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The UK is a leader in the innovation of new medicines – will Brexit change this?

Nabil Rastani | Dods Monitoring

3 min read

Any new tariffs could impact the production of drugs, Dods Monitoring's Nabil Rastani writes.

If a Brexit deal is not struck by October 31st World Trade Organisation (WTO) rules would underpin our trade policy. This would have significant implications for the domestic life sciences sector. 

The UK is in uncharted waters as the Government seeks to forge an independent trade policy for the first time in over 40 years. The Global Britain Strategy will need to address a series of questions, including what consequences any new trade agreements will have on the medicines developed by the life sciences industry.

The interconnectedness of the life sciences sector to continental Europe means that any tariffs could impact the production of drugs. Indeed, EU tariffs would add an additional 1.5% in average cost. Such changes in prices will negatively impact on productivity by incurring additional burdens on both the industry and consumers. 

This could undermine the ability of the Government to present Global Britain as a shining opportunity for businesses to flourish abroad. 

The state of play

The Government has failed to forge the multitude of new trade agreements it was hoping to sign under the auspices of its Global Britain strategy. This will mean the UK will need to seek new opportunities further afield. 

Presently, the UK has agreed to 12 trade continuity agreements with a further three mutual recognition agreements being signed with the US, Australia and Zealand.

Boris Johnson has already committed to the mammoth task of negotiating a new FTA with the US, which has its own raft of complexities associated with it.

A trade deal with China?

But Global Britain also encompasses efforts to develop new ties with BRIC nations such as China. Indeed, the House of Commons International Trade Committee has launched a new inquiry assessing the implications of such a new trade arrangement. 

An FTA with China may appear to offer exciting opportunities for the life sciences sector, such as new injections of capital and the opportunity for enhanced Sino-British scientific cooperation. 

However, the issue with trading with authoritarian regimes such as China (in addition to their controversial human rights record) is their lack of respect for the rule of law. This is manifested in a limited adherence to the rules-based model of global trade and would have significant consequences on the nature and benefits drawn from such a prospective trade deal. 

Such a process is exemplified by the fact that the Chinese Government will be reluctant to reduce protective measures aimed at insulating domestic sectors such as its own life sciences from international competition. 

This would plague issues such as medicine price arrangements and the quality of chemical products. It could inadvertently result in an asymmetrical trade model being developed bilaterally. 

The quality of medicines and medical devices produced in emerging economies such as China are significantly poorer than in the UK due to weak legislative and procedural frameworks. Indeed, the International Federation of Pharmaceutical Manufacturers and Associations has said the production of poor-quality medicines in developing countries amounts to a “global pandemic”. 

What does the future hold?

If the UK does negotiate comprehensive FTA’s without adequate productive measures any liberalisation of regulations could result in a ‘race to the bottom’ in the quality of British medicines - and severely impact on the UK’s status as a world class producer of innovative drugs. 

Brexit has thrust the life sciences sector into the unknown, regardless of how the UK exits from the EU and seeks to build ties elsewhere.

Any trade deals which relax regulations could see a wave poor quality drugs enter the market. Autocratic signatories may not stringently bind themselves to agreed terms of trade such as on transparency and accountability measures.

The sector will have to rapidly adapt to the new political reality. 

Nabil Rastani specialises in Healthcare policy for Dods Monitoring.

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Read the most recent article written by Nabil Rastani - The Integrated Review offers a hint into the UK’s future priorities