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Brexit’s implications on the pharmaceutical industry


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Speculation has abounded in recent weeks regarding the short and long term consequences of Brexit. For the pharmaceutical industry, there are ramifications both in the UK and across continental Europe.

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Brexit’s implications on the pharmaceutical industry

  1. 1. Brexit’s implications on the pharmaceutical industry Pricing, market access and trade Marc Matar, Partner Sinead O’Sullivan–Carty, Senior Consultant August 2016 London Office 1 Plough Place London, EC4A 1DE, UK Tel. +44 207 832 6820 E-mail:
  2. 2. Speculation has abounded in recent weeks regarding the short and long term consequences of Brexit. For the pharmaceutical industry, there are ramifications both in the UK and across continental Europe. Pricing volatility Coping with short term currency fluctuations and long term IRP implications The most immediate market consequence of the Brexit vote is currency fluctuation, resulting in continued uncertainty impacting European prices. For novel products launching in Europe: A lower UK price may affect reference basket prices for those European markets using international reference pricing (IRP) as the driving price setting mechanism. For post-launch products: The risk of re-referencing and price cuts arise. Long-term, European markets may exclude the UK from their reference baskets due to the market’s exit from the union. Historically, the UK has been an early-to-launch market due to free pricing typically creating a higher anchor for IRP. However, the UK may no longer be an attractive or supportive option in the early launch sequence if European markets exclude the UK price from their reference baskets. Pharmaceutical companies now need to assess and adapt their European launch sequence strategies as well as monitor and minimise EU pricing risks for established products. Within the UK, pharmaceutical pricing rules are expected to remain unchanged until the expiry of the PPRS and subsequent re-negotiation in 2018. It’s the long term prospects in this new and evolving competitive environment that will put UK launch prices at risk. With the NHS already under cost pressure, and significant additional pressure expected depending on the economic impact of Brexit, NHS regulators may need to take a harder stance on new drug and device prices, using it as an opportunity for cost containment. Market access A new regulatory era The final post-Brexit trade deal will have immediate, primarily UK-centric repercussions, potentially transforming the UK’s regulatory structure. Adopting the EFTA or WTO model routes will lead to the UK having greater or complete control over the verdict and speed of product and device market authorisation. A move away from EMA-led market authorisation in the UK will mean the expansion of the MHRA. The result of such an expansion is unknown especially how process timelines and outcomes could be affected. How easy will it be to gain UK market authorisation and how long will this take? A new era for the MHRA therefore represents a potential market access risk. Pharmaceutical companies may in the future consider deprioritising UK launches due to the time and cost commitment of an additional regulatory application. Manufacturers may therefore need to redefine their UK launch strategies. As we have already heard from patient groups this further adds concern around patient access and outcomes.
  3. 3. Trade negotiation Competing in the face of uncertainty The UK trade agreement negotiated with the EU will impact all industries. If the UK no longer has access to the single market, the revision of trade duties, routes, and customs processes is required. Moreover, the UK may set its own import tariffs during negotiations. For the pharmaceutical industry in particular, this is likely to impact parallel trade – import and export of pharmaceutical products between different countries. The imposition of tariffs will discourage and thus limit or halt parallel trade in some cases. This may benefit pharmaceutical companies who will be able to better manage their revenues per market. However, in the UK market, less parallel trade is likely to mean less competition, which in turn could lead to greater pressure on NHS resources. Any trade agreement will also have serious consequences for UK-based pharmaceutical or MedTech companies. Imposed duties or tariffs will impact profitability and could reignite the debate around strategic relocation of headquarters and production. Furthermore, whilst uncertainty remains, there are further risks to UK business, as companies will have lower willingness to invest heavily in the interim. In the long term, Pharma is a global industry which should be insulated from Brexit consequences commercially. We can look to Switzerland as evidence that life outside the EU is compatible with a thriving pharmaceuticals sector. What remains uncertain is whether EU governments will grant the UK similar privileges.
  4. 4. Simon-Kucher & Partners Simon-Kucher & Partners is a global consulting firm specialising in TopLine Power®, which encompasses strategy, marketing, pricing, and sales. Our practice is built on evidence-based, practical strategies for profit improvement via the top line. Simon-Kucher & Partners is regarded as the world's leading pricing advisor and thought leader. Contacts Global presence 33 offices worldwide, 930 employees, €209m revenue in 2015 Americas Atlanta, Boston, Mountain View, New York, San Francisco, Santiago de Chile, São Paulo, Toronto Europe/Middle East Amsterdam, Barcelona, Bonn, Brussels, Cologne, Copenhagen, Dubai, Frankfurt, Geneva, Hamburg, Istanbul, London, Luxembourg, Madrid, Milan, Munich, Paris, Vienna, Warsaw, Zurich Asia/Pacific Beijing, Singapore, Sydney, Tokyo