London. June 23rd, 10PM GMT. The polls have just closed across the United Kingdom, and eyes around the globe turn to televisions awaiting results of the Brexit vote. Just minutes after the polls closed, Leave faction and UKIP leader Nigel Farage somberly told reporters that it looked like Remain “had edged it.” Soon, though, results show that less districts than expected vote to Remain, including Wales and northeast England. Defying most experts and polling, the Leave campaign wins the close referendum, with immediate and far-reaching repercussions. By morning, the pound had plummeted to a 30-year low against the dollar, David Cameron had resigned as prime minister, and the UK was on course to exit the European Union.
Brexit shocked the world. The lead-up to the vote was covered by this blog and every news outlet on the planet. While it will take years for the full effects to be felt and understood, here are a few of the biggest issues facing companies that do business in the UK in general, as well as for the life sciences specifically:
The British pound has tumbled since the vote, falling from 1.48 against the USD to a 30-year low of 1.29. The pound recovered in July and September, but has fallen sharply to 1.21 against the dollar as of 10/13, a level not seen since 1985 according to the BBC.
In response, the Federal Reserve postponed plans to hike short-term interest rates until the global economic picture improves. Brexit will add to global economic uncertainty, but shows no signs of triggering a regional recession. The US dollar also strengthened as a result of the vote, which will revive headwinds for manufacturing and exports, but will keep inflation at bay and provide some cost relief to American consumers.
Meet the New Boss
Brexit shook up not one, but three of the UK’s major political parties. The Conservative government of David Cameron was replaced by that of the new Prime Minister Theresa May, and Nigel Farage also stepped down as the head of UKIP. Labor’s Jeremy Corbyn has been waging an ongoing fight with the party’s MPs, many of which blame Corbyn for Remain’s poor showing among Labour voters and wish to elect a new party leader. It remains to be seen how this will affect UK policy.
Access to the EU Market and EMA Approval
Much to the chagrin of its employees, who recently settled into a new headquarters, the European Medicines Agency will necessarily need to move from London to one of the remaining EU states. This will require an adjustment period and potential uncertainty as the agency reestablishes itself. In a wider sense, pharmaceutical approvals will grow more complex unless UK negotiators can retain access to the single market for common approval of new drugs. If the EU denies this access, UK pharma will have to apply to each national regulatory agency separately, lengthening the time and cost to bring drugs to market. Given that the UK life sciences industry generates over £60 billion ($78 billion) and over 220,000 jobs, this is no small issue.
For non-UK companies, this will likely increase the odds of introducing new medicines into the EU market before seeking UK approval. Although the UK pharmaceutical market is estimated to grow between 4-9% by 2019, faster than any developed market besides the United States, and will remain the 8th largest pharmaceutical market and the 4th largest in Europe, the populous EU market will most likely be a more attractive target if simultaneous approval isn’t feasible.
No Article of Faith
Before Brexit is to become a reality, the British government must trigger Article 50 of the Lisbon Treaty, which would begin formal UK-EU negotiations on British withdrawal from the union. The EU will be able to set the schedule for negotiation, which gives it an important advantage. A much less complex treaty between Canada and the EU has been in negotiation for eight years, and with issues of trade, market access, border control, immigration, regulation, security, and more, UK-EU talks could potentially go even longer. For now, May’s government has indicated they plan to trigger Article 50 until around April 2017.