BREXIT: Is the Pharmaceutical Industry at Risk?

In or out? We investigate the potential impact on pricing.



In general, the pharmaceutical industry has benefited from the UK being within the European Union; from centralized European drug approvals that simplify the regulatory process to research funding grants that support universities and innovation. The full impact of a potential Brexit on market access, patient access and innovation is still unknown.

What impact would Brexit have on pricing?

The majority of European countries use an International Reference Pricing (IRP) mechanism to establish the price of a new pharmaceutical product. While most of these countries would not be impacted directly by Brexit, countries that reference using an average EU price such as Austria and Belgium may be influenced by Brexit. Global Pricing Innovations (GPI) analyzed the potential impact of the UK leaving the European Union by looking at two recently launched products, Kyprolis for Multiple Myeloma and Orkambi for Cystic Fibrosis. Our analysis focuses on two types of IRP rules, 1) The average of the three lowest prices and 2) The average EU basket rule.

What are the repercussions of an EU without the UK? Will it impact IRP from a positive or negative perspective?

Rule 1: Countries that use the average of the three lowest approved prices in the EU to set the price eg Greece and Slovakia

Kyprolis is currently marketed in Austria, Denmark, Finland, Germany, the Netherlands, Slovenia and the United Kingdom. Slovenia, United Kingdom, and the Netherlands are the three countries with the lowest prices.

The average of the three lowest with the UK in the EU is €1,215.55 and the average without the UK in the EU is €1,238.20, meaning a 1.86% price variation for Greece and Slovakia depending on Brexit.


If we consider the case of Orkambi which is currently marketed in Austria, Denmark, Germany, the Netherlands and the United Kingdom with the lowest prices in Denmark, the Netherlands and UK.

The average of the three lowest prices with the UK in the basket is €11,161 vs €12,529 without the UK meaning a potential 12.25% price variation for Greece and Slovakia depending on Brexit.

Rule 2: Countries that take the average of the EU prices to set the price e.g. Belgium

The average of price of Kyprolis with the UK in the EU would be €1,270.60 vs €1,286,73 without the UK in the EU meaning a 1.27% price differential for Belgium depending on Brexit.


The average price of Orkambi with the UK in the EU basket is €12,094.92 vs €12,895.58 without the UK in the EU meaning a potential 6.62% price variation for Belgium depending on Brexit.


So what does all this mean revenue-wise?

Extrapolating from the UK treatment population using Kyprolis, we assumed 534 patients in Belgium and Greece and 267 patients in Slovakia, with the total number of units used annually per patient being 72 vials. The total projected annual revenue for Belgium, Greece and Slovakia would be €119,000,000 with the UK in the basket vs €120,900,000 without UK, meaning a potential gain in revenue of €1.9M with Brexit. The revenue impact for Orkambi, assuming the treatment of 300 patients in Belgium, Greece and Slovakia, with or without Brexit would be €136,600,000 vs €123,900,000 respectively. The potential revenue gain could be as great as €12.7M in this case,  around a 10% increase in global revenue if UK leaves the EU (see table below for breakdown).

The analysis indicates that there could be a price and revenue impact if the UK were to leave the European Union and although the price differential appears to be marginal in some cases (1-2% difference), the increase in global pharmaceutical revenue could mean a substantial gain for companies if the UK votes for Brexit. One point to bear in mind is that the products selected in this analysis are not currently available in France, Italy or Spain. If launched in these countries, the average EU price is likely to be lower than the price in the UK meaning the net global revenue gain would be lower than reflected in this analysis.

Note: GPI does not affiliate to either political view of the Brexit political referendum. Impact due to currency exchange rate fluctuations were not taken into consideration.


References:

1. Orkambi posology : http://www.ema.europa.eu/docs/en_GB/document_library/EPAR_-_Product_Information/human/003954/WC500197611.pdf

2. Kyprolis posology : http://www.ema.europa.eu/docs/en_GB/document_library/EPAR_-_Product_Information/human/003790/WC500197692.pdf

3. Orkambi incidence SMC : https://www.scottishmedicines.org.uk/files/advice/lumacaftor-ivacaftor__Orkambi__FINAL_April_2016_for_website.pdf

4. Kyprolis incidence : http://www.hsric.nihr.ac.uk/topics/carfilzomib-kryprolis-for-multiple-myeloma-third-line/

5. Belgium population : http://countrymeters.info/en/Belgium

6. Greece population : http://countrymeters.info/en/Greece

7. Slovakia population : http://countrymeters.info/en/Slovakia

8. UK population : http://www.worldometers.info/world-population/uk-population/

9. Price and IRP rules supplied by GPI


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