The Adam Smith Institute enjoyed some successes in the Budget yesterday. With ‘full expensing’ at one point coined the ‘best policy you’ve never heard of’ by our Senior Fellow Sam Bowman. Now I’m not sure it deserves this moniker at all - as the Chancellor gave us ‘full expensing’, which means firms can write off (some) their investment expenditure.
Alongside Abolishing the Factory Tax, the ASI had another, more understated policy win. This has garnered less public buzz, but will bring about outsized value at the cost of a piece of low-hanging fruit: medicinal reciprocity with trusted countries.
The Chancellor told us he will implement Sir Patrick’s interim recommendations for Life Sciences reform. One policy recommendation concerns the Medicines and Healthcare products Regulatory Agency (MHRA) which will now explore: ‘partnerships with trusted international agencies [...] to provide simple, rapid approvals for medicines and technologies that have received their approval from 2024.’ (Spring Budget, 2023: 67). In short - adopting the best drug and medical device regulatory practices from around the world.
Charter Cities CEO Mark Lutter wrote an ASI paper advocating for such a policy. This called for allowing the use of drugs and medical devices that have been approved by the regulatory agencies of other developed countries. This could include the Food and Drug Administration (FDA) of the USA, and Japan’s Pharmaceutical and Medical Devices Agency. If Japan or the US approve a drug, it will be automatically approved for prescription here in the UK.
Drug reform of this kind means that countries can streamline the process of getting new medications approved, saving time and resources, and lowering the transaction costs of bringing new potential life-saving drugs to market. That money once earmarked for burdensome regulatory processes, now becomes unlocked for direct life sciences research and development (one would hope). It could also incentivise further innovation, by encouraging collaboration between the pharmaceutical companies of each country within the reciprocity web.
It’s such an easy win that one can only wonder: why has it taken the UK so long post-Brexit to implement? This piece of low-hanging fruit has been hitting us in the face every time we walk into the Garden of Potential Policies for years until yesterday we finally decided to pick it off its branch! Why didn’t we do this pre-Brexit? Because we couldn’t.
Before Brexit (remember that time?), the UK’s membership to the European Union (EU) meant that we were a part of a centralised system for the approval and regulation of medical drugs through the European Medicines Agency (EMA). We were required to follow the EU's regulatory framework and could not unilaterally reciprocate drugs with countries outside the EU without adhering to the EMA's standards and processes.
Even outside of its own multiple-state-lined walls, the EU has its own set of agreements with third countries (like the US and Japan) for the mutual recognition of drug approvals and regulatory standards. These agreements are negotiated at the EU level, and individual member states, including the UK before Brexit, still did not have the authority to establish separate agreements with non-EU countries. This centralisation of regulatory processes within the EU was designed to maintain consistency and quality control for drug approvals across all member states, but could nevertheless prove sclerotic.
By recognizing each other's regulatory processes and sharing information, the UK can follow the lead of trusted international partners and expedite the availability of new treatments, promote innovation, and ultimately improve patient outcomes. As the world continues to face new healthcare challenges, the importance of international collaboration and reciprocity in the pharmaceutical industry cannot be understated.