British General Election: the potential ramifications for UK healthcare industry

25 May 2017 (Last Updated May 25th, 2017 09:26)

With the British General Election looming on June 8, questions have arisen regarding how the UK medical devices industry will fare under each of the respective main national political party manifesto pledges.

British General Election: the potential ramifications for UK healthcare industry

With the British General Election looming on June 8, questions have arisen regarding how the UK medical device industry will fare under each of the respective main national political party manifesto pledges.

A competitive edge in the UK’s medical device industry is largely maintained through the development of innovative therapies to meet an increased demand as the population ages. To understand possible future directions for UK research and development (R&D), it is necessary to understand how it is constituted at present.

Overall, R&D in the UK is funded and executed through a number of sources. Based on estimates provided by the Office for National Statistic (ONS), in 2005, industry provided 49% of funding but consumed 66% of expenditure. The government provided 21% of overall funding and consumed 7% of overall expenditure. Overseas funding, which included EU funds and other sources, provided 17% of overall funds. Higher education generated 8.5% of overall funding, but consumed 25% of overall expenditure. Private non-profit organisations, such as charities, provided 5% of overall funding and consumed 2% of overall expenditure. Overall, UK R&D expenditure amounted to nearly $40 billion in 2015; around 1.4% of gross domestic product (GDP).

The pharmaceutical industry is the largest consumer of R&D funding, at more than $5 billion in 2015, underlining both the expense of developing new therapies and the importance of the healthcare industry to the UK economy.

In the run up to the election, the importance of the EU to UK science has become contentious. The amount of EU funding toward UK research is difficult to quantify. The UK National Audit Office reported that much EU funding would not be considered R&D by the Organisation for Economic Co-operation and Development (OECD), and so is not considered as part of R&D by the ONS. EU Structural Funding, for example, included funding to train scientists. Between 2002 and 2007, the UK received an average of approximately $630M per year from the EU’s Six and Seventh Framework programmes. While the OECD might not consider most of this funding to be R&D, EU Framework funding has obviously enabled R&D to be carried out.

These Framework programmes have been replaced by the Horizon 2020 programme, which, like its predecessor, is thematic, with themes determined by EU participants. In this way, the direction of research is determined by the overall priorities of the EU, rather than the priorities of individual member states. In some respects, because of this, EU funding can be seen as a poor means of enabling a national industrial strategy, unless there are coinciding priorities.

To date, because the UK has been involved in the framing of the themes, these has been considerable overlap with UK national needs. However, following the exit of the UK from the EU in 2019, it is likely that the Horizon 2020 programme and subsequent programme will increasingly become less relevant to the UK, because the country will not be involved in discussing themes with other member states.

With consideration of the broad direction presently being taken by UK science R&D, and therefore also by medical research, there are questions as to whether any conclusions can be drawn from the published manifestos of the four major national parties: the Green Party, the Liberal-Democrat Party, the Labour Party, and the Conservative Party.

Surprisingly, the Green Party has little to say about its policies regarding the scientific and medical sectors. There is no policy proposed about advancing R&D. The party proposes reducing the role of the private sector in the National Health Service (NHS) and fully extending free healthcare at point-of-use for dental services. Currently, most patients are required to make some contribution to costs of treatment.

The Green Party also proposes to end the monetisation of health records. The impact of these policies on the medical devices industry is uncertain. A reduction in the role of the private sector in the NHS, for example, might result in a fall in companion diagnostic testing for cancers, which are sometimes undertaken or subsidised by the pharmaceutical and device manufacturers. The extension of free dental services may also lead to a further restriction in the availability of different treatments.

A restriction in how some health records (the Green Party does not comment on anonymised records) can be monetised may impact the burgeoning home healthcare market, where patients are granted access to diagnostic devices in their homes. In these cases, test data is transmitted to the manufacturer, which then provides an interpretation to the healthcare provider. In some cases, the manufacturer may see value in the received patient data, such as to support R&D. A government restriction in how this data is handled will likely have negative consequences for the availability of advanced homecare diagnostics.

The Liberal Democrat Party are making general calls for campaigns against a reduction in university investment and to continue the rights of UK institutions to access the EU’s Horizon 2020 programme. The ability for the Liberal Democrats to have influence in this regard will depend on them recapturing seats lost during the 2015 election. The Liberal Democrats are committed to raising national R&D spending in line with inflation, but also to double innovation research.

There is precedent for non-EU members, such as Israel and Norway, to benefit from Horizon 2020 programme funding, but this is associated with a fee, which is set by the EU and will likely be dictated by the UK’s future relationship with the EU.

Currently, the UK contributes 4.7% to the annual EU budget, but receives 18% of Horizon 2020 funding. Moving forward, following its withdrawal from the EU, it is unlikely that the UK will receive a similar benefit unless there is a dramatic increase in UK funding provided to the Horizon 2020 fund, which will result in the UK gaining the same advantage that any shared research programme would based on an economy of scale. As a non-EU member, the UK would no longer be guaranteed access to certain facilities outside of the UK.

