Health 7 February 2020 Brexit isn't done: what next for pharmaceuticals? The UK has long been a global leader in this hugely valuable sector, but Brexit arrives just as competition from elsewhere is growing. Getty Sign UpGet the New Statesman's Morning Call email. Sign-up AstraZeneca, which is headquartered in Cambridge, is one of the world's largest pharmaceutical companies, with 2018 revenues of more than $22bn. It directly employs 6,500 people in the UK. But it is also a global company, with the opportunities and competitive pressures that that brings, and in the aftermath of the referendum it has often appeared to be rethinking its relationship with its current home. In September 2017 AstraZeneca's chairman, Leif Johansson, told the Swedish newspaper Dagens Nyheter that in the case of a hard or no-deal Brexit, "the likelihood of us moving into the EU is high". In October 2018, AstraZeneca announced it would suspend investments in the UK until a transition deal was agreed. Then, last month, it announced an investment of just over half a billion dollars in research and manufacturing – all of which will be spent in France. The pharmaceuticals sector is immensely valuable to the UK economy. In 2018 it contributed more than seven per cent of total exports (at £24.7bn, the value of pharmaceutical exports is second only to cars). It directly employs around 63,000 people. And, according to the Association of the British Pharmaceutical Industry (ABPI), the Gross Value Added by the industry to the British economy is £13.8bn per year. But while Brexit has certainly unnerved some observers, there are reasons to suspect that the pharmaceuticals industry will be well insulated against any fallout. Mireia Jofre-Bonet, head of research at the Office of Health Economics, explains that over the past four decades, "we've been working so closely with the EU, and it's so embedded in all our regulations" that a failure to agree would be "almost impossible". "My interpretation is that preserving the mutual recognition of regulations and institutions, for instance, the MHRA [the Medicines and Healthcare Products Regulatory Agency], will be key," she adds. "Reciprocity will be a paramount objective." Jofre-Bonet says the UK still has much to offer the EU in terms of regulatory guidance, as the prices and approvals of our health system are often used in Europe. "There's a lot of reference pricing in Europe that follows the pricing allowed by NICE [the National Institue for Health and Care Excellence]," she explains. The chief executive of the ABPI, Richard Torbett, agreed in a statement that alignment looked possible. "We are optimistic that both sides will be pragmatic," he wrote, "about the need to work together on some essential aspects of medicines regulation and be open to exploring continued co-operation and collaboration in the interests of public health, patient safety and driving progress in medical science". Nor does the pharmaceutical industry have much to worry about as far as tariffs are concerned. Since 1995 the UK has, as an EU member, operated under the WTO's Pharmaceutical Tariff Elimination Agreement, which allows tariff-free trade of all finished pharmaceutical products between the US, Canada, Australia, Japan, the EU and others. What's more, the government has stated that even if the UK didn't sign up to the Pharmaceutical Agreement as a separate country, zero-tariff trade would still continue because the EU would remain a signatory. The more serious concern is whether wider factors in the UK's economy will lead global pharmaceutical companies to see the UK as a less attractive option for research and development. The UK pharmaceutical industry employs around 24,000 people in R&D, and it is here that many of the most skilled and best-paid jobs are found. It is important, observes Jofre-Bonet, "to keep [the UK] attractive for engineers, life scientists, chemists, and this is being protected by the immigration rules they are setting because these people are usually above the minimum salary." However, if Brexit has far-reaching repercussions for the wider economy and this affects the quality of public services, the UK will face competition for skilled individuals from a European pharmaceutical industry that has been enjoying strong growth. The EU's pharmaceutical industry has more than doubled in size in the last two decades and now turns over more than 250 billion euros a year. A close examination of the balance of trade demonstrates this growth. Exports of pharmaceutical products from the UK to the Netherlands dropped by 25 per cent in the five years up to 2018, while imports grew by 118 per cent. A similar change occurred with France where exports dropped six per cent while imports grew by 50 per cent. In Spain and Italy exports dropped by 30 per cent and 14 per cent respectively. All the same, it is likely that the UK will do whatever it can to protect its valuable pharmaceutical industry. It was one of the few sectors singled out for special mention in the Prime Minister's written statement on Monday, and our relationship with the EU is already well aligned. "At the end of the day," observes Jofre-Bonet, "the most important thing is regulation, because it sets everything else - authorisation, pricing, investment, and how you reward for R&D. And it's already interlinked." But while the EU may be a willing, interested and familiar partner in pharmaceutical trade, the great unknown is – as in almost every other sector – how this deal will be affected by negotiations with the US. The American market for pharmaceuticals is vast, more than twice the size of the markets of China, Japan and Germany combined. It remains to be seen what price the newly global Britain will be charged for access. This piece is part of the New Statesman's Brexit isn't done series. › Eight questions for the Labour leadership candidates Will Dunn is managing editor of the New Statesman. Subscribe For more great writing from our award-winning journalists subscribe for just £1 per month!