Brexit aftermath: Drug firms brace for new regulatory framework

While there would be little immediate impact of Britain’s exit from the European Union (EU) on Indian pharmaceutical companies operating there, it is becoming clear they would have to brace for a new regulatory framework. It would be significantly different to that of the EU.

“From a long term perspective, companies will have to tinker with their strategy. For example, unified EU regulations that apply uniformly may no longer apply to the United Kingdom (UK) and a new set of compliances may be required. Sovereignty was one of the pillars of the ‘leave’ campaign, and any new regulations created by the UK will no doubt shape marketing strategies for Indian companies as well,” said Sameer Sah, associate partner, Khaitan & Co.

According to Grant Thornton’s 2016 report, the fastest growing Indian pharmaceutical companies in the UK are Emcure, Wockhardt, Lupin, Glemark and Dr Reddy’s. “Emcure Pharma, following its acquisition of Tillomed Laboratories through its UK subsidiary, has ambitious expansion plans in the EU and UK markets,” said the report.

According to experts, in the short term, there would not be any significant effects as the exit would take place only after two years. This deadline of two years would start only when UK serves the exit notice to EU, which is likely to happen sometime after October.

The European markets account for only 10-13 per cent of total revenues — US is India’s largest export destination. “Accordingly, the impact of British pound and euro depreciation is likely to be limited. Given the fact the profitability in the European business has been low vis-a-vis other markets on account of price cuts and shift towards tender market, currency depreciation and any possibility of further austerity measures may impact the attractiveness of the market,” Subrata Ray, senior vice-president, co-head — corporate sector ratings, ICRA.