The Liberal Democrats’ intent to maintain R&D spending in line with inflation and to double spending on innovation is slightly paradoxical. An inflation-linked rise in R&D spending, assuming OECD forecasts of 2% inflation annually are correct, would yield a national R&D spend by 2027 of $50 billion and by approximately $53 billion by 2030. At 1.3% of expected GDP, this is far less than the OECD’s target of 3% by 2030. This may reflect pessimistic thinking by the Liberal Democrat Party, which wishes to retain the UK’s membership of the EU, regarding the likely retention of pharmaceutical manufacturers in the UK following the country’s exit from the EU in 2020.

The Labour Party has ambitious targets, with a commitment to increase national R&D spending to 3% of GDP by 2030, which is in line with OECD targets. To support this increase, the party has proposed completion of the Science Vale Transport Arc, linking Oxford and Cambridge, as well as investing £250 billion ($323 billion) in infrastructure. The party has also made a commitment to staying in the Horizon 2020 Programme, although this in itself would not greatly increase  R&D spending as defined by the OECD.

It is not clear in the Labour Party’s manifesto how the necessary 8% annual increase in R&D spending will be achieved with such modest proposals. The Labour Party does identify some specific areas of interest that may slightly impact the medical devices industry and is committed to increasing research into overlooked diseases found in the developing world.

Rare disease outbreaks are transient in nature and developing diagnostic tests and therapies on a commercial basis is difficult. The Labour Party is likely committed to increasing government funding of existing tropical medicine facilities in the UK, a modest goal that will likely make little impact on overall medical research. However, the developing economies often have poor infrastructures, which drives the demand for small, portable diagnostic devices that can be used outside of the traditional laboratory structure. The recent large Ebola outbreak in West Africa highlighted the inadequacies of domestic healthcare systems, with even large nations such as the US struggling to implement a largescale diagnostics programme in Liberia.

Contentiously, the Labour Party supports opening a public enquiry into medical devices and medicines regulation as a result of the use of Valproate, an anti-epilepsy drug linked to birth defects. The European Medicines Agency (EMA) is already committed to a public hearing into the use of this drug, so it is unclear what the Labour Party intends to achieve with a second enquiry, unless there is an intention to broaden the remit.

The Medical Devices industry is already facing upheavals due to new medical device regulations being implemented by the EU, with full implementation coming into effect a short time after the UK exits the EU. The assumption has been that as part of the Great Repeal Bill being implemented by the present UK Government, the existing EU regulations would become subsumed fully into British law, allowing medical devices to be produced in and for the UK to meet identical standards as those produced in the EU, for at least a short period of time. Without this, British exporters face non-tariff barriers, and UK healthcare providers face increased costs as manufacturers are forced to adopt another set of standards.

The Conservative Party’s manifesto also seeks to increase national R&D spend as a percentage of GDP. By 2027, the party intends to increase R&D spending to 2.4% of GDP, and then increase further to 3% of GDP by some undefined future date. If the increase in R&D spending continues beyond 2027, the 3% goal would not be realised until sometime beyond 2040. The Conservative Party is also similarly vague as to how this increase in R&D spending will be realised. There is a general intention to increase the numbers of scientists employed through easing immigration requirements and a general increase in university investment, particularly in facilitating university spin-out companies, which can enable the commercial exploitation of developments. Whether these measures will be sufficient remains to be seen, but the Conservative Party’s ambitions are slightly less than those of the Labour Party, during a period of great uncertainty for industry following exit from the EU.

With respect to medical research, the Conservative Party highlights the success of the 100,000 Genome project, which seeks to sequence the genomes of 100,000 people suffering from rare inherited diseases to further research in areas overlooked by industry. The implication is that the party believes investments in clinical sequencing could be extended to the broader population. This may have a revolutionary impact on healthcare in the UK by way of greatly expanding the availability of personalised medicine to the population. The 100,000 Genome project has established the UK as one of the front runners in population level, high-grade genome sequencing, achieving a low cost per genome with concomitant expansions of technical skills within UK industry.

Similarly to the Labour Party, the Conservative Party will also seek to expand research into health threats. However, the Conservative Party proposal will focus on threats of a global nature rather than rare and emerging diseases that may only affect limited regions or are transient. In recognition of the importance of the pharmaceutical industry to national R&D, the Conservative Party manifesto includes a commitment to maintaining the UK as the hub for European life science research, although without explaining specifically how. There is no mention of Horizon 2020 Programme, perhaps either to keep all options open during brexit negotiations with the EU, or due to the recognition that the Horizon 2020 Programme will be irrelevant to the needs of UK industrial strategy.

Ultimately, none of the national political parties have a fully formed strategy for R&D in the UK. There are good intentions being outlined, but the manifestos lack enough details to make a full judgement on which party is most likely to succeed. The Conservative Party comes closest with a firm strategy, but it is important to remember that this manifesto was developed with full access to the tools of government. It is to be expected that the governing party, which called the election, would have the most developed role.