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With nature now in full bloom, my daily commute to work within recent weeks has become a tireless battle to survive the morning commute amid a salvo of sneezes and coughs. Thank you hayfever season! Among the seasonal sniffles from commuters across London, the resilience of the UK pharmaceuticals industry has been severely tested in the wake of the country’s decision to withdraw from the European Union. The issues span research funding, questions over future trade arrangements, as well as legislative complexities. It would seem that damning forecasts of fire and brimstone for the pharma industry have yet to play out as immediately and definitively as had been suggested by a multitude of market analysts and industry experts prior to the Brexit referendum.
The pharma industry has shown itself to be quite resistant to fluctuating macroeconomic conditions and, if my morning commute is anything to go by, lifesaving drugs and treatments will continue to be in demand, even in the face of the most chaotic political, economic, and social disruptions. For example, key UK firms such as AstraZeneca, GlaxoSmithKline (GSK), and Shire have all managed to ride the waves of Brexit and even enjoyed marginal improvements in share price in the aftermath of the result. With changing demographics such as growing populations, improving life expectancy, wider wealth distribution and the populous becoming increasingly immune to current generic drugs, it would seem pharma is one of a few global industries able to withstand the challenging international climate.
CPOs must not mistake Brexit as a mandate for complacency. Procurement must ensure it does not jump the gun by making premature and impulsive decisions in reaction to the referendum result. Rather than feeding into the propagation of scaremongering facts from every expert in the industry, there are three key areas that procurement must watch diligently in the upcoming months.
With the sterling falling to a 31-year low in the immediate aftermath of Brexit, a weaker pound could signal improvement in competition among pharmaceutical products most notably in the generics industry. Foreign buyers would be able to purchase the same quantity of drugs for less, for example, while UK exporters could strategically move towards selling cheaper products (overall increasing profit margins).
The past 30 years has seen EU procurement law in particular, intricately woven into UK law surpassing the general minimum obligatory requirements by parent directives. However, in light of Brexit, the UK will have to endure a contentious and obscure separation from European law which will uproot some of its most complex regulatory systems already in place. For Example, the European Medicines Agency (EMA) approves drugs on behalf of all member states and is headquartered in London. However, the UK is now faced with the challenge of safeguarding its position as leaving the EU would essentially relinquish the UK’s voting and negotiation power within the organisation.
If the UK remains a member European Economic Area (EEA), pharma companies would still need to consider EU regulations. Trade negotiations will remain a contentious subject as key figures such as German chancellor Angela Merkel, European Council president Donald Tusk, and European Commission president Jean-Claude Juncker have all refused to engage in informal negotiations until the UK officially invokes article 50 of the Lisbon treaty (the procedure to commence a member state’s withdrawal from the EU). Therefore, procurement must essentially participate in an uncomfortable waiting game in assessing the UK’s fate with access to the single market post-Brexit and the implications of the UK being denied this access.
Discussions and negotiations on how the UK’s position in the pharma space can proceed are now required, rather than abstract speculation about what ‘may happen’. Conditions remain highly complex, emotions are still running high, and unfortunately for procurement, this phase is not one that will pass quickly.
This article is a piece of independent writing by a member of Procurement Leaders’ content team.