Aditya Bhattacharji takes a look at the potentially damaging impact of political uncertainty across Europe – including the impending exit of the UK from the European Union – on pharmaceutical firms across the continent.
The right-leaning parties that will play a more prominent role in European politics are even less likely to support pan-EU healthcare initiatives, and there is already talk of some of the more industry-oriented parliamentarians leaving their posts
Over the past eight months, I’ve devoted most of my attention to both transnational trends and also to political dynamics in key emerging markets, mostly in Asia. I’d like to take this opportunity to check in on Europe, given the recent flurry of political activity on the continent.
Euroskepticism remains alive and well in many Member States. The centrists who have dominated European parliamentary politics for four decades ceded ground to victors on both ends of the political spectrum. The result? A more fragmented European Parliament and complex coalition-building process that will make legislative activity more difficult over a variety of issues, including trade and investment agreements and the EU’s multiannual financial framework.
For pharmaceutical firms, this feels like a net negative. It is unlikely that the next European Commission (EC) will prioritize healthcare. To be fair, this has not been high on the list for the current EC, either. But the right-leaning parties that will play a more prominent role in European politics are even less likely to support pan-EU healthcare initiatives, and there is already talk of some of the more industry-oriented parliamentarians leaving their posts. Additionally, despite political polarization and dissonance, the onus will be on officials to make progress on the limited set of issues over which there is common ground, one of which could be drug pricing. In a sense, the composition and mandate for this parliament will mirror that of the US Congress.
The glimmer of hope for the industry is that, despite an agreement that something needs to be done on drug pricing, this motley crew may be unable to land on a specific pathway. In that regard, the outcome of the World Health Assembly last month was promising, as the UK, Germany, and Hungary all opted out of the World Health Organization’s drug pricing proposal, in part because they were not aligned with its process or its outputs.
Taking a closer look at the UK, the Brexit process has effectively been reset, in what feels like a political version of chutes and ladders. For now, the most likely outcome is yet another extension, with Boris Johnson favourite to take Teresa May’s role as Prime Minister. Most critically for pharmaceutical firms, the chances of the UK crashing out of the EU have risen once again—and this worst-case scenario deserves the most planning, given the macro and direct effects it could have on drug makers.
In general, the UK’s National Health Service would face fiscal challenges if businesses pulled investments and/or relocated, creating macroeconomic headwinds for the country. A weaker currency could also make imported therapeutics more costly, and should the UK administration support immigration barriers, wage spending could increase as well. Moreover, firms could expect high non-tariff barriers, with consumer health products facing especially unfavourable conditions.
Already, senior officials have indicated that Brexit has impeded the European Medicines Agency’s ability to support industry, by forcing it to triage its activities and shelve a number of initiatives. Moreover, in any Brexit outcome, there is a potential for the UK to lose funding for research programs. With no resolution at hand, uncertainty will continue to loom large.