UK Medtech One Year Post-Brexit Vote: Still In The Land Of Uncertainty

The UK's Brexit and a failed Conservative Party election strategy last month weigh heavily on the minds of local medtech businesses, looking ahead nervously at the type of trade deal the UK might finally strike with the EU. They could be waiting awhile, because the When and What are still not yet apparent – never mind that the Why still rankles with many UK medtechs. That much is clear from a brand new survey of companies, which also reveals the primacy of NHS access.

Will the UK still leave the European Union, given the result of the June 8 2017 UK election and the slowly-dawning realization about the levels of trade, policy and economic disruption – not to say damage – that the UK will subject itself to for years to come?

An Association of British Healthcare Industries (ABHI) "Question Time" panel this week decided that the answer remains yes, although now with signs of equivocation: on a panel of six political, legal, NHS and industry specialists, three were unable to commit whole-heartedly either way when asked the question; and the other three were perhaps not 100% forthright.

They don't have to do the tricky negotiating work, of course. Neither are they subject to humiliation, in the UK and overseas, whenever Brexit is mentioned. But they are experts in gauging mood in the UK and its appetite for change: and on the former issue, there is growing uncertainty, while on the latter, there is real concern about just what would replace the EU's freely-accessible medtech markets and potential lost business for home-grown companies. Never mind the misplaced hyperbole that preceded and followed the 2016 referendum.

It is one year after the UK voted to leave the EU, and not two weeks since the first meeting between UK "Brexit Minister" David Davis and his EU counterparts in Brussels. The big picture themes are just emerging. The detail must wait. Medtech and health products are not yet an agenda item, for instance. But at some point, they should be.

Simmering Unease Among Local Businesses

Question Time panel chair Richard Phillips, ABHI director of healthcare policy, revealed that UK business unease in the post-vote period simmers with ever greater intensity. In an ABHI members' survey that closed just this week, over 50% of respondents put Brexit as a top agenda item for their business. The survey, a follow-up from a similar poll by the association last May, also showed that, with the value of UK sterling languishing – especially against the Euro – rising manufacturing costs are starting to bite.

Sixty per cent of UK medtech businesses say they have seen a rise in production costs, indicating significant cost pressure in the system. But the picture is partly cloudy, as a net 20% of companies say they have seen an increase in export orders. Claims that the weaker pound will produce thriving export market opportunities are reportedly prone to exaggeration, however, and the survey's findings do in fact point to a major imbalance in Brexit's effects on the UK's medtech import/export business.

Just 3% of UK companies polled want digression from EU medical device regulation – specifically the new EU Medical Device Regulation – MDR (EU) 745/2017 and its IVDR counterpart (EU) 746/2017. A resounding 97% do not.

Panel Views – Hard Brexit Less Likely Now

ABHI panellist Charles Mayo, a Simmons & Simmons corporate team partner, said that the election result makes a "hard Brexit" less likely. In its negotiations on Brexit, the UK should not be fazed by the first and second rounds of fire, he advised. Brussels-based EU regulatory specialist Steven Bridges, of SB Consulting, thought that the beginnings of the talks signified that the UK is at last confronting Brexit reality: the negotiations mean that some kind of trade deal between the UK and EU is marginally more likely than hitherto. He rates it at a 65:35 chance.

A positive outcome of the election result is that UK industry now feels empowered to speak up – PB Consulting's Paul Bristow

Prime minister Theresa May's high poll lead at the start of the campaign was not pointing to the hung parliament, an outcome that surprised PB Consulting managing director Paul Bristow. For him, one positive outcome of the election result is that UK industry now feels empowered to speak up – many big manufacturing associations and Confederation of British Industry (CBI) are coming out strongly against a hard Brexit.

But he also feels there is no such concept as a "soft Brexit", and that the Norway model of Economic Area (EEA) membership and access to the EU single market would be unpalatable to the minority Conservative government. Bristow also observed that Conservative backbench MPs will suddenly have more of a voice on government issues.

Next comes the Great Repeal Bill, which could be a chance for health care businesses to raise profile. This and Brexit discussions will dominate the unusually extended (two-year) parliamentary session, a prospect that must fill many with dread.

Left On The Sidelines Of Key EU Regulation Decisions

It is highly doubtful that the two-year negotiation timeframe to complete Brexit can be adhered to. But if it is, a problem would arise for the UK medtech industry in that the MDR and IVDR, Regulation, would be effective after the UK's EU withdrawal (in the MDR's case on May 26 2020 and for the IVDR, two years later still).

The UK competent authority, the Medicines and Healthcare Products Regulatory Agency (MHRA), intends to keep following the MDR and IVDR, but these require some 60 pieces of secondary legislation; the UK government and MHRA would have no impact/influence on the drafting or content of these elements of the regulatory package, observed legal expert Alison Dennis, head of life sciences and healthcare at FieldFisher.

"Trade Comes With Trade-Offs"

In any event, the UK will have to relearn how to negotiate trade deals – something that has been off its agenda for at least 44 years. As to the "financial settlement" that the UK must pay to the EU for leaving, this is now estimated at €40bn ($45.4bn) without the UK reneging on responsibilities: it is by no means a small figure, but maybe not as high as many had expected, said Bridges. But he added that UK should learn that "trade comes with trade-off". Tariffs can be expected for UK exports if no trade agreement is reached, but the non-tariff barriers may yet be worse.

It's not all a one-way street, however. Mayo noted that UK exports to the EU in 2015 were £230bn (43% of its exports); while EU exports to UK were valued at £290bn (53% of the UK's imports).

The No. 1 concern of UK medtech companies is doing business with the NHS – ABHI June 2017 survey of members

Business Concerns Most Focused On The Here And Now

For all that, the ABHI poll shows that the No. 1 concern of UK medtech companies is doing business with the NHS – 70% of respondents to the latest survey said so – whereas last year the figure was 46%. This probably indicates that business is focused more on real and immediate problems than theoretical and future disruption.

The need for the UK to do new trade deals comes at a time of unprecedented levels of financial strain on the NHS, said Sarah Collen of the NHS's European Office in Brussels. The NHS thus wants a minimal effect from Brexit. "We're not prepared for or culturally ready for Brexit," she said, adding that 10% of NHS clinicians are from the other 27 EU member states.

A new Brexit Health Alliance, co-chaired by Sir Hugh Taylor, chair of Guy's and St Thomas' NHS Foundation in London, and Niall Dixon of the NHS Confederation), will have its inaugural meeting in July, with an expected focus on access to innovation and clinical networks, rare diseases, and the regulatory environment, among other themes.

But the Brexit process may be long and the transitional arrangements could last for years. The precedents are not good: Bridges observed that it took a full ten years for the MDR/IVDR to be negotiated – and that's just a single piece of twin legislation.

The verdict from the ABHI panel for now is that Brexit will likely be followed through, subject to nothing hindering the process, like an economic recession, or no new referendum being called. But significantly, there are now question marks that were not there just a month ago. Uncertainty prevails still.