Of all the foreseeable global political changes of the next decade, Brexit is likely to be the most momentous. While some commentators suggest that little will be changed by Brexit, it is likely that some sectors will experience a period of fluctuations over the short term. Pharmaceutical pricing is just one of thousands of economic factors that will be affected by Brexit, although it is very difficult at the moment to predict what this impact will be.
A study by the government’s Business, Energy & Industrial Strategy committee, published in December 2017, suggested that the cost of pharmaceutical products and the level of medical investment in the UK would both be negatively affected.
However, it is the uncertainty surrounding Brexit that the report deemed to be most potentially damaging, rather than Brexit itself – which is after all an unknown quantity.
Brexit could affect pharmaceutical pricing in the following four ways. These changes could be positive or negative.
A new regulatory structure will need to be agreed governing the sale of medicines and the mutual recognition of pharmaceuticals.
2) Medical Funding & Investment
The UK is a big recipient of medical research funding from the EU. Between 2007 and 2013 UK researchers received €8.8 billion in funding. After Brexit the sector will need to seek funding from other sources, including the UK government and international grants. While this may affect prices, it is worth noting that the majority of inward investment into the medical industry is not dependent on EU funds.
3) Movement of Medical Professionals
Medical research thrives on the free movement of researchers and medical professionals. This is greatly aided by freedom of movement within the EU. The status of free movement after Brexit is unknown, although the lack of free movement treaties between the UK and other countries, such as the USA and Japan, has not so far impeded cross-border medical cooperation with these countries.
4) Trade Barriers
Should UK-EU trade revert to WTO rules, standard trade tariffs will be applied to medical products, raising prices. Of course, the presence or absence of trade barriers will depend on the details of the final exit treaty and trade deal, which is under discussion. Medical products could conceivably be exempt from tariffs under such an agreement.
5) External Price Reference
External Price Reference is a price regulation system that is used by the European Union to keep pharmaceutical product prices low. The United Kingdom does not use this “system”, however, the EU uses the United Kingdom as a reference in their “basket” of countries from which they compare prices. Should prices in the United Kingdom rise more due to Brexit, is that going to cause a knock-on effect to the rest of Europe and increase pharmaceutical prices or will changes be made to External Price Reference?
We should emphasise that none of the risks associated with Brexit are foregone conclusions. Studies always tend toward pessimistic and cautious forecasts for the future, and so far no comprehensive study has been undertaken of the positive benefits of Brexit. Some commentators envisage increased levels of medical investment in the UK as the country diverges from Europe – resulting in greater innovation and lower long term prices.
Pharmaceutical Pricing Data In A Changing World
The future is uncertain and political factors do affect pharmaceutical pricing, but these are just one of many other considerations medical businesses should be aware of. To help you remain competitive and relevant in your pricing strategy, we have written a free Guide To Pharmaceutical Pricing Data Influences Pricing Strategies in Launch Programs, which you can download for free by clicking here.