Six in 10 UK hospital pharmacists report medicine shortages daily – twice the rate as the whole of the European Union.
And this is before the fast-approaching EU withdrawal agreement puts additional pressure on the medicine supply chain.
According to Mike Thompson, chief executive of the Association of the British Pharmaceutical Industry: “every month, 45m packs of medicines move from the UK to the EU – and 37m come the other way”.
Brexit has the potential to destabilise this supply chain, and could make importing drugs extremely
difficult. Britain’s withdrawal from the EU risks creating delays at ports, driving up costs, and creating regulatory changes that threaten the movement of medicines between the UK and Europe.
As a result, UK pharmaceutical companies have already started preparing for the worst. Stockpiling and warehousing is increasingly becoming the go-to option for many providers as they attempt to mitigate the stock issues affecting the UK in order to minimise any disruption in the supply of medicines to patients.
However, while many pharmaceutical companies have begun to formulate and execute these action plans, not all will be successful on their own.
Outside investment may well be the key to solving the pending national drug shortage.
If Britain wants to reduce its reliance on Europe for medicines, pharmaceutical manufacturers based in the UK will need to develop and grow their businesses. With local and overseas investors already showing interest in this market, this may be the solution that UK-based pharmaceutical companies need to ensure their operations are fit for the future.
With sufficient funding, drugs once made in Europe could be manufactured in the UK – alongside the 100 different drugs that are currently only produced here.
Investment to facilitate this will only come, however, if these companies can show their potential for growth and strong returns.
One segment of the industry displaying strong signs of growth is vaccinations, comprising both the travel and school markets.
The travel vaccinations market is forecast to increase at nine per cent in value terms over the next four years, while the school vaccinations market is predicted to grow by a similar rate of 10 per cent each year until 2022.
However, one of the drug areas most commonly in short supply in the UK is preventive medicines – and this includes vaccinations.
The NHS is already under pressure due to funding and supply constraints, and GPs are increasingly referring patients to private travel clinics and pharmacies to ensure that they can get any necessary vaccinations before holidaying abroad.
With such vast potential for increased activity across the private portion of the pharmaceutical market, there is likely to be significant opportunities and rewards for investors.
Inflexion, a UK-based private equity house, recently invested in European LifeCare Group (ELCG), which is Europe’s largest provider of vaccinations. Its buy-and-build strategy for ELCG is premised on making subsequent bolt-on acquisitions in the same sector. In adopting this strategy, ELCG will be able to execute its growth plans, doubling its number of private clinics across the UK.
This would provide much-needed vaccinations and ancillary services to a greater number of patients.
It is currently a favourable time for private equity houses to invest in the UK pharmaceutical and related services markets. With the market primed for consolidation, investors with similar buy-and-build strategies can allow pharma specialists to boost their customer base in the UK.
Inflexion’s strategy is not confined to the UK; it can also be seen more widely across Europe, as investors target companies with scope for international growth.
With backing from outside investors, UK pharmaceutical firms could have an opportunity to expand their global footprint, providing resilience against downturns in specific geographies.
Brexit, therefore, doesn’t have to mean further fragmentation of the market. In fact, it could end up encouraging UK firms to accelerate their growth and focus on building strong businesses at home as well as overseas.
This is all while ensuring that the 100 drugs only made in the UK can still be made here. The same UK companies can look to producing drugs previously exclusive to Europe’s pharmaceutical manufacturers.