After three-and-a-half years of long and often tedious negotiations, the UK finally left the EU on January 31. Despite the official exit date, a long road is ahead for all parties to come to agreement on the official terms of the exit, due by the end of this year, on Dec. 31. During this 11-month period, the UK will continue to follow all EU rules, and its trading relationship will remain the same. It is also during this time that many agreements likely to affect the healthcare market will be negotiated. The Healthcare Technology team at Omdia discusses what has happened over the last few years and what is likely to occur in the next few years.
Note: This Market Insight article addresses several issues of consequence that will affect the healthcare space in the United Kingdom following its exit at the end of January 2020 from the European Union. The research information, data, and other intelligence supplied in this piece comes from Omdia, our new research powerhouse. Omdia represents the merging of Informa Tech brands Ovum, Tractica, and Heavy Reading with the research portfolio of IHS Markit | Technology.
After three-and-a-half years of long and often tedious negotiations, the UK finally left the EU on January 31. Despite the official exit date, a long road is ahead for all parties to come to agreement on the official terms of the exit, due by the end of this year, on Dec. 31. During this 11-month period, the UK will continue to follow all EU rules, and its trading relationship will remain the same. It is also during this time that many agreements likely to affect the healthcare market will be negotiated.
The Healthcare Technology team at Omdia discusses what has happened over the last few years and what is likely to occur in the next few years.
What has happened over the last few years?
On June 23, 2016, a referendum was held to decide whether the UK should leave the EU. This resulted in 17.4 million (52%) UK residents voting to leave, with the remaining 48% voting to remain. The UK was due to leave the EU on March 29, 2019, but without a deal in place, negotiations were extended to October 31, 2019. That date fell short once more, negotiations continued, and Brexit dampened the economy.
All told, three prime ministers presided as Brexit dragged on. David Cameron led the “remain” campaign during the referendum and left his post on July 13, 2016, after the “leave” side won. His replacement, Teresa May, sought to get the deal done but could not get Parliament’s approval. She was succeeded by Boris Johnson following a momentous win on July 23, 2019, by the former mayor of London.
During Boris Johnson’s negotiations with the EU government, the deal previously established by Teresa May and her government was adapted with a ”full stop” agreement, whereby Northern Ireland remains aligned to the EU from the end of the transition period for at least four years. A change can only happen if it is voted on by the Stormont assembly.
In the next 10 months, the most important deal will be a new free trade agreement, one which will ensure the movement of goods around the EU without checks or charges. If an agreement cannot be reached in time, additional taxes and barriers will be imposed, negatively impacting the UK market.
Additional negotiations are ongoing to resolve the following:
- Law enforcement, data sharing, and security
- Aviation standards and safety
- Access to fishing waters
- Supplies of electricity and gas
- Licensing and regulation of medicines
Discussion on trade agreements and their impact on medical devices
The UK government has released a statement to ensure that relationships are maintained between the UK and EU in an attempt to ensure benefits for everyone, to the extent possible. The UK’s aim is to replicate similar free trade agreements between the EU and Canada, but various quarters maintain this won’t be possible for the UK and EU. It is proposed that a free trade agreement between the UK would cover the following:
- National treatment and market access for goods – proposing no tariffs, fees, charges, or quantitative restrictions between the UK and EU
- Trade remedies – to protect the UK from increased imports of goods or unfair trading practices
- Technical barriers to trade – assessment of regulatory barriers to trade in goods and to cooperate on technical regulations, standards, and conformity assessment procedures
- Customs and trade facilitation – to ensure custom agreements are established to create smooth trade between the EU and the UK
- Cross-border trade in services and investment – ensure measures to minimize barriers are in place specifically supporting professional and business services and digital trade
- Temporary entry for business purposes – enabling EU and UK nationals to undertake short-term business trips
- Regulatory framework – to reduce unnecessary barriers to trade and provide regulatory cooperation
- Mutual recognition of professional qualifications – to ensure that qualification requirements do not become a barrier to trade
- Tax – will be assessed at the level of the comprehensive trade agreement recognizing respective commitments to ensure no impact to distort trade
There are numerous topics on which to negotiate the best path forward, but the options that are discarded will have as much impact as what options end up being chosen. One concern for the medical Imaging market will be surrounding the access and supply of medical radioactive isotopes, which is coordinated by the European Atomic Energy Community (Euratom). Once the UK leaves the EU, it will be necessary for the UK government to continue to work with Euratom to discuss the supply of radioactive materials, to ensure diagnostic imaging procedures are not affected in anyway.
What will happen to the healthcare workforce?
From a UK perspective, a key focus in healthcare workforce issues has been migration, which affects a large proportion of the UK’s health workforce. According to the Office of National Statistics (ONS), of the 1.9 million people employed by the UK health force in 2018, 6%—or 114,000 people—were EU nationals. Approximately 1 million are employed by the National Health Service (NHS), with EU nationals again accounting for 6%, or 60,000. EU nationals currently employed in the UK are permitted to work in the UK until December 31 this year. Beyond that date, those currently living in the UK will need to apply for EU settlement.
EU settled status will typically be granted if the resident has continually lived in the UK for longer than five years. Pre-settled status will be granted to those who have worked in the UK prior to December 31, 2020, after which they will have five years to apply for EU settled status. If granted EU settlement, migrants will be able to live and work in the UK beyond June 30, 2021, with varying rights depending on settled or pre-settled status. Those who wish to enter the UK after December 31, 2020, will need to apply through the UK visa system.
