Britain's pharmaceutical industry faces new uncertainty and potential market turmoil after voters in the U.K. voted to leave the European Union on Thursday.
In the wake of the close vote, the Association of the British Pharmaceutical Industry, a trade organization whose members include U.K. pharma majors like AstraZeneca and GlaxoSmithKline, warned of "immediate challenges" for the industry.
The "leave" vote imperils the ability of pharmaceutical companies in Britain to easily access the 500 million patient E.U. market, and creates significant uncertainty around the regulatory framework for new and existing drugs in the U.K.
A Brexit surprise
In a national referendum with dramatic implications for the future of Britain and possibly the European Union itself, the British people voted in favor of leaving the 28-country bloc by a margin of 52% to 48%, surprising markets which had expected a vote to remain.
As global currency and stock markets reacted sharply, British Prime Minister David Cameron announced he would step down from office by the fall.
The vote starts what will likely be a lengthy process of negotiating Britain's exit, which has no precedent in the history of the European Union.
Leaving the E.U. will also likely have a substantial effect on the British pharmaceutical and biotech sectors, and potentially for the European Medicines Agency (EMA), the regulatory body for the E.U.
"Key questions about the regulation of medicine, access to the single market and talent, intellectual property and the precise nature of the future relationship of the UK with Europe are now upon us," said Steve Bates, CEO of the U.K. BioIndustry Association, which had supported Britain's membership in the E.U.
That sentiment was echoed by the Association of the British Pharmaceutical Industry which said the vote "creates immediate challenges for future investment, research, and jobs in our industry in the U.K."
One of the more immediate hurdles will be determining the status of the EMA, which is currently located in London. The EMA oversees drug regulation and approval for all E.U. countries but could now have to relocate.
The association of Germany's pharmaceutical industry has already called for the EMA to move its operations to another E.U. country, according to a report from Reuters.
"It is too early to foresee the implications of this decision and we will be in close contact with the EU institutions. When we have concrete information, we will share it with our stakeholders," said an EMA spokesperson. The spokesperson also noted the lack of precedent for Britain's decision.
In a world where the EMA's authority no longer applies to the U.K., drugmakers would need to win approval in two jurisdictions, requiring more time and effort to get new drugs to patients in both markets.
GlaxoSmithKline, which has its headquarters in the U.K., said the vote "creates uncertainty and potentially complexity for us in the future." However, it does not currently anticipate any significant adverse impact on its business.
"We will continue to operate as usual and will engage in the process ahead," said a spokesperson for the company.
AstraZeneca, also based in the U.K, took a stronger stance. "We believe that the UK remaining in the EU would be in the best interests of patients, our industry and our company, but we respect the democratic decision reached in this referendum," a spokesperson said.
The company also indicated it would engage with stakeholders during what it expects will be a "protracted period of transition."
In a statement, Novartis said it "expects no significant impact on our activities and businesses as the mechanisms and measures for the exit still must be defined." While a Swiss company, Novartis has operations in the U.K. as well.
Similar statements from other companies reflect the lack of concrete knowledge over how Britain will proceed in secession talks. The "leave" campaign did not coalesce around a definitive position on what a post-Brexit U.K. might look like. And negotiations for secession could take up to two years, and possibly longer, under Article 50 of the 2007 Lisbon Treaty.
Negotiating new free-trade agreements would likely take years, as would setting up new regulatory frameworks around drug approvals and marketing authorizations.
The U.K. could follow the model of Norway and stay in the Eurpean Economic Area, which would preserve access to the single market. But going this route would leave the U.K. without a voice in decisions.
Currency effects may be the first financial impact felt by pharmaceutical firms, as the pound dropped in value against other currencies following the vote.
GlaxoSmithKline reports in pounds while AstraZeneca reports in U.S. dollars.
Impact on science
Brexit could also have an impact on scientific research in the U.K. While part of the E.U., the U.K. contributed money to fund science and technology research. But it also got a lot of money back in the form of grants.
Between 2007 and 2013, the U.K. contributed 5.4 billion euros to the E.U. for research and development, according to The Royal Society, a British research fellowship. In return, however, it received 8.8 billion euros in direct funding for R&D, which is the second highest mark out of the 28 countries in the European Union (behind Germany).
While clearly not all this money is going toward pharmaceutical research, leaving the E.U. could limit Britain's ability to keep funding levels up.
"In the upcoming negotiations we must make sure that research, which is the bedrock of a sustainable economy, is not short changed, and the Government ensures that the overall funding level of science is maintained," said Venki Ramakrishnan, president of the Royal Society.