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Top 8 Brexit Risks for Life Science Companies

Alexandre Alain
by Alexandre Alain on Wed, Feb 24, 2016

British Exit from the EU – Brexit – Is a Real Possibility and Risk Managers in Life Science Companies in Europe Must Plan Ahead For It

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The referendum on the UK’s continued membership of the European Union could take place as early as June – and current polling suggests the result is too close to call. While the Prime Minister is expected to campaign for Britain to stay in Europe, those who favour ‘Brexit’ are also getting organized – a UK exit from the EU, which would have seemed inconceivable even five years ago, is now a very real possibility.

That would affect everyone in Britain in all sorts of ways, including the business community. But while life sciences companies would have to confront the same challenges as everyone else, the industry would also be impacted in very specific ways by Brexit.

That said, the precise nature of those impacts remains uncertain. Not least, this is because it isn’t clear what the nature of the relationship between the UK and the EU would be should the UK quit – as a study from Global Counsel points out, it could be anything from a Norwegian model of European Economic Area membership to a much looser trading arrangement where the UK has a most-favored nation status. But as Global Counsel adds, most studies have suggested the impact on trade would be negative – and significantly so.

As for the life sciences industry specifically, Scientists for EU warn that the effects of Brexit would be especially detrimental. It foresees trouble in a number of areas:

  • Industry leadership – The UK is home to many of Europe’s largest life science organizations, including the European Medicines Agency, which has helped spawn a number of commercially mature clusters throughout the country. If the largest organizations feel they have no choice but to relocate to elsewhere in the EU, might smaller organizations follow? And without them, would the UK be able to wield the influence it currently enjoys? It might no longer be able to set the research agenda, or drive policymaking initiatives.

  • Collaboration – The UK is a major participant in cross-EU research programs such as Horizon 2020, in which many life sciences businesses are closely involved, and the wider EU science program. However, in the event of Brexit, it is not clear how much access British firms would continue to have to these programs. Scientists for EU point to the example of Switzerland, which, while not an EU member, had enjoyed access to the EU’s programs until 2014 when an immigration referendum limited freedom of movement. Since then, its European research funding awards have fallen by 75%.

  • Innovation – If industry leadership moves elsewhere in Europe, will the UK’s life sciences businesses continue to generate patentable outcomes? If innovation declines, moreover, what will happen to the UK’s burgeoning life sciences startup sector?

  • Funding – UK businesses receive the third highest amount under the EU’s FP7 program, with small businesses accounting for 9.6% of funds allocated. This funding would be at risk.

  • Talent – Restrictions on freedom of movement could see UK life sciences companies limited in their ability to recruit the talent they need in the global marketplace, leading to skills shortages. These would be exacerbated if British scientists and others opted to seek better opportunities elsewhere.

  • Regulatory Uncertainties – The Pro Europa group points to the regulatory concerns Brexit poses. To what extent, for example, would the EU’s medicine regulations continue to apply to the UK? Would we have to develop our own authorizations process – and how portable would it be. At the very least, building parallel regulatory systems would take time and add complexity.

  • Healthcare Policy – The UK has been a major driver of legislation such as restrictions on tobacco advertising, and continues to debate issues such as caps on sugar content and minimum alcohol pricing. How these would develop outside of the EU discussion remains to be seen.

  • Supply Chain Risks – As law firm Hogan Lovells points out, this is an area of significant concern. Brexit would be likely to cause major disruption to the supply chain in a sector where every ingredient and component is regulated and scrutinized.

Naturally, campaigners who favor Brexit will argue that these concerns are overblown – and they could be proved right in the longer term. At the very least, however, uncertainty will be a business distraction.

This is why risk managers need to plan carefully for the impact of Brexit – both for the uncertainties ahead and for the real possibility of the UK voting to leave. While the polls remain so close, it’s important to plan for every eventuality.

Takeaways:

  • This is why risk managers need to plan carefully for the impact of Brexit – both for the uncertainties ahead and for the real possibility of the UK voting to leave. While the polls remain so close, it’s important to plan for every eventuality.

  • If the UK votes to leave the Europe, life sciences companies will be affected in areas ranging from industry leadership to supply chain risk.

  • Even the debate over the UK’s possible departure from the EU could create destabilising uncertainty.

Take a Long-Range Approach to Risk Management. Download: Beat the Regulator – Proactive Quality Management in the Life Sciences

Beat the Regulator - Proactive Risk Management in the Life Sciences

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Alexandre Alain
Written by Alexandre Alain
Life Science Product Manager
Written by Author

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