Brexit and Pharma

14 November, 2016 Daunis Auers

The business opportunities of Brexit have been much discussed since the British voted to leave the EU Jāņos. However, the level of chatter has noticeably increased after prime minister Theresa May announcement that she that she would trigger article 50 by the end of March next year at the very latest. This was interpreted as a signal that the British would head for a “hard Brexit” – harsh immigration controls on EU citizens leading to to the UK leaving the single market and trade barriers between the UK and the EU.

In Latvia and elsewhere the economic opportunities of Brexit have focused on the relocation of manufacturing enterprises and London’s huge financial sector. Indeed, Russia’s VTB bank’s recent announcement that it was seeking to relocate its European hub from London to elsewhere in Europe (likely Frankfurt, Paris or Vienna) will be the first of many such actions as large businesses scramble to get away from the uncertainty and risk that will dominate the UK for the next few years.

However, it is not just businesses exiting the UK. NGOs and agencies focusing on EU issues will also be seeking to relocate – and one of the largest EU agencies happens to be based in London.

The European Medicines Agency

The European Medicines Agency (EMA) has been based in London since it was founded in 1995. Its primary function is to harmonise the work of the EUs 28 national regulatory bodies dealing with medicines and pharmaceuticals. In April 2016 the EMA had a staff of 885 all of whom were on the European Union’s standard salary scale (meaning that starting salaries were over 2,000 EUR a month) and it has a 2016 budget of 325 million EUR and occupies 9 floors (or 23,500 square meters) of office space in the Canary Wharf financial district in Latvia.

There is already a queue of countries lining up and offering to host the institution – Denmark, Germany, Italy, Sweden and Spain have already made pitches to attract the EMA.

However, Latvia should be jostling to be at the head of this queue. Latvia is far more suited to host the EMA than these other countries – Riga has a leading research institute specializing in pharmaceutical research (OSI), several manufacturers (Grindex and Olainfarm are the two largest) as well as Rigas Stradina University and the University of Latvia both of which are quickly growing and attracting large numbers of international medical students – more than 2,000 between them in the 2016-17 academic year.

Riga is already clearly a pharmaceutical and medicines hub. Of course, there are other hubs in Europe – major competitors, with similar clusters, are Austria (Vienna), the Czech Republic (Prague) and Hungary (Budapest). There are also five EU member states that currently do not have an EU agency and will pitch hard to attract the EMA – Bulgaria, Croatia, Cyprus, Romania and Slovakia – but of these only Bulgaria has a (small) cluster of pharmaceutical businesses.

Riga already has one European Union institution. However, the Body of European Regulators for Electronic Communications has just 27 staff members and a 2015 budget of 4 million EUR. This is just a tiny fraction of the jobs and budget of the EMA and should not be a barrier to lobbying for the relocation of the EMA to Riga.

Who will make the decision on relocation?

The decision on relocation will be made by common agreement among member state representatives – Foreign Ministers and Health Ministers in the Council of Ministers as well as Prime Ministers and Presidents in the European Council.

Latvia’s diplomats and politicians should point out that relocation to the Baltic region would be an important political signal of continuing support for the Baltic states in the face of continuing geopolitical uncertainty to the east. It would also make sense in terms of providing a further impulse to developing Riga and the Riga region into a major European pharmaceutical hub. Finally, this is also the right time to cash in the chips for Latvia’s continuing good behavior in quickly and uncritically adopting European Union legislation.[i] Nice guys don’t always have to finish last.