March 3, 2017 / 10:41 AM / 9 months ago

Drugmakers pose Brexit Britain withdrawal risk

LONDON (Reuters Breakingviews) - Drugmakers could lump Britain with a withdrawal problem. They aren’t publicly threatening to pull staff out of the UK, as the automotive and financial industries have done. But Britain’s looming exit from the European Union gives them renewed negotiating power - especially after Prime Minister Theresa May’s gushing endorsements of the industry.

A volunteer receives a trial Ebola vaccine at the Centre for Clinical Vaccinology and Tropical Medicine in Oxford, southern England January 16, 2015. REUTERS/Eddie Keogh (BRITAIN - Tags: SCIENCE TECHNOLOGY HEALTH) - RTR4M60H

Britain’s life sciences sector is a success story. It employs over 100,000 people, and generates 40 billion pounds of sales - and is at the heart of a fuzzy industrial strategy outlined by the Conservative government on Jan. 23. Yet apart from locally listed companies like GSK and AstraZeneca, there’s nothing inherently British about it: global companies can move research and manufacturing easily to other countries.

That might happen. Years of austerity mean the health service is not a big market to sell to. Britain invests less in healthcare than counties like Denmark or Belgium, according to the Organisation for Economic Co-operation and Development. Some clinical trials are already being shifted to other countries more likely to use the drugs, according to one pharmaceutical company executive.

Brexit makes things worse in several ways. Border controls could deprive hospitals of staff, and laboratories of scientists. If Britain can’t persuade Europe’s regulator, the European Medicines Agency, to see it as equivalent, pharma groups might have to undergo a separate process to get drugs licensed - and such a small market would be far down the list of priorities.

The government, which announces its annual budget on March 8, can throw money at the problem. It could buy more innovative high-priced drugs, and make procurement quicker. It could simply give tax breaks to drug companies. Yet Europe may be even less tolerant of aggressive tax practices when the UK has left: it recently clamped down on the so-called “patent box” introduced by the last government.

Paying for drugs is less politically toxic than helping bankers. But in any case, Theresa May could have little choice if they decide to exploit their advantageous position. One of her first moves as leader was to complain that AstraZeneca was almost bought by U.S. group Pfizer, threatening - in words that may come back to haunt her - to defend an “important” sector. She cannot easily go cold turkey.

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