Will Domestic Healthcare Compromises Prove Too Much for A Post-Brexit US Trade Deal?

by James Maxwell
Future trade agreements may radically shake-up the UK’s healthcare market

Future trade agreements may radically shake-up the UK’s healthcare market, paving the way for liberalisation, foreign competition, and closer policy alignment with the United States.

Provided the United Kingdom leaves the European Union Customs Union, the country will be free to set an independent trade policy and look towards negotiating its own free-trade agreements. Healthcare will become a focus of discussions surrounding the formulation of free-trade deals and may have a considerable impact on the healthcare market in the UK, with the realisation of new opportunities for healthcare products.

The size and reputation of the UK’s healthcare market is an attractive opportunity for both businesses and foreign countries who wish to invest and trade within the sector. The healthcare markets across the United Kingdom continue to grow with public and private healthcare expenditure reaching a high of £191.7 billion in 2016, an increase of 3.6% on spending in 20151. The NHS is an influential organisation, which according to Professor Alex de Ruyter, Director of the Centre for Brexit Studies at Birmingham City University, sets the price of pharmaceuticals in Europe2. The Government’s Life Sciences Industrial Strategy embarks on an ambitious future of opportunities for growth, with new investments across the health tech and pharmaceutical sectors envisaging the UK as a global leader in life sciences. The strength of the UK healthcare sector would be viewed as a major opportunity for potential trading partners in any future negotiation, benefiting from a government-backed drive towards innovation, research, and cutting-edge technologies, and an untapped healthcare market for foreign competition.

As a member state, the European Union affords the UK wide-scope to develop protections for its National Health Service, and issues regulation as it sees fit in the interests of public safety. Besides national health policies, there are also high standards at EU level for products which increase public health protections. The EU extends these standards to its trade policy with third-countries, where sustainable economic development is promoted. Although there is a wide consensus on the need to protect the status of the healthcare system, significant compromises are likely to result due to the political pressure to fulfil trade deal agreements post-Brexit quickly. This may involve a conscience effort to alter the balance between regulation and market access, or the acceptance of the necessity of trade arbitrational panels, which would move the decision-making process away from health authorities. These panels would be unlikely to favour public health input based upon purely precautionary measures where they are viewed as discriminatory or too costly to industry.

Following British withdrawal from the EU, there will be increased pressure for the UK to strengthen its economic, political, and military ties with the United States through the ‘special relationship’ to ensure it protects its world status. The United States is Britain’s closest strategic partner, and the UK’s largest trading country representing 18% of UK exports, with this figure rising by over 26% between 2001-2016. Given the importance of the relationship, the May and Trump administrations have repeatedly clarified that a trade deal between the two allies is a pressing priority following Britain’s withdrawal from the EU. Any future trade deal would include the healthcare sector, with US healthcare spending projected to reach nearly $5.7 trillion by 20263.

Such a blueprint for a future US-UK trade deal has been published in 2018 by the American libertarian think tank, the Cato Institute, in collaboration with Conservative MEP Daniel Hannan, which would see more competition within the healthcare sector, and the harmonisation of products between the two countries4. This would likely involve a lowering of standards and protections to provide consistency with the US market, a decrease in the power of domestic health authorities to tailor products to their priorities, and increasing market access for companies wishing to sell their products to the NHS. Such a vision may be possible but would lead to divisions within the government. The UK Department of Health has recently abandoned its ‘rigid competition’ policy which characterised the Lansley reforms, and there would likely be unease in Parliament and the electorate over liberalisation of the market which the state dominates with the NHS’s robust purchasing power. Depending on the political situation, the domestic compromises necessary to the status of the healthcare system may prove too much, and present a barrier to securing a comprehensive trade deal with the United States.

The European Union is Britain’s single biggest trading partner, accounting for 44% of UK exports and 53% of imports in 20175, and continued barrier-free access to the European market is essential for Britain’s economy. The economic reality of the UK’s reliance on trade with the EU will be a pressing urgency for future governments in the negotiation of a trade agreement.  Forty-six years of integration with the European Union has produced extensive regulatory and policy alignment which will have a lasting impact on the country after it has left the bloc, including on products in the healthcare sector, regardless of the UK’s ability to set its own independent standards. A future trade deal with the EU would require the commitment of alignment on goods and services. The importance of UK-EU trade, combined with likely continued regulatory alignment, will reduce the ability of the UK’s future independent trade policy to radically depart from current arrangements, favouring the existing European approach over alignment with the US. For the healthcare sector, this means that existing policies are unlikely to alter drastically, minimising opportunities for a post-Brexit US trade deal, however, there is no guarantee and depends upon the focus and priorities of future governments negotiating on the behalf of the UK.

The UK’s future independent trade policy and healthcare policy relies in part upon its exit from the EU and its subsequent trade agreement. The government will need to decide where its priorities lie, and whether maintaining alignment with the EU in the medical sector trumps the opportunities that increased competition would bring in other trade deals. A failure to commit to the prioritisation of a market may result in companies struggling to align their production to meet the differing requirements of standards and competition of each market, potentially proving too costly and burdensome to industry, and lead to the pulling of investment away from the UK. There are other trade relationships to consider outside of the EU and US which may affect the healthcare sector, with International Trade Secretary Liam Fox MP aiming to replicate the EU’s existing free trade deals. With much uncertainty over Brexit, the future of the UK’s health sector and its independent trade policy will become clearer once the UK approves the draft withdrawal agreement, and the government establishes its policy during the transitionary exit phase.


References

[1] https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/healthcaresystem/bulletins/ukhealthaccounts/2016

[2] https://www.independent.co.uk/news/uk/politics/brexit-uk-us-trade-deal-nhs-trump-theresa-may-alex-de-ruyter-a8390021.html

[3] https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/downloads/forecastsummary.pdf

[4] https://object.cato.org/sites/cato.org/files/pubs/pdf/ideal-us-uk-free-trade-agreement-executive-summary-update.pdf

[5] https://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-7851