Brexit Round Two: What Is Next For The UK Pharma Industry?

By Patricia Van Arnum - DCAT Editorial Director

July 20, 2016

The policy direction of the pharmaceutical industry in the UK in the wake of Brexit took another turn when the UK Life Science Minister George Freeman was re-assigned to a new post under UK's new Prime Minister Theresa May. So what is next for the pharmaceutical industry in the UK?

In his role as UK Life Science Minister, Freeman had announced earlier this month the formation of the UK-EU Life Sciences Transition Steering Group to oversee and manage the transition of the UK from the European Union (EU) as it related to the pharmaceutical sector. Freeman was later appointed to a new position as Chair of the Prime Minister's Policy Board, leaving unfilled for now a UK Life Science Minister. DCAT Value Chain Insights (VCI) examines recent developments and the impact on the UK pharmaceutical industry.

Shifting priorities
In his role of Chair of the Policy Board, Freeman will be taking on a larger role in setting policy and working with the prime minister and her team on economic and social reforms in the UK. "After two years as a Business Minister and Health Minister leading the Government's work on public service innovation, and industrial strategy in agritech and healthcare, I will now be able to develop a wider program of support for the role of science and innovation, infrastructure, localism, enlightened public service and a more inclusive society and economy at the heart of a 21st-century UK pioneering a new future outside the EU," said Freeman in a statement dated July 18, 2016. In 2014, Freeman was appointed the first UK Minister for Life Sciences at the Department of Health and the Department of Business, Innovation and Skills (BIS) and was reappointed to the role following the 2015 general election.

While still Minister for Life Sciences, Freeman outlined in early July plans to transition the UK's pharmaceutical industry post-Brexit, referring to the UK's decision, via a public referendum to exit as a member state from the EU. In 2011, Freeman and then Prime Minister David Cameron launched the UK's 10-Year Life Science Strategy, and Freeman said it was the UK's wish to continue with an overall life-science strategy. "As the industry and government spoke with one voice before the referendum, so we must now work together again in the best interests of the UK life science sector, patients, taxpayers and the economy, to manage the new situation and negotiate a new relationship with Europe," said Freeman in a July 11, 2016 statement.

At stake for the UK is a life-sciences industry, which according to estimates provided by Freeman, generates over £60 billion ($78 billion) and over 220,000 jobs for the UK economy annually. In his capacity as Minister for Life Science in the few weeks following Brexit, Freeman had initiated a work program with the UK's BIS, the Department for Health, and the prime minister "to reassure stakeholders that we are actively managing how to preserve and enhance the strength of UK life science," said Freeman in the July 11 statement. To that end, he outlined three priorities: (1) providing immediate reassurance that there would be no immediate changes to the UK's membership of the EU and it remained a full member of the EU with full voting rights as it negotiated its transition from the EU; (2) exploring the priorities of the UK life science sector ahead of the UK's negotiation of a new relationship with the European Union (EU); and (3) beginning the process of exploring how the UK can create a domestic landscape in which the UK is the country of choice to design, develop and introduce innovative health products to market.

As part of that effort, Freeman formed the UK EU Life Sciences Steering Group to oversee and manage this transition. The group, which was to report to the Ministerial Industry Strategy Group, was to provide recommendations and considerations for how the UK can define a new relationship with the EU. He enlisted not only participation from government but also from the pharmaceutical industry. The Steering Group is co-chaired by a Minister along with GlaxoSmithKline's (GSK) Chief Executive Sir Andrew Witty and AstraZeneca's Chief Executive Pascal Soriot, with the Association of the British Pharmaceutical Industry (ABPI), which represents innovator pharmaceutical companies, and the BioIndustry Association (BIA), the UK's biotechnology trade association as core members. The Group was slated to provide its recommendations and considerations in September 2016 on how the UK life-sciences sector can move forward in its new relationship with the EU following Brexit.

With the ongoing executive changes in the UK, punctuated by the UK's new prime minister Theresa May and senior leadership, including Freeman in his new role as Chair of the Policy Board, the key question is if and how will the UK government address the concerns of its life-sciences sector. A key issue going forward is whether the US will to appoint a new Minister of Life Sciences to replace Freeman and whether the Office for Life Sciences will continue as well.

Pharma investment in the UK
As those issues are considered, one consideration for the pharmaceutical industry will be the impact that Brexit will have on investment strategies in the UK. Two of the leading multinational pharmaceutical companies, headquartered in the UK, AstraZeneca and GSK, have made significant investments in the UK both in research and development (R&D) and manufacturing over the past several years, investment that the UK and the pharmaceutical industry associations are keen to continue. 

GSK has nine manufacturing sites in the UK, four sites making active ingredients, three sites making finished drug products, and two consumer healthcare sites. In total, products to the value of approximately £2 billion ($2.6 billion) are exported from GSK manufacturing sites in the UK each year, according to the company. In March 2012, GSK announced that it was investing more than £500 million ($655 million) in the UK across its manufacturing sites to increase production of key active ingredients for its pharmaceutical products and vaccines, representing tone of the largest commitments to the UK life-sciences sector in recent years. The investment was encouraged by government policy for a so-called "patent box" to encourage investment in R&D and related manufacturing in the UK, by introducing a lower rate of corporation tax on profits generated from UK-owned intellectual property. Those investments included the selection of Ulverston in Cumbria as the location for the first new GSK manufacturing facility to be built in the UK for almost 40 years. Investment will also be made at the company's two manufacturing sites in Scotland at Montrose and Irvine. This was followed by an announcement by GSK in December 2013 for an additional £200 million ($262 million) for new manufacturing sites in Ware, Hertfordshire for producing the company's Ellipta inhaler and in Worthing, Sussex for a new bulk sterile building and filling line for producing the company's antibiotic Augmentin as well as new manufacturing innovation center. In April 2016, GSK opened a £56 million ($73 million) manufacturing facility in Ware to double production of the company's Ellipta inhalers at Ware to at least 37 million per year by 2017, 95% of which will be exported.

AstraZeneca has a workforce of more than 6,700 employees across seven sites in the UK, according to company information. In 2013, the company announced plans to establish a new Global R&D Center and corporate headquarters in Cambridge on the Cambridge Biomedical Campus, with the new site scheduled to come on line in late 2016 and will be home to approximately 2,000 employees.The Cambridge site will bring together AstraZeneca's small-molecule and biologics research and development activity and become the company's largest center for oncology research, as well as housing scientists focused on cardiovascular and metabolic diseases, respiratory, inflammation and autoimmune diseases and conditions of the central nervous system. The site will also be home to a joint research center, which will see Medical Research Council-supported researchers working side-by-side with AstraZeneca's high throughput screening group.In advance of the new site becoming operational at the end of 2016, over 400 AstraZeneca staff relocated to interim facilities in Cambridge, at the Melbourn Science Park, Cambridge Science Park and Granta Park. This is in addition to the approximately 500 staff already located at the Company's MedImmune facility at Granta Park.

See related story, "Brexit: What Does it Mean for Pharma?"