Over the last 24 hours, the Brexit secretary, David Davis, has been clear that the timeline for negotiations between the UK and EU will be the “row of the summer”. This is the latest intervention in a long running disagreement between London and Brussels about the format that the discussions should take; they haven’t even started to debate the finer details of an Article 50 agreement. With relations between the UK and EU starting to deteriorate, especially following the very deliberate leak of details of the dinner between Theresa May and Jean-Claude Juncker in April, a breakdown in talks between both sides is a distinct possibility. This would present significant challenges for the life sciences industry in the UK, potentially undermining the legal, regulatory and commercial foundations upon which the sector operates.
While the forthcoming negotiations should focus on developing a future economic relationship which delivers benefits for both sides, the reality is that these are deeply political discussions where the priority for UK and EU leaders is to preserve their political capital with their own domestic audiences. Take for example, Emmanuel Macron, the newly elected French President who stated during his campaign that Brexit is a “crime” and that the British must face “total exit”. While Macron will not be conducting negotiations, he does have influence and there is a political imperative on him to promote French interests abroad and to protect the Union. The German parliamentary elections may deliver a similar outcome; a Chancellor with a mandate built on a promise of protecting, and potentially reforming, the EU.
Theresa May has her own political realities to contend with. In under a month’s time she will win the General Election comfortably allowing her to provide the “strong and stable leadership” that the country clearly needs. But this election will be won on a platform of delivering a ‘hard Brexit’ and with the support of a significant portion of the four million people who voted UKIP at the 2015 General Election. The political gravity is pulling Theresa May in one direction and her European counterparts in another.
While it seems unlikely, there is a possibility that talks between the UK and EU could breakdown, with political expediency and short termism taking precedence over the long term interests of people and businesses across Europe. The life sciences sector has to be prepared for this outcome.
As a company that advises leaders across the life sciences and healthcare sector, we believe that the following issues should be a priority:
- The UK Government needs to undertake an impact assessment so it can fully appreciate how the life sciences sector will be affected by a ‘no deal’ scenario prior to full negotiations taking place. David Davis has so far ruled out undertaking and publishing an impact assessment of this outcome. If Government refuses to do this then industry should commission an independent organisation to undertake this work.
- Set out a vision for the UK’s future regulatory system. Since the referendum, a number of regulatory scenarios for the sector have been identified which has created confusion and uncertainty. There has been speculation that the UK will seek to remain a member of the EMA, align or opt into the FDA system or that the MHRA will establish its own “world-class, financially stable, regulatory offer”. Government should agree, in partnership with the sector, what the future UK regulatory system should look like and allow businesses to plan appropriately.
- The rights of EU citizens should be clarified (in agreement with the EU or unilaterally). In the event that talks break down then the rights of EU citizens can no longer be considered to be a ‘negotiating’ issue. Life sciences companies operating in the UK have a number of EU (and non-EU) nationals working in the UK whose legal status is unclear. The UK has a moral responsibility, and an economic imperative, to guarantee the rights of EU citizens in advance of Brexit.
- Provide certainty for trade and the life sciences supply chain. International pharmaceutical supply chains are complex. Product manufactured in one country may be shipped to another country for packaging and then another for distribution. While pharmaceuticals are unlikely to face tariffs, owing to the WTO Pharmaceutical Elimination Agreement, signed during the Uruguay round, services and other products do potentially face barriers. Furthermore, the UK would cease to be a member of the customs union requiring the imposition of border checks and controls. The sector needs clarity on how the UK Government intends to construct and implement a new customs system as soon as possible in order to relocate stock, redirect supply chains and reconsider their manufacturing operations.
- Accelerate the completion of trade deals. Signing trade deals with countries across the world is already a clear priority for the Government. However, these are complex discussions and the Department for International Trade will develop a list of countries to prioritise. While this will likely be headed by major economies, such as the US and Japan, there is scope to influence their thinking. In the absence of a trade deal with the EU, free trade with other countries takes on greater importance, especially for businesses that are importing and exporting products between their UK and international operations.
- Address the Irish question. A tripartite agreement between the UK, Ireland and the EU should be agreed during the early stages of negotiations (and outside of the withdrawal process if necessary) in order to provide certainty.
- A long term deal for life sciences. The Government is currently developing the Life Sciences Industrial Strategy and a ‘Sector Deal’ in partnership with representatives from industry. This is likely to be agreed and implemented prior to the UK leaving the EU, with or without a deal. Alongside this the sector will be negotiating a new PPRS agreement with the Department of Health and NHS England. Both of these developments will shape the foundations of the future commercial environment in the UK. However, breakdown in Brexit talks have the potential to completely change the UK operating environment. Will a Life Sciences Industrial Strategy and a new PPRS be fit for purpose in these circumstances?
The next two years will see businesses and organisations in the healthcare and life sciences space facing considerable political uncertainty and regulatory risks. We are here to help you build your political reputation, maximise commercial opportunities and create compelling campaigns. Do not hesitate to contact us to find out more.