negotiations around Britain’s exit from the European Union, two new reports warn that the so-called Brexit could mean turmoil, and possibly shrinkage, for the U.K.’s life sciences sector.

For now, the outcome is uncertain and will depend on the nature and degree of the separation. A “soft” Brexit would leave the U.K. in a close and harmonized stance with the rest of Europe, along the lines of Switzerland, which has a healthy life sciences sector. But both reports suggest that a “hard” Brexit is more likely given the current political situation.

A hard Brexit would put the economic success of the U.K.’s life sciences sector at risk, says the advisory group Public Policy Projects (PPP), which is headed by former health secretary Stephen Dorrell. The sector contributes more than $74 billion in annual revenues to the U.K. economy and employs 220,000 people.

Key ties to the EU would be severed in areas including regulation, trade, intellectual property, and research funding. For example, the U.K., the fourth-largest pharmaceutical market in the region, would have to establish a drug approval structure independent of the EU’s European Medicines Agency. U.K. firms also rely heavily on European venture and stock investors for funding. PPP concludes that Brexit would make the U.K. a “less attractive place for investment and launch of new medicines.”

Likewise, Britain’s participation in the broader research community may be threatened. In 2015, it received nearly $10 billion in R&D funding, or 15% of the EU’s total scientific spending. U.K. researchers may not be able to continue to participate in cross-border programs and collaborations, or will have to do so under new terms.

“It would be hard to overstate the importance of EU money to the U.K. life sciences sector,” says a report from the market research firm Evaluate. “Many fear the loss of access to these huge pools of capital, as well as restrictions on the movement of highly trained labor.”

Evaluate says the U.K. government is being called on to signal support for research with tangible measures and cash commitments. So far, the U.K. Treasury has pledged to keep funding U.K. projects currently paid for by the EU’s $90 billion Horizon 2020 research program. Yet to be decided is how the U.K. will make up for monies that now come from the European Structural & Investment fund.

“Maintained funding is obviously welcome, but the essential U.K. national interest is to ensure that the U.K. science continues to be at the heart of the wider European scientific community,” writes PPP report author Luke Tryl.

The reports point out that some within the U.K. business and scientific communities see benefit in greater independence around regulations, trade, and research. Most people in the life sciences sector opposed Brexit, however, and now are arguing for measures to mitigate its adverse effects.

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