Discussion is currently underway around the suggested point-based UK visa system, with the Migration Advisory Committee (MAC) taking a key role as an independent body to advise the UK government on migration policy. Recent reports from the MAC suggested that an Australian-based point system would only be suited to specific types of applicants wishing to enter the UK; examples were laid out for each circumstance, with the corresponding recommendation based on a tiering system. The overall aim of the immigration policy is to ensure a fairer assessment of those looking to migrate to the UK.
As the UK finally leaves the EU, those who are currently working in the UK and have successfully gained EU settlement will be able to work without hindrance. That being said, a large proportion of those applying for settlement have been granted pre-settled status, requiring them to remain for a total of five years before applying for settled status. Furthermore, the “red tape” around the rights to start to work in the country will become a heated topic, reducing the attractiveness of new talent to the country. With a current shortage of 100,000 healthcare professionals in the NHS, the UK visa system will need to remain favorable enough to attract into the country desperately required healthcare professionals.
How will the regulatory process for medical devices change?
Currently, Class II and III medical devices that are to be used in the UK are subject to EU legislation and require a CE mark to conform to acceptable European standards. Devices are currently regulated under the following EU legislation directives:
- Directive 90/385/EEC on active implantable medical devices
- Directive 93/42/EEC on medical devices
- Directive 98/79/EC on in vitro diagnostic medical devices.
In the EU, this regulatory process is due to be replaced by the new European Medical Devices Regulation (MDR), in force from May 25, 2020; and by the In Vitro Diagnostic Medical Devices Regulation (IVDR), in force from May 25, 2022. The UK will follow through with this approval process to its EU departure on Dec. 31 of this year. The Medicines and Healthcare Products Regulatory Agency (MHRA) in the UK will continue to work with the EU to ensure the safety of medical devices. If a free trade agreement is to be in place, the MDR and IVDR will continue to apply to medical devices sold to the UK.
If a no-deal Brexit were to take place, it is likely the MDR and IVDR will impact the UK medical device regulations, and the following scenarios are likely to occur:
Either way, manufacturers of medical devices will be seeking updates on how to conform to the new UK regulatory standards from the final date of departure. Despite the path forward for Brexit, most medical device manufacturers have already taken heed of the more stringent assessments required under the MDR directive. This is likely to continue moving forward even with a no-deal result aligning UK standards to that of the EU.
Impact on funding for healthcare
The funding of the NHS is largely driven by its economic performance. In July 2018, the UK government pledged to invest in the NHS through a new five-year funding deal that was targeted to increase spending by 3.4 % on average from the 2019 or 2020 period to the 2023 or 2024 period. This long-term funding deal applies to services within the scope of NHS England’s mandate. In the September 2019 Spending Round, the government announced further increases to budgets for capital investment, public health, and the education and training of the NHS workforce.
Yet Omdia saw a 4% decline in healthcare spending dollars in 2019. As part of its World Healthcare Markets forecast, Omdia predicts an uplift in healthcare spending by 4.3% in 2020 and 4.6% in 2021. If the economic stability of the UK falls following its departure from the EU, it is not likely to impact the spend on healthcare in the medium term. However, budgets moving forward will be aligned with the future economic growth of the country, possibly causing further disruption.
Looking more closely at the medical imaging market, the Healthcare Technology team at Omdia has projected flat growth for new shipment demand in the UK in 2020. Total unit shipments for X-ray, ultrasound, CT, MRI, and molecular imaging are projected to increase by a marginal 1.6% from 2019 to 2020. As the significance of the UK’s exit of the EU becomes clearer over time—likely from 2021 onward—favorable growth is projected as business confidence is restored, resulting in a CAGR of 2.8% from 2018 to 2023. If no trade agreement is reached by the end of 2020, it is likely that the sale of medical devices will be hit with higher trade tariffs, impacting their pricing. This is expected to create an increasingly competitive market to ensure customers get the best deal; with faster price erosion, revenues would likely increase at a slower rate than currently projected.
How will data security change?
Data protection and privacy is governed in the EU by the General Data Protection Regulation (EU) 2016/679 (GDPR) regulation. GDPR gives control to individuals of their personal data. It also addresses the transfer of personal data outside the EU and the European Economic Area (EEA) zones.
The UK currently follows GDPR and ensures that the use of all patient data is sufficiently handled according to GDPR guidelines, with compliance in effect through the transition period. Data that is collected by a manufacturer in the EU prior to the transition date, regardless of the location of an entity’s headquarters, will continue to be governed by EU GDPR. To ensure the safety of its population, the UK is expected to adopt a similar regulation for data collected in the country after the transition date.
Who else will capitalize on the Brexit momentum?
Many issues of consequence remain up for discussion even after the UK’s official exit from the EU. This Market Insight article has summarized the main factors likely to affect the medical device space in the UK following its final departure from the EU. Because some uncertainty remains on the shape and form of the trade agreements that would be in place by the end of 2020, some risk is to be expected in predicting whether growth will be in store for the medical devices market.
For those countries in the EU contemplating the possibility of exiting the bloc, they are looking to the UK to assess how it was done. Most are united, however, in their displeasure at the numerous dispiriting discussions and contentious back-and-forth negotiations that have taken place—an example that no on wishes to emulate. One thing is certain: Once final agreements are in place and the dust has settled, the full impact of Brexit is likely to trigger serious debate in those countries considering an exit from the EU, just like what the UK managed to achieve.
Omdia’s Healthcare Technology team will continue to assess the impact of Brexit on the medical market in both the UK and the wider European region. Our analyst team will be discussing this subject while ave of steady growth. But for now, the country will have to wait and see.