Brexit: Shockwaves to AstraZeneca, Novartis, GlaxoSmithKline

Business Finance News believes It is too early to comment on the effects of Brexit on the pharmaceutical arena in European Union and the UK

The astonishing verdict by the UK people to cut ties with the European Union (EU) has put pharmaceutical companies such as AstraZeneca plc (NYSE:AZN), Novartis, and GlaxoSmithKline in a rollercoaster as the European Medicines Agency (EMA) has to be relocated from London to other cities in Europe. EMA plays a distinct role in the regulation of the clinical trials and approval of drugs for the EU members. The association of Germany’s pharmaceuticals industry said that the relocation of the EMA will bring multiple administrative problems for the pharmaceutical industry.

With Brexit’s voting results, manufactures will be in hot water as they will face a long-lasting impact for the approval of the drug and multiple hurdles in initiating the clinical studies. Pharmaceuticals and medical devices contribute a major chunk in the UK exports to the EU. According to the UK Trade and Investment board, the life sciences sector generates revenue of $80 billion annually.

GlaxoSmithKline plc (NYSE:GSK) representative said: “Although the EU Referendum result creates uncertainty and potentially complexity for us in the future, we do not currently anticipate a material adverse impact on the business, Group’s results or financial position. We will continue to operate as usual and will engage in the process ahead. We look forward to working closely with all relevant stakeholders. Our priority continues to be ensuring patient access to our medicines, vaccines and consumer products across the world.”

In addition, GSK expects that Brexit’s impact on the global market will be not so unfathomable, but it will definitely put its slight impression on the UK pharmaceutical industry in terms of investment, research, and jobs opportunities.

AstraZeneca’s spokesman said it is completely UK’s choice, but we think enduring with EU will be more beneficial for the patients and industry. The spokesman added that the company respects the decision of the referendum.

Alexion Pharmaceuticals, BioMarin, and Amgen have shown a dip of 9%, 8%, and 4%, respectively due to their major exposure to the European market.

For the last four decades, the pharmaceutical companies in Europe were working in a systematic manner and have an integrated portfolio beginning from the research and development and finales at commercialization of the drug in the therapeutic market. After the announcement of the results, GlaxoSithKline and AstraZeneca are still uncertain whether to shift their head offices from the UK.

EMA will have the major impact of Brexit as it has a fulltime staff of 600. Since 1995, the agency has been involved in the approvals of multiple drugs, which will be marketed in EU member countries. According to the EMA spokeswoman: “It is too early to foresee the implications of this decision and at this stage, we are waiting for further guidance from the European Commission (EC).”

Despite EMA officials are waiting for further progress from the EC, multiple countries such as Sweden, Denmark, Italy, and Germany have shown their keen interest in establishing the EMA head office in their territories.

EMA has 33 members of national associations and 40 leading pharmaceutical companies. In addition, it exemplifies 1,900 EU companies involved in the research, development, and manufacturing of novel molecules for the management and treatment of multiple therapeutic areas.

Despite the transfer of the EMA head office to other location, UK does not face any critical problem, as it has regulatory agency by the name of Medicines and Healthcare products Regulatory Agency (MHRA).

In the UK, National Institute for Health and Care Excellence (NICE) plays a vital role in conserving the drug price factor. The agency is interlinked with European network for Health Technology Assessment (EUnetHTA), who is responsible for the data influx regarding the price factor in the EU. With the implementation of the voting that might take more than two years, NICE will not be able to get the data influx from EUnetHTA and will be in hot water in order to testify the drugs’ price factor in the UK.

Currency Impact

The impact of the currency will be limited as expected, because majority of the pharmaceutical companies are established in the US and Asia. GlaxoSmithKline has a positive scenario after Brexit result and is of an opinion that it will not affect its business, but on the other hand, it will give benefit due to the volatile pound sterling in the days to come. Other companies such AstraZeneca will not be affected by the referendum decision as they are dealing in US dollar. Approximately, 70,000 people are involved in the pharmaceutical sector in the UK, which encompasses 25% of the total research and development in the country.

New Drugs Approval

After the exit, the UK drugmakers have to become the European Economic Area in order to get the fastest drug approval as Norway, Liechtenstein, and Iceland are implicating. With the membership, UK will have an access to the EMA for single marketing authorization to launch the drugs throughout Europe, but they will not be entitled for the operational entities of EMA.

On the other hand, if the UK does not adopt the aforementioned process, it will be difficult for the pharma industry to get authorization of the drugs in a simple fashion.

Drug Pricing Factor

In the UK, drug pricing is a type of voluntary agreement between the pharmaceutical industry and the government. Both the entities mutually set the drug’s price for five years. The UK pricing mainly depends on the external reference price of other EU countries and then finalize the price keeping in view EU’s situation.

The UK is also a member of EU Joint Procurement Agreement, which gives the liberty to the countries for the procurement of drugs in the case of a cross-border health emergency.

Leaving the EU will put immense pressure on the UK pharmaceuticals as the majority of clinical trials and launch of new drugs in the UK will become cumbersome. The majority of the pharmaceutical companies are of the opinion that Britain will have to remain in the EU chapter.

According to the pharmaceutical industry, Britain has been involved in approximately 40% of rare disease trials covering the whole EU segment. After the decision, the region will lose some of the clinical trials.

On the other hand, officer bearers of the National Eczema Society also elaborated that they were intimated by the two US companies that their eczema drug trial will not be initiated in the UK due to Brexit decision.

Despite all the drawbacks, UK pharma segment will be freed from the EU and EMA. British government has an excellent opportunity to implement its own strategic policy for the research and development of drugs. According to the GlobalData, it will be a tough time for Britain to maintain the same level of excellence in the research and development of its participation in external programs such as Horizon 2020.

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