The impact of Brexit on the pharmaceutical sector Contents

1Introduction

The pharmaceutical sector

1.The pharmaceutical sector is one of the UK’s most productive industries,1 generating £41.8 billion turnover2 and contributing around one per cent of the UK’s output and 7.7 per cent of manufacturing GVA.3 The sector employs 62,600 people across 543 companies, supported by 1,314 service and supply companies comprising a further 51,000 people.4 The majority of pharmaceutical companies are SMEs, with 90 per cent of manufacturers having fewer than 250 employees5 and 43 per cent being micro companies with fewer than 5 employees.6 Pharmaceutical products represent 8.2 per cent of goods exported from the UK and 5.3 per cent of goods imported to the UK.7

2.The UK pharmaceutical sector is part of a global industry with high productivity and growth, in which the UK forms a global cluster and remains a leading European nation.8 The global sector is characterised by regional manufacturing locations serving continent-wide markets.9 The UK currently forms part of the European market, and as a result is heavily integrated with European Economic Area (EEA) states for supply chains and the regulation of production and distribution.10 Decisions on where to manufacture pharmaceuticals within a region are dependent on a range of factors, but there are specific, onerous regulatory requirements on development, testing and release of medicines that restrict the options for manufacturers wanting to access the EU market.11

3.Pharmaceuticals are part of a wider life sciences sector that also includes medical technology and medical biotechnology, which together contribute 233,400 jobs across 5,142 companies and a turnover of £63.5 billion.12 There has been significant support from successive Governments for the sector, including the establishment in 2014 of the Office for Life Sciences jointly by the Department for Business, Innovation and Skills and the Department of Health, and the appointment of a joint Minister for Life Sciences between 2014 and 2016.

4.In 2017, ahead of the Government’s Industrial Strategy, the sector published its own Life Sciences Industrial Strategy that made long-term recommendations to Government on the support and collaboration necessary to maintain and grow the industry.13 The Government’s subsequent Industrial Strategy White Paper was launched with an announcement of new investment from pharmaceutical manufacturer MSD and Qiagen,14 and plans for a Life Sciences Sector Deal, which was subsequently launched in December 2017.15 The sector deal included existing and new commitments from Government and industry to increase investment, develop new programmes and grow collaboration between industry and Government.

5.As their approach to industrial strategy has shown, the life sciences industry, and the pharmaceutical sector within it, are effective at offering a coherent voice to Government and maintaining strong engagement. The creation of the industry-led, Government-supported, UK EU Life Sciences Steering Group soon after the referendum result established a network intended to consider the new relationship with the EU as the UK leaves.16 The Government too have presented a consistent and upbeat message on the need for continued cooperation with the EU for the success of both the UK and EU’s pharmaceutical sectors, from Greg Clark and Jeremy Hunt’s widely welcomed July 2017 open letter in the Financial Times,17 to the Prime Minister’s Mansion House speech in March 2018.18

6.We welcome the Government’s positive, collaborative approach so far, and trust it will continue as negotiations progress. The Government must continue to seek to preserve and build upon the success of the UK pharmaceutical sector, and the effective collaboration between industry and Government, as it undertakes negotiations on future trading arrangements with the EU.

Our inquiry

7.This is the fifth and final report in a series we are publishing on the impact of leaving the European Union on specific sectors of the economy.19 The Committee has been supported during this work by Dr Kathryn Wright, Lecturer in Law at the University of York and Parliamentary Academic Fellow, to whom we are very grateful. This report contains our assessment of the consequences for the pharmaceutical sector of different outcomes of the negotiations and seeks to establish what type of withdrawal agreement would most benefit the sector and, consequently, the UK’s broader economic interests. We have sought to inform public debate and influence the Government’s negotiating approach and priorities.

8.The Health and Social Care Select Committee also conducted an inquiry into the impact of Brexit on medicines, medical devices and substances of human origin between September 2017 and March 2018.20 Its inquiry considered a broader range of sectors and issues than our business-focused inquiry, and its report provides an insight into these wider issues.

9.As part of our inquiry we received 21 submissions of written evidence from trade bodies, businesses and other stakeholders. We took evidence in public from some of them, covering UK and overseas-headquartered companies who manufacture and distribute branded, generic and over-the-counter pharmaceuticals. We have also taken evidence from the Secretary of State for Business, Energy and Industrial Strategy, Open Europe and the UK Trade Policy Observatory and seen the full, unredacted version of the life science sectoral analysis carried out by the Government. During a visit to Brussels in November 2017 we held private meetings with the UK Permanent Representation to the European Union and with the European Federation of Pharmaceutical Industries and Associations. We are grateful to all those who have contributed to our inquiry.


1 Office for National Statistics, UK Productivity Introduction: April to June 2017, (October 2017), p4

2 Office for Life Sciences, Strength and Opportunity 2016, (April 2017), p10

3 Exiting the EU Committee, HM Government Life Sciences Sector Report, 21 December 2017, p3

4 Office for Life Sciences, Strength and Opportunity 2016, (April 2017), p16

5 As above, p17

6 Exiting the EU Committee, HM Government Life Sciences Sector Report, 21 December 2017, p5

7 House of Commons Library, Brexit and medicines regulation, Number 8148, 20 November 2017, p27

8 The Association of the British Pharmaceutical Industry and the Bio-Industry Association BRP0001

9 Q24 [Mr Thompson]

10 Q17 [Mr Thompson]

11 Exiting the EU Committee, HM Government Life Sciences Sector Report, 21 December 2017, pp11–14

12 Office for Life Sciences, Strength and Opportunity 2016, (April 2017), p4

13 Life Sciences Industrial Strategy Board, Life Sciences Industrial Strategy, (August 2017)

14 Major pharma leader MSD first to endorse Government’s Industrial Strategy”, Department for Business, Energy and Industrial Strategy press release, 27 November 2017

15 Department for Business, Energy and Industrial Strategy, Life Sciences Sector Deal, 6 December 2017

16 Department for Business, Energy and Industrial Strategy, Life Sciences: a new relationship with the European Union speech by George Freeman MP, 11 July 2016

17 Letters to the Editor, Financial Times, 5 July 2017




Published: 17 May 2018