Brexit life sciences 'beauty contest' underway
Leela Barham
Leela Barham reviews recent reports on the status of the life sciences industry in the UK and considers how the country's exit from the EU may influence pharma companies' decisions to stay or go elsewhere.
Brexit has focused attention on the relative attractiveness of the UK for the life sciences sector, compared to other countries in Europe (and further afield). This is resulting in what amounts to a 'Brexit' beauty contest with a slew of reports coming out in recent months to show the UK in the best light. There's much at stake; will companies stay or go from the UK?
The UK as a location for the life sciences sector
The UK has boasted a strong life sciences sector for a long time. This has important consequences for government, bringing employment, a positive balance of trade and contributing to its coffers through taxation.
From a company perspective, being in the UK in some form has been good too (given that it's a global industry and there are good reasons not to put all activities in one place).
And if it wasn't a good place to be, surely the industry would have gone by now? Well, there is evidence to suggest that the benefits of being located in the UK may already be waning. Some large R&D sites have closed in recent years. AstraZeneca announced the closure of a UK research centre back in 2010, for example.
On the government's side, the Office for Life Sciences (OLS) released Strength and Opportunity 2016 and the 2017 version of the Life Science Competitiveness Indicators on 7 April this year. Both are annual reports, but they take on special importance in light of Brexit.
Strength and Opportunity 2016 draws on data from the Health Life Sciences Database. This year's report gives government some bragging rights; the Ministerial Foreword notes that the UK has secured over £7.5 billion of inward investment and life sciences has created 18,000 jobs since 2011. The story isn't all positive, though as the report notes that employment and turnover in biopharma have been falling.
The competitiveness indicators are international in scope, and help to put the UK's position in context. Lord Prior of Brampton, Parliamentary Under Secretary of State for the Department for Business, Energy and Industrial Strategy, once again cites the inward investment and employment. The report itself shows how the UK is behind European counterparts on some indicators, including employment, exports and share of Initial Public Offerings (IPOs). In other indicators, the UK is doing better than others, such as in the number of foreign direct investment projects.
On the industry side, the UK BioIndustry Association (BIA) published its report, Building something great: UK's Global Bioscience Cluster 2016, on 22 May. Highlights include the UK-based biotech companies securing £1.13 billion in investment from private and public sources in 2016, plus the statement that the UK leads Europe in venture capital funding. That said, BIA warns that more than half of European venture capital money will go outside Europe after Brexit.
The BIA report comes hot on the heels of the Association of the British Pharmaceutical Industry (ABPI) and the Academy of Medical Sciences release of The UK drug discovery landscape on 13 March 2017. This report reads like a to-do list; from more collaborative working to attracting more international funding and venture capital, to metrics to evaluate the future of the UK drug discovery landscape. In common with the other reports it recognises the UK's 'outstanding track record for research and development of new medicines'. It's clear that the goal of this report is to point out to stakeholders – including government – that more needs to be done to stop the UK falling behind.
The ABPI, the BioIndustry Association (BIA), the British In Vitro Diagnostics Association (BIVDA) and the Association of British Healthcare Industries (ABHI) released a PWC report setting out The economic contribution of the UK Life Sciences industry on 10 March 2017.
That gives industry some reasons to be proud, as it states the average Gross Value Added (GVA) per employee at £104,000 – over twice the UK average – and the direct contribution of life science companies at £14.5 billion in 2015. The numbers increase further if indirect contributions and induced spending are included.
However, comparison to previous years is not always so cheerful; in 2014 the ABPI estimated that the GVA per employee in pharma was £149,000. This is not quite comparing apples to apples, though, as the PWC work is across a wider base. But making a comparison over time gives an indication of the health of the industry in the UK.
These March reports come after the 17 October 2016 publication of The Changing UK Drug Discovery Landscape by the ABPI, which hints at a less happy picture. This report highlights how some large biopharmaceutical companies have cut in-house drug discovery jobs in the UK. At the same time, small and mid-sized companies have added jobs.
The picture is murky; losses in some companies may be made up by gains in others, but the way that companies operate has been changing too, with more collaboration and outsourcing. Plus everything is relative; it's not just about where the UK is and where it's going, but also whether other countries are doing better. It seems that large firms have been increasing investment outside the UK.
The politics of life sciences in the UK in the Brexit era
The tricky issue for both government and industry is achieving a balance between acknowledging the strengths and weaknesses of the UK; it is in no-one's interest to paint the UK as a basket case. That would put off any inward investment and imply that companies with operations here are poor business operators.
The government needs to balance not giving away more than necessary to secure the benefits of having industry in the UK; for example, contributing R&D funding but not crowding out that which others would fund. For industry this means not allowing government to take for granted their decision to have at least part of their business in the UK.
The reports show a mixed picture of life sciences in the UK. Some indicators are going up and others down over time, and the country sits in different positions on the leader board in Europe depending on which materials are reviewed.
Government and industry are both trying to navigate the post-EU referendum political landscape and each is trying to present a case that all is not lost for the UK.
But more is needed, and that 'more' is in the form of a new Life Sciences Industrial Strategy – as trailed in the Building our Industrial Strategy Green Paper. The Green Paper consultation period closed on 17 April 2017 and it remains to be seen how it will be taken forward politically.
Actions speak louder than words?
The reports are undoubtedly well researched and useful, but they are – and this is no criticism of the researchers involved – commissioned by those with particular interests. They are useful, but it is actions that will affect the Government and those currently working in the UK in the life sciences.
Brexit is just one factor to consider when deciding on new investments or cuts. Novo Nordisk plans to fund a new research centre in Oxford, saying that Brexit didn't affect its deliberations. GlaxoSmithKline has said that the UK remains attractive and it is investing in UK manufacturing sites. Pfizer, meanwhile, is shutting three manufacturing plants in the UK in the next four years, but says that the Brexit result didn't contribute to this decision.
Speculation continues about whether Brexit will lead to a net loss in the UK life sciences industry. Companies are considering whether to relocate, even if those decisions have not yet been taken. It's plausible that some companies are playing a waiting game and, once they know where the European Medicines Agency (EMA) will relocate to from its current London location, they'll consider whether to move key functions that benefit from close liaison with the regulator too.
Aside from Brexit, selling the UK as a preferred location has become tougher because of recent changes introducing the potential for negotiation with NHS England. NHS England is responsible for paying for specialised medicines and cancer drugs – even when a new medicine is cost-effective because of a high budget impact.
Some question whether the uptake of new medicines – including their reimbursement status – really affects the choice of location for life sciences companies. For example, is there really a link between where companies choose to do clinical trials and the pricing and reimbursement environment? Even without clarity on whether and just how important the pricing and reimbursement environment is to decisions on where to locate which part of the business, poor uptake of new medicines doesn't improve the attractiveness of the UK.
A Brexit future
What we do know is that Brexit is happening, and it now has a timetable. Whether it will bring the opportunity for life sciences that the Conservatives have been promoting arguably won't be known for some years – even after the UK leaves the EU.
Perhaps a stiff upper lip is the mind-set to adopt?
Leela Barham is an independent health economist and policy expert who has worked with all stakeholders across the health care system, both in the UK and internationally. Leela works on a variety of issues: from the health and wellbeing of NHS staff to pricing and reimbursement of medicines and policies such as the Cancer Drugs Fund and Patient Access Schemes. Find out more here and contact Leela on leels@btinternet.com.
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