Launching the Conservative Manifesto, Forward Together, last week, Theresa May set out her vision for tackling the five great challenges she believes the UK is facing. The life sciences industry is invested in at least four of these areas. The need for a strong economy is obvious and the sector has legitimate (and so far dismissed) concerns about exactly how Brexit will affect the operating environment. The fourth challenge, an ageing society, is both driving demand for medicines and constraining budgets, while fast-changing technology represents the promise of the industry.
It is therefore a shame that the policy promises outlined in the manifesto offer little for the sector. The signs are that the commercial environment for life sciences companies following the election will continue to deteriorate as the funding crisis continues to bite and affordability becomes even more entrenched into the system.
So what are the issues that life science leaders in the UK should watch closely? The following is a guide:
- Will new faces at the top strengthen NHS England? Despite repeated attempts to build a consistent, credible and coherent vision for life sciences across Government (including the Cooksey Review, Innovation, Health and Wealth, the creation of the OLS, George Freeman’s role as life sciences minister, the AAR, the Life Sciences Industrial Strategy), the DH, BEIS, DIT, HM Treasury and No 10 feel completely divided and unaligned in their thinking. Part of the challenge has been the constant churn of ministers and people within key departments and this looks set to continue. Jeremy Hunt is one of the longest serving Health Secretaries and the Prime Minister may regard this as a good time to move him on to a new department, with Ben Gummer as a possible candidate to replace him. Alongside this, we may have a new Chancellor; Theresa May’s refusal to confirm that Philip Hammond would keep his job following the election suggests he has lost influence and may be on his way out with Damien Green and Amber Rudd as potential alternatives. This looks set to benefit Simon Stevens. The relationships between the Prime Minister, the Chancellor, the Health Secretary and the Chief Executive of NHS England are crucial for determining the overarching strategy for the health service and key issues like funding. Stevens can extend his influence and control over the NHS as the stabilising force in times of uncertainty. This presents challenges as NHS England has been lukewarm in its engagement with industry and its policy towards the sector can be fairly described as periodically hostile.
- The funding crisis looks set to continue. The Conservatives have promised to increase spending for the NHS by an additional £8bn in real terms by 2022/23, which includes £2bn of money previously allocated by the former Chancellor, George Osborne. This is simply not enough and we can expect the rationing of services and treatments to continue. Furthermore, the U-turn on social care will place significant financial pressure on local authorities as they try to manage care for older people. The result will be that the NHS will continue to be used as a safety net for a broken social care system. As the primary customer for the life sciences sector, a poorly funded NHS is bad news for driving uptake of new medicines as well as for attracting future investment.
- Affordability is hardwired into the commercial environment. The 2015 Conservative Party manifesto promised to “speed up your access to new medicines by implementing the findings of our Innovative Medicines and Medical Technology Review. We will increase the use of cost-effective new medicines and technologies.” This hasn’t happened and the sector is still reeling from the introduction of affordability measures by NICE and NHS England to manage the uptake of innovative treatments. It should therefore be of concern that the 2017 manifesto promises to “ implement the findings of the Accelerated Access Review to make sure that patients get new drugs and treatments faster while the NHS gets best value for money and remains at the forefront of innovation.” The Conservatives will have a mandate to get “best value for money”, which will be used as a justification to place further pressure on the sector to support the affordability agenda. Furthermore, there is no commitment to improving the uptake of new medicines, which is a departure from the 2015 manifesto, and there is almost no mention of the Life Sciences Industrial Strategy, despite this being at the heart of the Government’s offer to the sector.
- A new regulatory environment? Brexit means that there will undoubtedly be changes to the regulatory environment for pharmaceutical, medical technology and health services companies. The Conservative manifesto states that they will “work hard to ensure we have a regulatory system environment that encourages innovation”. This may point to a more prominent role for the MHRA after we leave the EU. The MHRA business plan, published in April, outlines its intention to establish a “world class, financially stable, regulatory offer”. However, this might be overly optimistic. The MHRA currently takes on around 20% of the EMA’s workload meaning that it would in future be required to undertake the remaining 80% of approvals while also trying to redesign and implement a new regulatory system. Furthermore, as the Great Repeal Bill makes its way through Parliament and the Department of Health begins considering which European legislation and regulations to keep or remove, the MHRA should expect that it will be required to guide and shape this process. There are already concerns that the UK will lack the people and the expertise to manage the Brexit transition effectively, and it is unclear how the MHRA would both expand its role in the regulatory environment and manage the Brexit transition without this impacting on the timelines for medicines approvals.
- Corporate management and governance. Theresa May identified corporate governance reform as a key pillar of her offer to the British people when she succeeded David Cameron. This speaks to her concern that business, and its leaders, are detached from the lives of ordinary working people. While she has rowed back on her promises to put workers on all company boards (at least for private companies), there is a desire for Government to be more actively involved in the inner workings of businesses and markets – a more interventionist approach to managing industry. This is not helpful and it is unclear how much value will be created by introducing salary caps or intervening in corporate takeovers. However, if the Government is intent on being involved in the corporate management aspects of the life sciences sector then it should also use this more active role to remove barriers in the commercial environment.
- Metro Mayors present themselves as a new engagement target. One potential opportunity for life sciences companies is the recent election of six new metro mayors. Andy Burnham is clearly of interest as he has some power over the health and social care agenda in Manchester and is a former Secretary of State for Health, but the other metro mayors should not be discounted. Each has a mandate to represent the interests of their localities, and as such, they and their teams may present an opportunity to discuss some of the wider challenges facing patients in accessing healthcare services and vital medicines. Furthermore, they are an alternative political powerbase to the Government and NHS England and could present significant operational challenges. There is potential for a crisis to merge if Metro Mayors oppose plans being developed as part of the Sustainability and Transformation Plan agenda. Will the NHS close A&E units if the local Mayor is opposed to it? What if NHS England plans to restrict patient access to a new treatment because it has a budget impact of over £20m per year but that medicine would have a disproportionately positive impact in urban areas?
These challenges present risks for the life sciences industry but they are not insurmountable. We know that having a credible, coherent and consistent engagement strategy can produce wins whether on a strategic level or in addressing commercial challenges. We are here to help you develop and deliver these plans, maximising your commercial outcomes and facilitating the development of a positive business environment for the future. Do not hesitate to contact us to find out more.